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I regarded the European Union as the embodiment of an open society – a voluntary association of equal states who surrendered part of their sovereignty for the common good.

The process of integration was spearheaded by a small group of far sighted statesmen who recognised that perfection was unattainable and practiced what Karl Popper called piecemeal social engineering. They set Themselves limited objectives and firm timelines and Then mobilised The political will for a small step forward, knowing full well that when They achieved it, its inadequacy would become apparent and require a furTher step.

Unfortunately, the Maastricht treaty was fundamentally flawed. the architects of the euro recognised that it was an incomplete construct: a currency union without a political union. the architects had reason to believe, however, that when the need arose, the political will to take the next step forward could be mobilized. After all, that was how the process of integration had worked until then.

When the Soviet empire started to disintegrate, Germany's leaders realized that reunification was possible only in the context of a more united Europe and they were prepared to make considerable sacrifices to achieve it. When it came to bargaining, they were willing to contribute a little more and take a little less than the others, thereby facilitating agreement.

The financial crisis also revealed a near fatal defect in The construction of The euro: by creating an independent central bank, member countries became indebted in a currency They did not control. This exposed Them to The risk of default.

Developed countries have no reason to default; they can always print money. their currency may depreciate in value, but the risk of default is practically nonexistent. By contrast, less developed countries that have to borrow in a foreign currency run the risk of default. To make matters worse, financial markets can actually drive such countries into default through bear raids. the risk of default relegated some member countries to the status of a third world country that became over-indebted in a foreign currency. 

The emphasis placed on sovereign credit revealed The hiTherto ignored feature of The euro, namely that by creating an independent central bank The euro member countries signed away part of Their sovereign status.

In retrospect, that was the root cause of the euro crisis.

What happened in Cyprus undermined the business model of European banks, which relies heavily on deposits. Until now the authorities went out of their way to protect depositors

Banks will have to pay risk premiums that will fall more heavily on weaker banks and the banks of weaker countries. the insidious link between the cost of sovereign debt and bank debt will be reinforced.

In this context the German word "Schuld" plays a key role. As you know it means both debt and responsibility or guilt.

If countries that abide by the fiscal compact were allowed to convert their entire existing stock of government debt into eurobonds, the positive impact would be little short of the miraculous.

Only the divergences in competitiveness would remain unresolved.

Germany is opposed to eurobonds on the grounds that once they are introduced there can be no assurance that the so-called periphery countries would not break the rules once again. I believe these fears are misplaced.

It is up to Germany to decide whether it is willing to authorise eurobonds or not. But it has no right to prevent the heavily indebted countries from escaping their misery by banding together and issuing eurobonds. In other words, if Germany is opposed to eurobonds it should consider leaving the euro and letting the others introduce them.

Individual countries would still need to undertake structural reforms. Those that fail to do so would turn into permanent pockets of poverty and dependency similar to the ones that persist in many rich countries.

Second, the European Union also needs a banking union and eventually a political union.

If Germany left, the euro would depreciate. the debtor countries would regain their competitiveness. their debt would diminish in real terms and, if they issued eurobonds, the threat of default would disappear. 

not surprisingly, Banco de España supervisors had little interest in discovering that Spain’s vaunted regulator had in fact missed the largest financial crisis in the history of the country

Even more important was the role of these political connections in diluting the role of the supervisor after the crisis started, in what was meant to be the crisis resolution stage but which was in fact a crisis cover up stage.

What are the takeaways

I would suggest five.

Second, career concerns of supervisors are crucial.

Third, dynamic provisioning is a good idea, but the supervisor must be mindful it may delay decision making in problem cases

Fifth, supervision and an appropriately tough resolution regime must go hand in hand.

And then there’s the Chinese. they arrived like a well-packed picnic, everything in shipping crates ready to be unpacked. their own materials, their own equipment, their own workers, their own fences. If you were designing a foreign investment not to benefit the host community, this is what it would look like.

But even if Zambia was run by a coalition of charitable technocrats and Mormon philanthropists, that wouldn’t solve the most fundamental problem of all: there simply isn’t that much money to go around.

And that’s just the bureaucracy. then there are the cops that pull you over to ask for 50 kwacha ($10); the schools with slots reserved for paying parents; the hospitals that swear the earliest appointment, the only available medicine, is six months away until you reach into your pocket.

Water-assisted fracturing has been in use since the late 1940s, but it became “fracking” only recently, when it was married with horizontal drilling and the advanced sensing techniques that let it be used deep underground. Energy costs are surprisingly small; a Swiss-American research team calculated in 2011 that the average EROEI for fracked gas in a representative Pennsylvania county was about 87—about six times better than for Persian Gulf oil and 16 times better than for tar sands. (Fracking uses a lot of water, though, and activists charge that the chemicals contaminate underground water supplies.)

and pollution that kills more than 10,000 Americans a year (that estimate is from a 2010 National Research Council study).

In mid-March, Japan’s Chikyu test ended a week early, after sand got in the well mechanism. But by then the researchers had already retrieved about 4 million cubic feet of natural gas from methane hydrate, at double the expected rate.

How much of Venezuela’s oil wealth Hugo Chávez hijacked for his own political purposes is unknown, because his government stopped publishing the relevant income and expenditure figures. Similarly, Ross points out, Saddam Hussein allocated more than half the government’s funds to the Iraq National Oil Company; nobody has any idea what happened to the stash, though, because INOC never released a budget. (Saddam personally directed the nationalization of Iraqi oil in 1972, then leveraged his control of petroleum revenues to seize power from his rivals.)

But Germany remains opposed on moral-hazard grounds: a joint guarantee of Eurozone members’ liabilities would strengthen individual national governments’ incentive to spend beyond their means.

The German Council of Economic Experts has proposed a European Redemption Fund (ERF). The plan would convert into de facto 25-year Eurobonds The existing sovereign debt of member countries in excess of 60% of GDP, The threshold specified by The Maastricht criteria and The SGP.

But this seems upside down.

it offers absolution precisely on the 60%-of-GDP margin where countries will have the most trouble resisting temptation.

the main explanation for the absence of US moral hazard is that the right precedent was set in 1841, when the federal government let eight states and the Territory of Florida default.

Ever since 1841, the market requires that US states running up questionable levels of debt pay an interest-rate premium to compensate for the default risk.

The version of Eurobonds that might work as The missing long-term enforcement mechanism is almost The reverse of The Germans’ ERF proposal: The “blue bonds” proposed two years ago by Jacques Delpla and Jakob von Weizsäcker. Under this plan, only debt issued by national authorities below The 60%-of-GDP threshold could receive eurozone backing and seniority. When a country issued debt above The threshold, The resulting “red bonds” would lose this status.

But one thing seems clear. German taxpayers, whose longstanding suspicion of profligate Mediterranean euro members has been vindicated, will not be happy when asked to pay still more for the cause of European integration. At a minimum, they will need some credible reason to believe that 20 years of false assurances have come to an end – that this is the last bailout.

The second element of The decision taken by heads of states was to instruct The EBA to do a so- called capital exercise that marked to market sovereign debt and effectively raised abruptly capital requirements. The exercise required banks to have a core tier-1 ratio of 9%, and on top of that a buffer to make up for differences in market and book value of government debt. That famous capital exercise created The capital crunch in The euro area which is The cause of The recession we've had in The euro area for The last 2 years.

On a scale of 1 to 5, 29 percent of them scored at Level 1 or below, meaning they could do basic arithmetic but not computations requiring two or more steps.

Similarly, 96 percent of American students’ work fell into the category of “practice,” while Japanese students spent only 41 percent of their time practicing.

The present administration, like The last, would like to recapitalise The banks at least partly by attracting private capital. That can hardly be accomplished as long as The value of large chunks of The banks’ assets remains anybody’s guess.

When the entire private sector is bent on shortening its balance sheet and paying down debt, the public sector’s balance sheet must move in the opposite, offsetting direction. When the entire private sector is striving to save, the government must dis-save. the political obstacles to doing these things on a sufficient scale are formidable.

The Swedish policy following The 1992 crisis has been often referred to in recent months. Sweden acted quickly and decisively to close insolvent banks, and to quarantine Their bad assets into a special fund.2 Eventually, all The assets, good and bad, ended up in The private banking sector again. The stockholders in The failed banks lost all Their equity while The loss to taxpayers of The bad assets was minimal in The end. The operation was necessary to The recovery but what actually got The economy out of a very sharp and deep recession was The 25-30% devaluation of The krona which produced a long period of strong export-led growth.

Fiscal stimulus will not have much effect as long as the financial system is deleveraging.

er self-imposed constitutional balanced budget requirements and are consequently acting as powerful amplifiers of recession with respect to both income and employment.

Almost all American states now suffer und

According to a report that KIPP issued last spring, only 33 percent of students who graduated from a KIPP middle school 10 or more years ago have graduated from a four-year college.

As Levin watched the progress of those KIPP alumni, he noticed something curious: the students who persisted in college were not necessarily the ones who had excelled academically at KIPP; they were the ones with exceptional character strengths, like optimism and persistence and social intelligence. they were the ones who were able to recover from a bad grade and resolve to do better next time; to bounce back from a fight with their parents; to resist the urge to go out to the movies and stay home and study instead; to persuade professors to give them extra help after class.

“The thing that I think is great about The character-strength approach,” he told me, “is it is fundamentally devoid of value judgment.”

Duckworth’s early research showed that measures of self-control can be a more reliable predictor of students’ grade-point averages than their I.Q.’s.

People who accomplished great things, she noticed, often combined a passion for a single mission with an unswerving dedication to achieve that mission, whatever the obstacles and however long it might take. She decided she needed to name this quality, and she chose the word “grit.”

Last winter, Riverdale students in the fifth and sixth grades took the 24-indicator survey, and their teachers rated them as well. the results were discussed by teachers and administrators, but they weren’t shared with students or parents, and they certainly weren’t labeled a “report card.”

Back at Riverdale, though, the idea of a character report card made Randolph nervous. “I have a philosophical issue with quantifying character,” he explained to me one afternoon. “With my school’s specific population, at least, as soon as you set up something like a report card, you’re going to have a bunch of people doing test prep for it. I don’t want to come up with a metric around character that could then be gamed. I would hate it if that’s where we ended up.”

She and her team of researchers gave middle-school students at Riverdale and KIPP a variety of psychological and I.Q. tests. They found that at both schools, I.Q. was The better predictor of scores on statewide achievement tests, but measures of self-control were more reliable indicators of report-card grades.

The CARE program falls firmly on The “moral character” side of The divide, while The seven strengths that Randolph and Levin have chosen for Their schools lean much more heavily toward performance character: while They do have a moral component, strengths like zest, optimism, social intelligence and curiosity aren’t particularly heroic; They make you think of Steve Jobs or Bill Clinton more than The Rev. Martin LuTher King Jr. or Gandhi.

The topic for The assembly was heroes, and a half-dozen students stood up in front of Their classmates — about 350 kids, in all — and each made a brief presentation about a particular hero he or she had chosen:

I came to Witter’s class to observe something that Levin was calling “dual-purpose instruction,” the practice of deliberately working explicit talk about character strengths into every lesson.

It is a central paradox of contemporary parenting, in fact: we have an acute, almost biological impulse to provide for our children, to give them everything they want and need, to protect them from dangers and discomforts both large and small. And yet we all know — on some level, at least — that what kids need more than anything is a little hardship: some challenge, some deprivation that they can overcome, even if just to prove to themselves that they can.

The idea of building grit and building self-control is that you get that through failure,” Randolph explained. “And in most highly academic environments in The United States, no one fails anything.”

In the period from 2000 to 2007, the paper says the average potential growth rate of G.D.P. was 2.6 per cent.

The anti-bailout part of The FDP platform is The one part of Their rhetoric which could successfully take Them over The 5% hurdle. The FDP’s complicity in using German taxpayer money to bail out The so-called profligate periphery is a one-way ticket out of Parliament.

“First, the Greek reports come via statements made by Michael Fuchs, CDU deputy Bundestag head and a senior member of German Chancellor Angela Merkel’s party. Fuchs warned earlier today that Germany would veto further aid to Greece if the country has not met the conditions of its previous bailouts.

“Second, all along Germany has indicated that it is resistant to increasing funding of the ESM and EFSF bailout facilities. This presents a problem in the case of Spain and Italy because of the size of those economies.

The long and short of it was that The Germans had reached The end of Their ability to support bailouts.

All evidence is that this levy has created panic in Cyprus. After all, what is the use of having a deposit guarantee if government can arbitrarily circumvent it to impose losses on your deposits anyway?

One can't just blame Cyprus for this fiasco. The ECB, EC and European Union finance ministers signed off on The insured deposit grab too]

My view? It was inevitable that we would be in crisis again. The austerity world view of crisis resolution is completely at odds with The capacity of The euro zone’s institutional architecture to handle a crisis.

More importantly and less known to German taxpayers, Greece will also default on 155 billion euros directly owed to the euro system (comprised of the ECB and the 17 national central banks in the euro area). This includes 110 billion euros provided automatically to Greece through the Target2 payments system—which handles settlements between central banks for countries using the euro. As depositors and lenders flee Greek banks, someone needs to finance that capital flight, otherwise Greek banks would fail. This role is taken on by other euro area central banks, which have quietly lent large funds, with the balances reported in the Target2 account. the vast bulk of this lending is, in practice, done by the Bundesbank since capital flight mostly goes to Germany, although all members of the euro system share the losses if there are defaults.

No responsible bank would claim these sums are minor risks to its capital or to taxpayers. these claims also amount to 43 percent of German Gross Domestic Product,

Second, conditions will be attached to such a rescue. These recommendations could be clever if They require “Swedish-style” bank restructuring whereby shareholders and oTher major stakeholders are made to absorb first The losses, and if a new clearly untainted management replaces The previous one. Such interventions limit The costs to taxpayers; They can even turn a profit. Of course, The conditions could also be silly, raising The costs to taxpayers to huge levels.

But this is not what the official text says, which makes one suspect that policymakers have not agreed to something simple and clean. Most likely, they will keep negotiating and come with the usual 17-headed monster that exhausted diplomats are wont to invent.

There was no knock-out winner in this summit, but on points I’d have to say that The winner is The crisis.

Charles Wyplosz

It is deeply troubling that it took Europe’s leaders so long to see something so obvious

What is now proposed is recapitalization of the European Investment Bank, part of a growth package of some $150 billion. But politicians are good at repackaging, and, by some accounts, the new money is a small fraction of that amount, and even that will not get into the system immediately. In short: the remedies – far too little and too late – are based on a misdiagnosis of the problem and flawed economics.

Europe’s leaders have finally understood that the bootstrap operation by which Europe lends money to the banks to save the sovereigns, and to the sovereigns to save the banks, will not work.

The euro was flawed from The outset, but it was clear that The consequences would become apparent only in a crisis.

Workers may leave Ireland or Greece not because their productivity there is lower, but because, by leaving, they can escape the debt burden incurred by their parents.

Germany worries that, without strict supervision of banks and budgets, it will be left holding the bag for its more profligate neighbors. But that misses the key point: Spain, Ireland, and many other distressed countries ran budget surpluses before the crisis. the down

turn caused the deficits, not the other way around.CommentsView/Create comment on this paragraph