First, we would like to clarify that we are strong supporters of the European monetary integration project. Our view is that the single currency involves significant potential economic and political benefits for all its participants which far outweigh its potential costs. We thus believe it is right to spare no effort to ensure the euro’s continued stability and success.

The conventional wisdom is that, when the seas get rough, it’s better to be in a big boat. But being in the European Monetary Union (EMU) hasn’t exactly been smooth sailing for all its members. On the contrary, as I argued in my blog posted January 21, the crisis has highlighted that sound policy frameworks are more important than ever.

"British or German taxpayers cannot finance the failures of others," German Economy Minister Rainer Bruederle said at the World Economic Forum in Davos, Switzerland, according to the Associated Press. "Solidarity also means everybody adheres to common rules."

France is not working with Germany or other countries on a support package for Greece which is managing to handle its problems on its own, a French government source said on Thursday. "I am not aware of a support plan. There is not a plan. We're not discussing one (with Germany or others)," the source told Reuters. "They are managing themselves. They are finding financing support on the market. There is no plan for a support plan. We are not working on one. Le Monde newspaper said earlier that euro zone countries were studying ways of helping Greece resolve its budget problems."

Well, the Spanish government are due to announce their 2009 fiscal deficit number this morning, together with their adjustment plan for reducing the annual fiscal deficit to below 3% of GDP by 2013. This rather distasteful news will be presented to the Spanish people later in the same day on which they opened their morning newspapers to discover that they were all going to have to work two years longer - no crisis comes free - since the Labour Minister Celestino Corbacho has announced that the retirement age will be raised from 65 to 67 (in two-month-per-year installments) between now and 2025.

At the beginning of a new year it makes sense to look both back and forward. Last year was characterised by an extraordinary recovery on the equity markets in Eastern Europe, most markets have recorded triple digit gains since their respective bottoms. The recovery should, however, be viewed with the dramatic correction in 2008 in mind.

Greece announced a 5-yr 8 billion euro deal today (as expected) – yesterday I called this a Hail Mary. Well, the Hail Mary worked! Books are closed, and the deal is well over subscribed (i.e., strong demand for the deal). Evidently, the talk is that there is natural demand for this product, via the rest of Europe, to shore up the value of the bonds over the near term.

Greece – it’s the Eurozone’s black sheep. If this isn’t a Hail Mary, I don’t know what is: Greece Plans Bond Issue Soon. From the Wall Street Journal:

Greece said Friday that it plans to syndicate a five-year benchmark bond next week to address renewed market jitters over its ability to finance its giant budget deficit, even as yields on Greek debt hit a new high. The bond, long awaited by market participants and seen as a key test of Greece's ability to attract investors, will raise between€3 billion and €5 billion, the head of the country's debt agency said.

What a difference a year makes. January 2009 marked 10 years since the introduction of the euro. That anniversary fell in the midst of the worst global financial crisis in the past half century.

The euro—and the European Central Bank—proved important safeguards against the spread of the crisis. Countries whose currencies would likely have been subject to severe market gyrations had they not been part of the eurozone held their ground. And the ECB used innovative approaches, along with central banks around the world, to help provide liquidity and calm markets.

But as the crisis progressed, it became clear that the eurozone countries were affected in very different ways.

Markets took notice and the premia charged on sovereign bonds diverged. This month, as the euro turns 11 and even as the crisis is receding and an economic recovery is underway, prominent commentators—including Martin Wolf and Paul Krugman—are concerned that the strains within the eurozone are serious, and will need serious attention.

While investors are generally aware of the dire state of the western economies’ accounts, quite a few of them are optimistic that these large budget deficits can be closed through a combination of fiscal discipline and expenses reduction. Such optimism, based on other countries’ past experience, is likely to be disappointed for mainly two reasons. Firstly, the closing of the gap relies on consensus growth estimates that appear overly optimistic, leaving room for tax revenues disappointment. Secondly, the budget deficit problem concerns countries accounting for more than 50% of global GDP, meaning that single countries’ past experience does not necessarily provide a reliable guide here. Andrea Cicione, PNB Paribas

Much is riding on getting the timing of the exit right from the stimulative policies used to combat the global economic and financial crisis. This is something that IMF Managing Director Dominique Strauss-Kahn has repeatedly emphasized. Exiting too early may jeopardize the recovery. But exiting too late may sow the seeds for the next crisis, as Wolfgang Munchau and others have argued recently. I also agree with Jean Pisani-Ferry and his colleagues that exiting in an uncoordinated fashion will lead to a renewed build up of financial instability.