And information network: you and hearing friends, good afternoon, welcome to visit and interview the core telecommunications network, and I host Cho-Chou Kuo today. There was a time not to meet you, because it is busy for some time in several forums, today finally time we do a core interview. (17: 13)
and Information Network: relatively hot topic of recent sovereign debt crisis of the EU, we had the Greek does not seem very worried about the debt crisis is now intensifying the EU announced 10 March .5 an unprecedented 750 billion euros (much higher than the current 787 billion U.S. dollars in U.S. aid program) rescue plan, the EU plans to disclose, 750 billion euros rescue mechanism from , multi-national central bank will restart currency swap with the United States and the European Central Bank will buy the government and agency debt. For a time the stock market have soared in Europe and America. But just over a day, a variety of voices on the heels of doubt, and soon the stock market in Europe and America began to fall, making the EU a huge rescue plan casts a shadow. (17: 14)
and News Network: So, how could evolution of the debt crisis of Greece to the point? how to see 750 billion euros of rescue plan ? to the successful implementation of it? euro how the evolution of the debt crisis? the euro will fall apart? how to treat several major credit rating agencies play a role in the crisis? These problems may be particularly interested to know everyone. To this end, we issue Finance Sharon invited two guests, an international financial center of China Academy of Social Sciences General Dr. Zhang Ming. (17: 14)
Zhang: and telecommunications networks netizens Good afternoon! (17:15)
and News Network: there is a macroeconomic analyst at the Institute of Finance ICBC Dr. Cheng Shi guest and hearing. Dr. Cheng is a graduate of Fudan University, on the international financial problem is very insightful. (17: 15)
Cheng real: and telecommunications networks netizens, good afternoon! (17: 15)
and Information Network: the debt crisis began there early, and we think that is not very serious, Greece so small a country, What kind of impact can produce, what can cause the monstrous waves. but now looks like a lot of people are wrong, and now everyone is worried that the euro has been serious enough to be able to keep the problem. why the Greek debt crisis evolved into such a serious stage? If we had EU countries, notably Germany shot as soon as possible, is not it will not produce such a result? (17: 18)
real way: I feel the Greek sovereign debt crisis of this matter, if we already have clues dating back to 2005, Greece medium and long term problems are a regular bomb, it has not aroused much public attention. But in 2009, several major credit rating agencies have lowered the registration, we suddenly realized that this problem than we had imagined and more serious, which is Why the Greek sovereign debt crisis at the beginning of hiding for a long time, then suddenly broke out. a bit like the sub-prime crisis, the subprime crisis our first concern is March 2007, including the IMF, including the world's major international agencies define its starting in 2007, 7 to 8 months, that is the middle of incubation period. (17: 21)
Zhang: Greece itself, the crisis seems relatively small, because the Greek of the total euro area GDP2%, even if the problem is also the Greek the euro area will not get involved. Greece is not a country at war, and the Greek budget deficit and government debt with similar problems in several countries, such as we now more familiar with the five European countries, the scale of these countries, especially Spain and Italy, Greece, much larger than the size. These five countries together accounted for about euro-zone GDP is about one-third the weight. we fear the crisis in Greece, repeated in five European countries, such a fear is caused by financial market turmoil is important reason. (17: 26)
Zhang: Another reason, the Greek itself has some problems, for example, we all know, when to join the euro, Greece, and Goldman Sachs through a series of currency swap agreements cover their government debt. we feel that the credibility of the Greek government itself is missing. On the other hand is also very interesting, we all know that official statistics in Greece Greek billionaire is very small, probably no more than ten people. (17: 29)
Zhang: But the rich as a group in Greece, the euro area is quite famous, for example, one of my friends in investment banking, he said that the City of London is full of Greek billionaire tax system proved a problem with the Greek government. Greece has large underground economy, on the one hand is the lack of good faith, on the other tax limited capacity, we think the future of Greece through its difficult fiscal consolidation to reduce the deficit. I think these two reasons, the common and contributed to the further spread of the outbreak of the crisis. ( 17: 30)
and information networks: the EU until now to hand, if the long shot, things are not evolved to such an extent Buzhi Yu. Germany is not shot, the German hesitated, because by this time is not thinking about Greece kicked out of the euro area the opportunity to? (17: 30)
Zhang: Germany was not shot, just highlight the plight of the euro area. We all know that the establishment of a monetary union is good long-term interests of a country, but in many cases, common interests and national interests to fight, this time in Germany is very clear. the German public that we usually live frugally, work hard, why do we not very hard to save the Greeks? meaning people become politicians refuse to aid Greece reasons. (17: 31)
Zhang: In addition, I personally feel that this time the five countries, including Greece and Europe, they are in an awkward position in the euro area. There are two traditional means of national economic recession, currency devaluation expansionary fiscal and monetary policy. But for the countries of Greece, owned by the European Central Bank monetary policy, exchange rate there is no way, because the euro is not your final say, the last fiscal policy, fiscal policy can indeed have to do, but as cornerstone of the euro area the government debt has some limitations. In fact, as countries outside the euro zone, in the economic turmoil, particularly in the economic cycle and in your heart when the national inconsistent, not too many tools of macroeconomic adjustment, which highlights the difficulties. Germany is now the most important thing is to control inflation, and will not be very loose monetary policy, he is the euro, as well as aid to Greece itself, these issues will appear. (17: 32)
implementation process: I would like to add that Dr Cheung said very clearly earlier, the German Greece before the problem is not reflected very quickly in this one very important reason, he might feel that moral considerations. There are a very important point, the German aid Greece in this respect from the start that he might be in such a situation, in itself no guarantee of his own. just out of recession in Europe, the U.S. first quarter growth of 3.2% growth in the fourth quarter of last year, five percent in a few, the euro zone until the fourth quarter of last year is a contraction of negative 4.1, figures released yesterday, an increase of only 0.5%, meaning that the entire economic cycle, the euro area, including the whole of Europe is lagging behind the United States, one to two quarters. (17: 33)
implementation process: in this case, Germany did not fully estimate the beginning of the importance to Greece, or he may have much of an impact on their own. and he rates the debt burden, we know that at the outbreak of the Greek problem is more government debt ratio to 110%, then Germany debt ratio is 70% more than you put in perspective the entire euro zone, Germany ranked relatively higher. Germany on this issue, partly because some of their public moral practices are not optimistic about Greece. On the other hand, he there are some deficiencies in capacity. (17: 33)
and Information Network: the best start out of the Greek crisis, Germany was in a hurry, when Goldman Sachs to help the Greek currency swap done, a lot is sold to Germany, the German holding a lot of things, if this problem occurs, the first death was in Germany, Germany was very worried. (17: 33)
Zhang: Yes, you start to say the crisis has exposed the euro area of Greece have such a mechanism problem, as long as come after, no matter how bad my performance, I will not go out, I can count on me to rescue the core countries. This time is also a factor, Germany has been hesitant on whether to aid Greece, I think part of the German have this idea that he hoped the Greek initiative barely out of the euro because, with this precedent in the euro area has a dynamic adjustment mechanism. when you come in first if not in financial discipline, the same will be adjusted out. but also of the Finance and economists hope that the euro zone have such a mechanism to prevent future moral hazard. (17: 33)
and Information Network: from the euro zone to maintain the sound development of the euro, which is a good thing. Although the European Central Bank to control money , but is independent of financial power, you just messing around, come up with a deficit, so that everyone would buy you one last, this is a problem. (17: 33)
way real: I think this time the crisis with Greece the Great Depression, there is a place very much like the Greek sense is in fact kidnapped, or the formation of a free-rider effect. We see in the Great Depression, when some financial institutions were when something goes wrong, when the policy control, policy control is the United States flatter settlement doctrine, who made the mistake Who commitment, and not others shared responsibility. just beginning to play some effect, but in fact Shajixiahou all monkeys are not. (17: 34)
and News Network: I think the whole of China with the Chinese real estate, like kidnapping. Now things have come to this step, the EU out of the 750 billion bailout plan, this rescue plan in the end can not be implemented, and now everyone is suspect, including the IMF said The 250 billion euros is to talk about numbers, there are 440 billion in the end could not raise the issue. There you have just mentioned, because you have to combine the Greek deficit and improve their financial capability, but now trouble the Greek national uproar, such a big strike, and even riots, how can this continue? you think this can help please? (17: 34)
way real: You just mentioned can IMF2500 billion in cash, this is indeed a problem. Although he did not say he is a temporary relief, he is a long process, but we know that 250 billion to enhance the role of markets more confidence. (17: 35)
real way: You just mentioned another to 440 billion, which is raised within the European area, which makes us think of the U.S. 786 billion in 2008 just came out, in September 2009, when all of a sudden this thing just out of the stock market joy, happy, the Government finally bailed out . but soon in the Congress, the House rejected the bill came, when the stock market immediately dropped. we see a sudden increase of all U.S. credit risk, leading to escalation of the subprime crisis. This policy can not deliver relief from a good program into a real positive or play on a question mark. But in any case, we made a key first step in relief. (17: 35)
Zhang: In addition to 750 billion U.S. dollars can not be implemented, I think this stimulus there the following questions. The first problem, a problem with the Greek state, is 750 billion rescue plan, five European countries Greece is the smallest one among the countries GDP. assumes that a problem with Italy and Spain, 750 billion enough? second problems, which keep up to spend 750 billion euros linked to IMF adjustment loans, which means that to get the money, the crisis countries must make the same as Greece's commitment to the pain, commitment to substantially reduce the fiscal deficit in the next few years, Greece and the major reduction in pension wage freeze, which can easily lead to instability, its economy in decline, this increase in the short term economic downturn. (17: 35)
Zhang: The third point is more important, the Greek assistance, despite lower interest rates than market rates , but there are 5%. We all know that, according to IMF forecasts growth in the next few years the Greek economy is certainly less than 5%, which means that future debt will keep rising. not to mention the principal relief, periodic interest payments very difficult. If several European countries have not adopted structural adjustment in the short term, by finding a new economic growth point to enhance the growth of GDP, even if only to obtain loans from the crisis now pushed to the future, the future debt snowball He was unable to debt service, debt crisis will be more and more. (17: 36)
and News Network: So many people are not very good, the money can not be achieved in the end, you said the most fundamental to find new economic growth, I would like now to find a new economic growth point, as a small business easier, but as a nation euro zone, to find a new economic growth point too hard. (17: 36)
process Real: I would like to add that Dr. Zhang Ming mentioned earlier, we are now regarded as a short-term relief substantially relieve your pain symptoms formula. we really care about the long-term prescription assistance to find the Greek, it is important to the Greek fiscal consolidation program. premise Greece to a program, with one point, he put his business tax from 19% to 21% of the general efficiency of the financial consolidation plan from the tax increase. the international aspects of academic research have a very important conclusion, fiscal consolidation or spending cuts or increase revenue, increase revenue often bring in the long term effect is negative, it is best to cut spending. Greece to do more in this piece of rough. In addition a proportion of revenue is too large, this time we suspect that he finances consolidation plan, the economy in the long run what is a good thing or a bad thing? I think this is marked by a very large question mark. (17: 36)
and Information Network: Greece trouble now so powerful that many would prefer to Professor national bankruptcy, is not willing to lower my welfare. What happens if Greece really bankrupt? (17: 36)
Zhang: Greece really very bad case of insolvency, the first, he may have all the sovereign debt default , which means his future in the international financial markets to develop new bonds and then basically very difficult. Second, in addition to sovereign debt, the residents, businesses and financial institutions have borrowed a lot of debt, this may also breach basically means that the country's future for a long period of time can only rely on themselves, he has not played financing through international financial markets function, so is very bad. (17: 37)
Zhang: There are After your default will affect other countries, including some international financial institutions for his help, this I am referring to is bankrupt the country. In another case, Wei Lai fundamental solution to the crisis in Greece, you may need the help of a fairly standard external debt restructuring , which is able to Greece to get out from the debt crisis. now thinking of aid, do not let the creditor impaired, but this will only make the debt snowball, similar to the debt crisis in Latin American countries, through the Brady bonds of these dragged out of the country from debt, I think change will happen next idea. (17: 37)
and Information Network: the whole in order to keep all bonds is also very difficult. Now some say the debt crisis of the Greek a little conspiracy theory, Greek debt crisis evolved into this level, there is definitely behind the speculators fueled. (17: 38)
way real: I think the conspiracy theory has some truth, but can not explain all of reality. We know that speculation is in the affirmative exist. We know there is a leverage effect of Greece, Greece in Europe accounted for less than 3% of GDP, at this time such a big event, causing panic in the market so much, must have some speculative profit space, and they will definitely participate in this market. I think speculation is largely magnified the impact of the crisis, magnified by our short-term pain. But from another perspective, we have 750 billion could accelerate the arrival of large-scale rescue package. dialectical speculation we have to look at, it certainly exists. (17: 38)
Zhang: I think the speculation will not change the trend, it will only amplify trends, it only contributed to the severity or add fuel to the fire role. the problem is still here, do not stare seamless fly eggs, is that you own a problem, the flaw was caught investors, enlarge it, so basically speculation is not the most fundamental factor. (17:38)
and Information Network: No question is too hard, but their own, the first euro-zone building system, the existence of institutional and structural birth defects, no question is too hard to let him. (17: 39)
implementation process: We know the problem is the long-term problems the euro area, we do not know how long the problem will have little short-term impact, this time the Greek crisis, just a connection point to. (17: 39)
Zhang: And speculators operation is not the time to see who has problems, but to see who the problem even more. before the problem in the United States, we think that the problem is more the United States, the U.S. stock market may also be short on the dollar. But the European crisis in the short term cover up the problem of the United States, So now between the euro and the dollar is not good and bad, but rather the problem worse and worse, speculators will take on the future trend of further deterioration of the currency and financial markets to start. (17: 39)
and Information Network: From the U.S. perspective, the situation of the euro is not the dollar is now more readily see? (17: 40)
Zhang: This is not to say, because there are both positive and negative forces. from the positive in terms of ability to do the euro challenge the dollar is the only currency of the international monetary policy, so the outbreak of the crisis in Europe weakened the strength of the euro, U.S. dollar will certainly help strengthen the international hegemony. On the other hand, a weaker euro will affect the U.S. exports to the U.S. domestic private consumption remains weak now, the Government can not always be sustained stimulus, so the United States in exports this year would particularly like to stimulate economic growth through. (17: 40)
way real: This is me with Zhang Dr little bit different point of view, Dr Cheung between the dollar and euro long tangle I very much agree, I would like to add that short-term impact. Last night I've just watched a new study, this report is very precise analysis, Now 10% depreciation of the euro, and 1% of the recession in Europe, the U.S. GDP would have much impact? (17: 41)
way real: This is a short-term measure, the results of this calculation is beyond my expectations, just sheets Doctor said, U.S. exports are dependent on their recent U.S. economy, and the United States more dependent on exports to Europe itself, but the estimation results from our expectations. When the whole euro-zone economy shrunk down to 1%, 10% depreciation of the euro down against the United States Only 0.05% of economic damage, which is very small. From this point of view of trade, if we analyze the structure of the entire U.S. economy and economic structure of Europe will come to this result, the depreciation of the euro the U.S. economy can bear. (17 : 41)
and Information Network: We are still in the discussion of the depreciation of the euro, the euro if restored to the mark, franc and other previous conditions, the dollar is more better? including the then arises the euro, the main is strategic cooperation. Germany as Europe's largest economy, the world's second largest economy, is not very willing to put their own mark disappears, and then join the euro. when Cole was persuaded Mitterrand said, you give me a euro I give you a country. As the United States, Mark, francs into euros last trophies with their confrontation, what for them is definitely not a good thing. If the last back to Mark and francs to the dollar situation is not better? (17: 41)
Zhang: I think that if the euro area collapsed, and in the international monetary point of view of today's dollar is a benefit. But the case of choosing whether the euro, economic interests and political interests above. in particular to France , Germany, the relative economic strength in the decay, but in the international arena is a big country, he wants to maintain the status of great power, and only tied up. In this place will suppress the differences between the long-term political interests. (17: 41)
and Information Network : From the American point of view, the dollar falling apart is not better? (17: 42)
Zhang: It is natural, but less likely to fall apart. (17: 42)
and Information Network: a challenge before the yen against the dollar, the Asian financial crisis. was very strong in Europe, the Kosovo war out soon, the euro is in turmoil. With the euro getting stronger, a variety of things out. (5:43 p.m. )
way real: We have talked about the euro impact from the perspective of U.S. trade is very small. But from the perspective of financial markets, especially from the perspective of the credit crunch, the euro changes, including disappearance of the euro on the U.S. economy How much impact? from the perspective of financial markets, the impact is far greater than the impact from a trade perspective, why is that a significant depreciation of the euro now, even though the trade did not produce as much damage. (17: 43)
process Real: I would like to add that Dr. Zhang Ming and the host have just talked about, why the euro will not fall apart, from an economic point of view that we know that the euro area, including the European Union from the point of view, impact of export on the economy very large, two-thirds of euro area exports and trade is internal, so if the euro single currency, the transaction cost savings, improve the overall economic interests of the whole of the EU and the euro area is great. And Germany is also very happy to see that we look further, in the euro zone exports, Germany is the largest exports, Germany is also very happy to see the existence of the euro. (17: 43)
and Information Network: This time 750 000 000 000 The introduction, as if the U.S. Obama is a call to Merkel, said that Europe needs some big action. This is the time of 9 am local time, then 10, introduced this thing. from the United States is concerned, although the war mess will eventually burn itself, it is also very possible. (17: 43)
Zhang: On the other hand, the United States and some European countries also returned to the bilateral U.S. dollar exchange, which is on the euro-zone countries a support. (17: 43)
and News Network: Because the conspiracy theory is impossible to confirm that we are here Xia Xiang, in the end how to say no. The reason why so much trouble, we are so worried , do you think the Greek radio, Spain, will soon feel that it is not a problem, as Greece, Spain, the likelihood? (17: 44)
way real: I think the possibility is very small, we know the size of the debt itself is a issues, debt burden rate is another question, how much I can bear the economic. you just say how much debt the U.S. debt was up to, he can not do it? but the U.S. debt risk is very, very small. Spain is the situation, although the situation is more debt large, but the capacity is far more than Greece. But Spain's economic recovery in the euro zone front row of the comparison, the euro zone economic recovery is beyond our imagination. I saw last night, said the euro zone is not much data, but a look at data in the euro areas the situation is very good, so the capacity of the euro area economy as a whole, or some. (17: 44)
and News Network: It seems that Germany is now the state are to the right direction. (17: 44)
Cheng fact: Yes, Germany is also good. (17: 44)
and News Network: I read an analysis, may eventually end the crisis in Europe's rapid economic recovery in Germany, the German economy is good, with an estimated many issues gone. (17: 45)
Zhang: Yes, the Spanish did in the budget deficit and government debt indicators stronger than Greece. Spain, high price-earnings ratio, price-earnings ratio of 20%. relative to the Spanish speaking, I think the more dangerous of Portugal, Portugal deficit and the relatively high proportion of government debt, his share of external debt to GDP more than 90%. Of course, he has the advantage, he borrowed a lot of debt, the debt is denominated in euro, but he himself is the euro. But Portugal and Spain compared smaller economies, the economic structure to be, once the turmoil in the future, his Government's fiscal policy space is small, so more dangerous compared to Spain and Portugal. (17: 45)
implementation process: the European I would like to add that the area economy, we know that a very important feature of the euro area economy is mixed. from the current state of view, the euro area has such an interesting image, the strongest like Germany and Spain are good, the most poor small countries like the Middle East is also good, especially as the Czech Republic and the like, the growth rate is very good. but the middle piece is not much, not enough solid middle class, which is the euro zone economy structural problems. (5:46 p.m. )
and Information Network: Tell us more similar to China, certainly not us so serious. In fact, the crisis in which we also are very concerned about a problem, it concerns not just in Europe, the United States is also concern that the credit rating agencies problem. including China, many scholars have also expressed doubts about the three major credit rating agencies, previously said he felt a little problem that he said he desperately, the situation is getting worse, you further reduce the rating to form a vicious circle. including before the Asian financial crisis, have seen a very active voice in it, where there is a problem they quickly jumped out, how do you view them? (17: 46)
Zhang: I think this time the credit rating agencies in Europe sovereign debt crisis without any mistakes. Of course, what insider trading is possible we do not know, but so far the outside, they do use their known information independent, objective, impartial and make a rating. in the U.S. subprime We accused him of the crisis, there is no time lowered ratings of financial products, leading to crisis. I think the credit rating agency capital market is important, and now the market is very complex and there are many investors rely heavily on his credit rating. (17: 47)
Zhang: credit rating equivalent to the pricing of accounting has been something that we have things priced in the U.S. financial crisis played an important role in the market for financial products issued by the debt I pay, loss of amplification. But you Pricing can find something better than the way has it? So, I think this kind of thing in itself is no problem, but it is some other risk prevention awareness of the institutions themselves down. I would think that this time the crisis broke out, he can promptly lowered credit rating, which is responsible on the market. (17: 47)
real way: I feel that good or bad? to do is not excessive, this is a subjective judgments, we say that an objective point These several major rating agencies to produce a significant effect is pro-cyclical effect, good times good times and bad is bad. Objectively speaking, this effect is certainly there, we are not accusing him, but that we do not have a monitor supervisory ratings agencies. I think in the international financial regulation, especially in the crisis, we are now caught in such a state of embarrassment, the whole international financial regulation at the regional level by a number of shackles, there is no breakthrough, a breakthrough in an international context that is more difficult, which is why pro-cyclical effect of credit rating agencies have not been effectively controlled, I think this effect can be constrained by some mechanism for it, but this mechanism we did not find a breakthrough. (17: 53)
and information network: I so powerful that you, as rating agencies, and why later told me how. was out of this debt, you give me evaluate how, you find out all the aspects. wait for it before the incident, evaluate and adjust your level, As you so well-known and authoritative rating agencies, you do not. For example, the Greek sovereign debt, in the end what level? Why did you dig out the hidden risks of all, you should tell people the real thing, why wait until the Finally broke out of tune again. (17: 53)
Zhang: I think the forward-looking independent credit ratings. section rating agencies have significantly before the sovereign bonds, will issue a warning to the market, of course, this approach does not good enough. I want to say, I am afraid that rating agencies have access to information that is not very complete, very often before the crisis, he may not be on the authority of your country is very, very good material, in this case he did not dare to do forward-looking ratings. For example, there is no problem in this country, he made a prospective rating, but the market to achieve this country into crisis, blame is also a lot of time, so he only saw plenty of evidence to conclusions, often this When comparing late. (17: 54)
and News Network: So for rating agencies, the rights of too much responsibility too. (17: 54)
way real: I have a different view I think the rating agencies have some volatility amplification effect, not ethics, but technical problems. I have a point of view, today the economic and financial operation of the state has told us to go to school finance to the small probability events have little impact, the it for some of the complex model to arrive at a rating, and ratings are based on these calculations. but we now have a very interesting phenomenon, in the current economic environment, the was much larger before the predicted. (17: 54)
real way: think of a few days ago, and why the Dow dropped a thousand points, which is very small probability, from the beginning of millions of short options, to the final true The dropped a thousand points, a lot of things together, each is a small probability, but it really happened. understanding of the changing trend of economic realities, needs some updating, I think it is just a technical problem. (17: 55)
Zhang: And a small probability event occurred, are generally systemic risk, impact great. This is also reflect domestic and foreign economists, how to make these things more fully integrated into this model to go, but probably not a short process that can take more time to efforts to achieve consensus. ( 17: 55)
and Information Network: From now on the circumstances, these big rights in the international rating agencies too much, too much influence, and what is not constrained by this I feel is a terrible thing. that fact, I want to buy a bond, you should tell me how to bond in the end, the last time someone defaults, you told me no, because they related to transactions which also. (17: 56)
Zhang Ming: In the past we have often accused the rating agencies said he had a conflict of interest, because he financial products to private financial institutions ratings, he is to the company money, not to the information user fees, so people say that you took someone else money you soft in the mouth. But the sovereign credit rating is not charged to the sovereign state, so the sovereign credit rating is no conflict of interest. (17: 56)
and Information Network: In any case, the right to do too much, can operate in some countries life and death, and no supervision. For us there are such problems in China, we Chinese are also said to foster a number of previous rating agencies, are basically the final say by others, that of China and the world is very important for many countries , is not restricted to individual countries to coordinate and control measures, it is not necessary? (17: 56)
Zhang: I think a development is to strengthen the supervision of rating agencies, as he had done .. .
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