Forget worrying about the euro; prepare for revolution

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This topic contains 20 replies, has 8 voices, and was last updated by Profile photo of Anonymous Anonymous 4 years, 6 months ago.

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  • #56849
    Profile photo of GarySFBCN
    GarySFBCN
    Participant

    Austerity measures that disproportionately affect people who are barely getting by; a reactionary government that is using the poor economy as an excuse to sell off national assets to the highest bidder; NO ACCOUNTABILITY, NOR APPARENT UNDERSTANDING OF JUSTICE OR FAIRNESS:

    Director Of Spain’s Failed Bankia To Leave With €13.8 Million Termination

    If those in charge are still confused why the general population is not very “appreciative” of the banker social substratum, the following example should provide some color. Following the ever greater public bailout fund black hole that Spain’s Bankia has become (first of many zombies), we now learn that one of its financial directors, Aurelio Izquierdo, will be entitled to €14 million in pension and termination benefits. Supposedly in compensation for running the bank straight into the ground after just one year of operation, and lying fabulously about its financial performance, in the process suckering in thousands into investing their hard earned cash so that oligarchs such as Aurelio can promptly retire to a non-extradition locale. And this, dear powers that be, is why the general public continues to scratch its head at how it is remotely possible that incompetent crony capitalists get paid tens of millions for blowing up their firms, while everyone else is stuck footing the soon to be soaring inflation bill (because print they must, and print they will).

    http://www.zerohedge.com/news/director-spains-failed-bankia-leave-%E2%82%AC138-million-termination

  • #109250
    Profile photo of GarySFBCN
    GarySFBCN
    Participant

    Sorry – this post was supposed to be under the ‘press articles’ thread. I don’t know what went wrong.

  • #109251
    Profile photo of DBMarcos99
    DBMarcos99
    Participant

    It may deserve a seperate thread even so…

    Here’s a very interesting article – 6 reasons why Spain will leave the euro first..

    http://www.marketwatch.com/story/6-reasons-spain-will-leave-the-euro-first-2012-05-30?link=MW_story_popular

    Three: Spain has a real economy. The Greeks understandably feel nervous about life outside the euro zone. They don’t really make anything. Spain is a successful economy with a perfectly respectable industrial base – its export to GDP ratio is 26%, similar to the U.K., France or Italy. Only last week the Japanese car-maker Nissan announced a major new investment there. Spain’s problem was a deranged currency that created an insane property bubble, which burst with calamitous results. But there is no reason for Spain to fear it doesn’t have a prosperous future outside the euro. It has plenty of successful export industries.

    The only point I don’t agree with is the “politically secure” one. The two Spains are currently comitted to democratic process, but that could change if things get worse. Let’s hope not.

  • #109267
    Profile photo of GarySFBCN
    GarySFBCN
    Participant

    The only point I don’t agree with is the “politically secure” one. The two Spains are currently comitted to democratic process, but that could change if things get worse. Let’s hope not.

    This is my only fear about living in Europe. Nationalism is easily exploited by maniac politicians. But the article you posted demonstrates that there are alternatives to the gloom and doom.

    Thanks for posting – it actually gives me hope.

  • #109269
    Profile photo of logan
    logan
    Participant

    Spain will not leave the Euro. It’s a fantasy to believe otherwise. The economics and social structure are too deeply tied into the Euro. It would be a nuclear option and set the country back for decades and would certainly destabilise government.
    There are no political voices even suggesting it.

    Nissan would not have made those investments you refer to in your post without Eurozone membership.

    Spain has run out of money and the salvation lies only in being a member of the Euro. The government of Rajoy will need to make further concessions and turn the screw even tighter before Germany will relent.
    Civil unrest and social disintegration is inevitable anywhere when the cash runs out. Germany will have to drop their opposition to EU bonds once the tanks roll down the streets.
    http://www.guardian.co.uk/business/2012/may/30/eurozone-financial-disintegration-european-commission

    They have got themselves into this awful mess as a consequence of the Euro but leaving it now will be an even greater disaster.

  • #109270
    Profile photo of katy
    katy
    Spectator

    @logan wrote:

    Nissan would not have made those investments you refer to in your post without Eurozone membership.

    They have got themselves into this awful mess as a consequence of the Euro but leaving it now will be an even greater disaster.

    Why do you think that. Nissan has invested an extra £127 million in the UK, and that’s not eurozone.

  • #109271
    Profile photo of logan
    logan
    Participant

    Global companies require a presence in regions of the world which use stable internationally traded currencies. Incentives by governments are also a factor. Nissan has a long established and successful presence in both UK and Spain. If Spain left the Euro that might change.

  • #109272
    Profile photo of Anonymous
    Anonymous
    Participant

    then why is it that the german plant might be closing as it is the most stable place out of the 3

  • #109273
    Profile photo of logan
    logan
    Participant

    Unit costs. Labour, taxes, union inflexibility. lack of government subsidy. I’m speculating but it’s usually a combination of reasons.
    German Bunts fell to 0% yield today. What does that tell you about the state of the European economy? 😥

  • #109274
    Profile photo of DBMarcos99
    DBMarcos99
    Participant

    http://www.thecorner.eu/2012/05/rajoy-opposition-party-european-rescue/

    It has been a long time since a Spanish government and its opposition party have been able to join a standpoint with just one voice. The crisis triggered by Bankia’s bailout seems to have broken the trend. According to the agreement terms, Rajoy and Rubalcaba will be in permanent contact in the near future, especially before the European Council meeting, which will take place in Brussels at the end of June.

    Both politicians aim to explain that the reason why the Spanish government rejects a rescue plan is not a sort of national pride or a question of not accepting the reality. The fact is that Spain thinks that the European Union has not succeeded at all in the bailout programmes it has already carried out. If the model are the Greek, Portuguese and Irish recues, their only result has been economies and societies even more depressed than they were before the EU assistance, so the answer would be a “no, gracias”.

    I may be completely wrong, but I get the feeling the Spanish would sooner leave the Euro, than put up with bail-out conditions that have failed in Greece, Portugal, Ireland. There is only so much austerity punishment an economy can take.

  • #109278
    Profile photo of Chopera
    Chopera
    Participant

    @logan wrote:

    Global companies require a presence in regions of the world which use stable internationally traded currencies. Incentives by governments are also a factor. Nissan has a long established and successful presence in both UK and Spain. If Spain left the Euro that might change.

    Not to sure about this. It would be to Nissan’s advantage that the Spanish currency devalued by as much as possible since it would reduce local costs. I agree that labour laws are important, and general economic stability, and maybe the lack of trade barriers that come with being part of a single market. But those won’t necessarily disappear if Spain left the euro. The one thing that defibnitely would happen is it would be a whole lot cheaper for Nissan to build cars in Spain.

  • #109279
    Profile photo of logan
    logan
    Participant

    Chopera. If Spain returned to the Peseta unit costs would increase not decrease.One advantage would cancel out the other.
    This is a complicated technical subject with differing view points. If you want to understand better why multinationals prefer single currency regions try this link.

    http://ideas.repec.org/p/dgr/rugsom/01e60.html
    Quote:
    We discuss the impact of liberalisation, deregulation and the introduction of a single currency on cash management within multinationals in the euro zone. The developments in the euro zone reduce financial market imperfections in transferring cash and diminish the need for separate local cash holdings. This facilitates the centralisation of cash management and headquarters’ financial control. Increased financial power of multinational headquarters, moreover, offers opportunities for disintermediation. By exploiting these options multinationals in the euro zone can start to reap additional benefits of internal financing and conglomerate discounts of euro zone multinationals may diminish.

  • #109280
    Profile photo of Chopera
    Chopera
    Participant

    @logan wrote:

    Chopera. If Spain returned to the Peseta unit costs would increase not decrease.One advantage would cancel out the other.
    This is a complicated technical subject with differing view points.

    If an employee is earning say €2000/month, and then the new peseta is introduced at say €1 = 1 peseta the employee will then be paid 2000 pesetas/month. Then if as the peseta devalues to say €1 = 2 pesetas the employee will be earning the equivalent €1000/month. So unit labour costs have decreased.

    @logan wrote:

    If you want to understand better why multinationals prefer single currency regions try this link.

    http://ideas.repec.org/p/dgr/rugsom/01e60.html
    Quote:
    We discuss the impact of liberalisation, deregulation and the introduction of a single currency on cash management within multinationals in the euro zone. The developments in the euro zone reduce financial market imperfections in transferring cash and diminish the need for separate local cash holdings. This facilitates the centralisation of cash management and headquarters’ financial control. Increased financial power of multinational headquarters, moreover, offers opportunities for disintermediation. By exploiting these options multinationals in the euro zone can start to reap additional benefits of internal financing and conglomerate discounts of euro zone multinationals may diminish.

    Yes cash management is easier if it is all in the same place and in the same currency, but do those cost savings outweigh the advantages of being able to exploit cheaper economies?

  • #109282
    Profile photo of logan
    logan
    Participant

    Yes you are probably right in the examples you give especially since the business is well established and set up costs out of the way. However consider this if hypothetically Spain returns to the Peseta the government would almost certainly double corporation tax and increase employer social insurance contributions.
    There just ‘aint any easy solutions.
    The government in this instance would be clawing cash back from every source possible. Tourism and the housing market would boom, it’s a great solution but it will not in my opinion happen for political reasons, not least the loss of EU bailout cash which is coming soon.

  • #109284
    Profile photo of DBMarcos99
    DBMarcos99
    Participant

    http://www.reuters.com/article/2012/05/31/uk-eurozone-spain-idUKLNE84U00K20120531

    “The resentment in Madrid is very apparent”

    To hear the government tell it, outsiders have got it all wrong: Spain has lived beyond its means for too long and is now going through a painful but necessary period of adjustment to shrink its state sector, cut spending and boost competitiveness. All the right things are being done. Rajoy’s government is serious, committed and enjoys a comfortable parliamentary majority.

    Officials say foreigners don’t understand that Spain has boosted its exports more than any other European country in the past three years, that it has reformed its labour markets, cut its costs of production and come clean about the problems in its banks, which lent too enthusiastically to finance a huge property bubble that has now burst.

    Now, ministers say, Madrid just needs time and some help and support from its European partners to get through the most acute phase of the crisis and give the reforms time to work.

  • #109285
    Profile photo of logan
    logan
    Participant

    All is well then Marcos. 🙂 No mention of the Bankia cock up, the regional cock up and the additional €60bn minimum the government doesn’t have to save the remaining banking system.
    http://www.telegraph.co.uk/finance/debt-crisis-live/9301285/Debt-crisis-live.html

  • #109286
    Profile photo of DBMarcos99
    DBMarcos99
    Participant

    @logan wrote:

    All is well then Marcos. 🙂 No mention of the Bankia cock up, the regional cock up and the additional €60bn minimum the government doesn’t have to save the remaining banking system.
    http://www.telegraph.co.uk/finance/debt-crisis-live/9301285/Debt-crisis-live.html

    Well actually a good deal of the article does cover the Bankia issue. But the point is that the people in charge in Madrid feel resentful that they’re not getting the support (they feel they deserve) from Berlin, given the progress in other areas such as exports, reform of labour markets etc.

    Which is why I feel that Spain will endd up leaving the Euro, unless the ECB will lend at a decent interest rate. Of course leaving the Euro still won’t create any more credit for Spain, but at least the devalued currency should (in some people’s views) attract external investors.

    Scary times

  • #109288
    Profile photo of logan
    logan
    Participant

    I think for once that attitude towards Spain by the ECB and EU Commission is justified. I don’t necessarily blame Rajoy personally but the culture of secrecy which prevails within Spanish boardrooms and government.
    Coming clean with the true extent of a problem is an anathema to the Spanish. They work only on a need to know basis and the Germans in particular don’t understand that. They believe that only the tip of the iceberg has been so far revealed.

  • #109295
    Profile photo of katy
    katy
    Spectator

    Logan I agree, I think there is a lot more to come out re. Spanish banks. They have never been transparent.

  • #109296
    Profile photo of Chris McCarthy
    Chris McCarthy
    Participant

    @katy wrote:

    Logan I agree, I think there is a lot more to come out re. Spanish banks. They have never been transparent.

    It is one of the fantastic benefits of the this whole crisis and fiasco though, that not only Spanish banks are being forced to be transparent, the whole structure and system in Spain from top to bottom town hall to regional junta is going through such a transformation, that will eventually lead to a North European standard of low to no corruption, low to no black money, greater and more open tax revenue collection and all around higher standards in every area hopefully.

    All of this stuff is incredibly traumatic for Spain and even more so for Greece, but after Dictatorship and transition to democracy and in the case of Greece from a military junta, the people themselves want their governments regional and national, their banks and their whole infrastructure to be right in line with the UK, Germany, Scandinavia – that’s why they don’t want to go back to the Peseta and Drachma – not at any time, they see being governed by Brussels as far preferable to being governed by Madrid or Athens.

    Spain has changed all ends up over the past twenty years but ever more so since the Euro was introduced, great transparency and real accountability in the future is one silver lining out of all of this.

  • #109306
    Profile photo of Anonymous
    Anonymous
    Participant

    @katy wrote:

    @logan wrote:

    Nissan would not have made those investments you refer to in your post without Eurozone membership.

    They have got themselves into this awful mess as a consequence of the Euro but leaving it now will be an even greater disaster.

    Why do you think that. Nissan has invested an extra £127 million in the UK, and that’s not eurozone.

    Don´t be so naive – the UK has no own car brand / plant left – they pay a lot of money(subsidize- building new debts) to get nissans investments.

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