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Hi, I know from the last thread on this subject that many find it boring but I found it interesting and I do think the GBP v Euro rate does have a direct bearing on the Spanish property market.
Anyway it looks like we may be approaching some kind of watershed with the second bailout of Greece on the horizon. Here is a Bloomberg story that looks at what is going on.
http://www.bloomberg.com/news/2011-06-09/moody-s-says-voluntary-participation-on-greece-s-debt-is-hard-to-imagine.html
But there are quite a few other stories on it at the moment.What is clear to practically everyone is that Greece will almost certainly default at some time in the future since they have almost no hope of paying back what they owe so the only question is when. Both the ECB and the Finance Ministers want to put it off for as long as possible so that hopefully the rest of Europe will have recovered sufficiently to absorb any losses.
Essentially it is developing into a battle of wills between the ECB and the Eurozone finance ministers, and especially the German Finance Minister.
The ECB wants a proper bailout with no haircuts for existing lenders, they say that any hint of a default would cause a Lehman Bros style disaster that would have terrible effects on the European Banks. It would be assumed by creditors that Ireland and Portugal would also be tempted to default and it would put severe pressure on Spain and Italy, ultimately pushing Europe and the US back into serious recession.
The Eurozone ministers, being politicians, know that using taxpayers money to save Greek creditors is deeply unpopular with their electorates and could cost them their jobs and seats so they want some kind of haircut for creditors to keep the voters happy.
The current suggestion by the Finance ministers is that Greece asks their creditors to “voluntarily” rollover their debts as they mature. The ECB are OK with this idea but the problem here is that the ratings agencies have said that they would probably still view this as a default. They are a little cynical that it wouldn’t really be voluntary, just dressed up to look that way.
So, will the politicians take fright of the electorate and bring the house down or will the ECB win and place the burden of the bailout on the taxpayers? Or will they both find a way to hide it all and put it off until another day? Is anyone interested enough to post a view or put up other links?
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History have told us that the market in due time will make a correct valuation of the situation. Some countries like Greece, Spain and Portugal are trying to hide their problems and hopefully they will be treated like pest burdened third world countries for many years to come. It’s just a matter of time before this house of cards fall together.
Hopefully countires like Ireland and Iceland will be treated better since they have attacked the problem straight on.
The biggest problem with all of this is the way banks are allowed to lend out money. According to the old rules you only need 3000 euros to lend out 1 000 000 euros. Crashes are mandatory in a a system like that since its speeds up inflation and especially on real estate property. The question I want to ask you is why in the hell should we carry the banks when they behaved this recklessly for so many years?
Privatise profits and nationalise losses is what the lenders wants us to go along with.
I’m very right wing when it comes to economics but I’m ashamed how most of these so called right wing leaders/parties have behaved. They have actually done exactly what they usually acuse their nemesis for. If a company makes a bad decision it must be punished for it not getting bail outs. The left wingers at least have an excuse since they have used the normal left wing policies that they usually bring to the table.
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the more i read on the subject of this and what is being hidden by the spainish banks i can only see it all ending in tears,they can’t honestly expect the tax payer to keep footing the bill for their incompatance.The germans for one are not happy about carrying all the eurozone stragglers,most brits i speak to don’t want to be part of the euro bail out and think we already give far to much in aid to other countries while we are not doing so well ourselves
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The Spanish regional governments together owe €32bn. Most of them are close to bankruptcy and have not paid their creditors for months.
Castille and La Mancha cannot even pay their civil servants salaries. Cataluna’s budget is overdrawn by twice the set legal limitAdd this situation to the current state of Spanish banks which are rumoured to need €70 – €100bn to keep afloat.
The situation in Spain is unsustainable in the long term without financial assistance from both the IMF and the EU stability fund. They will have to come clean eventually. Probably after the general election next spring.The truth is that markets although aware of this grim situation, cling on to the strong economic performance of Germany and therefore worry less about the peripheral states. They believe Germany will always pick up the tab in the end.
If that belief is ever shaken by negative political events in Germany, I believe the Euro is doomed.
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@zoro wrote:
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So, will the politicians take fright of the electorate and bring the house down or will the ECB win and place the burden of the bailout on the taxpayers? Or will they both find a way to hide it all and put it off until another day? Is anyone interested enough to post a view or put up other links?Either way it’ll be the tax payer who pays – either to bail out Greece so she doesn’t default, or to bail out the banks if she does. That’s the big outcome of the financial crisis: the realisation that the banks are backed by the tax payer. They are like nationalised companies, except they can control the money supply. A ludicrous situation.
But getting back to your question, I suspect they will keep “bailing” Greece out for the time being. The EU seems resigned to a “make it up as you go along” approach to the debt crisis (or any crisis for that matter) since any pre-emptive action would be seen as an acceptance of the problem. However giving further loans to a country with a cronic deficit & debt problem will not cure it. Greece will eventually have to default. Unfortunately they’ll keep putting it off until there’s no alternative, therefore prolonging the agony.
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Well Trichet, head of the ECB, has made his position clear which is: Voluntary rollover of debt is fine with me for other creditors, providing you don’t mean me.
http://www.bloomberg.com/news/2011-06-09/trichet-rejects-ecb-participation-in-greece-bailout.html
Can’t see that idea working then.
24th of June is the crunch date when the Finance Ministers need to come up with some weasily words that effectively say (but they hope disguises) that the (mainly German) taxpayers are picking up the bill for the next bailout. Or they agree the (in)voluntary rollover plan and all hell breaks loose. Or, just as likely, they’ll do nothing and hope against hope that the problem will go away. Interesting times.
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This move by Trichet is a significant breach in the previous unity of purpose in dealing with Greek and peripheral debt within the EU.
If the ECB has no intention of rolling over its Greek holding why then should private investors even consider doing the same.
The warning given against the German finance ministers idea of pressurising investors in Greek bonds to accept longer maturities on their holdings is very sound.It will send a message to the markets that this would only mark a beginning of the long process of forcing private investors to assist in the bailouts of the peripheral states.
The German government are also currently attempting to force investors into taking voluntary ‘haircuts’ on their Greece holdings.
This move is significant because it shows there is some solid political resistance within the Germany ruling party to further contributions in the second bailout for Greece.
That resistance no doubt is because of opposition among the German electorate and tax payers to providing further aid to Greece.
German political sentiment is crucial. The country is the paymaster of Europe and the entire EU project is dependent on the countries co-operation in funding weaker states.
The slightest whiff that they will fall back from their current stance will send shock waves through world markets and send the Euro tumbling.Bond markets are not the place to be now and in a few months time the quagmire will get worse, much worse.
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My simplistic view from the ground…..
@Chopera wrote:
However giving further loans to a country with a cronic deficit & debt problem will not cure it. Greece will eventually have to default. Unfortunately they’ll keep putting it off until there’s no alternative, therefore prolonging the agony.
Absolutely right Chopera. You can see it, the average Greek can see it, but the EU’s priority is simply “the EU project will not fail”. Prolonging the agony as you put it is achieving only one thing, burdening the Greeks with more debt that they can never repay.
How the heck is this type of borrowing ever going to be serviced? The answer is it can’t. Greece only has a population of 10 million people. The loans so far of €110 billion, with the ridiculous interest rate and repayment timeframe, can only result in failure. That’s without any new lending which would only delay the inevitable.
But the elite of the EU, panicking that their pet project could fail, would rather ‘whip the dying donkey’ than admit it can no longer stand. Making Greece restrict some of it’s successful industries such as salt and flower production (making tens of thousands redundant) as a pre-requisite to joining the EU due to vested interests of other EU countries, is now viewed as ‘it’s all not been worth it’. Mis-use and abuse of EU funding over the years by politicians should warrant numerous jail sentences.
Forget the tired ‘joke’ that Greeks are lazy and don’t like to pay taxes so it’s their own fault. The average employed Dimitris works hard and is taxed at source. The game of tax-avoidance is played the elite and the politicians who have their own businesses, masters of the loop-hole, smoke and mirrors.
You can only cut the pensions of the elderly by so much, same for salaries. People are being made redundant by the tens of thousands, the cost of essentials are going through the roof (eg. taxation on petrol, foodstuffs etc). What is going on here is brutal but the sad truth is it won’t/can’t even dent the surface of this kind of borrowing. It is also ringing the death knell for any hope of kick-starting growth.
I repeat, the population is only 10 million – this size of borrowing, and possible further borrowing, can never be serviced and those up top should have the nuts to be honest and acknowledge that. The Greeks have been put in an untenable position and are paying a dear price for this insanity.
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Euro set to be slammed says today’s article in http://www.moneyweek.co.uk
If this Topic scenario does take place, what should those holders of Euro assets including Bank deposits and Euro property be doing, and, what is Mark’s view on this please?
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Predicting currency movements like property is a mugs game. These jurno’s on Moneyweek have about as much real idea where the Euro is heading as anyone else. In fact with predicted interest hikes by the ECB in July and later in the autumn the Euro path is an upward trend at least for the coming few months.
Once the chickens come home to roost however and Greece defaults as it undoubtedly will another story will develop. When Spain, post election requests financial aid next year the Euro will be trash.
I agree with Moneyweek on one item however. Investing in Sweden is proving fruitful. 🙂 No wretched Euro problems. Bliss. -
@logan wrote:
Predicting currency movements like property is a mugs game. These jurno’s on Moneyweek have about as much real idea where the Euro is heading as anyone else. In fact with predicted interest hikes by the ECB in July and later in the autumn the Euro path is an upward trend at least for the coming few months.
Once the chickens come home to roost however and Greece defaults as it undoubtedly will another story will develop. When Spain, post election requests financial aid next year the Euro will be trash.
I agree with Moneyweek on one item however. Investing in Sweden is proving fruitful. 🙂 No wretched Euro problems. Bliss.I’m a swede and we are doing ok at the moment but there are some things to watch out for in Sweden.
We have quite a large exposure towards eastern europe. Especially Estonia and Latvia. These countries took extreme austarity meassures during 2007-2008 and cut public spendings and wages. Both these countries seem to be doing way better than most other EU countries at the moment. We have an extreme housing shortage in the cities but in the last two three months we have seen a decline in real estate property prices from an all time high. This is probably not recorded in the statistics yet. Hard to say what will happen in the long run but prices have gone up a little bit to much in my opinion so a smaller decline would probably be healthy.
http://www.globalpropertyguide.com/Europe/Sweden
When it comes to buy to let in Sweden it’s impossible to do since all rents to private people are government controlled. It’s a very stupid system that they will probably change to a market driven system in the future. We have had complaints from EU about it “probably one of the few good things from the EU but luckily our controlled rents probably saved us since it’s hard to speculate in real estate property here to let them for a few years and then sell so this didn’t drive our “bubble”. You can’t freely let your apartment out either. If you only look at rental yields they will look horrible because of these regulated rents. The downside with this system is that there have been hardly any rental apartments built in the last 20 years and to get a rental apartment you either need to que for 15-20 years to get one or pay money under the table for it..
Sadly Sweden was a great place to live 30-100 years ago but immigration is on it’s way to ruin it. Back in the days everyone helped out but at the same time not many took advantage of the system. Immigrants that came from Italy, Iran, Spain, Finland, Chile etc in the 30-70s worked hard and made a better life for themselves and helped Sweden greatly. Our new citizens where very much welcomed but these days we are swamped with people that only come here because they want to cash welfare checks. People in Sweden are becomming more and more irritated at certain groups of people that immigrate. Immigration costs the tax payers enormous amounts of money every year and the voters have finally had enough but sadly all other parties have banded together so the “swedish democrats” have no say about immigration. This party is mostly filled with idiots but since no other political party even wants to touch these subjets their support will grow. Most politicians cry every week about it but they refuse to deal with the core issue and instead they sort of blame it’s citizens for being racists. Some people that have openly said that they voted for them have lost their jobs because of it so we can’t even pride ourselves for being a democratic and civilized country anymore. I can honestly say that there is not one country in the world that is as “Political correct” and that is destroying Sweden from within. There are huge differences between certain groups when it comes to crime rates and having jobs. For example 85% “another 10% or so are probably hidden in education programs etc” of all people from Somalia are unemployed and men from that country are 50 times as likely to commit rape as a person that has both parents born in Sweden. It’s officially blamed on structural racism and what not. I know it may sound harsh but why even accept people from such a country? Help them on the spot instead.
It’s sad that you can’t feel proud about your own country and it’s achievements anymore.
/End of rant
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@Ardun wrote:
It’s sad that you can’t feel proud about your own country and it’s achievements anymore.
/End of rantI accept you won’t agree with this Ardun but Sweden can be very proud of it’s record of inclusiveness and open door policy towards immigration.
Immigrants enhance a country, make it stronger not weaker. Diversification usually takes at least a generation to become accepted as positive. Sweden like the UK and elsewhere in the EU can only benefit in the long term.
Mankind has travelled the world since leaving Africa only relatively a short time ago. It’s simply part of the human story.
It’s too easy to produce negative individual stories to shore up an extremist position.
Most people want to have a better life for themselves and their families. They know hard work is the route to that. They just need opportunity denied to them elsewhere. -
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Ardun what you are saying is the same as people in the UK are saying, the same as our Norwegian and German friends are saying. Seems as if Italy, France and the Netherlands are saying it too. Hard working immigrants fine but 90% are just uneducated riff raff and criminals. The next wave will be from the countries caught up in the Arab “spring”….nightmare would be more appropriate. Everyone who raises doubts is branded a racist or a facist which is what will happen when the backlash turns all these countries to the right.
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@logan wrote:
@Ardun wrote:
It’s sad that you can’t feel proud about your own country and it’s achievements anymore.
/End of rantImmigrants enhance a country, make it stronger not weaker. Diversification usually takes at least a generation to become accepted as positive. Sweden like the UK and elsewhere in the EU can only benefit in the long term.
Mankind has travelled the world since leaving Africa only relatively a short time ago. It’s simply part of the human story.
It’s too easy to produce negative individual stories to shore up an extremist position.
Most people want to have a better life for themselves and their families. They know hard work is the route to that. They just need opportunity denied to them elsewhere.Thats the thing though. I have lived in quite a few countries and I have never expected my new “host” to take care of me or adapt to my private culture and I expect the same of others. Respect goes both ways.
This is some of the things that have happened in the last couple of years.
1. Discrimination “Calling it positive actually makes me smile”. It’s when you are allowed by law to discriminate a certain group of people. This happens daily for swedes when they apply to university or jobs. The law actually only gives this option when people from different backgrounds have the same credentials. The Law faculty of Uppsala university was actually convicted in court for giving students with certain foreign parents a 25% bonus to their merits. Becomming a police officer is ridiculously much more easier if you belong to a minority group. It also gives the option to discriminate against gender if that field has a majority of a certain gender but so far the courts have only clamped down on situations where women have been discriminated “Applying for veterinary school, nursing etc which in our country have many more women students.” I have always been living under the assumption that any kind of discrimination is wrong.
2. Hate crimes can not be commited against the majority group. In practise its even hard to sentence someone for hate crimes if they are from a minority group if they have done it towards another minority group. We have a small jewish community that have been hit hard by attacks by muslims and left wing groups. Certain gangs only target swedish children and when confronted about how they choose their victims they don’t hide the fact that it is because they hate white people. White girls/women are specifically targetted when rapes are commited. “It was just another white whore, she wanted it etc”.
3. In a majority of all schools singing the national antheme has been banned. Something that was always a tradition when school terms where over before. Wearing clothes with the swedish colors may get you suspended. Wearing any symbol that are connected to norse mythology will get you trouble. A few people have actually gotten prosecuted for commiting hate crimes just for wearing these things. Just recently any public school is not allowed to hold any sort of meeting in a church. Schools not following this have been scared into stop doing it.
4. In problem schools “In 99,9% schools with lots of immigrants” they recieve about four times as much money per student than in other schools.
5. We accept day care centers and schools that are run by fanatics and they get funding from the state. How will this help integration?
6. They have just now started to discuss if they should remove certain holidays so muslims can have some. This will not in a million years happen but it just shows how silly we are getting.
7. If you go to any government agency today they have their information translated into around 30-40 different languages. In a country with 10 millon people. By law you can force the state to give you education, information and what not in five different languages “finnish, jiddish, tornedals finnish, samiska and then romani chip or whatever it’s called”. In a few years time arabic will probably be added to this list.
8. A man that just recently refused to shake the employers hand because she was a women sued the company and won. Who could hire someone like this? A woman was not allowed to do her work practise in a hospital if she didn’t remove her hijab something she refused to do she also tried to sue the hospital but since she was not employed by them she lost. The hospital had a strict policy of their personel only using their clothes because of contamination risks.
9. Men that works at day care facilities are being switched around because some ethnic groups cant tolerate men changing their childrens diapers.
10. We are discussing on national TV if it’s ok to call chocolate balls “negro balls”. The translation from swedish becomes a little bit weird. They have always been called negro balls and making such a big fuzz about it is just stupid. http://www.youtube.com/watch?v=1Vb_FY_mDNI
11. Schools must supply food that all etnic groups can eat which basicly removes lots of swedish food since it contains lots of pork and it’s to expensive to serve more then one course.
12. For store owners gypsies are a huge problem. This is not something new though. Either you let them steal or they sue you. Most people just try and limit them from stealing expensive stuff.
13. You flee from a country and then you go back there for vacation. When something goes wrong you blame Sweden for not helping you.
14. They never let someone else care for their elders or sick so we pay out huge amounts of money so their own families can be employed. The state have zero control of how this care is being done. Last year it was found out that many had faked injuries and what not to employ family members. Hardly any was prosecuted. International gangs now “buy” handicapped people from poor countries and send them to families in Sweden and they share the profits.
15. Muslims attacking an artist called Lars Vilks. Sending death threats and trying to burn down his house. Accidently putting themselves on fire. http://www.youtube.com/watch?v=mRKACJtDw0E&NR=1&feature=fvwp
16. People loosing their jobs if they vote for certain parties and their politicians being attacked.
I could go on forever with lots of similar stuff. We only have ourselves to blame for this mess and most immigrants thinks we are crazy for putting up with it.
I have lived in a few countries and I can tell you that Finland, Spain and the US would never put up with most of these things. We are doomed and eventually we are going down together with Holland, France and England etc.
Please don’t reply since it will destroy this thread. Contant me in private if you want to keep the discussion going.
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Globalisation and better education equals immigration. You can go all round the houses, but can’t turn the clock back. The whole world is applauding the Turkish refugee camps for fleeing Syrians.
The Euro was dreamt up by such people who desperately wanted to promote the idea of equality among its people and discourage the age-old nationalism that caused conflict over the centuries.
It’s a noble idea and would have flourished had it not been for the last recession. Liberalism needs to be paid for and it does not come cheap.
I don’t know if the Euro will survive, the drums of nationalism are getting louder; in Spain the ‘indignados’ are setting up camps in the cities, and the world’s popular press is whipping up a storm of anti-foreigner frenzy.
It’s ironic that the German voters seem to be holding the key to the Euro. 90 years ago, the German voters got it wrong. Will they get it right this time?
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I think Ardun it was your post which went off topic. 🙂
I have read your interesting post for which I thank you. The listed items with a few exceptions confirm to me how well Sweden is governed and how much hope there is for the future prosperity of the nation..
The point is the open door policies and human rights legislation of the European Union have led to the current situation you describe. Your blame should lie with the EU project not your nation states attempts to deal with it.
Once you sign international treaties you have to adopt political policies compatible with the sentiment of those treaties.
How would you suggest you deal with the mass immigration in Sweden? Return them to their origins?
Positive discrimination is a tool to encourage inclusiveness. Doing nothing to help immigrants get a start in the country only creates a problem potentially more violent and destructive in the long run. The human rights movements in the USA is an example of how any persecuted and excluded minority will eventually rise up.
The political right always see immigration as a problem. They wistfully cast their eyes towards a mythical time when their country was a wonderful place to live. That view is just that, a myth. Like childhood always being a better place to be.
The fact is the world is a different place. You cannot put the genie back in the bottle. Unless you deal with mass immigration in a constructive and positive way, war and conflict will eventually engulf future generations.
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You are on a wrong forum. Perhaps with every concern of your’s. you could also post the positive contribution made by these immigrants. The Doctors, nurses, teachers etc. Besides you have to know that in a majority of cases these people come from villages & are uneducated and lack the development & sensitivities of their host nations. The educated & sophisticated will not clean toilets, streets & work on farms and such do not leave their Country of birth etc.
What ever you may feel. The host Country only welcome’s these people due to their own needs & requirements & not for the love of them. If the so called white women in these Counteries increase their reproduction rates. The host Countries will not need them.
If a host country has its own strong culture, tradation & history. It should not feel insecure & infact build on it as part of cultural evalution. Things that may seam to be alien to the host nation may have a very sound reason/or basis for not accepting until such time that they develop in the host Country & at stage take a fresh view of matters.
These people do the jobs that local do not wish to do & are at the bottem of the economic pile. I have never supported the German football team until the last world cup when they had two Turks & two black & one from Serbia player representing them. I felt overjoyed to see a Turk being the striker for Germany after seeing & hearing from my German friends over a number of years of their dislike & hate against them.
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@Ardun wrote:
This is some of the things that have happened in the last couple of years.
What do you expect when you let in large numbers of uneducated people from a mysogynistic culture enter a socially liberal country?
If you allow them to form ghettos instead of ‘motivating’ them to integrate, it only leads to problems
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@logan wrote:
@Ardun wrote:
It’s sad that you can’t feel proud about your own country and it’s achievements anymore.
/End of rantI accept you won’t agree with this Ardun but Sweden can be very proud of it’s record of inclusiveness and open door policy towards immigration.
Immigrants enhance a country, make it stronger not weaker. Diversification usually takes at least a generation to become accepted as positive. Sweden like the UK and elsewhere in the EU can only benefit in the long term.
Mankind has travelled the world since leaving Africa only relatively a short time ago. It’s simply part of the human story.
It’s too easy to produce negative individual stories to shore up an extremist position.
Most people want to have a better life for themselves and their families. They know hard work is the route to that. They just need opportunity denied to them elsewhere.well said
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@Rocker wrote:
The Euro was dreamt up by such people who desperately wanted to promote the idea of equality among its people and discourage the age-old nationalism that caused conflict over the centuries.
It’s a noble idea and would have flourished had it not been for the last recession. Liberalism needs to be paid for and it does not come cheap.The principal political philosophy of the European Union and the treaty of Rome is a noble idea. Bringing countries closer through trade and international co-operation in areas such as defence.
What we have now is something entirely different and principally the vision of left wing socialists of the like of Jacques Delors.
Treaties have been passed and forced upon the peoples of Europe without proper democratic accountability. That creates resentment, not the encouragement of equality or harmony between nations.
A recent example of that is the Lisbon Treaty where national sovereign rights were surrendered to the cause of the European super state.
I read this week that the EU’s next monstrosity in the pipe-line is a Finance Ministry to oversee and regulate individual states national budgets and with the power of veto over spending.
What that will mean in effect is that Germany, through the ECB will be in a position to control absolutely the financial affairs of all Eurozone nations.This is not Liberalism Rocker it’s surrender, control and dictatorship in another skin.
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Logan I knew I went off topic=). Just wished I wouldn’t pull others down with me.
I agree with what many have stated in their replies and immigration is not a problem if your society is setup in such a way that it encourages you to work hard etc. Here it doesn’t work like that. Many times people living on welfare gets no benefits from taking a part time job etc. We have in general worked hard anyhow because of social preassure not because we need money. That is not so relevant to our new citizens.
The EU project has probably closed the flood gates somewhat because with the new rules you are supposed to send immigrants back the first EU country the immigrant entered. http://en.wikipedia.org/wiki/Immigration_to_Sweden
Totally agree with your last post Logan.
The principles of free trade etc have long been forgotten and certain countries do their utmost to protect their own markets. For now it’s mostly the French and Spanish farmers that are screaming the most because Poland wants the same advantages as them. The EU colossus have also become one of the worst acting trader in the world together with the US by dumping produces in Africa etc.
The EU is becomming less and less democratic and only time will tell if it turns out good or bad. Our last government and this one have basicly told us that it doesn’t matter what we want we are joining the EMU sooner or later. Is that they way to encourage cooperation between different nations? The politicians from all different avenues have nothing against a more “politician” run society and that is what they get with the dream jobs in Brussels.
Our prime minister earns less then our EU-representatives. Who in the swedish political elite doesn’t want to climb that leader. Even the most die hard EU skeptics are now licking it’s boots. Nigel Farage is the only that seems to have any back bone….. ofcourse he is populistic but I bet he is one of the few in the parlament that stands up for the anti-superstate people.
These charlatans dressed up as sheeps are the real danger of the EU/EMU project.
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It’s a short reply, but it could well be right. The Euro’s strength has been largely ignored so far, but surely it’s most relevant. We live in a capitalist world, the markets rule us, and they are not stupid.
We’ve tried communism, a most noble idea which floundered on human failings, in exactly the same way as nationalism went to the wall.
Maybe the Greek debt and others is the price to pay for a brighter future? I’m sure Europe can handle it, if we are all willing.
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@peterhun wrote:
No matter what the Germans will bail out the Euro countries. The taxpayers will have it but they have no choice, the Euro will survive.
Whilst I lean towards agreement with that view, there have been signs in Germany that the electorate are restless and reluctant to keep signing blank cheques for the spend thrift southern EU states.
Over the last 10/15 years Germany has pushed through successful economic and social reforms to help the country cope with swallowing the east. These reforms among other matters meant the sacrifice of some labour protection laws, restricted income, later retirement and higher taxation.
Unfortunately the UK should have done the same but Britain was stuck with a dreadful spend thrift Labour government with their heads stuck in the sand.
Who could blame the Germans then for resentment when they see bankrupt countries like Greece and Portugal trying to continue with huge and expensive social privileges. The people going on general strike almost every week trying to prevent the reform their countries need to survive.
German has a federal political system and not all states are in agreement with Merkles policies. If bailing out Europe becomes a principle election issue things could easily change rapidly.
It will also change if the current slowdown in China hits a hard landing as some economists predict. Demand from China has driven Germany’s recent industrial renaissance. If that declines so will the value of the Euro.
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http://www.bloomberg.com/news/2011-06-12/trichet-holding-a-gun-to-own-head-on-greece-chart-of-the-day.html
The cost of insuring Greek debt is becoming unsustainable whilst the ECB and Germany stare each out in classic stand off.
The question is who will blink further. The FT this morning believes we are looking at the start of the end game for the Euro. Standard & Poors yesterday lowered Greece to triple C rating, the lowest in the G20 and probably most of the world.
Restructuring or default by another name looks inevitable.
The recriminations in the Eurozone are likely to be far reaching. -
@logan wrote:
http://www.bloomberg.com/news/2011-06-12/trichet-holding-a-gun-to-own-head-on-greece-chart-of-the-day.html
The cost of insuring Greek debt is becoming unsustainable whilst the ECB and Germany stare each out in classic stand off.
The question is who will blink further. The FT this morning believes we are looking at the start of the end game for the Euro. Standard & Poors yesterday lowered Greece to triple C rating, the lowest in the G20 and probably most of the world.
Restructuring or default by another name looks inevitable.
The recriminations in the Eurozone are likely to be far reaching.Germans will back down.
Euro has been their golden goose and what they want to do is kill it.
Wont happen.
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EU Fin Min’s fail to agree yesterday how private bond holders can share costs of bailing out Greece.
http://www.bloomberg.com/news/2011-06-15/euro-falls-amid-eu-deadlock-over-greek-crisis-aussie-oil-drop.html
Stand off with Germany and ECB continues.
BTW. If Greece defaults French banks who have the most exposure to Greek debt will be in trouble. Moody’s have just put them on watch for a credit downgrade.
There will be panic in the Elysée this morning. 😥 -
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@ozmunky wrote:
Germans will back down.
Euro has been their golden goose and what they want to do is kill it.
Wont happen.
It’s not at all certain that the Germans will back down.
Yes the Euro has been good for them and no they don’t want to kill it but they don’t necessarily think that a Greek default will end the Euro.
The head of the Bundesbank is on record as saying that the Euro will survive a Greek default. That statement was made in order to signal the German willingness to allow a default and to calm the markets at the same time, if one happens.
I suspect that Germany is testing the market right now with this continuous stream of statements on and off the record that imply private creditor participation in losses is a must so that it can guage what the likely outcome of a default would be before actually pulling the trigger.
I can see no other reason why they would keep making such statements, a whole two weeks before the June 24 deadline.
They clearly want a default (although they would rather it wasn’t called that) to appease their voters. The only question is whether they have gauged the knock on effect correctly. If they think they have it will go ahead and if they have guessed wrongly then the skies will fall in.
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@shakeel wrote:
I would be pleased if there in panic in ” Elysee”. It will teach the incompetant, lazy, rude, arrogant French to perhaps look at themselves.
😯 😯
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@zoro wrote:
I suspect that Germany is testing the market right now with this continuous stream of statements on and off the record that imply private creditor participation in losses is a must so that it can guage what the likely outcome of a default would be before actually pulling the trigger.
I agree they are certainly testing something. More likely the patience of Nicolas Sarkozy. France stands to lose far more than Germany if Greece defaults. The collective figure is around €61 billion.
Germany is attempting to get French banks to take a voluntary haircut. They call it ‘participation in restructuring’. Don’t you just love their phraseology. 🙂
If you understand the mind set of French bankers the idea that they would co-operate in that is unthinkable. -
@zoro wrote:
@ozmunky wrote:
Germans will back down.
Euro has been their golden goose and what they want to do is kill it.
Wont happen.
It’s not at all certain that the Germans will back down.
Yes the Euro has been good for them and no they don’t want to kill it but they don’t necessarily think that a Greek default will end the Euro.
The head of the Bundesbank is on record as saying that the Euro will survive a Greek default. That statement was made in order to signal the German willingness to allow a default and to calm the markets at the same time, if one happens.
I suspect that Germany is testing the market right now with this continuous stream of statements on and off the record that imply private creditor participation in losses is a must so that it can guage what the likely outcome of a default would be before actually pulling the trigger.
I can see no other reason why they would keep making such statements, a whole two weeks before the June 24 deadline.
They clearly want a default (although they would rather it wasn’t called that) to appease their voters. The only question is whether they have gauged the knock on effect correctly. If they think they have it will go ahead and if they have guessed wrongly then the skies will fall in.
I can see where you are coming from.
However you forget one thing — the credit default insurance (CDS’s) on Greece is mostly held by EU banks.
Once the credit default event is declared, the CDS’s are triggered — the EU banks that sold the CDS’s are up for 10-15% of Greek Debt within 30 days — not chump change.
This will kill the EU banks and all the ignorant tossers hoping for it.
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@ozmunky wrote:
I can see where you are coming from.
However you forget one thing — the credit default insurance (CDS’s) on Greece is mostly held by EU banks.
Once the credit default event is declared, the CDS’s are triggered — the EU banks that sold the CDS’s are up for 10-15% of Greek Debt within 30 days — not chump change.
This will kill the EU banks and all the ignorant tossers hoping for it.
No, I didn’t forget CDS’s in fact the US exposure is right up there with France’s and Germany’s when these are taken into account, hence the earlier reasoning that if the situation does explode the resultant recession will affect both US and Europe. Robert Peston of the BBC described the potential impact of loan guarantees on US banks more than a week ago, here.
http://www.bbc.co.uk/news/business-13663002
Everybody, it seems, is warning Germany not to do it but they presumably either don’t think the sky will fall in, or they think that bailing out their own banks will be cheaper than bailing out Greece, and more palatable to their voters.
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Now it would appear that even the EU Commission are pessimistic about the future of the Euro if this BBC report is to be believed.
http://www.bbc.co.uk/news/business-13781390
Someone needs to step back from the abyss sometime soon.
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@shakeel wrote:
“If you understand the mind set of French bankers the idea that they would co-operate in that is unthinkable.”
The French Bankers dont have a mind. ” Domonic Kahn” is a very good example.
Sorry Shakeel you are talking cobblers. The French banking and accountancy system is among the best in the world.
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@ozmunky wrote:
@logan wrote:
http://www.bloomberg.com/news/2011-06-12/trichet-holding-a-gun-to-own-head-on-greece-chart-of-the-day.html
The cost of insuring Greek debt is becoming unsustainable whilst the ECB and Germany stare each out in classic stand off.
The question is who will blink further. The FT this morning believes we are looking at the start of the end game for the Euro. Standard & Poors yesterday lowered Greece to triple C rating, the lowest in the G20 and probably most of the world.
Restructuring or default by another name looks inevitable.
The recriminations in the Eurozone are likely to be far reaching.Germans will back down.
Euro has been their golden goose and what they want to do is kill it.
Wont happen.
Just happened tonight as I thought.
IMF threats forced Germans to backdown.
http://www.guardian.co.uk/business/2011/jun/16/imf-forced-germany-to-guarantee-greek-bailout
So much for the Germans thinking they run things. They do not. Never think a single country has all the cards.
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Logan, Ofcourse I am talking cobblers. Have you ever tried to open a bank account in France, done any transaction or tried to obtain a mortgage there !!!!!!!!!!!!
How can you consider to deal with a Banker who thinks tax planning is tax evaion, does not understand cash flow financing, has no concept of off balance sheet risks or gain, thinks lending 30% loan to value on a property in prime location is high risk.
Insist, that a borrower has to have a life insurance cover even when the property purchased is a holiday home and the borrower already have a life insurance. If the borrowers dies the proceeds from life Insurance will add towards the inheritance amount.
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@ozmunky wrote:
@ozmunky wrote:
@logan wrote:
http://www.bloomberg.com/news/2011-06-12/trichet-holding-a-gun-to-own-head-on-greece-chart-of-the-day.html
The cost of insuring Greek debt is becoming unsustainable whilst the ECB and Germany stare each out in classic stand off.
The question is who will blink further. The FT this morning believes we are looking at the start of the end game for the Euro. Standard & Poors yesterday lowered Greece to triple C rating, the lowest in the G20 and probably most of the world.
Restructuring or default by another name looks inevitable.
The recriminations in the Eurozone are likely to be far reaching.Germans will back down.
Euro has been their golden goose and what they want to do is kill it.
Wont happen.
Just happened tonight as I thought.
IMF threats forced Germans to backdown.
http://www.guardian.co.uk/business/2011/jun/16/imf-forced-germany-to-guarantee-greek-bailout
So much for the Germans thinking they run things. They do not. Never think a single country has all the cards.
The IMF shows once again who their true masters are. It’s not the taxpayers it’s the ultra rich who wants to rob every country and it’s population with these ponziesque schemes.
They know that if they force countries to privatize it’s systems they can control it all with eaze.
Every country in the world should write of their IMF loans.
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@shakeel wrote:
How can you consider to deal with a Banker who thinks tax planning is tax evaion, does not understand cash flow financing, has no concept of off balance sheet risks or gain, thinks lending 30% loan to value on a property in prime location is high risk.
Since I’m based in France Shakeel and have been for many years you would expect that I would understand a few things about the way the country operates it’s banking,tax and financial system. 🙂
The fact is France does everything differently. Its their way and if you live here long enough you begin to believe it’s superior to other systems. However I also operate in Spain so can compare the two very easily.
France does not have a free market ethos such as the UK or US. The state believes in the control of virtually everything, especially the labour market. It’s socialist in outlook and does not really understand free market competition. The French state constantly has it hands in the populations pockets. 🙁
However when you made your negative comments we were referring to the banking system. The domestic French banking system is highly regarded, regulated and controlled by government and is safe and efficient as a result.
All the more surprising then that they have piled so much money into Greece. That’s a perfect example of how politics in the EU surpasses economic good sense. Investing €61 billion in a country of only 11 milllion people is complete madness. -
Thanks Logan, first of all I was not comparing French/Spanish Banking or Bankers. I am well aware of the French political system & its working and their superiority complex about all things French.
In my views as you have lived there for a while you have accepted the system. Ofcourse it is ones choice to beleive in a captalist or a socialist way of life.
Where a Country is not creating any more wealth & has drained her ex colonies out ( now venturing in others Libya a case of point ) Naturally it will be the citizens whose pockets will be raided. The effect of this raid is that no one wants to do anything, takes responsibilty for anything and they cannot be sacked the quality, level of service is next to nothing.
The Banking sectors is working in that kind of enviornment and does not have to inovative. Hence my comments. How diffcult it is to not to lend when you dont wish to lend.
I think we are getting of the topic here.
Cheers
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@ozmunky wrote:
Just happened tonight as I thought.
IMF threats forced Germans to backdown.
http://www.guardian.co.uk/business/2011/jun/16/imf-forced-germany-to-guarantee-greek-bailout
So much for the Germans thinking they run things. They do not. Never think a single country has all the cards.
Well; Stephanie Flanders of the BBC has reported completely the opposite to the Guardian. Given the Guardian’s (or should that be the Gruadian’s) reputation for inaccuracy over the years, on the whole I’d tend to believe the BBC. But Sunday week will see which of them were right.
http://www.bbc.co.uk/news/business-13796204
She says the IMF blinked first. Germany was always going to approve a second bailout, even the Guardian admits that, but Germany wanted explicit investor participation and according to her, that hasn’t changed. All that is going to happen is that the bailout will be approved in principle; which was always the case. No doubt there will be weasily words on Sunday that skirts around the issue but the argument about haircuts rolls on.
The IMF were saying that a decision had to be made on the bailout conditions before they paid up, that hasn’t happened but they are still going to pay anyway.IMO the way Germany sees it is that if the markets continue to believe that the peripheral countries can continue to borrow with impunity because Germany will ultimately pick up the bill then the debt problem will never be solved. They appear to want to draw a line in the sand that says to the market – price lending to these countries according to their ability to pay i.e. without German support. Presumably they want to see interest rates rise for these countries and thus rein in their borrowings over the long term.
Time will tell how that pans out.
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If you read and listen to most economists on the Greece situation you will find a consensus that the position of the country is hopeless. Managed default is now the only policy the Greeks can realistically adopt. That default may take the option of the forced roll over of maturing bonds. That may be the best case scenario. However it’s one the ECB is currently refusing to contemplate.
In any event it will trigger a ‘credit incident’ with all the consequences of that.However if these new austerity measures are not passed by the Greek Parliament even that becomes difficult and the second tranche of bailout funding will not be given.
I heard an economist on the radio this morning explaining the ECB will be insolvent if it agrees to managed default. The bank has lent so much money supporting the banking systems of Spain, Ireland and Portugal it’s close to running dry. So you can understand better the reason for Trichets stance.
If the ECB requires further capitalisation as looks increasingly likely Germany will have to stomp up a massive contribution.
The whole thing is like watching a slow motion car crash 🙁 -
@zoro wrote:
Hi, I know from the last thread on this subject that many find it boring but I found it interesting and I do think the GBP v Euro rate does have a direct bearing on the Spanish property market.
Jeeze Zoro, I have been following your instructions and trying to ignore this thread since you started the blooming thing!
But I couldn’t, it has been a very interesting thread, congratulations on even interesting me, and thankfully it has been far from being all about Spain bashing – which helps!
However, if it is not off thread, and putting aside all the debate back and forth about whether the Euro will go (can’t ever happen in my view, but we know I am no economist) what does everyone think about the role Germany has to play here?
I work with a number of German people, so I have a very positive view of them, and I spend half my time in a Euro country working with some 9 other European nationals, and well over lunch today, we were discussing the influence of Britain now in European affairs, or of its status / importance in the minds of these folk.
Was a bit depressing reallly. By not being in the Euro and therefore fully committed to European Union, well it seems we don’t rank too highly in any area. We are in their view disappearing into our own small island mist. They are not bothered about us or our view per se, we are seen as being without influence. We are in effect not recognised as being a power of any kind at all really.
Yes, we have our precious Sterling, we have our other vestiges of independence and vetos etc, but… we are fast becoming insignificant in the grand scheme of things, the big power player, the dominant force is now Germany.
I just so know I am going to be crucified for this next statement, but… wouldn’t we have been far better being a part of the Euro and therefore have been the biggest player and power alongside Germany instead of the frogeatingsurrendermonkeys as the French have been oft unfortunately described in the USA.
All this talk of demise of the Euro is simply a crisis being played out, being dealt with, managed, controlled, and will as a result shift the balance of power and influence where…?
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@Chris McCarthy wrote:
@zoro wrote:
Hi, I know from the last thread on this subject that many find it boring but I found it interesting and I do think the GBP v Euro rate does have a direct bearing on the Spanish property market.
Jeeze Zoro, I have been following your instructions and trying to ignore this thread since you started the blooming thing!
But I couldn’t, it has been a very interesting thread, congratulations on even interesting me, and thankfully it has been far from being all about Spain bashing – which helps!
However, if it is not off thread, and putting aside all the debate back and forth about whether the Euro will go (can’t ever happen in my view, but we know I am no economist) what does everyone think about the role Germany has to play here?
I work with a number of German people, so I have a very positive view of them, and I spend half my time in a Euro country working with some 9 other European nationals, and well over lunch today, we were discussing the influence of Britain now in European affairs, or of its status / importance in the minds of these folk.
Was a bit depressing reallly. By not being in the Euro and therefore fully committed to European Union, well it seems we don’t rank too highly in any area. We are in their view disappearing into our own small island mist. They are not bothered about us or our view per se, we are seen as being without influence. We are in effect not recognised as being a power of any kind at all really.
Yes, we have our precious Sterling, we have our other vestiges of independence and vetos etc, but… we are fast becoming insignificant in the grand scheme of things, the big power player, the dominant force is now Germany.
I just so know I am going to be crucified for this next statement, but… wouldn’t we have been far better being a part of the Euro and therefore have been the biggest player and power alongside Germany instead of the frogeatingsurrendermonkeys as the French have been oft unfortunately described in the USA.
All this talk of demise of the Euro is simply a crisis being played out, being dealt with, managed, controlled, and will as a result shift the balance of power and influence where…?
I would like to say, as usual, Chris’s posts on spot on from the laymen’s point of view — not that I always agree with everything !
Previously, it was obvious the German position couldn’t prevail (because of their national trait of following the steps on the list, but cant deal with unstructured random issues — in Frankfurt when I was there, they cant deal with unpredictability and sit still until they are told what to do which was a surprise to me) as it would wreck the big picture as well as their own Banks as they discovered later after announcing their position.
The impasse over the past 6 weeks is everyone looking for a way the Germans could save face in front of their voters without looking weak.
The “Vienna Convention” has served its purpose after much looking and nervous sausage eating.
The joint love-in news conference today saved EU from world market panic — EU pollies can move fast when they have to.
What does this all mean for Spanish Property people on SPI ?
Well, it gives the short term holders of Spanish property some breathing space.
Take this as a sign from above and sort yourselves out now — if its a loss, then take it and fight another day.
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@logan wrote:
If you read and listen to most economists on the Greece situation you will find a consensus that the position of the country is hopeless.
They should’ve just had a chat with Kostas who runs our local village cafe. He’s been saying this for ages.
@Chris McCarthy wrote:
…..about whether the Euro will go (can’t ever happen in my view)
Well that’s given the Euro the kiss of death, Chris. 😆
Re. the UK not ranking highly on several fronts in the view of your colleagues – a sad result despite the UK Governement giving countless billions of British taxpayers’ money into the whole Euro project every year. The main thing we seem to get out of it are unwanted diktats from Brussels.
Just a little something to cheer you up Chris, I believe decades of liberal policies have been destroying Europe from the inside out. Give it 50 years and Europe will be a 3rd world continent, bereft of resources with an enormous population that will have long rendered public services and infrastructure obsolete. The mass movement of migrants will only escalate. Parts of many cities are beginning to be unrecognizable already. It’s far too late to stop the madness unfortunately.
I wish I could see where Europe would have been now if these madhatters had never come up with “The Eurozone” idea. And if each country could control their own currencies according to need, would they be managing better now? Would we all be better off if in fact this is the beginning of the demise of the Euro?
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@ozmunky wrote:
@Chris McCarthy wrote:
@zoro wrote:
What does this all mean for Spanish Property people on SPI ?
Well, it gives the short term holders of Spanish property some breathing space.
Take this as a sign from above and sort yourselves out now — if its a loss, then take it and fight another day.
If the spanish property market is price elastic then of course that would make sense. However, in today’s economic climate I am not sure whether anyone is in a good position to predict the elasticity of the different markets that make up the Spanish property market.
Richard
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I don’t believe in all the doom saying on the UK’s future. The country is going through a period of restructuring due to an over reliance on financial services, high private debt and very poor political and financial management in the years when Labour ran things.
I visit Britain about once a year on average and I find a vibrant forward looking, innovated and well motivated country.
Britain has a well educated work force with good managerial skills with a flexible labour market. How can it not succeed?
The worlds economies are going through a lean period now but Britain is better placed than most to rise on the upturn which will come along in two or three years.The country can manage it’s own economy, set interest rates and has the flexibility of Sterling. It will not be burdened much by the bailing out of failed EMU countries like Greece.
Investment in Sterling assets now with a hopelessly over valued Euro can only produce decent growth in the medium term.
In my view it’s the Eurozone countries which will continue to struggle burdened by massive public debt and the inability to manage their own economies. -
Logan: I agree with your posting. There is no crystal ball. I however think it will take longer than two to three years. While demand from USA & EU,, local’s highly geared, Banks reluctance to lend etc,etc.
The situation will change in UK before the next general election as there will be sweetners offered by the Tories as a rewad for the posterity & a bribe for the re election.
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@Chris McCarthy wrote:
I just so know I am going to be crucified for this next statement, but… wouldn’t we have been far better being a part of the Euro and therefore have been the biggest player and power alongside Germany instead of the frogeatingsurrendermonkeys as the French have been oft unfortunately described in the USA.
All this talk of demise of the Euro is simply a crisis being played out, being dealt with, managed, controlled, and will as a result shift the balance of power and influence where…?
Hello Chris, glad to hear you’ve found this thread interesting.
There can’t be a definitive answer to your question above; just opinions – so here is mine:
Yes, had Britain been in the Euro it would have had more influence; marginally!
When the old Common Market was born, it was really a mutually beneficial carve up between Germany and France. With a wink and a nod it was understood that Germany’s manufacturing sector would benefit and France’s agricultural sector would too. Had Britain been in it at that stage then maybe things would have been different. They weren’t and by the time they joined, the German and French symbiotic relationship was well and truly entrenched, and don’t forget that France worked hard to keep Britain out for quite a long time to ensure that.
OK, fast forward to the Euro and rightly or wrongly Britain stayed out, re-inforcing the image that it had of being ousiders with their heart not really in it.
OK, I accept that Britain would have maginally more influence than it does if it were in the Euro, but aside from the Franco-German relationship, real influence comes with economic power. The US isn’t in the Euro but almost certainly has more influence over Germany than the rest of the EU nations, and China is fast coming up the outside track.
Britain no longer has the industrial muscle to compete for that kind of influence, we don’t have the agricultural space to be net food exporters (who no doubt will do very well in the next few decades). In the eighties we turned to services, and in particular financial services and we were pretty good at it.
Then came the current banking crisis and here we are. I still think that, short of an industrial renaissance, financial services still has to be our future.Well that was a long winded answer to a short question and way off thread….sorry. Oh; and it is just an opinion!
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Well put zoro.
I am not sure about this ‘influence’ thing. I don’t see the UK being deprived of anything in the EU except having to bail out failed EMU states.
I agree with zoro that influence is obtained from economic power but equally so is military power. Britain relatively still has both and as a consequence has huge influence in the world outside Europe. -
@logan wrote:
Well put zoro.
I agree with zoro that influence is obtained from economic power but equally so is military power. Britain relatively still has both and as a consequence has huge influence in the world outside Europe.With the best will in the world I can’t really see that.
The Chinese, the Indian’s, the South American countries, African states, you think these people look to us as an economic and military power?
I am sorry, I just can’t see that at all, no part of it really.
Am bloody worried about Charlies apocalyptic outlook as well now, in 50 years a third world continent, jeeze put me right off my work this afternoon.
I can see a similar England to you in being motivated and bright in lots of areas but, I am afraid I don’t see it quite as rosy, and you make it sound as if we have all our ducks in a row, and we are ship shape for the future, seems to me we are as screwed as everyone else it , however… we are ALONE.
When China flexes its full might and presence, we will be of little to no interest to the North Americans either, and if we ever do join the euro one day, we may well have to plead for entry.
All well and good looking at the ‘mess’ the euro is supposedly in right now, but I still see you can only get 1:13 to the pound, I see Germany growing from strength to strenght and the French with them, and I think they are giving the PIIGS a long hard lesson and shaping them up for the future too.
You see, my colleagues don’t know the English, they just see that Germany is up off its backside, it is leading the way, and laying down the rules for everyone to follow, and… they are.
I am far from convinced that we are so clever, so special, so right to be ALONE.
Back on thread, it is therefore my distinctly uneducated and simply ‘hunch & gut’ view that somehow sterling is far more likely in my view to suffer a demise than the euro.
And I expect to be ignored too if this bores anyone!
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logan wrote:The country can manage it’s own economy, set interest rates and has the flexibility of Sterling. It will not be burdened much by the bailing out of failed EMU countries like GreeceQuote:Did not Britain make addtional billions available to Ireland – outside or additional to the EU bailout?
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The Germans have been writing the British off for at least 200 years. 🙁
The fundamentals of the British economy are strong and will improve with time and careful management especially debt reduction. Foreign investment is increasing. London remains the international financial capital of not just Europe but the world.
It turns the Germans into
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The UK isn’t doing well but it would be worse within the euro. Maybe the UK will need a bail out when it has finally bailed all the other countries out 😉
All the Germans I know want out of the euro, and the Dutch. They are sick and tired of European policies on immigration etc. and dipping into their pockets for failing countries.
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@logan wrote:
The Germans have been writing the British off for at least 200 years. 🙁
The fundamentals of the British economy are strong and will improve with time and careful management especially debt reduction. Foreign investment is increasing. London remains the international financial capital of not just Europe but the world.
It turns the Germans intoWhen I was living in Germany the locals always repeated the 2 things below which gives an insight into national thinking :
(i) When you look at Rome and now at the Italians, what has happened ?
(ii) The only thing the British have ever got right is the breakfastTranslated jokes aside, the Germans will do whatever it takes — its just that they havent told their voters yet.
If Germany goes back to the DM their currency will be valued so high so quick by the world, that their export driven economy will become too expensive overnight.
In short they will lose their export trousers.
The Euro has made them competitive and dominate at the game they do best — previously they would have been priced out of world markets due to their currency being priced too high.
The problem is that they are pissed off that their counterparts are having a nice sleep after a big lunch.
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Just to clarify and see if I can get an answer
@Chris McCarthy wrote:
@logan wrote:
I agree with zoro that influence is obtained from economic power but equally so is military power. Britain relatively still has both and as a consequence has huge influence in the world outside Europe.
The Chinese, the Indian’s, the South American countries, African states…
Do you think your argument stands up and these people look to us as an economic and military power?@Chris McCarthy wrote:
Did not Britain make addtional billions available to Ireland – outside or additional to the EU bailout?
Britain did agree to extra funds over and above any European bailout, specifically to Ireland didn’t they?
It isn’t like we stood apart and didn’t have to get involved, we actually got more involved than we needed to no?
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@ozmunky wrote:
The problem is that they are pissed off that their counterparts are having a nice sleep after a big lunch.
😆 😆 So true.
Recent poll among the Greeks say 50% reject the new austerity measures. It’s by no means a done deal the Greek Parliament will pass the bill next week.
Bankruptcy or servitude what a choice. -
As I posted some time ago on this very subject, I think it would have been disasterous for the UK if it had been a member of the eurozone.
We would be trying to compete for both eurozone and world wide business with a rate of exchange that is higher than our current rate. All at a time when interest rates are increasing in the eurozone, which is out of step with our current business cycle.
I have to say I am no eurosceptic because at one time I felt we should be in the eurozone. However, having witnessed the stress levels in this project am I am pleased that we didn’t join!.
I should add that if I was an expat living in the eurozone I might have a different view but purely for selfish reasons
Richard
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There are many demos in Spain today and the agenda seems to have changed to being against the “euro-pact”. Tens of thousands congregated in madrid and in málaga 10,000 to 20,000 according to which news you believe! The agenda seems to have gone away from corruption very quickly. The whole european dream is unravelling.
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@Chris McCarthy wrote:
…
I work with a number of German people, so I have a very positive view of them, and I spend half my time in a Euro country working with some 9 other European nationals, and well over lunch today, we were discussing the influence of Britain now in European affairs, or of its status / importance in the minds of these folk.Was a bit depressing reallly. By not being in the Euro and therefore fully committed to European Union, well it seems we don’t rank too highly in any area. We are in their view disappearing into our own small island mist. They are not bothered about us or our view per se, we are seen as being without influence. We are in effect not recognised as being a power of any kind at all really.
Yes, we have our precious Sterling, we have our other vestiges of independence and vetos etc, but… we are fast becoming insignificant in the grand scheme of things, the big power player, the dominant force is now Germany.
Did you manage to get any kind of objective economic discussion out of them? Like how to deal with the eurozone’s problems? The cronic uemployment? The insolvency of at least one country and the potential collapse of several banks that have leant to that country? Or is the whole project just about extending “influence” and becoming “significant”?
@Chris McCarthy wrote:
I just so know I am going to be crucified for this next statement, but… wouldn’t we have been far better being a part of the Euro and therefore have been the biggest player and power alongside Germany instead of the frogeatingsurrendermonkeys as the French have been oft unfortunately described in the USA.
The UK would not have been a big player alongside Germany if she had joined the euro. The UK would have had a bigger credit bubble and a bigger bust. Do you not realise that the only thing that saved the UK from total collapse was the Bank of England’s ability to slash interest rates and print money to bail out its banks? The irony is that the UK would have taken the euro down with her. Everybody would have been screwed.
@Chris McCarthy wrote:
All this talk of demise of the Euro is simply a crisis being played out, being dealt with, managed, controlled, and will as a result shift the balance of power and influence where…?
Yes of course this was all planned 🙄
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Here are the facts of new austerity measures planned by the Greek government. You could be forgiven in thinking it amounts to very little. 🙁
Increased taxes on property owners with assets worth more than 400,000 euros, a reduction in allowances paid to public servants and a levy on soft drinks are among the options the Finance Ministry is looking into as a means of saving 26 billion euros until 2015.
With representatives from the European Commission, European Central Bank and International Monetary Fund having left Athens for a short period, the ministry is looking for ways to find 6 billion euros’ worth of savings or revenues for the year in a bid to convince investors that Greece is on track to reducing its deficit by 2015.
According to sources, the government is looking at lowering the tax-free threshold for property owners. Currently, only those with assets worth more 400,000 euros are hit with a property levy, however, the ministry is looking into dropping this cut-off mark to 300,000 euros.
If implemented, the measure will apply from 2010, which means that property owners will have to pay backdated taxes as of January last year.
The government is also considering increasing a tax paid on large property portfolios, which means assets worth more 400,000 euros, a source added.
Government data show that about 150,000 taxpayers in the country own assets worth more than 400,000 euros.
Other options the ruling Socialists are looking into in an effort to bump up revenues is through the introduction of levies on natural gas and soft drinks, as of the start of next year.
With the country in its third year of recession and consumption and investment activity falling, Greece is struggling to bring in revenues, which fell short of annual targets early in the year.
Government figures for the first four months of 2011 show that net ordinary budget revenue totaled 14.46 billion euros, down 9.2 percent year-on-year, compared with a January-April target of 16.34 billion euros.
Other planned revenue-raisers the government is eyeing is upping several goods from the lower 13 percent value-added tax group to the higher 23 percent group.
The reduction of tax breaks for first-home buyers is also being examined, the source added.
The ministry is expected to unveil its medium-term 2011-15 strategy aimed at helping restore the country’s fiscal health in the next few days.
Source: ekathimerini.com -
Here is what I think is by far the scariest forecast of what might happen if Greece defaults or is deemed to have defaulted by the ratings agencies in the event that “voluntary” haircuts aren’t seen as voluntary.
Oh, and here is another:
http://www.bbc.co.uk/news/business-13838819
Nobody wants this but who is going to put their hands in their pockets to prevent it.
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Jack Straw says the euro may collapse. Although I am not sure about his credibiity rating 🙄
http://www.bbc.co.uk/news/uk-politics-13839381
I think it will survive, it is in Germany and France’s interest. Everything will be fudged just the same as it has been since the introduction of the monopoly money!
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Jack straw, hardly a economic or commercial brain. An MP for Blakburn, economic hot spot !!!!!! Like his reasons for going to war with …… mass destruction and all that. He is seeing things again. Like the Dictators he cannot quitely go to grass.
Katy : € hardly monopoly money !!!! Apart from the Swiss frank it is the strongest
currency. It is one of the main reason that the economies of the majority of the EU zone
are suffering. -
And here’s yet another BBC link
http://www.bbc.co.uk/news/business-13842763
This time it looks at the issue in greater depth.
But the conclusion seems to be that only if Germany (and France I suppose) or more accurately, if their electorates are prepared to throw LOTS of money at the peripheral countries, on an ongoing basis, can they keep the Euro going.
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I agree completely with the sentiment of that BBC article regarding the Euro’s inevitable collapse. In economic terms it never had a chance. When times were good the fault lines in the idea could be papered over. When the worlds economies hit the buffers the truth is revealed.
However the Euro is not an economic concept it’s a political one. The current generation of European political leaders believe in a Federal Europe with the common currency being the glue and central plank which holds it together. The principal remit of the Euro is to bring price stability to it’s member nations. It’s even failed miserably on that one central point.
Be under no illusions these people are quite prepared to bring Europe to it’s economic knees before they will admit the project has failed. As the article says it’s simply a matter of time. They hope the global economy will pick up in time before the pack of cards comes tumbling down. By then it will be to late.
If you doubt that look what’s happening to Greece.
The country has survived on credit and spent money loaned to them by European banks et al. They spent the money on consumption not on investment projects which could have returned a stronger domestic economy. By consumption I mean early retirement, high public servant salaries, tax breaks for the well off, public ownership of everything which should be in the private sector.
Plainly unsustainable by any criteria you care to name and impossible to repay from the countries relatively small and rapidly shrinking GDP.So what do the leaders of Europe think should be done, why give them more money, Europeans tax money and replenish the exhausted Athens coffers. This knowing the country has not a cat in hells chance of ever servicing it’s debts.
It’s like maxing out your personal credit card and then the bank simply doubling your credit limit knowing you won’t ever pay it back. There is NO difference and we all know where that will lead to in the end. The bankruptcy courts.
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@Chopera wrote:
The UK would not have been a big player alongside Germany if she had joined the euro. The UK would have had a bigger credit bubble and a bigger bust. Do you not realise that the only thing that saved the UK from total collapse was the Bank of England’s ability to slash interest rates and print money to bail out its banks? The irony is that the UK would have taken the euro down with her. Everybody would have been screwed.
OK Chopera, I have never claimed to do anything other than struggle with some of the concepts involved on the higher economic / national finance threads, so hopefully I get some credit for admitting that, and you can extend me a bit of patience.
So, this bright, innovative, highly moral, country of ours, would actually have pulled the Euro down is what you are saying, doesn’t say much for us does it and our much lauded nation status, jeeze the financial capital of the world hey, wonder if we gonna stay that way?
What you saying (which is actually what I figure anyway) is that in many respects we a bigger basket case than Greece, and were it not for the rather, well actually exceedingly dubious policy of just printing more money – for goodness sake, what a bloody uproar there would be on this forum if Spain was in the business of printing itself more money- Ha! I nearly fell off my chair laughing at that one.
But oh no, it is we – THE MONEY PRINTERS – we in all our wisdom consider the Euro a cracked, broken, useless and doomed dream…
Am sorry guys, I think we are the ones who are losing the plot really, short, mid and long term.
Think about that money printing scenario, and how cynical, critical and well incredibly abusive we would be about Spain if that was the case!
And nobody ever did answer my question as to whether we really did have influence outside our own shores or could actually be considered a military power going forward. 😐
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@Chris McCarthy wrote:
@Chopera wrote:
And nobody ever did answer my question as to whether we really did have influence outside our own shores or could actually be considered a military power going forward. 😐
Actually Chris I did. On Tuesday morning I spent the best part of an hour typing up a, thoughtful by my standards, reply. Only to have it disappear once I pressed the submit button. 🙁
I’ll try to recreate it from memory……….
There is no doubt that Britain is now a second rate power. The decline started in the early part of the 20th century and was accelerated by the world wars. This decline, from running the largest empire in the world to relative insignificance has been as inevitable as it was rapid. As the country’s power declined it compensated for this in part by forging a very strong alliance with the rising power on the other side of the Atlantic. This was cemented with WWII to the extent that, to all intents and purposes, Britain may as well have been the 53rd state.
In good part due to the strength of its relationship with the US Britain has always had a half hearted relationship with what is now the EU. It refused to participate when the common market was originally mooted and has since been no more than a bit player sometimes contributing, often sniping from the side. It is therefore no surprise that much of the rest of the EU, particularly the more important countries, regard the UK with distain. In order to get on with the business of running the EU the rest of the community have simply ignored it. The EU has thus been shaped by Germany and France with input from the other core nations. Britain’s input has arguably been less significant than that of Luxembourg.
Having said all that it is easy to understate the relative importance of Britain. A relatively small island in the North Atlantic is still the eight largest economy in the world. As Logan has so correctly stated, despite all the current problems, it is economically competitive with a well educated, flexible workforce. I’ll add the fact that they are English speaking helps considerably.
Yes, manufacturing has declined. The country has shifted towards services. Banking and finance may be in the doghouse now but it will no doubt bounce back. Even with the crisis the city is still by some way the world’s major financial center. It overtook New York in the last decade and is now some way clear. UK PLC are also world leaders in other services such as media and advertising. R&D based businesses such as those working biotechnology and pharmaceuticals are also world beaters.
The “soft power” that Britain wields throughout the world never ceases to amaze me. The BBC, for all its faults, is arguably the most highly regarded media organisation in the world. Other British institutions such as the likes of the Royal Society and the major universities have huge spheres of influence. You’ll find as many supporters of Man U in Thailand as in Manchester.
In short, what I’m trying to say is that, in world terms, Britain is still very influential. Certainly in relationship to its size and military power. Within the EU it is no more than a bit player.
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It’s a strange thing but when Britain entered EMU tied to the DM the rest of Europe were content, believing Britain was fully on board for the great project.
When the system hit the buffers Germany and the rest of Europe would not help Sterling and effectively facilitated Britain being ejected.
Had the EU really wanted Britain on board the time to display that was then and allow their central banks to support Sterling. They sat on their hands.
Treasury officials, one of whom was David Cameron have long memories. I personally lost a great deal of money in 1992, partly my own fault for believing the EU would support Sterling at any cost.
Yet now we see the EU machine falling over themselves to shovel money at Greece, a failed state and supporting the country until the cows come home…
The conclusion I draw from this is one of EU double standards. The rivalry, both political and economic which exists between Germany, France and Great Britain has never gone away. Currently there is a polite business like relationship. Nothing more.The new generation of EU politicians prefer to keep the UK at a safe distance.
The principal reason for that is Britain’s power and influence in the world.
The small peripheral EU states will never have an economy to rival that of Germany’s so the paternal core Europe will happily run to their aid.
Britain’s future has always been with a close alliance with the USA. As long as the US remains strong so will the UK. Long may that continue. The EU has never learned that for Britain it’s better to be outside the tent pissing in than inside pissing out. 🙂
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Chris
The phrase “printing money” is quite emotive since it smacks of what went on in Germany after the first world war i.e. wheelbarrow loads of money. These days Central banks don’t “print money” but they can create it to maintain liquidity for their client banks. The client banks borrow the money from the Central bank as and when they need it to keep the wheels of the economy oiled and pay it back in usually a very short time frame, the money then gets removed from circulation by the central bank so the money is then “unprinted” if you like.
Recently there has been the, now famous “quantitative easing” by the US and UK central banks but again this is really lending money whereby the central bank buys assets – usually financial assets such as government and corporate bonds – using money it has simply created out of thin, so many economists will argue that this is the same as printing money, however other economists argue that these are considered assets which the bank can sell again at some future date when the economy doesn’t need the stimulus and the money received is again “unprinted”.
OK, you said that if Spain did this there would be huge criticism, well effectively that is what it has done, with the help of the ECB who has provided unlimited liquidity to them. Again, the ECB consider this to be lending, not printing money, because it is asset backed; their huge property portfolios, I won’t get into the debate which says that the assets aren’t worth anything like what the client banks attribute to them 😆
Lastly you could say that the ECB is big time into quantitative easing too, although they wouldn’t admit it, by buying Greek Bonds.
In short, it could be called “printing money”, but all central banks do it. The difference in the UK’s case because it is outside the Eurozone, is that they can decide to do it without asking the ECB and therefore Germany’s permission 😈 whereas Spain and Greece had to ask permission, which they got.
Well that’s the principle, if anyone wants to correct me on the details feel free.
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Great analysis Zoro.
By buying Greek bonds and lending to Spanish and Irish banks on asset backed securities worth very little the ECB has compromised it’s own financial stability. That may well be soon the next need for restructuring.
Trichet says signals are flashing red for bank stability.
http://www.bloomberg.com/news/2011-06-22/trichet-says-risk-signals-red-as-debt-crisis-threatens-banks.htmlInteresting view point from Jeremy Warner:
http://www.telegraph.co.uk/finance/comment/jeremy-warner/8592773/Britain-should-save-the-euro-and-then-cash-in.html -
Does it matter if the UK has an influence in the world, not sure. There are some prosperous nations who have little influence but manage to do well. If “influence” means chucking away billions of pounds in overseas aid to prop up Arab and African despots who support terrorism, taking the lead in Libya to depose Gadaffi when they will probably get more of the same, or sending troops to be mudered in Afganhistan then we are better out of it. The same as being a member of the EU and paying billions to support Brussels crackpot policies….the UK doesn’t need it. The UK sold the Commonwealth countries down the river to join the EU and thus lost a lot of influence and trade. As a single country the USA is still our biggest importer.
As for the UK joining the euro 🙄 would it make any difference to spanish property sales? I doubt it. If Spain leaves the euro or the euro collapses I don’t think property sales would improve, they would probably get worse as all the financial markets will be in turmoil.
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@mark wrote:
If the Euro is in demise, can anybody explain why the Pound is now trading close to all-time lows against it? Given all the problems in the Eurozone I was expecting the Pound to strengthen rapidly, like the Swiss Franc is doing.
because it was devalued to help with our exports maybe.
because ireland are showing signs of a slight upturn.
because spain hasn’t shown it true debt yet -
@brianc_li wrote:
There is no doubt that Britain is now a second rate power…….
……. In short, what I’m trying to say is that, in world terms, Britain is still very influential. Certainly in relationship to its size and military power. Within the EU it is no more than a bit player.Damn fine answer that one, quote obviously edited.
Yep I get all of that, makes good sound practical sense to me.
Thanks for the trouble and your patience!
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@zoro wrote:
Chris
The phrase “printing money” is quite emotive….
Well that’s the principle, if anyone wants to correct me on the details feel free.Nope, I think I get all of that too.
It seems to me though that in 5 -10 -15 years we will all look back at this time and realise even more, that nobody had a ‘bloody clue’ what was going on and just fudged their way the hell out of it.
So thanks for that.
I still don’t think the Euro is going to go down though and working and living in Europe, with a real mix of Europeans, I think we write them off at our peril really.
Now, will the bankers ever pay the price for their Masters of the Universe behaviour, arrogance and debauchery?
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“As a single country the USA is still our biggest importer.”
Yes, and as USA is suffering we are feeling the cold. Here lies partly the answer to Mark’s posting. £ was devalued by low interest rates & quantatative easing etc. European central bank did the same. Further € is effectively underpinned by Germany.
Sadly & if only the answer was that simple as above. I do not see the Spanish debt is that much of an issue in the over all scheme of things.
Perhaps, the election in Spain in 2012 & increase in UK interest will have some effect.
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@mark wrote:
If the Euro is in demise, can anybody explain why the Pound is now trading close to all-time lows against it? Given all the problems in the Eurozone I was expecting the Pound to strengthen rapidly, like the Swiss Franc is doing.
Don’t know if that was a rhetorical question Mark, but if not…
The Bank of England has made it clear to the rest of the world that growth prospects in the UK are very poor, they have given clear signals that the historically low base rate of 0.5% isn’t going to be increased anytime soon – the forward market is betting on August 2012 – and they expect inflation to hit 5% anytime soon and stay between 4-5% for sometime. And earlier this week, the BOE Markets Director told anyone who would listen that more QE (quantitative easing) was still on the agenda.
In short if the Bank of England wants to screw the pound they are saying all the right things.
I’m especially peeved about this because the BOE’s single most important target is keeping inflation at or below 2% and if IRC they’ve managed that just one quarter in the last 4 years. Mervyn King has to keep writing letters of explanation to the treasury because of this failure but they obviously are giving him the nod and wink that the target shouldn’t be taken seriously. It just smells of rank hypocracy. If the target isn’t real the Treasury should give him a real one.
Rant over…. for now 👿
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@Chris McCarthy wrote:
I still don’t think the Euro is going to go down though and working and living in Europe, with a real mix of Europeans, I think we write them off at our peril really.
I don’t think the Euro is in imminent danger of dying. But if it is to survive long term, serious and far reaching changes will have to be made. Logan posted a link to Telegraph article yesterday which laid out what the future might be. Closer integration of the Eurozone to the point where the national governments effectively give up all economic power to Brussels i.e. Fiscal unity and serious and ongoing redistribution of wealth from the wealthier countries to the poorer ones. Just as it happens in the US and the UK where wealth is redistributed to the poorer regions via the tax system.
Question is; will the electorates of the wealthier countries allow it.
The current crop of Eurozone governments are seriously pro Euro in good times and bad, hence their current resolve to see it through. The electorates on the other hand, I suspect, are pro Euro in good times but not so pro in bad times, like now. If the bad times extend long enough, come election time that negative feeling might put Eurosceptic politicians in power. That would be the time when the demise of the Euro might actually happen.
Then again, your earlier comment that nobody really knows what is going on includes me, so I estimate I have about a 50% chance of being right; as if I tossed a coin. 😆
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@Chris McCarthy wrote:
OK Chopera, I have never claimed to do anything other than struggle with some of the concepts involved on the higher economic / national finance threads, so hopefully I get some credit for admitting that, and you can extend me a bit of patience.
OK apologies for the abruptness of my reply – it was mainly your German colleagues’ arguments based on “influence” that wound me up, rather than what you personally said. I’ve heard this “be part of the EU or be left behind as some forgotten island” line so many times. Not only do I dislike the bullying undertones, but I also dislike the concept of the EU as some politicians’ playground where they can take their private jets to expensive resorts and “exert their influence” over each other between courses in expensive restaurants. The people who should have influence – the electorates within the various EU countries – have none, while the poltician’s have too much.
@Chris McCarthy wrote:
So, this bright, innovative, highly moral, country of ours, would actually have pulled the Euro down is what you are saying, doesn’t say much for us does it and our much lauded nation status, jeeze the financial capital of the world hey, wonder if we gonna stay that way?
What you saying (which is actually what I figure anyway) is that in many respects we a bigger basket case than Greece, and were it not for the rather, well actually exceedingly dubious policy of just printing more money – for goodness sake, what a bloody uproar there would be on this forum if Spain was in the business of printing itself more money- Ha! I nearly fell off my chair laughing at that one.
Here is why the UK would have pulled down the euro:
These days the main tool for controlling an economy is interest rates. If an economy is having problems the government/central bank will lower interest rates to stimulate the economy. Lowering interest rates effectively pumps more money into the economy and encourages people to spend. If an economy is growing too fast then there is a threat of inflation and the government/central bank will increase interest rates to have the opposite effect and cool the economy down.
Now I don’t have the excact data at hand, but from the period between 2002 when the eurozone was created and the first financial crisis in 2007, eurozone interest rates were about half those of the UK. The bank of England has already come in for criticism for keeping rates too low during that period, but with the euro they would have been much lower still. People would have been taking out even more credit, even bigger mortgages, and house prices would have gone even higher. And with an even bigger credit boom there would have been an even bigger credit crunch. And being part of the euro the UK would not have been able to do anything about it.
This is nothing to do with being a “basket case” economy. It’s simply that the UK would have lost one of its most important economic controls. And it is this loss of control that caused such problems for Ireland and Spain. These countries also needed to have much higher interest rates during that period to prevent their economies from overheating. But they were stuck with the euro and could do nothing about it. And now they are getting punished.
As for money printing – well there are two ways of creating money: through printing or through lending (I can provide a good explanation of fractional reserve banking if you like, but I don’t want to make this post too long). Basically before the crisis too much money had been created by lending money, and when the credit crunch happened that money very quickly disappeared from the system. Money printing was the only way the central banks could compensate for this and prevent a deflationary depression, or worse. What do you think happens to modern societies when people suddenly find they have no money left in their bank account. Remember we are only 3 square meals away from complete social breakdown.
@Chris McCarthy wrote:
But oh no, it is we – THE MONEY PRINTERS – we in all our wisdom consider the Euro a cracked, broken, useless and doomed dream…
Am sorry guys, I think we are the ones who are losing the plot really, short, mid and long term.
Think about that money printing scenario, and how cynical, critical and well incredibly abusive we would be about Spain if that was the case!
And nobody ever did answer my question as to whether we really did have influence outside our own shores or could actually be considered a military power going forward. 😐
It would help the debate if you avoided misrepresting other people’s arguments so you can shoot them down (straw men). There are some solid arguments against the euro that many people have put forward for many years, and many have predicted exactly the problems being faced now. The people who put forward these arguments did so not because of some nationalistic superiority complex, but simply because they thought that it would cause a great deal of suffering for many peope within the eurozone. Right now millions of bright yound people people in countries like Spain, Greece and Ireland are having their futures destroyed by the euro.
As for influence – as I mentioned above, I’m more concerned about the influence I have in determining how I am governed rather than the influence one group of politicians have over another. 10 years ago the French had no influence whatsoever over US policy – they were the “cheese eating surrender monkeys”. A couple of months ago Barack obama declared France America’s most important ally. Right now you could argue the country with most influence in the eurozone is Greece – since they can bring the whole thing down. To the politicians it just one big game – the less influence they have the better.
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Concerning the link and point of a suggested EU fiscal unity.
In my view fiscal unity will not create wealth for poorer EU nations. What it will do in practice is create yet another massive and expensive unaccountable EU bureaucracy. The theory of redistribution of wealth to poorer regions is a sound one but in practice it seldom works. The SE of England remains far richer that the former industrial regions of the north and NW Scotland.
The same is true in other EU states such as Italy where the south remains as poor as any other club med country.In France the country has a very efficient and effective tax collecting system. It’s almost impossible to avoid taxation on almost every aspect of life here. You try it at your peril since the penalties for avoidance are very severe. The cost of administering this wonderful system are enormous. France employs 8m civil servants to do the job. Yet it works. There are no regional differences of wealth in France. The wealth of the nation is evenly distributed across the country. That however is because of it’s political system which would be unacceptable in most other states.
I would imagine then that a similar system would be adopted after fiscal unity and all the civil servants in the Eurozone moved to a new monolithic building in Brussels the size of a small town to beaver away chasing Europe’s tax dodgers…
They will have their work cut out in Greece and Spain where the black economy probably amounts to around 30% of their GDP.
Excessive taxation saps incentive and motivation. French works do the very minimum and use little initiative. The harder they work and the more they earn the more tax they pay. Overtime is almost never done since almost all of it goes to the tax man.
I have no doubt at all that this kind of fiscal tyranny will be the vision to come in Europe.
Under the Lisbon Treaty individual states may not have a veto to prevent it. The only thing that might is an electoral referendum.
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I don’t really get the point with having “influence” if you are not one of the bigger countries. None cares what Finland, Denmark and other small countries think anyhow. If smaller countries want the abillity to influence they join up together in their own respective union. Having Germnay and France telling them what to do is not something to aim for. Having the abillity to cast and official vote doesn’t mean you have influence.
Norway for example have a much bigger influence on anything these days and they are not in the EU/EMU.
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@Chopera wrote:
@Chris McCarthy wrote:
OK apologies for the abruptness of my reply – .
I never thought your repy was abrupt actually,
I also didn’t meant to give the impression that my multinational colleagues were indignant about Britains stance outside Europe, if anything they / me, are confused and saddened by it, we all love England as well as the other countries in our own way.
Also didn’t meant to be patronising or tough talking per se, I think we got wires crossed on the (straw men), because, I am happy that this is just bang on the third, equally good post and response on a – thread to dread – for me.
Your arguments are clear, concise and precise and some stuff makes a lot more sense to me know than it did before, well a helluva lot actually.
I still can’t figure where things are going to go, my gut still says the Euro will be here all our lifetimes.
But, I can see EXACTLY what you say about Ireland and Spain, it was nuts and I saw it daily, and my goodness yes the Brits; who were already in a credit frenzy, would have certainly gorged themselves to death!
And yet now, lowest rates in mankind’s history, no deposit required 100% mortgage, everyone is cowering in their bunkers.
World has gone mad, but you cleared a helluva lot up for me in there, and I really do appreciate the time and balance you put to it.
It was great and now I think I have learned enough for my small head on this thread and am gonna get the hell out of it!
Cheers, it was cool, thanks
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@Chris McCarthy wrote:
@Chopera wrote:
@Chris McCarthy wrote:
OK apologies for the abruptness of my reply – .
I never thought your repy was abrupt actually,
I also didn’t meant to give the impression that my multinational colleagues were indignant about Britains stance outside Europe, if anything they / me, are confused and saddened by it, we all love England as well as the other countries in our own way.
Also didn’t meant to be patronising or tough talking per se, I think we got wires crossed on the (straw men), because, I am happy that this is just bang on the third, equally good post and response on a – thread to dread – for me.
Your arguments are clear, concise and precise and some stuff makes a lot more sense to me know than it did before, well a helluva lot actually.
I still can’t figure where things are going to go, my gut still says the Euro will be here all our lifetimes.
But, I can see EXACTLY what you say about Ireland and Spain, it was nuts and I saw it daily, and my goodness yes the Brits; who were already in a credit frenzy, would have certainly gorged themselves to death!
And yet now, lowest rates in mankind’s history, no deposit required 100% mortgage, everyone is cowering in their bunkers.
World has gone mad, but you cleared a helluva lot up for me in there, and I really do appreciate the time and balance you put to it.
It was great and now I think I have learned enough for my small head on this thread and am gonna get the hell out of it!
Cheers, it was cool, thanks
No problem, I’m glad the post was of some use.
Regarding “where we go from here” I don’t know either. Here at least is my analysis of the situation regarding Greece:
Greece is insolvent – the Greek government does not have enough income to pay the interest on its debts, let alone pay off its debts. The usual solution to this situation is for Greece to have some of her debt written off in a controllable way. The traditional way of handling this situation would be for Greece to devalue her currency (and therefore her debt), get a low interest loan from the IMF or the World Bank, and restructure the debt so Greece had longer to pay it off. Of course Greece’s creditors would lose money but they would do so in a manageable way that would prevent them from going bust (you win some, you lose some).
Being part of the eurozone Greece cannot devalue. But she is still left with the other two options. Now although Greece has received loans (“bailouts”) from the ECB and the IMF, they have not been particularly cheap loans and she has not been allowed to restructure her debt. For some reason Greece’s creditors are being protected from having to take a loss, and all that’s happening is Greece is ending up with even more debt. The situation is getting worse.
The options I believe available are:
Greece leaves the euro and devalues her debt as described above
Greece simply just stops paying her debts
Greece pays off her debts in some other way: maybe an island or two, a few nationalised companies, an airport, the Parthenon, etcEdit to add: there is of course another option of getting somebody else to pay off Greece’s debts on a more continuous basis (a transfer union). That would have to be Germany and, for Germany to accept that, the Greeks would at least have to work as long as the Germans and pay as much tax as the Germans (a fiscal union). If Greece (and maybe others) are to remain in the euro then this seems the “best” option, provided they could get it past the Greek and German electorates.
As an aside I would personally like to see Greece awarded the olympic games every 4 years, using the existing facilities from the 2004 games. I don’t know the sums involved, but I’m sure the revenue generated would help, and it would render the corrupt IOC redundant as well.
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@Chopera wrote:
The options I believe available are:
Greece leaves the euro and devalues her debt as described above
Greece simply just stops paying her debts
Greece pays off her debts in some other way: maybe an island or two, a few nationalised companies, an airport, the Parthenon, etcDon’t get us all started on the IOC, of FIFA for that matter, jeeze even Logan and I might find something to agree on!
Fiscal Union sounded very interesting too, but putting that aside, have been searching my emails for a link I got from an Irish pal while back, and I think it may have been posted on the forum, where in the subject matter by an Irish economist / professor / whatever, postulated is I think that word, that in the case of say Ireland and its debt, which I understand to be mainly bank related bailouts, that the Irish should just say “Feck it” as they do, and give the banks to their creditors – the European Union to own and run, and what the hell it seemed the argument went, then they would have no debt anymore! It was a truly fascinating position that had the Irish all debating it for weeks.
Now it doesn’t sound like that can be done above, but yes it seems obvious to everyone I know that at some point Greece finds another way to repay, that for sure – win some, lose some – should come into play and we all have to take a hit, and maybe the Euro gets devalued somewhat this time. I mean if you can’t pay, then your creditors have to take the hit right?
But it is fascinating, and bloody stringent, and massively painful for the Greeks, you gotta hand it to the Germans no? They play hardball and tough in fiscal terms and a right wake up call to all the PIIGS I think, ship or eventually ship out and be ruined in the process. Which lets face it, we all want Spain to buck up its act in all sorts of areas, and this is a start really.
Even shakes my belief that we Britain should be more in than out really, I don’t want to be in and being spanked by the Germans every five minutes!
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@Chris McCarthy wrote:
@Chopera wrote:
The options I believe available are:
Greece leaves the euro and devalues her debt as described above
Greece simply just stops paying her debts
Greece pays off her debts in some other way: maybe an island or two, a few nationalised companies, an airport, the Parthenon, etcDon’t get us all started on the IOC, of FIFA for that matter, jeeze even Logan and I might find something to agree on!
Fiscal Union sounded very interesting too, but putting that aside, have been searching my emails for a link I got from an Irish pal while back, and I think it may have been posted on the forum, where in the subject matter by an Irish economist / professor / whatever, postulated is I think that word, that in the case of say Ireland and its debt, which I understand to be mainly bank related bailouts, that the Irish should just say “Feck it” as they do, and give the banks to their creditors – the European Union to own and run, and what the hell it seemed the argument went, then they would have no debt anymore! It was a truly fascinating position that had the Irish all debating it for weeks.
Now it doesn’t sound like that can be done above, but yes it seems obvious to everyone I know that at some point Greece finds another way to repay, that for sure – win some, lose some – should come into play and we all have to take a hit, and maybe the Euro gets devalued somewhat this time. I mean if you can’t pay, then your creditors have to take the hit right?
But it is fascinating, and bloody stringent, and massively painful for the Greeks, you gotta hand it to the Germans no? They play hardball and tough in fiscal terms and a right wake up call to all the PIIGS I think, ship or eventually ship out and be ruined in the process. Which lets face it, we all want Spain to buck up its act in all sorts of areas, and this is a start really.
Even shakes my belief that we Britain should be more in than out really, I don’t want to be in and being spanked by the Germans every five minutes!
Yes I think I remember reading the article on this forum – it was very good. But as you say Greece’s problem isn’t due to it having bailed out its banks.
To me the most logical route would be (if possible) to let Greece default by leaving the euro and devaluing, and then the ECB can bail out any banks holding Greek debt. The ECB would more likely get the bailout money back from the banks than the Greeks. The only reason I can think of for this not happening is too many politicians’ and bankers’ careers will be damaged by this. For them it is better to punish the Greeks and hope the sh1t hits the fan on someone else’s watch.
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@Chopera wrote:
To me the most logical route would be (if possible) to let Greece default by leaving the euro and devaluing..
One last bit of patience for the ignorant, somewhat bewildered but trying student…
Is it not a question of one out, all out, and therefore the utter collapse of the Euro and de facto whoooaaa a cataclysmic effect 100 times more powerful than Lehman, and serious soup kitchens ahead?
i just can’t see how anyone of the politicians is clever enough to figure this stuff out, not just on their watch, but on any watch, they just simply have to go with the Euro or the world plunges into chaos on a tsunami scale surely?
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I wish it was that easy Chris. The simple truth is that whilst many can conjecture what would happen in the (I think quite likely) event of a default.
First of all your faith in politicians and the system which supports them is touching but misplaced. Part of the reason we see this mess now is that difficult and unpopular decisions that should have been made years ago were avoided. The proverbial can was kicked down the road in time honoured fashion. Yes there are some wise heads around but all you need is some charismatic opportunist to start winning votes on the basis of a ‘no more of our money for foreigners’ ticket and who knows what will happen.
Optimists will point to the example of Argentina. After its default in the early 90’s there was a significant devaluation and a couple of quarters of real difficulty. Many people depended on food parcels, etc. With the devaluation the economy did however recover quite quickly. Pessimists can point to Greece’s long history of military rule and dubious human rights. The truth is probably somewhere in the middle.
The biggest worry for many is the so called domino effect. If/when Greece goes will the markets then turn their attention to Portugal… Ireland… Spain… Italy… If so we are heading for another crisis. One that will make the turmoil of a few years ago seem mild in comparison.
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It all boils down to one simple question.
Are hard-working, thrifty Germans prepared to pay Greeks and others (Spain?) to live beyond their means for decades, if not generations to come?
If not, it’s hard to see how the Euro can survive in its present form.
What I’d like to know is, with all this going on, why is the Pound so low against the Euro? Might it be the markets think Cameron’s team are all hat and no cattle, or might the Pound be substantially under-valued?
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I presume the point about all this will it/won’t it collapse is that Spain will go back to the Peseta and the sterling exchange rate will be so good that everyone will be able to buy a 2/2 for about £25,000? If a large economy like Spain fails and the euro collapses the UK will be in trouble too and the pound will not necessarily rise. Be careful what you wish for.
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@mark wrote:
It all boils down to one simple question.
…
What I’d like to know is, with all this going on, why is the Pound so low against the Euro? Might it be the markets think Cameron’s team are all hat and no cattle, or might the Pound be substantially under-valued?
The value of a currency is primarily linked to how much there is of it in circulation. We tend to think that weak economies automatically have weak currencies because when an economy is in trouble the government usually increases the amount of money in circulation, and therefore devalues it.
But this isn’t always the case. In the 1930s US depression the dollar was linked to the gold standard and in fact stayed relatively high. Which resulted in deflation (which is what happens when a currency increases in value)
With the case of Greece the ECB is being very reluctant to “solve” the problem simply by increasing the amount of euros in circulation. They are prepared to make the Greeks suffer a lot more than if the Greek government were in control of the value of the euro. After all the ECB has other economies to think of as well, many of which are going well at the moment, and they are not particularly accountable to the Greeks.
If Greece leaves the eurozone then there will be an initial shock to the financial markets, but afterwards you’d be left with a eurozone consisting of stronger economies. So the ECB will be even less likely to weaken the euro.
The only thing I can think of that would seriously weaken the euro is if Germany threatened to leave. And I think the markets view that as unlikely.
Personally I try not to view the pound (or any currency for that matter) as being “high” or “low”, since that implies it will return to some “normal” value “once things get sorted out”. The pound is lower than it was a few years ago, but that doesn’t mean it can’t go lower still.
Having said that I gave up trying to second guess markets years ago. After all they seriously got it wrong when they valued Greek debt at similar levels to German debt. So who knows. As Keynes once said “Markets can remain irrational longer than you can remain solvent”. Try to second guess them at your peril 😉
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@Chris McCarthy wrote:
@Chopera wrote:
To me the most logical route would be (if possible) to let Greece default by leaving the euro and devaluing..
One last bit of patience for the ignorant, somewhat bewildered but trying student…
Is it not a question of one out, all out, and therefore the utter collapse of the Euro and de facto whoooaaa a cataclysmic effect 100 times more powerful than Lehman, and serious soup kitchens ahead?
i just can’t see how anyone of the politicians is clever enough to figure this stuff out, not just on their watch, but on any watch, they just simply have to go with the Euro or the world plunges into chaos on a tsunami scale surely?
Yes whichever way I look at it the end result seems ugly.
The problem is that it is up to Greece whether she decides to leave the euro or not. Yes it would be a disaster for the euro project – and it might set a precedent for other troubled economies to follow. Also Greece would be punished by the markets if she left – it would be many years before Greece could get hold of cheap credit again. Then again Greece is being pretty badly punished right now for staying in the euro, and the current trajectory of giving Greece more debt to pay off the existing debt is making things worse.
There has been talk about French banks agreeing to restructure Greek debt, i.e. accept some kind of soft default, but they would expect a bailout from the ECB to cover their losses. If they can pursuade the German taxpayer to cough up yet more then it might be the route they take.
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@brianc_li wrote:
Optimists will point to the example of Argentina. After its default in the early 90’s there was a significant devaluation and a couple of quarters of real difficulty. Many people depended on food parcels, etc. With the devaluation the economy did however recover quite quickly.
Not so. Argentina has a real rate of inflation of 30%, a serious breakdown of social structure with rocketing crime, failing health and standards of living.
read some of the stories here
Specifically here
http://ferfal.blogspot.com/search/label/Argentine%20Collapse
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The eurozone contains 17 members most of whom are slowly but surely recovering from a world wide, mammoth recession. The zone has a trade surplus of more than 22 billion and many countries including the big one’s such as Germany and France are doing quite well. I really think Greece’s problems are not such a major problem for the entire zone and even if they leave the euro it will not bring down a complete collapse.
It’s a bit like any association or club. take for example a group of 17 golfers who get together to form a society which enables them to play together as a group and take advantage of cheaper deals on courses because they are a group rather than individuals.
Now if one of the members starts to misbehave, let’s say not turning up for days organised, not paying his fair share into the kitty, cheating on the golf course or whatever. He would be asked to clean up his act and if he does not he would either be kicked out or leave before he is kicked out. the rest of the group would carry on regardless. Maybe initially worse off because they are one member down but on the other hand better off without the weak link.
Maybe a simplistic view of looking at it but that’s how I see the situation with Greece. They are one of 17 members (a small one at that) who is currently misbehaving buy not accepting euro standards of work practices, paying of taxes and paying of loans etc. They have been asked to shape up a bit which they are trying to do but if things don’t approve they will either leave or be kicked out. The eurozone contains 17 members most of whom are slowly but surely recovering from a world wide, mammoth recession. The zone has a trade surplus of more than 22 billion and many countries including the big one’s such as Germany and France are doing quite well. I really think Greece’s problems are not such a major problem for the entire zone and even if they leave the euro it will not bring down a complete collapse.
It’s a bit like any association or club. take for example a group of 17 golfers who get together to form a society which enables them to play together as a group and take advantage of cheaper deals on courses because they are a group rather than individuals.
Now if one of the members starts to misbehave, let’s say not turning up for days organised, not paying his fair share into the kitty, cheating on the golf course or whatever. He would be asked to clean up his act and if he does not he would either be kicked out or leave before he is kicked out. the rest of the group would carry on regardless. Maybe initially worse off because they are one member down but on the other hand better off without the weak link.
Maybe a simplistic view of looking at it but that’s how I see the situation with Greece. They are one of 17 members (a small one at that) who is currently misbehaving buy not accepting euro standards of work practices, paying of taxes and paying of loans etc. They have been asked to shape up a bit which they are trying to do but if things don’t approve they will either leave or be kicked out.
The euorozone group will carry on and not be too effected by the leaving of one small member. -
@Man in Marbella wrote:
…
The euorozone group will carry on and not be too effected by the leaving of one small member.What if the member being kicked out owed a large amount of money to the club (i.e. to some of the other members)? And that by being kicked out many of that member’s debts were written off by the club?
What then if some of the other members also owed a large amount of money to the club (i.e. to some of the other members)? And when those indebted members find that they no longer receive the debt payments from the member who left, they may suddenly find that they can’t pay their debts either. Wouldn’t they decide to leave as well?
So eventually you end up with a golf club consisting of members who originally were the creditors, but now find that much of their credit is not being repaid.
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There is an interesting article on the BBC News web site by Robert Peston on a Greek default (unfortunately there is no link to that specific page)
In essence what he is saying is that it may not be in Greece’s interest to default now as they have a primary deficit (what it raises from taxes does not cover the basic running costs of the state, let alone its borrowing costs too) and need loans to tied them over
However if they can slash state costs and reduce their primary deficit to zero then that would put them in a stronger position to default
In terms of why the pound has not strengthened against the euro I think that may be to do with news that retail sales have recently fallen rather than increased as predicted together with comments from the MPC that further quantitive easing may be needed
Richard
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looks like EU civil servants are now in the firing line 🙂
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@mark wrote:
It all boils down to one simple question.
Are hard-working, thrifty Germans prepared to pay Greeks and others (Spain?) to live beyond their means for decades, if not generations to come?
If not, it’s hard to see how the Euro can survive in its present form.
What I’d like to know is, with all this going on, why is the Pound so low against the Euro? Might it be the markets think Cameron’s team are all hat and no cattle, or might the Pound be substantially under-valued?
Just heard on radio that sterling could be sliding to parity. Not far off now at 1.10! Tourist rate will be about 1.06.
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@Fuengi wrote:
looks like EU civil servants are now in the firing line 🙂
Yup – they wanted to increase their budget by something like 5% while demanding everyone else slash theirs. There’s even been talk of them introducing their own VAT and financial transaction tax to line their coffers.
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@Chopera wrote:
@Fuengi wrote:
looks like EU civil servants are now in the firing line 🙂
Yup – they wanted to increase their budget by something like 5% while demanding everyone else slash theirs. There’s even been talk of them introducing their own VAT and financial transaction tax to line their coffers.
This to me is the end of this once so great project with free trade amongst it’s members. Let the people that behave pay for the missbehaving ones. 😆
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As to how the EUP (EUR-periphery) would have fared in the same period (and how one goes about working out its exchange rate), HSBC says:
What would be the value of EUP-USD? There are several possible ways of estimating this. The two simplest are shown in table 8. The first column assumes that the current EUR is just a simple average of the values of the hypothetical EUC and EUP. This would mean EUP-USD of about parity. If the EUR is a weighted average of EUC and EUP then, based on approximate GDP weights this would mean EUP-USD of about 0.65.
Et voila — one set of current EUP current exchange rates:
Now, while all this might strike you as fanciful theory, there are, say HSBC, some interesting lessons to be learned.
The gist of this is a Euro split could result in a exchange rate of 1.6-2.5 Euro’s to the GBP or 1-1.6 Euro’s to the USD. How long that situation would remain is debatable, with investors buying into properties and the increases in exports.
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@shakeel wrote:
1.6-2.5,
Sorry Peter are you saying 1.625 ????No, between 1.6 euros and 2.5 euro to the pounds. With 2.5 being the most likely.
In contrast, the German Euro would be 0.85 euro’s to the pound.
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@shakeel wrote:
Thanks, roll on that day. I can walk like a Sheik again in the Andulcian towns & villages.
You and the Germans, imagine the boost top Spain’s economy.
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Good for the foreigners, but wow it would destroy the Spanish.
Inflation would jump 20-30% on the day of the change; gas, food, all perishable products are imported in such high quantities, it was be disastrous on a short term basis.. In the long term it will be good, but in the first few years the shift would be eye opening.
Hey if we really believe this scenario, and you really want to buy property in Spain, make sure it is a farm or farm land.
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@kgpoc wrote:
Good for the foreigners, but wow it would destroy the Spanish.
Inflation would jump 20-30% on the day of the change; gas, food, all perishable products are imported in such high quantities, it was be disastrous on a short term basis.. In the long term it will be good, but in the first few years the shift would be eye opening.
Hey if we really believe this scenario, and you really want to buy property in Spain, make sure it is a farm or farm land.
While gas in imported, I suspect Spain produces enough food to feed itself, and have enough left over for export. Spain has plenty of other stuff people will buy – at the right price – and a devaluation would help Spain sell that stuff. Any spike in inflation would be offset by increased growth. Devaluation might hurt for a few months while the economy rebalances, but it would be of overall benefit to Spain.
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@kgpoc wrote:
Hey if we really believe this scenario, and you really want to buy property in Spain, make sure it is a farm or farm land.
Water is far more important, it takes 1000 tonnes of water per tonne of wheat, Spain is severely lacking in that respect. Farmland is quite cheap in the UK/Ireland and it tends to have enough water.
Good for the foreigners, but wow it would destroy the Spanish.
They are getting destroyed now. Unemployment is horrendous and its not going to get better until Spain becomes more competitive through internal or external devaluation. Internal devaluation is extremely difficult for the southern countries, devaluing the currency (external devaluation) is far less painful. UK did it successfully and Spain, Italy etc have always done it.
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Well Thursday will be another chapter in the saga when the Eurozone leaders are meeting to try and agree how to fix Greece. 😆
It’s still being said that Germany and Finland at least are going to insist on haircuts, whatever words are used in it’s place.According to Stephanie Flanders, the BBC economics editor, there is now serious talk by economists about the “End Game” for the Euro.
http://www.bbc.co.uk/news/business-14203824
It is being suggested that if Greeks genuinely believed a return to the drachma was imminent they could start hoarding Euros rather than leaving them in the banks, and that would effectively transfer the Greek Banks’ debt to the ECB and the Eurozone i.e. Germany. It seems that there is some evidence that this might already be happening with deposits down by 15%. The same would be true for any of the other candidates for eviction from the Euro. The calculations being quoted come to 230% of Germany’s GDP.
In the light of that, if the Euro really is going to fail, I’d think that it is more likely to be because Germany leaves it rather than Greece.
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The German Empire is complete
So it looks like there will not be a crash and recovery for Spain etc, just the long slow.. slow.. crash.
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I’m still not bored with this, zoro 🙂
Have heard that George Soros, who strongly advocates that Greece must leave the euro and be able to devalue in order to survive as against facing certain bankruptcy, is now adviser to George Papandreou, the Greek PM. Would love to be a fly on THEIR wall. No pressure then, George P. 😀
Everyone in Greece is holding their breath, meanwhile stuffing their euros in safety deposit boxes or under the mattress. The wealthy got their euro-millions out of the country ages ago.
More and more politicians recently are coming out of the woodwork backing the line: “the one-size-fits-all euro has turned out to be a one-size-fits-none” to quote the latest one I’ve read below.
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I’m not bored with it either Charlie.
It’s hard to see how the Euro can continue indefinitely, at least in it’s current form. It was fine during the debt fuelled boom times but it’s creaking at the seams now that the debts are being called in.
The only way I can see that it has a long term future is if German voters accept that the price to keep it, is the ongoing transfer of wealth from them and the richer countries to the poorer countries, just as happens from the South East of the UK to the North etc. So far they’ve shown no sign of wanting to do that. Merkel’s outright rejection of the Eurobond idea speaks volumes.
If Greece does attempt to leave the Euro it’s going to be a painful transition for them. As the quote in the article says, it would be an easier transition if the richer countries left it.
Interesting article by the way.
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I have – unbelievably – to admit I am not bored with it either.
In fact, I am just talking to a client of one our staff about this today.
We have – believe it or not – quite a number of clients just waiting at the edge of their seat for several things to be confirmed, the chief of which currently are:
1) The euro will be secure, that there will be no return to individual currencies and or also, no two-tier euro introduced.
2) That it is official, the market for property has hit the bottom.
At the risk of dragging up all sorts of old arguments, in relation to number 1) while a country like Greece may somehow decided, through a tortuous and I would think disastrous process, that they may work to leave the euro; it is just not going to happen that the euro itself goes altogether or even two tier is it?
The debate has surely gone on long enough, for us to have perhaps enjoyed the conversation, but the likelihood of the euro going has to be non existent in reality, it would cause Armageddon in the world economy surely? We are three years soon into the great crisis and collapse, it would a cataclysmic event beyond anything ever seen to abandon the euro.
And, isn’t it also a question of what good – the euro is doing and bringing, particularly to Spain, where, after several decades of learning about democracy following decades of dictatorship, the country is more and more learning that it has to adopt Northern European levels of standards and fiscal behaviour. If still in the peseta or returned to it, how would that wash? It has been a hard, hard road for the Southern Euro states to understand just how Northern Europe really works, but in the end it will benefit all, as well a strong and vibrant euro economy.
As to no 2) well, someone asked me today, when will it be official, that the market has hit bottom, and who says so? I am asked this all the time, my stock answer is that it is a number of different factors, which eventually coalesce into a general feeling and understanding, but that people usually find the bottom of the market has been hit – six months to a year after the fact.
And so on we go, round and round in circles really.
But prices have stopped falling across the board, am pretty certain of that, people are buying in euros, and with sterling, and this time next year…. Surely, the picture at some point, after so many years improves.
Or am I still an over simplistic and misguided individual?
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Chris
To deal with your two points in reverse order.
2) Yes, agreed, no-one will know when the bottom of the market is reached until we have the benefit of hindsight. Everything else is just speculation.
1) A single currency cannot survive indefinitely without fiscal unity. Fiscal unity, as in the UK and the US means serious transfers of wealth from the richer regions to the poorer regions. It also requires true mobility of labour to succeed properly. In the UK and the US, ordinary workers from the poorer regions can move to jobs in the wealthier regions without any language barriers. In the EU a spaniard trying to get a manual job in a VW factory in Germany who doesn’t speak German, has practically zero chance of succeeding.
Chris, do you accept these premises and are confident they will be addressed or are you saying that the Euro will suceed without them?
The current problems with the single currency have been well documented. Germany has immense industrial strength and attracts enormous investment from multi-national corporations because they are super efficient with high productivity despite higher wages than most other EU countries. This inward investment enures that they always have the most up to date tools and machines to maintain that productivity (their work ethic also helps). If there were no Euro and Germany still had the DMark this productivity would cause the DMark to ever appreciate in value and make their exports ever more expensive.
The likes of Spain, who aren’t as productive as Germany, and don’t receive the same level of inward investment, would see their peseta devalue against the DMark and make their exports much cheaper, and therefore much more attractive. This is the self balancing feature that separate currencies exhibit and which is destroyed by the Euro. Germany’s exports are cheaper than they should be and Spain’s are more expensive. The Euro is great for Germany and bad for Spain and the other peripheral countries
The model suggested by Germany to counter this, is that the Peripherals drive down wages, spending on infrastructure and social benefits and hence standards of living, to increase their competitiveness i.e. condemning them to decades of austerity. Eventually, when they are seen as a low cost economy they might attract enough inward investment much as Asia has, to compete with Germany on a level playing field.
It’s a high price for the Peripherals to pay for a single currency. Maybe they will go for it – maybe not! -
Or am I still an over simplistic and misguided individual?
Guilty on both counts 😆 😆
To come to the questions you raise…..
Leaving the euro would be an incredibly dangerous and complex act for any country. Strong economies such as Germany would lose their competitiveness overnight and destroy their export markets. Weak economies would face banking collapses with social chaos. There is also no guarantee that they would return to competitiveness with a devalued currency and, what would be rampant inflation.
Those European countries, both strong and weak, that have looked at the option of leaving currency union have backed away from doing so once they have realized the consequences.
As an aside, most of the euro doom mongers, such as Ambrose Pritchard-Evans (APE) in the Telegraph, have separate euro-septic ideas that drive their opinions more than the facts. APE has in fact been predicting the demise of the euro for some 20 years now. Way back to the time before the currency itself existed and the EMU was the control mechanism.
Having said that, there is a significant risk that the currency will break up. Whilst I personally feel it will survive intact, it would be churlish to deny that fact. I would say that there is a 25%-33% chance that a split of some kind will happen.
Moving on to the decline in the market, here I agree with you in part but disagree with you as well. I will grant you the fact that you actually work in the real market rather than viewing it from the side as I do.
You are in my view correct to say that the market will have bottomed and be on the way up before anyone realizes or reports it.
As far as prices having bottomed I have to disagree with you. The more I look at it the more I come to the conclusion that the market still has some way to drop. That it is only when we see falls of 50% from peak, such as has happened in the Irish and Florida markets which had very similar booms, that the market will stabilize.
Given the particular dynamics of the Spanish market, opaque market, banks becoming estate agents, etc I don’t think there is going to be any sharp drop. Rather we’ll see a continuation of what we have seen over the past few years. A 5-10% drop each year for the next 2-3 years.
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It’s not so much that the Euro is strong against the $ and the £ it’s that those two currencies are in a really bad way against all other currencies because of the promise of years of low interest rates by both, the likelihood of low growth despite these interest rates, and a mountain of debt, much down to QE, which doesn’t seem to have worked. Euro zone growth is being buoyed by Germany, although question marks are now hanging over her growth too now. Hence we’re lurching from one Eurozone debt crisis to another at the hint of any bad news
When the Euro is compared to either the Swiss Fanc or Yen, both seen as safe havens, it has done quite badly, just not as badly as USD and GBP.
These are certainly interesting times, as the Chinese say; witness the record price levels of gold at present. No-one really knows where to put their money.I happen to agree with Katy and brianc_li about Spanish property prices, the full drop in values hasn’t been realised in the Spanish market yet. If it doesn’t happen soon, I believe that a full recovery to a healthy market, where buyers are happy to buy, confident that they are not buying into an immediate loss, is some way off. I realise that potential (do I mean certain?) losses shouldn’t concern a lifestyle decision but I can’t help feeling that they do. I believe that a healthy market, where buyers are keen to buy and sellers keen to sell (and not hold out for unrealistic prices) encourages such lifestyle decisions whereas the current situation very much discourages them.
Chris, you said you have been talking to clients about what is holding them back from buying. Are these investors or lifestyle purchasers?
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@dartboy wrote:
APE was right the euro would have collapsed by now if all the rules were followed its only because the rules of the euro have been broken that we still have it.
Yup – I posted something along these lines a while back. It you view the euro as “just” a currency that can be traded on the markets then it has been around since the late 90s (albeit not usable as legal tender anywhere until 2002) and in that sense it will probably be around for a long time yet. However if you view the euro as a basis for a monetary union that requires any country that adopts it to meet certain economic criteria, then it already “failed” as soon as certain countries that adopted it stopped being able to meet those criteria (the first of those being Germany by the way).
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@zoro wrote:
Chris
To deal with your two points in reverse order.
2) Yes, agreed, no-one will know when the bottom of the market is reached until we have the benefit of hindsight. Everything else is just speculation.
Glad I got something about right for once!
@zoro wrote:
Chris
1) A single currency cannot survive indefinitely without fiscal unity….
Chris, do you accept these premises and are confident they will be addressed or are you saying that the Euro will suceed without them?
I think fiscal unity is an eventual certainty, I too see Germany as being incredibly strong and Spain incredibly weak. But I also see massive changes in economic mentality, culture and behaviour in Spain today compared to the last 21 years I have been here.
Spain, is a weaker region at present for sure. Greece is I understand weaker still. But they have to come up to Northern European levels and standards if they want to be in the Euro, it seems to me as simple as that.
Spain is only a couple of decades into democracy after decades of dictatorship, change doesn’t happen overnight, but look now at the exposure of corruption at every level of government, the fiscal responsibility that has been forced relentlessly upon them by being in the Euro.
My kids were born and raised in the time I have been here, Spain is a bit like a teenager that just has to grow up at some point and is doing so. In many ways these tough times could be the making of the country. I don’t know enough about Greece, but if the retirment age and black economy is half what is reported it looks like it is going to be much harder for them.
But in the end, German management and the hard price of austerity to get to real growth and genuine development, has to be good, and yep, there will be a fiscal union, and the cost to the powers that will be, will have to be a transference of benefit and wealth to poorer areas.
We are not going to see the Euro go, and it has as much chance of outdoing Sterling and the Dollar as they do in return.
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@zoro wrote:
Chris, you said you have been talking to clients about what is holding them back from buying. Are these investors or lifestyle purchasers?
It is now both again. It has been lifestyle for quite a while, but increasingly we have people feeling that they can ‘invest’ people who have bought this week have effectively put down as little as €12,000 all costs in, and have interest only mortgages for the next couple of years.
Others have bought Villas and negotiated at prices that made even me gasp.
But it is funny, in all the years that I have been on the forum, even right through the worst days of the financial crash and burn, someone has always bought a property with us, every single week.
The truth is, we haven’t got a clue about the economy, we just sell homes and try to ensure that those buying them have the best service possible, I am hyper cautious about giving my view to anyone on the economic factors – because I just don’t know enough.
At the end of the day, folk buy when they think it is right for them. I just hope for a return to a stable, progressive and well managed economic time – and I hope those bankers are dissuaded for a few decades that they are the entreprenurial masters of our universe.
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@Chris McCarthy wrote:
@zoro wrote:
Chris, you said you have been talking to clients about what is holding them back from buying. Are these investors or lifestyle purchasers?
It is now both again. It has been lifestyle for quite a while, but increasingly we have people feeling that they can ‘invest’ people who have bought this week have effectively put down as little as €12,000 all costs in, and have interest only mortgages for the next couple of years.
Others have bought Villas and negotiated at prices that made even me gasp.
But it is funny, in all the years that I have been on the forum, even right through the worst days of the financial crash and burn, someone has always bought a property with us, every single week.
The truth is, we haven’t got a clue about the economy, we just sell homes and try to ensure that those buying them have the best service possible, I am hyper cautious about giving my view to anyone on the economic factors – because I just don’t know enough.
At the end of the day, folk buy when they think it is right for them. I just hope for a return to a stable, progressive and well managed economic time – and I hope those bankers are dissuaded for a few decades that they are the entreprenurial masters of our universe.
The problem with economics is it isn’t falsifiable – you can’t readily perform an experiment to prove an economic theory right or wrong. So it ends up being abused – people using numbers and equations to back up their political prejudices, or promote their vested interests. It’s like trying to predict markets – if anyone tells you they know where a market is heading ask them why they aren’t a billionaire by now! So in business I think it is best to avoid the subject (if possible) and leave for the forums and the pub.
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@Chopera wrote:
So in business I think it is best to avoid the subject (if possible) and leave for the forums and the pub.
I hear that…!
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read the whole post at FT, however, this seems most relevant
There are two ways a breakup could happen, writes JPMorgan. First, a Germany-led northern exodus which leaves the periphery with a rump currency led by France. Second, a periphery-led southern exodus which leaves the north with a rump currency led by Germany.
Either way, it’ll be messy (our emphasis):
For one, exit would take time. There is no legal provision for leaving the euro without leaving the European Union itself, meaning that EMU exit would have to be negotiated multilaterally, then ratified domestically (via parliamentary debate or a referendum). In that time, bank deposits would flow out of a country if its new currency was expected to depreciate, and vice versa. The only way to stop this would be an extended bank holiday or capital controls.
JPM notes how after the break-up of Czechoslovakia, the two countries agreed to maintain a currency union but Slovaks moved money into Czech countries anyway, on the assumption that their new country would devalue. The union lasted all of six weeks.
Then there’s the legal issue: JPM cites this paper to argue that domestic law debts would probably be redemoninated to the new currency whereas those contracted under English law will probably remain denominated in rump euros.
Possibly relevant, if a cds event is not required, then its more likely to happen.
All this sovereign turmoil is just what credit default swaps are designed for, right? Well, JPM points to an interesting technicality that’s also worth bearing in mind should the improbable happen and you’re hedging against the reemergence of the Italian lira (our emphasis):
A quirk of CDS contracts is that a change of currency is a restructuring credit event, except if the new currency is the legal tender of a G-7 country (including Italy) or a AAA OECD country. Thus we believe CDS would be triggered if corporate, bank or government bonds were redenominated to Drachma, Punt, Escudo, Peseta or Belgian Franc, but not if they were redenominated to a newly-reintroduced Italian Lira
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http://ftalphaville.ft.com/blog/2011/09/08/672831/jpmorgans-alternate-eurozone-free-universe/
On my opinion a breakup of the Euro will happen overnight. I cannot see how country can be forced to keep using a currency. If its a long legal process capital controls will be used, for sure.
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I would guess not.
A large amount of the over valuation of Sterling was the highly leveraged, British based banks. And that will not be allowed to happen again. The nationalized banks are in a bad shape and will be for quite along time (5 years+) before they can be privatized again.I’m in Spain now and I’d say the exchange rate is fair.
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@angie wrote:
IMO the Euro will go in it’s current form maybe a 2 tier Euro if it’s lucky.
However, should it survive eventually after constant patching up, does anyone here think we will ever see the likes of a 1.65 euro per £1 stg exchange rate ever again? 🙄
Yes – if Spain left the Euro, or was relegated to a 2nd division Euro.
In my opinion the Euro is too strong for Spain. If Spain went back to the Peseta tomorrow, it would devalue overnight by 25pc or more against the Pound (my guess). That’s why Spain has to get more competitive by raising productivity and / or reducing costs. Unless that happens, or unless the Germans agree to subsidise our standard of living for ever (fat chance), the only possible outcome is leaving the Euro. Will Spain take the bitter medicine we need to stay with the Euro in the long-run? That’s the big question.
Barcelona is now as expensive as London, but salaries are nothing close. Purchasing power is going down, and many Spaniards are getting poorer.
Mind you, if we crashed out of the Euro, we’d all be 25pc (or however much it is) poorer overnight.
For what it’s worth, I dearly hope Spain takes the medicine and stays with the Euro. But I wouldn’t bet on it.
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@mark wrote:
In my opinion the Euro is too strong for Spain. If Spain went back to the Peseta tomorrow, it would devalue overnight by 25pc or more against the Pound (my guess).
Mind you, if we crashed out of the Euro, we’d all be 25pc (or however much it is) poorer overnight.
For what it’s worth, I dearly hope Spain takes the medicine and stays with the Euro. But I wouldn’t bet on it.
Just for the selfish reason of maybe buying a house in Spain: in case Spain goes to peseta and this gets devalued overnight, should one buy a house right away or the prices are then expected to fall much further in Pesetas?
I guess we will soon see the Greek scenario and their drachma prices…
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The more I think through the implications of leaving the Euro, the harder it is to imagine. The costs would just be too dramatic.
Just imagine what would happen if Greece left the Euro tomorrow. It would be bankrupt and run out of money immediately. Nobody would lend to it, and it would not be able to pay for it’s most basic requirements of food, medicine, etc. The country might collapse overnight. Better to stay in the Euro and take the medicine, because however bitter it is, it won’t be as bitter as leaving.
Same applies to Spain.
That said, I don’t think it’s a bad idea right now to hold more cash than normal (in your wallet or under the mattress, not in the bank) – just in case!
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If one does not have “dinero negro” than it is not practical to do so withdrawing money from the bank in cash & stuffing in a matress is not advisible as one could be labelled for having cash from illicit activities & than spend hours to justify one’s reasons in doing so. Sadly in the last few years one is deam to be guilty & one has to prove that this is not the case.
I would keep the money in the bank & ensure that it does not breach the deposit protection limit which I believe is €100k at present..
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@mark wrote:
The more I think through the implications of leaving the Euro, the harder it is to imagine. The costs would just be too dramatic.
Just imagine what would happen if Greece left the Euro tomorrow. It would be bankrupt and run out of money immediately. Nobody would lend to it, and it would not be able to pay for it’s most basic requirements of food, medicine, etc. The country might collapse overnight. Better to stay in the Euro and take the medicine, because however bitter it is, it won’t be as bitter as leaving.
Same applies to Spain.
That said, I don’t think it’s a bad idea right now to hold more cash than normal (in your wallet or under the mattress, not in the bank) – just in case!
I think if Greece left the euro then the IMF would lend enough to Greece to prevent her from doing a hard default (i.e. not paying her debts) The devaluation would count as a soft default: lenders still lose money through currency devaluation, but in a way that is deemed “acceptable”. Organisations would still lend to Greece – but they would demand a lot of interest (which they are doing right now anyway)
Leaving a currency peg has been done before and usually the country in question recovers after a few years, and is able to borrow money. The problem with leaving the euro is the threat of bank runs, however I’ve read that capital controls can be implemented overnight quite easily.
As for Spain – I personally would like Spain to hang on a bit longer since I like the way the Spanish government is being forced to liberalise the economy, cut down the size of the state, control lending, and generally face up to difficult economic decisions. However in the long run I believe the euro is simply unworkable and I’ve seen no evidence that the people in charge can fix it. A split into two blocks seems the best suggestion so far – but that would require a level of foresight and political coordination that the EU simply does not possess.
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The IMF doesn’t have enough money to bail out Greece. Nobody does, its an unending black hole. Its going bust because it cannot pay the interest on its debt, even if the interest was a good rate – which its isn’t an never will be again.
According to this, the collapse will not be clean, but total and severely affecting all 17 Euro countries. Germany and France will be very badly hit.
http://ftalphaville.ft.com/blog/2011/09/14/676871/eurozone-crisis-porn/
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@katy wrote:
Yes a bottomless pit. The euro could never work, the figures were fudged right from the start. The eurozone is pushing the rest of the world into another recession. If it falls the UK will be hit too. Time for Cameron to take action and get out of the whole European dream 🙄
Its the fault of the whole of the western countries, UK included.They used borrowing instead of generating money through hard, real, work.
There is nothing Cameron can do about it, the UK debt problems are the UK’s fault entirely.
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Another call for Germany to leave the Euro.
Will German indecision on the euro drag the whole world down?
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14.40 Reaction from Max Johnson, broker at Currency Solutions:
Quote The IMF prognosis for the UK and indeed global economy is the latest brushstroke on a canvas that could have been painted by Hieronymus Bosch.
The eurozone has essentially become a noose around global economy’s neck. And one that’s getting tighter by the day.
14.35 Confused? This is what the IMF’s 140 page report says, in 60 seconds:
• Growth is slowing. Everywhere.
• It’s particularly bad in the US, but emerging markets such as China and Brazil haven’t escaped either.
• The UK is now expected to grow by 1.1pc this year.
• Three months ago the IMF said the UK would grow by 1.5pc.
• …a few months before that it was 1.7pc – can anyone see a pattern emerging?
• The IMF said that if growth slows any further, George Osborne and co. should think of a Plan B.
• It also called on the ECB to lower rates if growth risks persist. The Fed should also stand ready with its policy bullets.
• All of the above depends on the financial turmoil not running beyond policymakers’ control.
• If it does, expect worse.
14.17 This IMF caveat highlights just how serious the situation is:
Quote WEO projections assume that policymakers keep their commitments and the financial turmoil does not run beyond their control, allowing confidence to return as conditions stabilize. The return to stronger activity in advanced economies will then be delayed rather than derailed by the turmoil.
In other words, if countries don’t deliver their austerity measures and it all goes down the toilet, we’re all going to be in a spot of bother.
14.13 Remedies? The IMF suggests two:
Quote In the euro area, given a weak recovery, declining inflation pressure, and an overall highly uncertain economic and financial environment, the ECB should lower its policy rate if downside risks to growth and inflation persist. Also, the ECB should maintain its unconventional support to contain market volatility at least until the implementation of the July EU summit commitments.
The Federal Reserve should also stand ready to implement further unconventional support, as needed, as long as inflation expectations remain subdued.
Two words. Money. Printing.
SHTF time
http://www.telegraph.co.uk/finance/financialcrisis/8720479/Debt-crisis-live.html
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What do those holding large amounts of Euros in Banks, under the bed, etc do with them if they believe the Euro will demise?
Would it be wise to take a punt and exchange them now for other currencies, say sterling for example, then convert back to a national currency when introduced, or even back to Euros if that currency remains but weakens/devalues?
What’s the view on here, and are any of you getting out of Euros in a big way?
Or, are many really trying to sell their Euro assets including property before this scenario possible comes about?
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When I started this thread with the use of the word demise, I was thinking more that it couldn’t survive in it’s current form rather than it’s complete disappearance. I was thinking that unless Europe became a United States of Europe then either some countries would have to leave the Euro and go back to whatever they had before or that there would two forms of the Euro, one for the stronger countries and one for the weaker ones.
There appears to be a strong determination across the Eurozone, including Germany, to preserve the Euro in it’s current form but in the end I really can’t see how that can be done unless Germany is willing to pick up the bill, and that just doesn’t seem likely. They want to keep the Euro but don’t want to pay the price. I don’t think that the value of the Euro will plummet just because weaker nations leave it but if these nations default then the cost to the Eurozone banks (because they have the greatest exposure) would cause damage to their economies and that could cause the Euro to drop in value.
All governments borrow money i.e. have a deficit. Usually that deficit is kept under control and financed by growth in the economy. But it is that growth that is now lacking. This is why it is now generally accepted by economists that without growth Greece won’t be able to pay back its debts and will have to default. It is why the markets have taken a hard look at the debts and predicted growth in Spain and Italy and more or less stopped lending to them, forcing the ECB to buy their bonds on a massive scale.
Today, there have been several dire warnings about the worldwide lack of growth and predictions for future growth have been downgraded again and the markets have responded by nose diving.
Back to the Euro; because the lack of growth is worldwide there aren’t really any other major currencies in which to seek haven, the yen and the swiss franc were the ones considered safe but those governments have had enough and said that they will do whatever it takes to keep their value down. So if you want to get out of the Euro where do you go? The dollar is appreciating right now, not because their economy is strong, it isn’t, but it’s now a case of the market trying to guess which is the least risky and the US dollar wins simply because it is the largest economy.
These are uncertain times indeed. I wish I knew the answers I’d sleep more soundly; my money is currently in sterling but only because it is my home currency. I haven’t a clue where it will be against the Euro, say six months from now, that will probably be decided by the Eurozone politicians and whether they ever manage to act together and act decisively.
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If you read my post on the previous pages it says the Euro will shatter into little pieces. Every Euro country will suffer, badly.
USD is a traditional safe haven, as I’m paid and have most of my wealth in Dollars I convert and payback into my local currencies where I have debts (GBP, PLN). I have gambled on Poland, which has very low wages and is getting all the foreign direct investment and banks give above inflation interest rates. But the fact is nobody has any idea about the best thing to do. Nobody
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@angie wrote:
Because Sterling is my currency I’d convert Euros to that and buy back later if the Euro is devalued perhaps, a real conundrum!!!
Its an opportunity. When there is turmoil I make money, the Dollar/Zloty rate and improved by 25% in a few months, it give me the possibility to shuffle as I need. Being paid in USD is a definite advantage, at least in the short term. Long term its probably very bad.
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The problem the Eurozone has right now is one of credibility. When the Euro was introduced predictions were made by those who were against it, all of which have largely now come to pass.
However ‘I told you so’ is a useless phrase.
Ignoring those predictions Europe’s banks piled billions into countries that could not afford to sustain that level of debt. French banks alone lent €42 billion to Greece, a country whose GDP and population could not possibility support borrowing on that scale. Governments ignored and participated in the madness and miss-managed their economies.
Most of the Club-Med countries joined in the binge, content in the belief that the ECB and Germany would ride to their rescue if things went wrong.
Well things have gone wrong, only on a scale unimagined, except by the people who warned originally that the Euro would not work.
Monetary union can not work without first fiscal union, which means taxation harmony and then political union which means legal and social harmony.
Such things that in reality are unacceptable to the populations and voters of half of Europe.
So the credibility crisis grinds on with European political leaders arguing like ferrets in a sack and trying desperately to ignore the truth which is the real elephant in the room.
That truth is Europe’s banks will have to loose most or all of the money they lent. They will have to be re-capitalised by Europe’s central banks that will need to print money to do it. Governments will also need to relax monetary rules and increase the money supply to get the economies moving again. Inflation will then erode anything of value, especially income and capital.
The consequences of all this is yours and my wealth will be greatly diminished. We are all going to be an awful lot poorer by the time this thing turns around.
The Euro will survive because politicians have too much to loose. They will ‘bet the farm’ on keeping it alive. Of that I have no doubt.
Will anyone learn anything? Probably not. By the time the world economies return to sustained growth most of this generation will have passed on. Those who come afterwards will continue to make the same mistakes.
History always repeats itself and markets the world over need to keep reinventing themselves to stay alive. -
The problem the Eurozone has right now is one of credibility. When the Euro was introduced predictions were made by those who were against it, all of which have largely now come to pass.
However ‘I told you so’ is a useless phrase.
Ignoring those predictions Europe’s banks piled billions into countries that could not afford to sustain that level of debt. French banks alone lent €42 billion to Greece, a country whose GDP and population could not possibility support borrowing on that scale. Governments ignored and participated in the madness and miss-managed their economies.
Most of the Club-Med countries joined in the binge, content in the belief that the ECB and Germany would ride to their rescue if things went wrong.
Well things have gone wrong, only on a scale unimagined, except by the people who warned originally that the Euro would not work.
Monetary union can not work without first fiscal union, which means taxation harmony and then political union which means legal and social harmony.
Such things that in reality are unacceptable to the populations and voters of half of Europe.
So the credibility crisis grinds on with European political leaders arguing like ferrets in a sack and trying desperately to ignore the truth which is the real elephant in the room.
That truth is Europe’s banks will have to loose most or all of the money they lent. They will have to be re-capitalised by Europe’s central banks that will need to print money to do it. Governments will also need to relax monetary rules and increase the money supply to get the economies moving again. Inflation will then erode anything of value, especially income and capital.
The consequences of all this is yours and my wealth will be greatly diminished. We are all going to be an awful lot poorer by the time this thing turns around.
The Euro will survive because politicians have too much to loose. They will ‘bet the farm’ on keeping it alive. Of that I have no doubt.
Will anyone learn anything? Probably not. By the time the world economies return to sustained growth most of this generation will have passed on. Those who come afterwards will continue to make the same mistakes.
History always repeats itself and markets the world over need to keep reinventing themselves to stay alive. -
Martin Wolf writes today about the existential crisis facing the Euro. There are no good choices. It’s not happy reading.
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Martin Wolf writes today about the existential crisis facing the Euro. There are no good choices. It’s not happy reading.
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Here is another FT article which sums up well the current plight of Spain. There are some positives.
http://www.ft.com/cms/s/0/e0a5eb4a-e396-11e0-8990-00144feabdc0.html#axzz1aBAtRKNn
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Here is another FT article which sums up well the current plight of Spain. There are some positives.
http://www.ft.com/cms/s/0/e0a5eb4a-e396-11e0-8990-00144feabdc0.html#axzz1aBAtRKNn
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Amazing, turkeys are going to be asked to vote for christmas. I mean of course the Greek referendum. I wonder if the Greeks will see the bigger picture and vote in favour of their own sacrifice in order to preserve the benefits of the Euro for their fellow Europeans.
I think this must be a clear answer to the title of this thread. Yes it is now much closer.
Assuming that it becomes obvious that they are going to vote against the austerity packages (practically a certainty according to current polls) then I’d suggest only two possibilities remain
1. Total default on their debts with most of the writeoffs coming from the ECB (incidentally the current 50% write off agreement didn’t apply to the ECB which is why a 50% writeoff didn’t equal 50% less debt). Germany will pick up most of that bill and then massive shockwaves through the rest of the banking system and all that means.
2. Germany bites the bullet either before the referendum or when the result is announced and Germany (mainly) picks up the bill to keep Greece from defaulting. Which German politician is going to be brave enough to suggest that?
Whatever happens this is going to put a lot of pressure on the other peripherals to announce their own referendums.
Interesting times as the old Chinese curse says. Ironic really since the Chinese are being suggested as the saviours of the Euro in some quarters.
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@zoro wrote:
2. Germany bites the bullet either before the referendum or when the result is announced and Germany (mainly) picks up the bill to keep Greece from defaulting. Which German politician is going to be brave enough to suggest that?
As I said it many times before, Germans should pay if they want to save the Euro. They need to pay for the HUGE past gains and for the future HUGE gains. They can’t take advantage of all Europe and impose draconic austerity measure without paying.
They will need to pay to keep Greece from defaulting. They will need to pay to balance the Spanish banks books after they take the 50%-70% hit on their property portfolios. They will need to pay for the results of wrong monetary policy in Italy, Portugal and Ireland.
Otherwise the hell will break loose.
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@zoro wrote:
Amazing, turkeys are going to be asked to vote for christmas. I mean of course the Greek referendum. I wonder if the Greeks will see the bigger picture and vote in favour of their own sacrifice in order to preserve the benefits of the Euro for their fellow Europeans.
Actually I think the Greek referendum call is a very smart political move. The Greek people have already looked over the abyss which is default and bankruptcy and decided, given that reality, austerity within the Eurozone is the lesser of the two evils.
I know there are protests but it’s mostly from the ‘usual suspects’, leftist, anarchists and trade unions.
If the silent majority of sensible Greeks vote for the referendum and I believe they will, it gives the government a mandate and should silence for a while the rebellious left.
After all it is the democratic thing to do and have you ever known a government call a referendum when they were not sure of the outcome?
So although the markets are panicking now, in a few days they will recognise the merits of the move.
I also believe it is a clever tactic to wring an improved deal from Germany if Greece should lose the referendum.
Opinion polls indicate that if you ask Greeks if they want to leave the Euro the answers NO. Ask if they want to support the bailout the answers also NO.
So what are they going to ask them to vote on. Probably an ambiguous mixture of those two issues. -
how does another sovereign state or states enforce judgement on another bankrupt country
seems to me the internal punitive measures on austerity are a lot worse than any external debt recovery plan
do france and germany seize greek assets?
when you have no money you have no money, the only diffrenence is who is calling the shots in the lifeboat which is sinking anyway
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Boothy, if you look at the example of several African states in the 70s & 80s and Argentina in the last decade, you will see that there is no direct enforcement per se. Germany couldn’t for example send in the bailiffs to repossess the Acropolis.
What would happen is that Greece would be frozen out of all international sources of lending for a long time. Possibly well over a decade. The government could only spend what cash it had. If it didn’t have any money it couldn’t pay civil service salaries, pensions, etc. Much in same way as an individual who is bankrupted has to behave.
I believe Logan may have called it right. The way things are shaping up, this could indeed turn out to be be a very smart political move. The Greeks are being forced to vote on their future within the Euro rather than the austerity measures they have to face.
This leaves them with a very stark choice. Vote yes and even tougher austerity measures will be pushed through. Vote no and be bankrupt within days. My guess is that the yes vote will prevail and that the government will then have the mandate it needs.
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Events are now moving quickly. Greece will not now receive the first tranche of bail out cash they desperately need. Government employees will not be paid and all hell and chaos may break out in the country.
The vote of confidence tomorrow in the Greek parliament may well finish off Papandreou. The opposition will grab power, cancel the referendum and take the cash. A sticking plaster measure which is doomed to fail.
I feel a great deal of sympathy for George Papandreou. He came to office with clean hands and has worked tirelessly to save the situation he inherited. He is that rarest of animals a brave politician.
I do hope he can survive but it’s looking bleak this morning.
In reality Greece should default, leave the Eurozone and restructure their entire economy. One the dust settled I think help would be forthcoming from elsewhere, China perhaps. -
Indeed Logan, things are moving very quickly. My post, which looked reasonable at 8am, is now well out of date.
In the meantime also, Italian 10 year bonds have gone out to 6.5%. This is unsustainable. There is a very real danger that the whole house of cards could come tumbling down within the next few days.
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Yes Italy is the tipping point. The ECB are wading into the bond markets buying Italian bonds like drunken sailors. It will be interesting the see if Dragi the new ECB chairman will continue with that policy. The markets are testing him. However there is a limit to which they can support Italy or anyone else for that matter.
Italian 10 year bonds are only 0.50% from an unsustainable level and with around 4.5% spread on the Bund. That spread level is more than Ireland faced when they called in a bailout and the IMF.
Italy owes €1.8 trillion. More than Ireland, Portugal and Greece put together. If they fail the EFSF and the Euro will be done for.
Good political perspective here:
http://www.ft.com/cms/s/0/ce3cd784-056a-11e1-a429-00144feabdc0.html#axzz1cdWrSwq9 -
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@mark wrote:
I guess the ECB will end up buying huge amounts of Italian (and Spanish) Govt. bonds. The crisis will be postponed for a while.
Draghi said “No, it is not written in the European treaty and we won’t buy bonds”… He cut the rate by .25% though.
On the other hand, it seems that frienship between Greeks and French+Germans has gone down the drain as the entire nation of Greece feels humiliated by the language of Merkozy (Merkel+Sarkozy).
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I read this BBC article this morning about the technicalities involved if Greece were to decide to leave the euro.
http://www.bbc.co.uk/news/business-15575751
No surprise that it would be nothing short of a financial disaster in the short to medium term but then again staying in is also nothing short of a finacial disaster. All old news, but what I thought was interesting is that according to the various treaties a country cannot legally withdraw from the Euro without leaving the EU and to do that all they have to do is inform the EU of their wish.
That doesn’t help them really but it got me wondering. Merkozy, as some wag has christened the duo, have stated that a referendum turning down the austerity package and hence triggering a total default would be treated as a withdrawal from the Euro.
It turns out, as I found this morning, there is no legal basis for that claim.
Some professor prepared a paper for the ECB last February and it turns out that there is no way to legally expel a country. To create the same effect they would have to create a new EU (presumably disbanding the current one) and not invite that country to join it.
Here is a link to the BBC article that discusses the paperhttp://news.bbc.co.uk/1/hi/business/8496839.stm
OK so it looks increasingly likely that no referendum is going to take place so the above is irrelevant but I thought it interesting that Merkozy felt it necessay to make such illegal threats. I guess they just panicked when hearing the news.
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Interesting post Zoro.
So now it clear. Papandreou was told in no uncertain terms not to go down the democratic route and ask the Greeks what they want for their future.
Do what we say or else. That’s the EU operating a quasi dictatorship. I have always thought the EU was a very undemocratic organisation and when push comes to shove they don’t even mind displaying it to the world.
The inconvenience of legalities are simply swept aside.
I don’t know how long these pygmy EU leaders think they can get away with it but I suspect a back lash coming soon.
People in Europe are getting very tired of being pushed around by bankers and politicians who simply don’t give a f##k for their electorates concerns. -
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@logan wrote:
Interesting post Zoro.
So now it clear. Papandreou was told in no uncertain terms not to go down the democratic route and ask the Greeks what they want for their future.
Do what we say or else. That’s the EU operating a quasi dictatorship. I have always thought the EU was a very undemocratic organisation and when push comes to shove they don’t even mind displaying it to the world.
The inconvenience of legalities are simply swept aside.Surely it would only be fair for both the lending and borrowing nations are allowed to vote. Giving borrowers the option to renege on their debt isn’t democratic, those who would pay for it should be entitled to vote as well.
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http://www.bbc.co.uk/news/business-15592197
A doom laden article but the logic is impeccable.
In summary Germany is the only nation capable of saving the situation but so far, has bitterly resisted agreeing to the actions necessary, although if the Euro crisis could be talked away they’re up for that.
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That article reads like a A level guide to global economics. 🙂
I agree Germany holds the key to saving the Eurozone as we know it but Merkle and Co have no confidence in any of the other states will or ability to control their own finances. Italy being the principal sinner.
In the meantime markets are losing patience and confidence this thing will ever be resolved. The G20 was a failure and billed as the ‘drinking in the last chance saloon’. So when the markets open on Monday I expect them to give a definitive reply.
I actually think Europe’s politicians have finally come to the same conclusion as most other commentators.
The Euro cannot be salvaged in it’s current form.
The trouble is it will be a long, slow, and painful lingering death. -
I receive a daily email from http://www.moneyweek.com which headlines today:
‘Italy hits the point of no return – get ready for the Euro to slide’
They reckon the Euro will slide against the dollar.
The way to tell which country needs bailing out next was to look at it’s bond yields. Bloomberg says the real point of no return was when yields on 10 yr bonds goes above 6.5%, it then took an average of 16 days to pass the unsustainable 7% level.
It will be interesting to see if this proves correct in Italy’s case 🙄
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@angie wrote:
I receive a daily email from http://www.moneyweek.com which headlines today:
‘Italy hits the point of no return – get ready for the Euro to slide’
They reckon the Euro will slide against the dollar.
The way to tell which country needs bailing out next was to look at it’s bond yields. Bloomberg says the real point of no return was when yields on 10 yr bonds goes above 6.5%, it then took an average of 16 days to pass the unsustainable 7% level.
It will be interesting to see if this proves correct in Italy’s case 🙄
Interesting but I do wonder where this 6.5% yield limit meme comes from. As I recall they’ve applied it to Greece, Spain, Portugal, etc, etc as if all those countries have identikit economies. Italian 10yr bond yields were much higher than 6.5% in the 90s so I wonder what has changed now. I can only assume it is something to do with the spread between Italian bond yields and those of other major economies, or the higher threat of a hard default (in the 90s Italy had its own currency so it could always avoid a hard default) Either way it’s obvious that the markets are a lot less tolerant these days.
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@Chopera wrote:
Interesting but I do wonder where this 6.5% yield limit meme comes from.
Countries who run a deficit borrow to fund the gap and assume that inflation will reduce the real value of the debt and growth in the economy will enable them to service the debt. Hence the important measure of sustainable debt is a percentage of GDP.
Back in the 90s inflation was higher than these days, as was average growth. The assumption now is that inflation will be low (the target is 2%) and growth will be extremely low or even negative, therefore in order to keep the debt manageable i.e stable and not growing vs GDP, lower interest rates are required than the 90s, whoever works these things out say that 6 – 7% is the tipping point these days.
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Accurately put Zoro. I would add that Italy has to now borrow in order to service it’s existing debt and repay maturing debt. €300bn next year alone.
If it has to pay 7% on a 10 year bond it’s unaffordable given it’s current growth levels of 1% or less. The country is in effect bankrupt. The ECB is still intervening in the bond market, keeping the level below 6.5% but how long they can continue with that policy is anyone’s guess. Without this artificial intervention 10 year Italian bond yields would be way over 7%. -
My question came from reading this article: http://blogs.telegraph.co.uk/finance/andrewlilico/100013055/italy-is-neither-insolvent-nor-illiquid/
The author claims that Italian inflation was around 4 or 5% in the 90s and debt to GDP levels were of a similar level to where they are now. The author also claims that Italy could pay her debts then and therefore should be able to do so now. But the markets think differently. As I mentioned above I think it’s because of the threat of a hard default rather than currency devaluation, but be that as it may, I would have imagined Italy could tolerate higher bond yields than say Greece and Portugal, but this 6.5% figure always seems to be banded about as the limit before any country (or at least any eurozone country) before it starts to slide into a debt trap.
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I see nothing in any of these numbers to indicate that Italy would find any more interest in defaulting on its debts now than it did 20 years ago.
Italy survived by the skin of its teeth and it could devalue and set interest rates.
Look at the Lire/DM exchange rate here, volatile to say the least. This release mechanism is gone.
http://www.oanda.com/currency/historical-rates/Italy hits 7%
Toast –
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Will the eurozone survive? If so, in what guise? If not, how will it be broken up and what might the consequences be?
These, among others, are some of the key questions currently occupying the minds of the financial great and good.
Here’s Martin Wolf in Wednesday’s FT:
Will the eurozone survive? The leaders of France and Germany have now raised this question, for the case of Greece. If policymakers had understood two decades ago what they know now, they would never have launched the single currency. Only fear of the consequences of a break-up is now keeping it together. The question is whether that will be enough. I suspect the answer is, no.
Wolf cites the four scenarios recently put forward by Nouriel Roubini to address the “stock and flow challenges” at the core of the crisis:
1. Restoration of growth and competitiveness through aggressive monetary easing, a weaker euro and stimulatory policies in the core, while the periphery undertakes austerity and reform.
2. A deflationary adjustment in the periphery alone, together with structural reforms, to force down nominal wages.
3. Permanent financing by the core of an uncompetitive periphery.
4. Widespread debt restructuring and partial break-up of the eurozone.An “unhappy mixture” of the second and third options — one-sided austerity with grudging financing – is now happening, but in the long term the first (the entire EZ adjusts) and the last (EZ breaks up) seem the most likely scenarios, Wolf reckons.
How would a break-up happen?
Here’s Citi:
We believe the most likely scenario for a disorderly breakup would be the following: under pressure from the electorate politicians renege on further austerity measures and reform. The Troika could then be expected to withdraw their funding support and the ECB to stop buying Greek bonds and providing liquidity to Greek banks. Greece would likely be left with little choice but to default faced with financing a deteriorating debt burden and a run on its banks.
Greece would pay big for leaving the EZ. The consequences of its exit would almost certainly involve a collapse of the new currency and banking system, deep recession and possibly hyperinflation, Citi predicted.
Ok, now your turn: will the eurozone survive? If so, in what guise? If not, how will it be broken up and what might the consequences be?
Of course, those known unknowns can be a killer, and don’t even mention the unknown unknowns, but if a break-up is coming it is at least worth having a stab at the questions.
http://ftalphaville.ft.com/blog/2011/11/09/736761/plotting-a-disorderly-ez-break-up/
How does this sound?
It is time for Osborne and Cameron to end the delusion that the German people will accept the bargain of euro integration that was signed up for them, and call it, in private, to Angela Merkel. The only thing that works is for Germany and France to leave the Eurozone and spend their money recapitalising their own banks to deal with the mistakes made in thinking the euro could persist. Then the periphery gets its devaluation and does not default because it still repays in euros. Banking systems survive all round, we have a short double dip recession in France and Germany and some other non-euro systems with euro assets, and the rest of the world does OK in a couple of years’ time even if growth is anaemic while the general debt load is worked off.
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Nice charts Peter. At the moment it looks like option 1.
A quote on Italy today from the political commentator Janet Daley:-The EU has created an economic monstrosity that seems to have outstripped the possibility of politics to contain it. And the EU leadership seems as determined as ever to ignore (or embrace) the consequences: the power of governments to determine policy is to be run down in favour of “technical experts” who will do whatever is required to protect the economic mechanisms which have been perversely imposed on the populations of Europe. Before this goes beyond the point of no return, politics is going to have to re-assert itself. That is, if it has not already lost its nerve and its self-belief so totally as to be beyond recall.
Couldn’t have put it better myself.
I have often warned on here of the consequences of the Eurozone. It was a disaster when it was created and it’s a worse catastrophe now.
Spain will be next, just wait until the general election in 2 weeks time.
I have bought a hard hat and going to camp out in my cellar. 😆 -
At the moment it looks like option 1.
Looks the most appealing, print 3 Trillion Euro’s and bailout all the banks. It would be relatively painless but QE had unintended consequences (besides inflation which is intended) of causing job losses at companies who have to pay into the company pension schemes to make up for lower bond yields.
I wonder what the effect on Germany of a 20% lower Euro? And it would only be temporary, the inefficiency in the PIIGS is still there.
Partial breakup still seems the best, most German, solution. I’ll stick to no. 4.
Pretty Picture:
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I posted the Money Week article on Monday about Italy in dangerous territory paying 10 yr Bond Int rates having reached 6.6% and if it reaches 7% watch out. Also, it took an average of 16 days for other bail-out countries to reach 7%.
Within 48 hours, Italy’s has passed this.
What’s next for the demise of the Euro? 🙄
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Reuters has put together this handy debt spiral calculator.
http://graphics.thomsonreuters.com/11/07/BV_ITDBT0711_VF.html
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Goodbye risk-free, hello French spreads at 21-year high
Posted by Sid Verma on Nov 10 10:52.Another nail in the coffin for old Europe’s risk free status.
The French 10 year note is now seen as a spread product over comparable Bunds — 153bp at pixel time.
Via Reuters.
According to our quote machines, the last time spreads were higher was during the pre-euro age of innocence, or October 1990, when the spread was 237bp.
If this is the new normal for French credit risk, it could have a huge impact on French corporate capital-raising trends as markets price in the declining creditworthiness of the sovereign. Nevertheless, the fall in Bund yields provides a natural offset for corporates that price off new risk relative to the German benchmark.
Anyway, markets are sounding the alarm over France’s fiscal funk and financial exposure to Italy. This is getting scary.
The Italian debt to France in the previous post’s chart explains it all – $511billion .
Germany’s getting hit too.
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The new empire is on. This time France has capitulated before hand:
http://www.spectator.co.uk/essays/all/7378428/europes-hit-squad.thtml
“The Old Opera House in Frankfurt — once Germany’s most beautiful postwar ruin and now its most stunning recreation — has become a symbol of European rebirth. And it was here, last month, that Angela Merkel and Nicolas Sarkozy met the EU’s bureaucratic elite in what would, in another era, be described as a putsch. They had grown tired of eurozone summits, with leaders flying here and there but getting nowhere. A smaller group needed to be formed, who would wield power firmly but informally. That evening, as they gathered to hear Claudio Abbado conduct the Mozart Orchestra of Bologna, a new EU hit squad was born.
As Silvio Berlusconi has now found out, this so-called Frankfurt Group means business. Only a few months ago, it would have been unthinkable that the head of one European government would try to destabilise or depose another. Now, two EU leaders have fallen in a week. As Sarkozy knows from recent experience, to enforce regime change one need only give a helping hand to the rebels.”
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Do you guys stop for a second and realise just how MAD you all look and sound?
You are running around like ‘chickens with their heads chopped off’ with all of these MAD and WILD scenarios and collapses and panic on the streets must ensue. You respond to every blog post or newspaper headline that has been put out there in the past week, as if it is some ultimate portent or confirmation of our doom.
You look and sound like nuts – the lot of you!
As far as I am aware, there isn’t a single one of you with any kind of qualification between you to back up a single thing that you are saying.
You have lost the plot and you don’t have an argument, you just have this ever spiralling fascination with the ever changing – economic situation and you confusing the hell out of people.
The Euro is going nowhere, it will be here as the currency for the 17 and probably many more for many more years than we will all be on the planet, thats point number 1. The alternatives are just to ridiculous to counter and there isn’t a single majority in any country that wants a return to their sovereign currency – FACT.
What happens next, is that the situation will be resolved over years, not hours and not with utter devastation as you all predict.
The world got past the credit crisis, it may face it again, it will get past it again. There will be casualties aplenty but the most likely outcome is far more integrated fiscal europe and that is no bad thing.
But, boy… it is bizarre to see you guys all loved up with your fantastical theories and positions based upon all you supposedly know.
This whole thread started out months ago with some interesting detail and views, now… it’s the crackpot’s united tea party!
It is insane reading all this stuff – just insane.
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@flosmichael wrote:
The new empire is on. This time France has capitulated before hand:
http://www.spectator.co.uk/essays/all/7378428/europes-hit-squad.thtml
“The Old Opera House in Frankfurt — once Germany’s most beautiful postwar ruin and now its most stunning recreation — has become a symbol of European rebirth. And it was here, last month, that Angela Merkel and Nicolas Sarkozy met the EU’s bureaucratic elite in what would, in another era, be described as a putsch. They had grown tired of eurozone summits, with leaders flying here and there but getting nowhere. A smaller group needed to be formed, who would wield power firmly but informally. That evening, as they gathered to hear Claudio Abbado conduct the Mozart Orchestra of Bologna, a new EU hit squad was born.
As Silvio Berlusconi has now found out, this so-called Frankfurt Group means business. Only a few months ago, it would have been unthinkable that the head of one European government would try to destabilise or depose another. Now, two EU leaders have fallen in a week. As Sarkozy knows from recent experience, to enforce regime change one need only give a helping hand to the rebels.”
Interesting read.
The article makes the same point I did earlier about where this 6.5% /7% cut-off point for Italy came from:
…
Furthermore, Italy is not really bust. Strip out the debt interest, and its national books would not just be in balance but have one of the greatest surpluses in the eurozone. Its prosperous north is one of the richest parts of the Continent, and would be far richer if there were a lira to devalue and help exporters. Its households are savers, with an astonishing €8.6 trillion squirrelled away. Government debt, at 100 per cent of economic output, is high — but stable. Debt comes in many forms, and the average Italian owes half as much as the average Brit.It is not at all clear who deemed Italy to be in crisis if the bond market charged above a supposedly fatal threshold of 7 per cent on its government debt…
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@Chris McCarthy wrote:
Do you guys stop for a second and realise just how MAD you all look and sound?
You are running around like ‘chickens with their heads chopped off’ with all of these MAD and WILD scenarios and collapses and panic on the streets must ensue. You respond to every blog post or newspaper headline that has been put out there in the past week, as if it is some ultimate portent or confirmation of our doom.
You look and sound like nuts – the lot of you!
As far as I am aware, there isn’t a single one of you with any kind of qualification between you to back up a single thing that you are saying.
You have lost the plot and you don’t have an argument, you just have this ever spiralling fascination with the ever changing – economic situation and you confusing the hell out of people.
The Euro is going nowhere, it will be here as the currency for the 17 and probably many more for many more years than we will all be on the planet, thats point number 1. The alternatives are just to ridiculous to counter and there isn’t a single majority in any country that wants a return to their sovereign currency – FACT.
What happens next, is that the situation will be resolved over years, not hours and not with utter devastation as you all predict.
The world got past the credit crisis, it may face it again, it will get past it again. There will be casualties aplenty but the most likely outcome is far more integrated fiscal europe and that is no bad thing.
But, boy… it is bizarre to see you guys all loved up with your fantastical theories and positions based upon all you supposedly know.
This whole thread started out months ago with some interesting detail and views, now… it’s the crackpot’s united tea party!
It is insane reading all this stuff – just insane.
Hi Chris,
1) I have some kind of qualification as I teach finance at university level. OK, finance was not the subject of my PhD but I gathered some knowledge to make me understand what it is going on economics-wise.
2) when the thread was created, the situation was not desperate as it is now.
3) during the last week Markozy clique changed two elected leaders of two European countries. Isn’t this kind of incipient dictatorship?
4) I am not convinced that the Euro will disappear, but some fundamental changes should occur as two speed Europe cannot be a unity.
And an advice: prepare for a either a new big credit crunch (with deep recession) or for a period of hyperinflation. it all depends if Germany decides to print or not.
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@flosmichael wrote:
Hi Chris,
1) I have some kind of qualification as I teach finance at university level. OK, finance was not the subject of my PhD but I gathered some knowledge to make me understand what it is going on economics-wise.
2) when the thread was created, the situation was not desperate as it is now.
3) during the last week Markozy clique changed two elected leaders of two European countries. Isn’t this kind of incipient dictatorship?
4) I am not convinced that the Euro will disappear, but some fundamental changes should occur as two speed Europe cannot be a unity.
And an advice: prepare for a either a new big credit crunch (with deep recession) or for a period of hyperinflation. it all depends if Germany decides to print or not.HI Flosmichael
1) Noted, good to know
2) No, in fact is more likely near a resolution and new future now as things come to a head.
3) Leaders have left so a greater consensus and coalition can take place in these times of ‘big decisions’.
4) Of course it is not going to disappear, and nor will there be a two tier half price Euro, none of that has an ounce of practical sense there will simply be ever greater fiscal unity amongst the 17 and to my mind that is all to the good. And the Greek
and Italian people would agree I think.We can all see a whole new wave of crisis, crunch, recession and depression coming, in truth we were never, any of us going to get away with just a few years of difficulty after the last cock up, but this is different than people on here with their protestations of DOOM FOR EUROPE and the EURO… it is just NUTS!
But I appreciate and note your qualifications – I respect your arguments and often bow to those who know on here – but reading this recent stuff, too many have lost the plot am afraid. Scarily so.
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agreed Chris; also, everyone forgets that journalists are just a bunch of scribblers on PAYE of €35,000 …………. never ran a business, taken a risk; just more articulate than us “plebs”………… these Spanish based correspondents of British newspapers are really beyond the pale as well…………. piddly salaries living in some one bed flat on the outskirts of Madrid writing crap about Spain non stop ……….. of course Spain is in deep s—t but hell they don’t have a clue what’s going on ………………. 😡 😡 😡 😡 😡 😡 🙄 🙄 🙄 🙄
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well Logan, if you knew any of the notaries in Marbella (for example)they’d be able to show you a large list of sales completed over the last few months – the majority well over €1,000,000 each – the “rich” are piling into “luxury” properties all over the world; buying up to 50% off (or more) this is going on everywhere not just London!!!!….. rich greeks are buying like crazy; likewise Arabs from Libya, Saudi etc………. don’t forget what Warren Buffet said all those years ago! – 😕 😕 😕 😕 😕 volatile times are times to get moving (if you can!? and if you dare!?)
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@logan wrote:
Investing in volatile EU markets is also a form of insanity. Spanish property being almost near the top of the list. At least this forum offers a differing perspective to that of the sellers of phoney dreams.
Nah, you still a bunch of nutters, sorry!
It is like something out of Lord of the Flies, the childlike way you are all dancing round what you think are the flames of some bonfire of the Eurozone.
It is quite MAD trust me.
This forum was once for people who simply wanted to look at ownership of a Spanish property and, as many of them have pointed out to you over the years – but you have never, ever listened – investment is not primary amongst their interests or concerns, it is simply you who always project that.
And so here we have it, the final stages of lunacy, but when you wake up and the embers are all dying round your bonfire…
The Euro will still be here and people will still be buying and selling Spanish property, using the Euro for that and a cup of coffee.
And I bizarrely will be looking at your posts, shaking my head and thinking, wondering to myself, why did I ever bother to read that stuff?
You guys lost the plot in the past few weeks, you really did.
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Whats remarkable about all this is that people with the intellect and understanding of economics that Chris displays are seemingly in charge of the Euro Project and utterly obivious to what they have done
Here is a nice summary of the situation
http://www.theregister.co.uk/2011/11/10/were_all_doomed/
We’re mad as hell and we’re not taking any more
So, we could do what is being done but it’s not going to work. Could we actually do something that would work? Sure we could.
We could just make new money. The European Central Bank (ECB) can do that, just like the Fed in the US and the BoE in the UK. This is very much what quantitative easing (QE) is. Print new money, buy government debt with it, prices of govt debt rise, yields on govt debt fall. Exactly what we want to happen. ECB prints up a trillion euro (creates it on a computer actually but…) buys Italian bonds and we’re done.
Sure, we get a bit of inflation out of this: but that’s actually good at this point. It makes all the other adjustments much easier, like grease on an axle. We’re not in fact doing this though: this simple and obvious thing that could and should be done. The reason we’re not is because it’s illegal. This would be the ECB acting as a “lender of last resort” and the ECB isn’t allowed to act as a lender of last resort. This is, believe me, from an economic point of view, really a quite remarkable fuck up.
It isn’t just that cramming 17 wildly disparate countries into one currency for entirely political reasons was a bad idea (the “optimal currency area” argument) it’s that when they did it, they set it up so that the central bank couldn’t perform the most important task of a central bank: be the lender of last resort. The ECB just isn’t allowed to print money and bail Italy (or whoever) out.
And put like that, you realise that the Euro doesn’t qualify as a currency at all as its not even backed by trust. They used to say they would give you a pound of silver for a pound.
Then its became a promise from the Bank of England ( I promise to pay the Bearer on Demand etc).. The Euro doesn’t even have that, its not guaranteed to be worth anything. Its worth as much as a Green Shield stamp, from a company which, in Greece’s case, is bankrupt.
The Euro will still be here and people will still be buying and selling Spanish property, using the Euro for that and a cup of coffee.
Anyone considering buying property at this time is certifiable, the entire worlds bank system is at risk. Lending money for anything is a no no. Buying coffee my be worth the risk.
Rich greeks are buying like crazy;
That works if you have cash. They know that paper money is worthless so invest in solid assets. Inflation and high interest rates will destroy money and make loans very expensive.
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@peterhun wrote:
Whats remarkable about all this is that people with the intellect and understanding of economics that Chris displays are seemingly in charge of the Euro Project and utterly obivious to what they have done
Here is a nice summary of the situation
Ha…typical, so in response you just send me a link to prove your point or argue your case, that has more dancing round the fire madness, its title says it all – were all doomed!
You gotta give up reading and finding all this stuff Pete, you gonna go plain crazier than you are already.
This what am talking about – we are not all doomed – I give up though, like I said, you’ve lost the plot and your last post proves it.
I don’t know why I ever listened anyway, it is not like you or several others from some place called Endless Econmic Issues, Nutsville UK were ever interested in buying a home in Spain your only interest was in knocking those who do and are.
Like I said bizarre and this link and post just makes it more so. Tell you what though…
€1,000 of my euros to what…. £200 of your pounds says my understanding and intellect beats yours when the Euro is still here a year or two from now.
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I thought November 5th had passed Chris, you went off late like a rocket, firecracker, roman candle all rolled into one, but highly amusing nonetheless 😆
However Chris, you know these guys are going to make you eat your words it they get proved right. IMO I haven’t a clue what is really going on, I doubt if the Eurozone crooked leaders have either, it’s far too difficult to predict the outcome, it’s so volatile. It’s now looking like a 2 tier Euro again but I appreciate everything will be done to keep the currency, it just doesn’t want Italy to go pearshaped first 🙄
I’ve told you all before, you maybe using yuans in future in Europe (only joking) 😀
Me , I’d prefer to bash the dodgies like the Ocean Estates crew 👿
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Bit of hysteria around here today. What I find laughable is the crazy stuff about all the multi-million pound properties that are selling like hotcakes. You can fool some of the people but I still have contacts on the CDS. Zagaleta….why is two thirds of the place on sale if it’s a healthy market 😆 I get bored with the euro stuff but it’s not exactly looking good in the eurozone is it! Coming on posting about all the properties selling is a bit of a yawn too…seen the figures out today, give us posters a bit of cred and don’t insult our intellingence 😈
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@Chris McCarthy wrote:
You guys lost the plot in the past few weeks, you really did.
This is what the European Commission said today
A eurozone crash, the commission has predicted, would see £10 trillion wiped off the value of the European economy, a catastrophe that would send living standards plummeting to the levels of Latin America. The shock would wipe out all the gains of Europe’s longest period of peace since the Second World War and herald the political chaos and collapse of governments that ushered in Nazism 80 years ago.
“It would be worse than anything our post-war generation can even imagine,” said an official. “Only those Europeans in their late eighties will have any idea about bad it could get.”
Chris, if you have a problem with this thread, don’t read it. Don’t read newspapers or watch TV’s and try avoid speaking to other people. The internet is a big no no, becuase it will introduce you to the real world – and its shit.
I know its depressing, I have seen two employees let go on Monday and my company is in difficulties (nobody is buying), so go back to the beach and stop worrying.
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@Chris McCarthy wrote:
@peterhun wrote:
Whats remarkable about all this is that people with the intellect and understanding of economics that Chris displays are seemingly in charge of the Euro Project and utterly obivious to what they have done
Here is a nice summary of the situation
Ha…typical, so in response you just send me a link to prove your point or argue your case, that has more dancing round the fire madness, its title says it all – were all doomed!
You gotta give up reading and finding all this stuff Pete, you gonna go plain crazier than you are already.
This what am talking about – we are not all doomed – I give up though, like I said, you’ve lost the plot and your last post proves it.
I don’t know why I ever listened anyway, it is not like you or several others from some place called Endless Econmic Issues, Nutsville UK were ever interested in buying a home in Spain your only interest was in knocking those who do and are.
Like I said bizarre and this link and post just makes it more so. Tell you what though…
€1,000 of my euros to what…. £200 of your pounds says my understanding and intellect beats yours when the Euro is still here a year or two from now.
Chris, knocking people on forums won’t change the outcome. European politicians are running like headless chicken, without having a clue on what the economic situation is.
Of course we are not all doomed. Just will be poorer in the future but most of us will still be richer than our parents at our age. We will just need to spend money more wisely and think twice before buying luxuries (among them the stupid houses in foreign countries that we do not understand).
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In case we might have thought that Spain is forgotten:
“But here’s what really sets Spain apart from Italy, and shows how dangerous Spanish investments now are: the vast scale of borrowing that took place within the private sector before the crisis and the consequent asset price boom.
And that’s not just the Spanish property market bubble.
According to Dannhauser’s report, ‘Spain’s corporate borrowing binge makes Japan’s in the early 1990s look fairly tame. Its ration of household debt to disposable income, although below Ireland’s and the UK’s, is similar to that in the US.’
‘The ratio is only 50 percent in Italy, compared with 130 percent in Spain.’
‘The loss of income from the financial crisis and the persistently lower rate of growth in the Euro banknotes wikifuture suggest the fundamental, or equilibrium, value of Spanish assets has been reduced significantly — but the debt, largely provided by domestic banks, remains fixed in euro terms.’
But don’t start thinking, ‘this is private debt, not sovereign debt, it’s not the same danger.’ Wrong. The debt wonks among you may remember that it was Ireland’s banks and the guarantee its (panicked, witless) government gave to bank debt in 2008 that drove Ireland into its disaster.”
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@flosmichael wrote:
Chris, knocking people on forums won’t change the outcome. European politicians are running like headless chicken, without having a clue on what the economic situation is.
Of course we are not all doomed. Just will be poorer in the future but most of us will still be richer than our parents at our age. We will just need to spend money more wisely and think twice before buying luxuries (among them the stupid houses in foreign countries that we do not understand).
The latter part of you post is a responsible, reasonable post that I have no argument with at all.
As to the first part, I am hopefully not so much knocking people per se, as trying to calm things down a touch.
I think UK politicians can equally be seen to have run around like headless chickens, the worlds a screwed up place, but actually, there is another way to look at this.
One could say that Greece is being seen to come right in line and take its medicine, Italy now also, then whoever is next, the Germans are indeed ensuring that people now behave responsibly, appropriately and pay the price. There is no short cut easy answer, there is only real hardship for awhile, then real recovery.
They are holding back on the very notion of quantitative easing, which the US and UK rushed to, they not making it easy for anybody to use the ECB as a last resort and nor should they.
It could rightly be said, that the Germans they are creating a fine example that we should all follow and had we already done so – nobody would be in this mess.
I mean hello…, is anyone going to argue that the Germans have managed this process and their country better than the UK in the past 10 years or so?
It could be said, and will be in the future, that the Eurozone will be come ever stronger now and will indeed benefit from far greater fiscal union.
Instead we have an almost hysterical, I told you so, the Euro is going down tomorrow, look at this that and the other half baked analysis, and spiralling doom and gloom scenarios largely written by people who don’t their proverbial from their elbow.
There will be good that will eventually come from all of this is I suppose my point. And most certainly I am happy that you agree, that of course we are not all doomed, the situation is just what it is, let’s deal with that.
Journalists and blog commentators et al, they are in competition with each other remember. They couldn’t spot the great crash coming when it was in front of their noses, and now they want to expostulate on a hundred different panic scenarios every day – just to get read.
They give a damn about the effect, to them it is just fish and chip paper (or whatever the Internet equivalents is) tomorrow.
Merkel, Sarkosy, the Greeks, the Italians are all facing up to some pretty tough, very real challenges and quite possibly are doing a good job handling them, it doesn’t get sorted over night, and there doesn’t look to be a radical, wave a wand solution, no matter how much the likes of David Cameron who has his own mess to sort would like to pretend that there should be.
I mean Cameron, really, talk about getting to grips with things – come on? Truth be told, I am rather impressed with the way that Merkel and Sarkosy have handled themselves thus far. And how straightforward and matter of fact they have been with the reality of the situation.
It is going to take time, and things will be fine.
But yes, Peterhun is right, people will lose their jobs, companies will close, these are terrible times, but the disappearance of the Euro, a two tier Euro – it is not even close, not remotely close. And I feel for Peterhun when he refers to employees lose their jobs, I have seen the situation many times over, over the past several years and will do so again shortly if this boat does not right itself.
Which is my point it is very real this stuff, it is bloody painful and desperate, but again folks – the Euro goes nowhere, in fact eventually benefits is my sure bet.
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Chris I agree with you that they are doing everything that is in their power to fix the situation.
What pisses me off though is that when the euro/EMU was introduced all the people that was against it was belittled by the opposition with the following reasons. They never even took our concerns seriously.
1. We were uneducated
2. Stupid
3. It would stop wars amongst the countries involved
4. Protectionists
5. We would become third world countries.
6. We didn’t deserve to vote for it because we couldn’t make the right decision
7. We would always make more money on it than it costedetc
Their only real reason they had was that one common currency would eliminate the transfer costs with exchanges.
It’s my god damn right to make fun of the people that now have been shown that we where actually right. My biggest opposition about the EMU is that sovereign countries transfers even more of their power to a quasi democratic institution like the EU. I never even thought it would turn out this bad and in retrospect even the folieheads were spot on.
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@Ardun wrote:
It’s my god damn right to make fun of the people that now have been shown that we where actually right. My biggest opposition about the EMU is that sovereign countries transfers even more of their power to a quasi democratic institution like the EU. I never even thought it would turn out this bad and in retrospect even the folieheads were spot on.
Fair enough I suppose.
But the Euro is not alone is it? It is the same for Sterling and the Dollar is it not? None of this was brought about just by being in the Euro, and it could be argued that if there had actually been 17 sovereign currencies out there right now, things could have got a lot worse. Don’t forget that.
I understand being pissed off though. I think we all understand that. I am pissed off too!
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@Chris McCarthy wrote:
@Ardun wrote:
It’s my god damn right to make fun of the people that now have been shown that we where actually right. My biggest opposition about the EMU is that sovereign countries transfers even more of their power to a quasi democratic institution like the EU. I never even thought it would turn out this bad and in retrospect even the folieheads were spot on.
Fair enough I suppose.
But the Euro is not alone is it? It is the same for Sterling and the Dollar is it not? None of this was brought about just by being in the Euro, and it could be argued that if there had actually been 17 sovereign currencies out there right now, things could have got a lot worse. Don’t forget that.
I understand being pissed off though. I think we all understand that. I am pissed off too!
No but the difference is that now those countries are not free to do whatever they feel is in their best interest. The US and the UK can still deal with the situation themselves and their voters will in the end say yay or nay to their solutions by giving them further support or voting them out. It’s not about the currency in itself
The norwegian, swedish, danish krona are doing ok but more importantly these countries are doing ok. Even Iceland with it’s population now are doing well after their extreme banking collapse “the worst banking collapse in the world ever”. It made it much easier for them to rectify the problem by staying out of this union.
The fractional reserve banking system is the heart of the problem not the currency and until we confront this it’s impossible to really do anything in the long run. By not allowing foreign loans you can still easily take yourselves out of these situations by just hyperinflating. Greece would still be hit hard by exiting and doing this because their loans would still be in euros. The PIIGS are all the same situation with no real way to get out of it. Now they are even being ordered around by foreign powers.
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@Ardun wrote:
No but the difference is that now those countries are not free to do whatever they feel is in their best interest.
Now they are even being ordered around by foreign powers.True.
What goes around comes around though.
The Italians have just voted 150 – 12 for austerity measures, they get a new government this next week, Greece likewise, Spain very shortly also via its electorate. I don’t see any majority, anywhere in the 17 who are saying they want to come out of the Euro though Ardun, do you?
Nobody could have thought going into the 17, into one Euro currency, that they would ever again be totally free to do as they chose did they?
And nobody put anybody up against a wall to join either. Countries did vote their way in, did they not?
Europe has had a catastrophic week, we all saw it coming, jeeze this thread has seen everything coming, but we move on, it is being dealt with as we speak.
It is Britain I worry about for the future, I would be more worried about demise of Sterling than the Euro, I don’t think our policies and posturing will be easily forgotten or forgiven in the future.
And if we want out of the wider community, then we should be very wary and cognisant of how quickly and eagerly the door is shown to us, the Euro Sceptic should be very careful what he or she wishes for.
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@Chris McCarthy wrote:
@Ardun wrote:
No but the difference is that now those countries are not free to do whatever they feel is in their best interest.
Now they are even being ordered around by foreign powers.True.
What goes around comes around though.
The Italians have just voted 150 – 12 for austerity measures, they get a new government this next week, Greece likewise, Spain very shortly also via its electorate. I don’t see any majority, anywhere in the 17 who are saying they want to come out of the Euro though Ardun, do you?
Nobody could have thought going into the 17, into one Euro currency, that they would ever again be totally free to do as they chose did they?
And nobody put anybody up against a wall to join either. Countries did vote their way in, did they not?
Europe has had a catastrophic week, we all saw it coming, jeeze this thread has seen everything coming, but we move on, it is being dealt with as we speak.
It is Britain I worry about for the future, I would be more worried about demise of Sterling than the Euro, I don’t think our policies and posturing will be easily forgotten or forgiven in the future.
And if we want out of the wider community, then we should be very wary and cognisant of how quickly and eagerly the door is shown to us, the Euro Sceptic should be very careful what he or she wishes for.
The problem is that in those countries that allowed voting about the EMU and the population just turned it down they basically said that until you vote yes we will have new elections. Talk about destroying the democractic process. In Sweden as an example we voted it down but all of our politicians said that it doesn’t matter and next time we wont even get chance to vote for it. Not sure if they still think they can get away with it. This is the biggest problem. Politicians that overrule their voters because they deem them to be wrong. In return they get well paid jobs in the EU.
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@Chris McCarthy wrote:
@Ardun wrote:
It’s my god damn right to make fun of the people that now have been shown that we where actually right. My biggest opposition about the EMU is that sovereign countries transfers even more of their power to a quasi democratic institution like the EU. I never even thought it would turn out this bad and in retrospect even the folieheads were spot on.
Fair enough I suppose.
But the Euro is not alone is it? It is the same for Sterling and the Dollar is it not?
Not at all. There is no lender of last resort with Euro, unlike every other currency on the planet. The Euro is also unique in having som many different economies sharing a currency with no way of re-balancing the differences between then. There is no fiscal union between the countries, unlike say the UK or USA states.
The Euro has been designed to fail, unfortunately. I’m not happy about it becuase it was a good idea and could have been a major currency. The benefits to everyone using it have been obvious.
The Italians have just voted 150 – 12 for austerity measures, they get a new government this next week, Greece likewise, Spain very shortly also via its electorate. I don’t see any majority, anywhere in the 17 who are saying they want to come out of the Euro though Ardun, do you?
The issue about austerity versus spending is during a recession is a defining issue among economists. Applying austerity to Greece or Italy means their ability to generate tax income is reduced which makes their interest payments increase. Neither country can afford austerity and applying it simply increase the likelihood of default.
The solution is for the ECB to print money, but they still don’t get the message and the Germans have their constitution thing. Maybe the EU should tell the Germans to tear up their constitution. 😆
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@Ardun wrote:
Even Iceland with it’s population now are doing well after their extreme banking collapse “the worst banking collapse in the world ever”. It made it much easier for them to rectify the problem by staying out of this union.
Iceland is a typical example of a country using borrowing to fake the effects of a healthy economy.
Iceland was lent 100% of its GDP to keep the deficit spending going, there are capital controls forcing the exports to convert at the ‘official’ exchange rate, its credit rating is shot and it can only borrow at high rates from lenders who have been described as ‘scary’ (don’t repay our money and we will break your arms, scary).
Iceland is burning through this borrowed money and will probably crash again when it runs out.
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@peterhun wrote:
@Chris McCarthy wrote:
@Ardun wrote:
It’s my god damn right to make fun of the people that now have been shown that we where actually right. My biggest opposition about the EMU is that sovereign countries transfers even more of their power to a quasi democratic institution like the EU. I never even thought it would turn out this bad and in retrospect even the folieheads were spot on.
Fair enough I suppose.
But the Euro is not alone is it? It is the same for Sterling and the Dollar is it not?
Not at all. There is no lender of last resort with Euro, unlike every other currency on the planet. The Euro is also unique in having som many different economies sharing a currency with no way of re-balancing the differences between then. There is no fiscal union between the countries, unlike say the UK or USA states.
The Euro has been designed to fail, unfortunately. I’m not happy about it becuase it was a good idea and could have been a major currency. The benefits to everyone using it have been obvious.
Yes and the reason for this is because they are afraid of that the voters would have found out that we were heading into a federalistic system like the US. It would have been much better if they did this and the end result is a system that have all the negative aspects of an federal system and few of the positve aspects.
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@peterhun wrote:
@Ardun wrote:
Even Iceland with it’s population now are doing well after their extreme banking collapse “the worst banking collapse in the world ever”. It made it much easier for them to rectify the problem by staying out of this union.
Iceland is a typical example of a country using borrowing to fake the effects of a healthy economy.
Iceland was lent 100% of its GDP to keep the deficit spending going, there are capital controls forcing the exports to convert at the ‘official’ exchange rate, its credit rating is shot and it can only borrow at high rates from lenders who have been described as ‘scary’ (don’t repay our money and we will break your arms, scary).
Iceland is burning through this borrowed money and will probably crash again when it runs out.
Still think they made a better decision than what the “zone” is promoting. In the “zone” you wouldn’t be allowed to let the owners/lenders take the hit. This in itself overrules the idea of capitalism. The countries not doing this will become slaves to foreign powers. They got themselves into the problems and I’m not denying that but it’s hardly the tax payers faults for having private banks that behave like idiots. This goes totally against what the financial industri is promoting that everything will go bad if you don’t do what they say. Privatised profits and socialised losses seems to be their moto.
That the UK used anti-terrorist laws to try and stop Iceland is probably one of the worst financial elbowing I have ever seen in my life time.
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That the UK used anti-terrorist laws to try and stop Iceland is probably one of the worst financial elbowing I have ever seen in my life time.
Excuse me its was an anti-mafia law, and it was correctly applied. Iceland is a mafia state, the Icelandic government was actively involved with deceiving and cheating the Dutch government.
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@peterhun wrote:
Excuse me its was an anti-mafia law, and it was correctly applied. Iceland is a mafia state, the Icelandic government was actively involved with deceiving and cheating the Dutch government.
Oh dear, sorry to say it but just a hint of the – nutter – in there again am afraid Peterhun…
Anyway back to my point – the Euro is as at the very least as sound as the pound – probably much more so!
So that is this thread done and dusted then hey!
(Eeeeehh… Angie you were right earlier, those were the days when it was Agents under constant attack, you know, I think I almost preferred that. 🙄 🙄 :roll:)
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@peterhun wrote:
That the UK used anti-terrorist laws to try and stop Iceland is probably one of the worst financial elbowing I have ever seen in my life time.
Excuse me its was an anti-mafia law, and it was correctly applied. Iceland is a mafia state, the Icelandic government was actively involved with deceiving and cheating the Dutch government.
Still think it was wrong. Any depositor guarantees supported by the icelanding state should ofcourse be honoured but that is a totally different matter and Iceland have wised up about that.
To solve this situation we need to make loans based on foreign currency illegal, irradicate the fractional reserve banking system and make companies that make bad investments “banks not excluded” go bankrupt.
If in a monetary union it should share all powers of a sovereign country.
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@Ardun wrote:
@peterhun wrote:
That the UK used anti-terrorist laws to try and stop Iceland is probably one of the worst financial elbowing I have ever seen in my life time.
Excuse me its was an anti-mafia law, and it was correctly applied. Iceland is a mafia state, the Icelandic government was actively involved with deceiving and cheating the Dutch government.
Still think it was wrong. Any depositor guarantees supported by the icelanding state should ofcourse be honoured but that is a totally different matter and Iceland have wised up about that.
Iceland is still refusing to honour the depositor protection scheme, but the EEA court has delayed the court case against Iceland until after he bank assets are distributed.
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About 2.5 years ago, seems an age away now, I had a business plan for investment in Spain. I planned to buy a completed and unsold apartment complex on the coast which had been repossessed by a consortium of banks.
My plan was to create affordable sheltered homes for the over 60’s with all necessary services.I spent weeks trying to negotiate with the banks and in the end gave up. I was unable to convince them that the price I was offering per unit was reasonable given the present financial state of Spain the market and the wider European cause.
Bankers can never see what’s in front of their noses and have a total lack of business imagination or foresight.Since then of course the economy of Spain has got much worse and the wider European economy twice as worse. I take no pleasure from saying everything I predicted with the bankers has come to pass.
Not difficult to see you might think even 2.5 years ago. However I would remind forum readers that at about that same time some contributors on here were writing that the upturn was just around the corner, property sales were increasing and the bottom of the market had been reached. I was accused of being a doom and gloom merchant.
Anyway the point of this post is during this last week I received several phone calls from a director of one the banks I had been dealing with. They said they were now prepared to accept my offer in full unconditionally and went on to offer me further financial incentives.
I have moved on and am no longer interested in property anywhere.
However I think this move by these banks does indicate the sheer panic and pandemonium occurring in the board rooms of Spain and Europe right now. It also indicates the total lack of interest by others in this market sector investment.Posting on this forum describing the volatile financial state of the Eurozone highlights well the increasing schizophrenia of markets and politicians. The message is clear to anyone who bothers to read it and in my opinion it’s an informative tool. Better to have it than not. Insight of a sort it is.
The economic depression in the Eurozone and property markets is getting worse, much worse and like 2.5 years ago, still has the legs to run and run in only one direction.
There are those on here who seek to shoot the message/messenger down for reasons of their own.
That’s fair debate I suppose but anyone with only half a brain knows this market and the Euro will need life support mechanisms for years to come. -
Bankers can never see what’s in front of their noses and have a total lack of business imagination or foresight.
Banks don’t exist to support business, they are purely interested in property speculation. My business has burned through a couple of million dollars of investment and none of it has come from a bank.
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I don’t think so Peter. Merkle re-stated at her party conference in Lipsieg yesterday she would not allow the ECB to lend directly to Eurozone nations.
Of course that could solve the crisis if governments still believe in Keynesian economics but German objections are strong and largely historical.
They fear a weakening of the currency, hyperinflation and a return to the days of the Weimar Republic. http://en.wikipedia.org/wiki/Hyperinflation_in_the_Weimar_Republic
We know where that led to and it’s deep seated in the German conciousness.
The markets think otherwise. They believe there is no real alternative which will work.
The latest set of political changes in Italy and Greece bringing in the grey technocrats will solve nothing.
Berlusconi still leads the largest party which still has a mandate from the people and has publicly stated he will not co-operate with further austerity programmes. -
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There are signs this morning that Germany will soon capitulate and allow the ECB to become lender of last resort and issue Euro Bonds.
France is starting to hurt with bond yields rising fast and Spain is right at the edge of insolvency.
http://www.telegraph.co.uk/finance/financialcrisis/8895207/Latin-showdown-with-Germany-over-ECB.html
It looks like game over for Merkle if she wants to keep the alliance with France alive.Spain this morning paid an average yield of 6.975 per cent to issue €3.6bn of 10-year bonds, nearing the 7 per cent level widely regarded as unsustainable and underlining the extreme strain in eurozone sovereign bond markets.
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Asia nations now dumping German Bonds.
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There are signs this morning that Germany will soon capitulate and allow the ECB to become lender of last resort and issue Euro Bonds.
I could be wrong about this but my understanding is the Merkel’s hands are tied on this. After one of the recent rescues the German constitutional court ruled that no further German money could be distributed to other states without first having a referendum.
Interesting times no question.
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That’s essentially true Brian but there is another route.
Germany can increase it’s contribution to the IMF who in turn can lend directly to sovereign states in trouble.
It’s not really a legal problem. The German electorate and the markets feel the peripheral EZ states have not done enough yet to control their spending and reduce their deficits.
In the case of Spain and Italy I think that’s true. I’m sure it will start to happen soon with PP in power in Spain and a new regime in Italy. However like all things European it takes a long time. -
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On top of Mark’s very interesting chart above, I thought this was a great link from the BBC, real simple and effective graphic that takes you to more data.
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Not just the debt it is the ability to pay it off. That is why Spain is high risk with 22.7% unemployment.
What the BBC graph demonstrates how incestous the EU is. Maybe they should negotiate wiping out each others. It all reads like a ponzi scheme. The Eurozone has been fiddling and fudging the figures from the introduction of the euro…it’s pay back time.
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That BBC chart is focussing on the gross foreign debt of each country’s banks as opposed to the net debt in order to demonstrate the exposure of each country to another in the event of a default. The net debt isn’t so large.
If you want to know the net debt, for example the UK banks you need to click on the UK and add up all the numbers for the countries that owe them. Then click on all the other countries in turn to see what the UK banks owe them.
For the UK, they owe EUR1404Billion (I assume the 1.7 trillion shown in the information box includes outher countries not shown in the diagram) whereas they are owed EUR1566.8Billion so superficially not too bad if no-one defaults.
Ireland on the other hand, as noted above, don’t look good by any measure, their gross debt only seems to be offset by a relatively paltry EUR113.5Billion. -
Good explanation of gross and net debt here including an OECD chart of both for 2011. It’s a little out of date (March 2011) but essentially explains the current situation well.
http://wallstreetpit.com/21762-gross-debt-net-debt-and-future-debtThis quote is the crux of the matter.
And here is where the assessment of government solvency gets more difficult: what you really want to do is not just to look at government debt but also at future revenues and liabilities.As Katy said it’s not just the debt but how they can service it. The market sentiment is these countries in the Eurozone can only service their debts and maintain spending by borrowing more because their economies cannot perform and growth is expected to be almost zero. That is particularly true in the case of Spain, Greece, Ireland and Portugal.
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http://www.cbc.ca/video/news/audioplayer.html?clipid=2175162753
Interesting discussion about how Iceland handled it like Dr. Ron Paul thinks a financial collapse of the banking system should be handled. It starts around 9 minutes and 10 seconds in.
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Eurozone back in crisis again, it didn’t take long to hit the markets.
Up to 9 Eurozone countries supposedly downgraded by Standard and Poors, France loses it’s triple A rating which is bad news for it’s wealthy German wife as they need to stand together, the bail-out fund (forgotten the title) also loses it’s triple A rating meaning it has less money to bail-out countries if called upon, Portugal reduced to junk status. Greece on verge of defaulting (will they won’t they again).
All in all a right bloody mess 🙄
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There was some overoptimism in the early part of the week when Spain managed to sell €10bn worth of government paper and also Italy achieved it’s target.
In truth banks bought up this paper with cash created and lent to it from the ECB at 1% for 3 years. At around 4% yield these 3 year bond investments chalk up a decent margin ‘sans risque‘.
The markets were cheered a little only to face the reality later on that the fundamentals of the Eurozone economic problems are dire.
Spain alone has to repay or more likely rollover €300bn of debt this year, Italy something similar. Debt repayment in the Eurozone in 2012 amounts to around a staggering trillion Euros.
Add to that talks to resolve the Greek crisis and persuade EU banks and hedge funds to accept a voluntary 50% hair cut on their debts have stalled. No surprise there, have anyone really seriously considered asking their bank to write off half their debt whilst not offering anything in return?
If an agreement cannot be reached by March then the next tranche of bail out funding to Greece cannot be paid.
A disorderly default will result and Greece will be ejected from the Euro.
That dear friends is only the beginning. I like this prediction from Louise Armitstead.
http://www.telegraph.co.uk/finance/financialcrisis/8965688/Predictions-for-2012-eurozone-debt-crisis.html
The US buying up Europe, Sarkozy being returned as French President? As likely as Scotland entering the Euro. 😆 -
@angie wrote:
Eurozone back in crisis again, it didn’t take long to hit the markets.
Up to 9 Eurozone countries supposedly downgraded by Standard and Poors, France loses it’s triple A rating which is bad news for it’s wealthy German wife as they need to stand together, the bail-out fund (forgotten the title) also loses it’s triple A rating meaning it has less money to bail-out countries if called upon, Portugal reduced to junk status. Greece on verge of defaulting (will they won’t they again).
All in all a right bloody mess 🙄
It’s all a bit dangerous too, as you can guess British banks are going to be heavily exposed if countries start defaulting. Already George has been blaming uncertainty in the Eurozone for poor prospects in the UK. Nervous times..
How long can Greece stay in the Euro? And if plans are made for Greece to pull out and use a devalued currency, how long before Italy, Portugal, Spain are forced to follow suit? Or will we just see an almighty explosion of the Euro? Crazy times. -
You’re right DBM, even the UK’s Banks will be affected, methinks instability all round and the domino’s start collapsing throughout Europe 🙄
Sarky will be ok though in the end, he can retreat to his mistress, Berly will continue his bunga bunga parties with immunity from prosecution and all the crooked politicians can fill their baths with useless euros and wallow in them 😆
Will Spain become honest, well, Pata Negras will keep flying ?8)
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@angie wrote:
Eurozone back in crisis again, it didn’t take long to hit the markets.
Up to 9 Eurozone countries supposedly downgraded by Standard and Poors, France loses it’s triple A rating which is bad news for it’s wealthy German wife as they need to stand together, the bail-out fund (forgotten the title) also loses it’s triple A rating meaning it has less money to bail-out countries if called upon, Portugal reduced to junk status. Greece on verge of defaulting (will they won’t they again).
All in all a right bloody mess 🙄Jaayzuz Angie…
This thread was long dead and better left to be pushing up the daisies and gone to join the choir invisible!
It was not just boring and needing to be ignored, it was totally mad at times, an example of the worst excesses of ‘forum lunacy’.
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Happy New Year Chris!
Thought you may have commented on mark’s post re. it’s all the greedy Agents to blame not those poor maligned Developers 😯 Even I came out on the Agent defence
Here is a clip from Mark incase you mised it.
Many of the problems were the result of an insane, credit-fuelled boom. Things got out of control, and yes, greed was a big part of it, but it ain’t going to happen again, least not in our lifetimes. It wasn’t just the Spanish who were greedy.
Many horror stories have been blamed on Spanish developers. Sure there were some high-profile dodgy Spanish developers, just like there were in many other countries. But I suspect most of this class of problems were brought about by British, Irish and other foreign estate agents who used hard sell and exaggerated claims to sell to people who should have known better. The agents cleaned up and made off with their commissions, leaving the developer and clients to blame each other. I’ve spoken to lots of Spanish developers who were trying to do their best but were overwhelmed by the boom and then the bust. They might have been naïve and didnt’ know how to manage estate agents properly, but they never set out to screw their clients.
I know of one case where a British agent sold several hundred units off-plan to British buyers, took millions of Euros in commission, and then left the developer to pick up the pieces when boom turned to bust. All the buyers pulled out, none of the sales went through to completion, and the developer returned all the deposits plus interest, ending up more than 10 million Euros out of pocket. The Spanish developer acted with great decency.
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@katy wrote:
Happy New Year Chris!
Thought you may have commented on mark’s post re. it’s all the greedy Agents to blame not those poor maligned Developers 😯 Even I came out on the Agent defence
Here is a clip from Mark incase you mised it.
.Happy New Year to you too Katy!
I just spent the last twenty minutes carefully editing the quotes and adding the odd comment to it myself, I didn’t see your defence but I will certainly go take a look!
But, lets face it, he’s not wrong I and a good few others are around, but to be fair there’s a good number who did exactly what he said.
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@Chris McCarthy wrote:
It was not just boring and needing to be ignored, it was totally mad at times, an example of the worst excesses of ‘forum lunacy’.
Read the title and act on it.
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Since the economic threat to the Eurozone has major consequences to us all and also to the Spanish property market I think this topic and others like it are very relevant. Other peoples ideas and views when constructive are always interesting. Information and debate broadens knowledge.
The recent downgrades by S&P seem to have shocked French and German leaders towards taking further measures of budget austerity.
In my view action such as this by ratings agencies and the bond market will eventually be the major tool in forcing Germany to think again about treaty change and direct government financing by the ECB.
In truth that is the only realistic way to solve this crisis and get Europe’s economy working again. -
@angie wrote:
Chris, please don’t be that surprised that the topic is back, it cropped up big time yesterday with Standard and Poors downgrades, I don’t think it can be ignored nor go away until it finally is over, but what do I know?
Hi Angie, I was being a bit tongue in cheek, am not surprised it is back. In fact back when it started, I contributed with some interest and very little boredom as it happens. It did kind of go on a bit though and get crazy with protestations of instant doom toward the end.
As for the Standard and Poor downgrades, these would be the same people that rated America’s investment banks triple AAA within days of the collapse of Lehman Bros.
And wasn’t the USA downgraded to AA+ or some such back last year? Do we really take any notice of that anymore?
Might have been better as a new thread I think, more people might have picked up on it instead of reading through 17 pages of now irrelevant and often rather bizarre thoughts – my own included!
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@logan wrote:
In my view action such as this by ratings agencies and the bond market will eventually be the major tool in forcing Germany to think again about treaty change and direct government financing by the ECB.
In truth that is the only realistic way to solve this crisis and get Europe’s economy working again.Yes, I suspect you are not alone in this Logan.
I rather suspect the USA and UK dearly wish that the ECB bends to quantitative easing, so that they don’t stand alone in having sucumbed and in fact having ONLY had that as their sole answer.
Am all for Germany trying to prove their point, and frankly I think we have a bloody liberty trying to dictate and force Germany to our view. We should have taken a leaf out of their book and should be using their model as our own, not the other way around.
We screwed up. Not the Germans, us and the USA, we caused this huge mess. And because we control the markets it suits us to ensure a Eurozone crisis is created to deflect our transatlantic failings.
We get what we deserve, I don’t think the Germans deserve what they are getting.
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@Chris McCarthy wrote:
We screwed up. Not the Germans, us and the USA, we caused this huge mess. And because we control the markets it suits us to ensure a Eurozone crisis is created to deflect our transatlantic failings.
We get what we deserve, I don’t think the Germans deserve what they are getting.The Eurozone is in a mess because the sovereign state members borrowed too much money. That has little to do with the sub-prime collapse, although their GDP dropped as the worlds economies slowed. That is also a normal symptom of the fiscal cycle of a capitalist system.
The Maastricht treaty set budget borrowing ceiling limits of 3% of GDP. It was called a stability pact and supposed to ensure market confidence in the Euro currency in the absence of the ability to create and manipulate their own currencies.
The first country to break that was France followed quickly by everyone else.
The treaty allowed for sanctions against countries breaking the agreement. Germany with the most power to influence anything did nothing.
It’s quite simple, European governments spent far too much money they didn’t have, many of them to finance a socialist agenda in their countries.
They have now arrived at the state where they have to keep borrowing huge sums of money on the bond markets simply to service and rollover their debt or default. The ECB cannot print money but they have begun lending to financial institutions so they can buy up bonds on the primary market. Backdoor QE which is sensible in the absence of treaty changes.
You can blame neither America, UK or the rest of the world for the mess the EU finds itself in, it’s of their own making and a predictable consequence of the creation of a financial system which was doomed from the start.
Even Jacques Delors agrees with that! -
@logan wrote:
You can blame neither America, UK or the rest of the world for the mess the EU finds itself in, it’s of their own making and a predictable consequence of the creation of a financial system which was doomed from the start.
Even Jacques Delors agrees with that!Oh.. so we in the UK / USA are not actually in the mother of all recessions / downturns / economic bloody disasters then?
It is all the fault of the Eurozone is it?
Doomed from the start, yep I kinda get that, but so is everything that is created by definition – doomed from the start – it has to be fixed up somewhere along the line does it not?
And the policy and activity of the people in the markets and banks and governments in the UK / USA, they have no blame, no consequence, they have a perfectly sound – non doomed – financial system do they?
I think we agree that the Eurozone has its own particular problems but it certainly wasn’t helped by the monumental cock up of the US and UK banking community now was it, and… I don’t think it needs lessons from them on how to resolve its own particular problems is my view.
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Most of the world’s leaders have told the Eurozone to get it’s finger out over the past 2 months as it is dragging down the world economy. Canada (one of the strongest banking systems in the world) Australia and China have said it. So have many other countries. Despite all the meetings and summits the Eurozone have done nothing, they are like rabbits trapped in the headlights…mostly unelected ones too!
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Katy is right. The knock on effect of the Eurozone crisis directly affects the UK and world economy. Of course the global down turn is not all the responsibility of the Eurozone. As I have already mentioned capitalist economies are cyclical in nature and eventually run out of steam. The sub-prime crisis simply heightened that.
However the current EZ crisis it is a huge drag on the prospects for recovery.
At the beginning of 2011 there was great optimism the worst was over but the crisis in Europe destroyed that.
So we must continue to wait in hope that eventually Europe’s politicians will finally get an act together and take some decisive action which will end it.
They have sufficient power but seem unable or incapable of understanding how to use it. -
@logan wrote:
So we must continue to wait in hope that eventually Europe’s politicians will finally get an act together and take some decisive action which will end it.
They have sufficient power but seem unable or incapable of understanding how to use it.Yep, got no argument with that as the current situation, that’s fair enough as it stands now.
But they sure were not helped by the dear old USA creating the whole damn credit crunch though hey?
And on an earlier point, you being someone who would know this answer… Was I right that the good ol’e USA has a Standard & Poor rating of only AA+? Just interested cos nobody picked up on that as France et al get downgraded now.
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@Chris McCarthy wrote:
And on an earlier point, you being someone who would know this answer… Was I right that the good ol’e USA has a Standard & Poor rating of only AA+? Just interested cos nobody picked up on that as France et al get downgraded now.
Yes that’s correct Chris, however it’s less of a problem for the USA than France. The reason is risk perception and the amount countries with a lowered credit rating have to pay to borrow.
The reasoning is the US can create Dollars if it needs to in order to service or repay debt. France on the other hand cannot so the risk of default is higher. Also US annual GDP is reasonable at the moment at around 3%, France is around 1% or less. US national debt at $16 trillion is of course far more than France hence the downgrade but their economy is huge, the largest in the world so their ability to service debt from income becomes much stronger. -
@logan wrote:
Yes that’s correct Chris, however it’s less of a problem for the USA than France. The reason is risk perception and the amount countries with a lowered credit rating have to pay to borrow.
.Well thanks for that Logan, I have been sitting here all afternoon and half the evening, working on plans and presentations for 2012 and popping in and out of the forum for the first time in ages!
This last post of yours was also very enlightening as usual, so… sounds like we all hoping that MERKOZY and the rest of the politicians find the bloody bazooka that is required to put a rocket up the Eurozone economy then.
Like you am sick and tired of waiting really, should not be beyond them by now.
But in the process as ever, and as the past five or six years have shown, we just better get on with it as best we can!
Off home now and a cup of tea and a crumpet is in order I think… and yes folks, we do have crumpets in Marbella!
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Oh Chris, that’s what all the men say ‘crumpets in Marbella’ 😆 And, lady boys and trannies in Puerto Banus too 😆
Two almost recession proof industries, food and crumpets 😉 Only kidding 🙂
I think you and Logan are right though about USA losing their triple ‘A’ rating, it was hardly noticed, but somehow France losing theirs seems to have more impact/negativity because of the whole Eurozone crisis.
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France and Spain have got plenty of assets they can sell off in order to reduce their deficits. In both countries the state still has a hand in the energy sectors, the media and telecommunications for example. That’s why I don’t think there will be a big bazooka. The ECB will continue to issue cheap loans to keep the banks afloat while Greece defaults, but not enough to take the pressure off. Germany feels that she has already liberalised her markets and reformed her labour laws, and is not prepared to subsidise other countries that refuse to do the same.
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@Chris McCarthy wrote:
This last post of yours was also very enlightening as usual, so… sounds like we all hoping that MERKOZY and the rest of the politicians find the bloody bazooka that is required to put a rocket up the Eurozone economy then.
Like you am sick and tired of waiting really, should not be beyond them by now.
Well, the Germans are not going to do that. They see themselves as a shining pillar of light, if the rest of the Eurozone simply follows their divine example, everything will be fine.
The fact that German goods are only bought because the Euro makes them affordable and Germany is only successful because of the sins of the borrowers escapes the Germans imagination.
Germany will sacrifice NOTHING to save the Euro because they refuse to accept the imbalances that causes the problem.
The Germans and French still don’t accept the cause of the crisis and will not be able to start fixing it until they do. S&P and the markets will re-educate them sooner or later.
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Eurozone ‘quantitative easing’ is set to continue without the Germans doing anything, whilst getting one over UK banks. Merkozy will enjoy that.
Quote:
The ECB’s decision to increase its exposure to banks has effectively seen it provide the “bazooka” markets had been urging it to use to help stem the debt crisis.
Spanish banks that borrowed money using the LTRO are thought to have used most of it to buy Spanish government debt, leading to a lowering in yields.This may be the medicine Europe’s economy needs and should have been done at least a year ago. The BOE should follow suit. Increasing the money supply in a time of austerity is in my view essential for growth. You can deal with the inflationary effects later on.
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@logan wrote:
Eurozone ‘quantitative easing’ is set to continue without the Germans doing anything, whilst getting one over UK banks. Merkozy will enjoy that.
Quote:
The ECB’s decision to increase its exposure to banks has effectively seen it provide the “bazooka” markets had been urging it to use to help stem the debt crisis.
Spanish banks that borrowed money using the LTRO are thought to have used most of it to buy Spanish government debt, leading to a lowering in yields.This may be the medicine Europe’s economy needs and should have been done at least a year ago. The BOE should follow suit. Increasing the money supply in a time of austerity is in my view essential for growth. You can deal with the inflationary effects later on.
I think that the BoE is taking the stance that if the UK banks can still afford to pay themselves multi-million pound bonuses then they’ve still got enough cash to lend out.
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I think that the BoE is taking the stance that if the UK banks can still afford to pay themselves multi-million pound bonuses then they’ve still got enough cash to lend out.
But they really don’t have the money for this. The list below is being widely reported all over the Internet. I didn’t include a link, but if you search on “29 trillion” you will find several credible sites with the same information.
Bank bailouts by the US Federal Reserve since 2008 (from Bloomberg):
Citigroup (US): $2.5 trillion ($2,500,000,000,000)
Morgan Stanley: $2.04 trillion ($2,040,000,000,000)
Merrill Lynch: $1.949 trillion ($1,949,000,000,000)
Bank of America: $1.344 trillion ($1,344,000,000,000)
Barclays PLC (UK): $868 billion ($868,000,000,000)
Bear Sterns: $853 billion ($853,000,000,000)
Goldman Sachs: $814 billion ($814,000,000,000)
Royal Bank of Scotland (UK): $541 billion ($541,000,000,000)
JP Morgan Chase: $391 billion ($391,000,000,000)
Deutsche Bank (Germany): $354 billion ($354,000,000,000)
UBS (Switzerland): $287 billion ($287,000,000,000)
Credit Suisse (Switzerland): $262 billion ($262,000,000,000)
Lehman Brothers: $183 billion ($183,000,000,000)
Bank of Scotland (UK): $181 billion ($181,000,000,000)
BNP Paribas (France): $175 billion ($175,000,000,000)The total amount of money given to various named and unnamed entities since 2008 is now 29 trillion dollars or 1/2 of ALL THE MONEY PRINTED BY THE FEDERAL RESERVE SINCE 2008.
I maintain that if banks and financial institutions are not helping the economy, they are hurting the economy. Funny, there is a lot of ranting about costly, lazy and useless government employees, and some of that is justified, and more importantly, governments are taking action. But they are not doing anything about the excesses, greed, anti-patriotic, and inhumane practices in the banking/financial industry. What’s the point of raising the retirement age if trillions of dollars/euros are going to be siphoned off by the vampires in the banking industry?
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I posted too soon – add another 2.7 billion dollars needed, this time in Ireland:
“A famed entrepreneur who was once rated Ireland’s richest person was declared bankrupt on Monday in a Dublin court as a bank pursues him for debts exceeding euro2.1 billion ($2.7 billion).Lawyers for tycoon Sean Quinn withdrew his opposition to a bankruptcy order sought by the former Anglo Irish Bank, the reckless lender at the center of Ireland’s calamitous property crash.”
http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2012/01/16/financial/f071658S59.DTL#ixzz1jdnBc9ex
This financial industry crisis is far from over.
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@GarySFBCN wrote:
Bank bailouts by the US Federal Reserve since 2008 (from Bloomberg):
Citigroup (US): $2.5 trillion ($2,500,000,000,000)
Morgan Stanley: $2.04 trillion ($2,040,000,000,000)
Merrill Lynch: $1.949 trillion ($1,949,000,000,000)
Bank of America: $1.344 trillion ($1,344,000,000,000)
Barclays PLC (UK): $868 billion ($868,000,000,000)
Bear Sterns: $853 billion ($853,000,000,000)
Goldman Sachs: $814 billion ($814,000,000,000)
Royal Bank of Scotland (UK): $541 billion ($541,000,000,000)
JP Morgan Chase: $391 billion ($391,000,000,000)
Deutsche Bank (Germany): $354 billion ($354,000,000,000)
UBS (Switzerland): $287 billion ($287,000,000,000)
Credit Suisse (Switzerland): $262 billion ($262,000,000,000)
Lehman Brothers: $183 billion ($183,000,000,000)
Bank of Scotland (UK): $181 billion ($181,000,000,000)
BNP Paribas (France): $175 billion ($175,000,000,000)These financial bailouts were loans to keep these institutions afloat. Much of the money has since been repaid. It was the correct and the only pragmatical solution avaliable to avoid a global financial Armageddon.
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These financial bailouts were loans to keep these institutions afloat. Much of the money has since been repaid. It was the correct and the only pragmatical solution avaliable to avoid a global financial Armageddon.
Why was the scale of these bailouts hidden from the public for 3 years? And what safeguards have been put into place to ensure that this doesn’t happen again? Regarding that “much of the money has been paid back,” why is there no ‘balance sheet’ available showing that?
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They were not hidden. Public announcements were made. Some companies were sold off.
The safeguards largely exist by public ownership in some cases, collateral in others.
I agree little real public transparency exists. Repayments are usually buried in government reports and in the balance sheets of the companies involved.
In the end government have to account to the taxpayer and the electorate for what they do. -
The only risk they run in Government is being voted out. They have no personal liability for the disastrous decisions they took. In the UK the whole Private Finance Initiative was a case of the Government using creative accounting to move liabilities off of their balance sheet. Have Gordon Brown or Tony Blair actually been personally impacted by their actions,no. Blair is now continuing to rake it in and Brown is lying low until he can sneak back into the limelight.
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@Ruefguet wrote:
The only risk they run in Government is being voted out. They have no personal liability for the disastrous decisions they took. In the UK the whole Private Finance Initiative was a case of the Government using creative accounting to move liabilities off of their balance sheet. Have Gordon Brown or Tony Blair actually been personally impacted by their actions,no. Blair is now continuing to rake it in and Brown is lying low until he can sneak back into the limelight.
Yup and lying about the value of the assets on your books is also fraud. Especially when you use it to as collateral against taking on further debt. If a normal company did this the board could face prosecution. Different rules for banks though.
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They were not hidden. Public announcements were made.
Not true. Bloomberg News had to sue using our Freedom of Information Act to get the bulk of this information:
…Bloomberg News compilation of data obtained through Freedom of Information Act requests, months of litigation and an act of Congress.
This is coming Bloomberg News, not the Marxist Times (if that exists).
My points are:
–>the true scope of the crisis is still a secret
–>not one worker or pensioner should suffer until regulations of the financial industry are put into place and some put in jail
–>our leaders do not understand that we need to adapt our economies to more sensible and sustainable profit expectations -
@GarySFBCN wrote:
They were not hidden. Public announcements were made.
Not true. Bloomberg News had to sue using our Freedom of Information Act to get the bulk of this information:
…Bloomberg News compilation of data obtained through Freedom of Information Act requests, months of litigation and an act of Congress.
This is coming Bloomberg News, not the Marxist Times (if that exists).
My points are:
–>the true scope of the crisis is still a secret
–>not one worker or pensioner should suffer until regulations of the financial industry are put into place and some put in jail
–>our leaders do not understand that we need to adapt our economies to more sensible and sustainable profit expectationsThe FED needs to go now.
If they don’t elect Ron Paul the whole empire of the US will come crumbling down in a year or two.
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@GarySFBCN wrote:
…
I maintain that if banks and financial institutions are not helping the economy, they are hurting the economy. Funny, there is a lot of ranting about costly, lazy and useless government employees, and some of that is justified, and more importantly, governments are taking action. But they are not doing anything about the excesses, greed, anti-patriotic, and inhumane practices in the banking/financial industry. What’s the point of raising the retirement age if trillions of dollars/euros are going to be siphoned off by the vampires in the banking industry?Yes there is a huge problem with the western financial system – excessive deregulation and corruption has turned it into a form of state capitalism, where supposedly private institutions are backed by the tax payer and cannot go bust. This on its own isn’t uncommon however when those same institutions have access to and indeed can influence the money supply then they become almost parasitic – manipulating global markets and economies for their own benefit until they take over the “host”.
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The death of capitalism has been wrongly predicted for generations. Yes the system stinks but not near as much as the alternatives.
Markets be they financial or otherwise create wealth and stimulate demand. Investment, risk, initiative and effort requires a reward otherwise societies simply wither on the vine and decline.If you want evidence of that look back through recent European history and the tried alternative systems which failed so catastrophically.
The past excess of the banking system was a product of incompetent regulation, supervision and greed. You cannot just throw the baby out with the bath water. Financial markets can be controlled effectively. Excessive regulation will stop them functioning to the point where they existence becomes pointless. A balance has to be struck by governments.
Unfortunately in the world today western democracies are burdened with third rate clueless politicians who cannot get an act together.
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You guys are missing that it’s not deregulation that have caused the problems. It’s that the market forces have not been allowed to roam free that have done it. We have taken a system that is not natural for granted as being a true market condition. The market cycle is caused by our financial system because of the inherent booms and busts in overexpanding and then contracting the money supply… these happenings occur faster and faster because goverments are trying to fill in the gaps when every crash happens… just print more money. We need to have banks that are allowed to go bankrupt and competing currencies so the goverment can’t use printing money as a hidden tax on it’s people through inflation. Goverments should use the budget the same way a househould do… not spending anything they don’t have.
First of banks are most of the times private corporations but they make money by maximizing how much money they have loaned out. It’s basicly the only way a bank makes money. Their work should be to loan out money to trust worthy people, communities and corporations. The interest should reflect how safe the investment should be. The problem lies in that the banks have known for a long time that they are to big to fail so the tax payers will take care of them when stuff goes bad. Either through subsidized intrest rates from the central banks or through nationalisation. If banks and their owners knew that if they go belly up it’s their own money they loose they would be very much more carefull with it. It would reflect the true “safety” of the investment and not like know. Add to the fact that 99% of the world uses a fractional reserve banking system which also makes it easy for the banks to just expand their money supply “something that the normal person only thinks the central bank can do but it’s not true, sure they regulate it a little bit by regulating the national interest rate”. If a bank only could lend out money that they had they would actually stand to loose money by bad investment and not like now.
For anyone that is interested you must look up these subjects and it will give you the biggest WTF feeling you have ever witnessed.
Fractional reserve banking
Hidden tax inflation
Competing currencies
Fiat currency -
I agree banks and other institutions became complacent in the maxim ‘too big to fail’. Recklessly lending to individuals and companies who had little hope of ever paying it back. Many banks actually wrote off loans as soon as they were granted. Lehman Bros however has now put paid to that belief.
Governments, particularly in the USA did pressurise institutions to do it because they craved expansion and growth. People like Gordon Brown, Greenspan, Trichet, et al knew the dangers involved but were prepared to risk it all for employment growth and increasing GDP. They wanted to bask in the reflected glory of finally abolishing boom and bust. Brown once even claimed that in a parliamentary speech.
Reckless in the extreme given the benefit of hind sight.
However it was predicted by some and the housing market crash particularly in the US and Spain was an accident waiting to happen. I am just surprised so many couldn’t see it. -
@logan wrote:
I agree banks and other institutions became complacent in the maxim ‘too big to fail’. Recklessly lending to individuals and companies who had little hope of ever paying it back. Many banks actually wrote off loans as soon as they were granted. Lehman Bros however has now put paid to that belief.
Governments, particularly in the USA did pressurise institutions to do it because they craved expansion and growth. People like Gordon Brown, Greenspan, Trichet, et al knew the dangers involved but were prepared to risk it all for employment growth and increasing GDP. They wanted to bask in the reflected glory of finally abolishing boom and bust. Brown once even claimed that in a parliamentary speech.
Reckless in the extreme given the benefit of hind sight.
However it was predicted by some and the housing market crash particularly in the US and Spain was an accident waiting to happen. I am just surprised so many couldn’t see it.I think the problem is that one can see when a bubble is forming but it can still take 10 something years until it bursts. Many people giving out warning about it where labled as kooks and fear mongerers… the same way people people got scrutinized for warning about the housing bubble.
http://www.youtube.com/watch?v=48Gfzgxh3ZQ&feature=related
This man has predicted bubbles accurately for 30 years and just now is starting to get some credit.
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@logan wrote:
I agree banks and other institutions became complacent in the maxim ‘too big to fail’. Recklessly lending to individuals and companies who had little hope of ever paying it back. Many banks actually wrote off loans as soon as they were granted. Lehman Bros however has now put paid to that belief.
Governments, particularly in the USA did pressurise institutions to do it because they craved expansion and growth. People like Gordon Brown, Greenspan, Trichet, et al knew the dangers involved but were prepared to risk it all for employment growth and increasing GDP. They wanted to bask in the reflected glory of finally abolishing boom and bust. Brown once even claimed that in a parliamentary speech.
Reckless in the extreme given the benefit of hind sight.
However it was predicted by some and the housing market crash particularly in the US and Spain was an accident waiting to happen. I am just surprised so many couldn’t see it.Yes the banks did not care whether the debt got paid back because of “securitization” – they could pass the debt on to someone else as a CDO and it was no longer their problem. Except they “turned a blind eye” to the fact that they were all buying the same kind of crap off each other. Especially after the rating agencies had rated it as AAA. But if your bonus depends on you trading in CDOs then screw everyone else, that’s what you’re gonna do.
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@Chopera wrote:
@logan wrote:
I agree banks and other institutions became complacent in the maxim ‘too big to fail’. Recklessly lending to individuals and companies who had little hope of ever paying it back. Many banks actually wrote off loans as soon as they were granted. Lehman Bros however has now put paid to that belief.
Governments, particularly in the USA did pressurise institutions to do it because they craved expansion and growth. People like Gordon Brown, Greenspan, Trichet, et al knew the dangers involved but were prepared to risk it all for employment growth and increasing GDP. They wanted to bask in the reflected glory of finally abolishing boom and bust. Brown once even claimed that in a parliamentary speech.
Reckless in the extreme given the benefit of hind sight.
However it was predicted by some and the housing market crash particularly in the US and Spain was an accident waiting to happen. I am just surprised so many couldn’t see it.Yes the banks did not care whether the debt got paid back because of “securitization” – they could pass the debt on to someone else as a CDO and it was no longer their problem. Except they “turned a blind eye” to the fact that they were all buying the same kind of crap off each other. Especially after the rating agencies had rated it as AAA. But if your bonus depends on you trading in CDOs then screw everyone else, that’s what you’re gonna do.
Very very good observation that I forgot mentioning. Investmentbankers basicly got paid lots and lots of money to fool even their own customers. Often giving them one advice but they themselves doing the opposite. It works a like a huge pyramid scheme where the big pensions funds and the tax payers where the last people holding the “black Petter” card when it all went belly up.
The rating institutions, investmentbanks basicly everyone that was involved with this should go to jail. It was not better than what Bernard Maddof did.
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Martin Wolf writing in the FT today argues that the Eurozone will survive because it has to.
Concluding para:
The most likely outcome – though far from a certainty – is compromise between Germanic ideas and a messy European reality. The support for countries in difficulty will grow. German inflation will rise and its external surpluses fall. Adjustment will occur. The marriage will be far too miserable. But it can endure.
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@mark wrote:
Martin Wolf writing in the FT today argues that the Eurozone will survive because it has to.
Concluding para:
The most likely outcome – though far from a certainty – is compromise between Germanic ideas and a messy European reality. The support for countries in difficulty will grow. German inflation will rise and its external surpluses fall. Adjustment will occur. The marriage will be far too miserable. But it can endure.
It’s a good analysis but ignores the issue of democracy. The political elites may have a huge amount of will to keep this thing going, and they may have got away with ignoring democracy so far, but I can’t see them continually placing unelected technocrats in charge of every bailed out country where there is a risk of the electorate demanding to leave the euro. Things would get too bloody.
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http://www.charlierose.com/view/interview/12309
Interesting “debate” by lots of the big shots.. maybe not big shots but whatever. Not had time to watch it yet.
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Eight reasons why the Euro is doomed:-
1) The new French government under Hollande does not intend to implement further austerity and plans to roll back Sarkozy’s efforts. He also plans to re-negotiate the Fiscal Treaty, and plans to breach it’s guide lines on deficits and borrow more.
2) It’s impossible for Spain to keep to the Fiscal Treaty on 4% deficit reduction of GDP, either this year, next year or in years to come or until the economy rebounds. Their deficit is ballooning as more of the work force become unemployed and tax receipts fall. Net borrowing will increase.
3) Italy which is the third largest economy in the EU and has the highest social spending per capita also will never be able to reign back it’s deficits by any meaningful margins.
4) Greece is dead in the water and will need further bailouts in the future.
5) Portugal as above.
6) The latest EU problem is the Dutch government has fallen yesterday because the coalition government cannot agree on austerity and budget reduction. The right wing is against it for political advantage and is likely to gain more seats in the parliament.
7) Germany’s economy, as well as the entire EZ is slowing dramatically because they remain non competitive with Asia and have yet to deal with their bad banks who cannot fuel their economies with much needed lending.
8) The Euro is overvalued and requires dramatic devaluation and interest rates need to be 0%. The ECB refuses to do it. Genuine quantitative easing on a massive scale is needed to kick start their economies. Germany refuses to change treaties to allow it.
With the noted exception of Ireland the current state of affairs are simply worsening without relief in sight. The Euro project will collapse, it’s just a question of who will blink first. 🙁
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@logan wrote:
Eight reasons why the Euro is doomed:-
The Euro project will collapse, it’s just a question of who will blink first. 🙁I don’t wish to be perverse, but are not those Eight Reasons flippable to be exactly why the Euro will survive.
The pound has also been doomed, we all doomed, but hey was watching that documentary on BBC about the 70’s the last week or so, and you know… looking back eventually, doesn’t it all come out in the wash really.
I still can’t see any kind of scenario or benefit, or anything less than a total financial catastrophe if countries were to try to abandon the Euro and return to sovereign currencies. We all in the mire really, just a question of the degrees, but then we get out of it.
Or have I missed the point here and you just staying that Euro is jiggered for a bit but that the currency will of course remain? You know me Logan, all this finance stuff isn’t my strongest point!
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@Chris McCarthy wrote:
@logan wrote:
Eight reasons why the Euro is doomed:-
The Euro project will collapse, it’s just a question of who will blink first. 🙁I don’t wish to be perverse, but are not those Eight Reasons flippable to be exactly why the Euro will survive.
The pound has also been doomed, we all doomed, but hey was watching that documentary on BBC about the 70’s the last week or so, and you know… looking back eventually, doesn’t it all come out in the wash really.
I still can’t see any kind of scenario or benefit, or anything less than a total financial catastrophe if countries were to try to abandon the Euro and return to sovereign currencies. We all in the mire really, just a question of the degrees, but then we get out of it.
Or have I missed the point here and you just staying that Euro is jiggered for a bit but that the currency will of course remain? You know me Logan, all this finance stuff isn’t my strongest point!
1. Hollande will totally destroy France economy… I like him more as a person but he is way off on the economy issues. He is going to destroy productive jobs and create goverment ones. He wants to close down a few nuclear power plants which is plain lunacy. I want him to win so France can crash and get a good alternative instead. He will also destroy the bond between Germany and france which is actually a good thing.
2. It will cost a lot more than it helps everyone. One positive side with this is that Spain will need to remove their bad expansions in goverment jobs. Politicians have to much invested in the euro but if the public opinion changes they will ofcourse also change.
3. Italy cannot be trusted in anything.
4. Yes they are dead.
5. Yes.
6. The more radical forces will ofcourse use this to gain momentum.
7. Germany is only in danger if they want to save the euro and banking sector. There is not a country in the world with so high efficiency ratings as Germany so they don’t really have anything to fear. Asia will ofcourse become a stronger competitor to everyone but Germany has the least to worry about.
8. Ireland should never have nationalised their banks. As soon as the banking crisis picks up again they will be crushed. They have dealt with their housing bubble in a great fashion though.
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@Chris McCarthy wrote:
Or have I missed the point here and you just staying that Euro is jiggered for a bit but that the currency will of course remain? You know me Logan, all this finance stuff isn’t my strongest point!
If countries enter an economic straight-jacket such as the Euro the benefits need to outweigh the disadvantages.
In the good times they did. Any economy can do well, prosper and grow when the world’s booming.The real test for a single currency principle is when things go bad. Can the individual states economies still perform and deliver prosperity for it’s people? The single currency carries that role because it is a political vehicle not an economic one. It’s also a central plank of the European project and you can’t get more political than that.
Well we know now the answer to that one.
The EU countries that kept their currency are suffering a difficult downturn. Not a catastrophic collapse of their economies as in the Eurozone.
We will see in the coming months how the markets will control the excesses of the politicians such as Hollande and eventually expose currency union as being the economic farce that it is.
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http://www.youtube.com/watch?feature=player_embedded&v=Zvl9N9GdraQ#! =) Quite funny and at least I see the election in Greece as quite a nice slap in the face to the establishment.
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Without wising to fan the flames on this one.
Am still believing that despite everything that is again going on around Greece and now France, not to mention Bankia and its being bailed out, the Euro guys is going nowhere, it will be here this, next and every other year for the rest of at least all our natural lives.
And, being too lazy I can’t be bothered to go and find it, but I heard them mentioning on Newsnight last night and I saw him on there also the other evening, that Peter Mandelson had written quite an incisive article basically saying that Britain needs to get past all of this crisis stuff in Europe, and in a few years time just plain have another vote.
Do we want to be in the European Community or not, basically just decide once and for all, and as part of that, if we do want to stay in, then look to go whole hog and join the blooming Euro currency.
He basically, doesn’t think it does us any good flip flopping around, we just need to make a decision one way or the other and get on with it, if we out, fine we out get on with it, if we in, we in and get on with it.
I have a lot of respect for Mandelson even though he is / was the Prince of Darkness et al, he knows his stuff.
He also, as do a lot of others, believe that all this stuff for the Euro at present is all a precursor to it becoming a massively strong currency and predominant in the future. Could be no? Forged in the current molten fire?
I haven’t heard of a single nation saying lets get out of the Euro, not even the Greeks, but hear plenty about UK folk saying lets get out of the EC, I wonder if we we right when we think we so clever and have it so right?
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@Chris McCarthy wrote:
Without wising to fan the flames on this one.
Am still believing that despite everything that is again going on around Greece and now France, not to mention Bankia and its being bailed out, the Euro guys is going nowhere, it will be here this, next and every other year for the rest of at least all our natural lives.
And, being too lazy I can’t be bothered to go and find it, but I heard them mentioning on Newsnight last night and I saw him on there also the other evening, that Peter Mandelson had written quite an incisive article basically saying that Britain needs to get past all of this crisis stuff in Europe, and in a few years time just plain have another vote.
Do we want to be in the European Community or not, basically just decide once and for all, and as part of that, if we do want to stay in, then look to go whole hog and join the blooming Euro currency.
He basically, doesn’t think it does us any good flip flopping around, we just need to make a decision one way or the other and get on with it, if we out, fine we out get on with it, if we in, we in and get on with it.
I have a lot of respect for Mandelson even though he is / was the Prince of Darkness et al, he knows his stuff.
He also, as do a lot of others, believe that all this stuff for the Euro at present is all a precursor to it becoming a massively strong currency and predominant in the future. Could be no? Forged in the current molten fire?
I haven’t heard of a single nation saying lets get out of the Euro, not even the Greeks, but hear plenty about UK folk saying lets get out of the EC, I wonder if we we right when we think we so clever and have it so right?
You must be joking right? Listen to the populace and not the panicking politicians that refuse to face up to what they have done. Ofcourse the big shots doesn’t want to get out of the EU/EMU because it makes them loose power and money. The greeks basicly voted for anyone except the europarties even handing their votes to extremists both left and right wing parties.
The only reason some feels the need to stay in the euro cooperation is not because they don’t want to get out but because they are locked into euro loans and when they get out their own currencies will devalue like crazy.
Why can’t the EU be a cooperation between states and not force the nations into one suprastate as is the case now.
The only thing I might agree upon you on is that if one wants to belong to the euro all financial policies should be handed over to the suprastate. This was not what the populaces signed up for though. The politicians told them that they could both eat the cake and keep it.
They should do like the icelanders did. Just switch the loans out by law and make it illegal for the loans to be in other currencies than they icelandic krona.
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@Chris McCarthy wrote:
Without wising to fan the flames on this one.
Fanning the flames is an apt phrase to use in the context of the Euro I’d say.
Many years ago William Hague likened the creation of the Euro to constructing a building without fire escapes.
Well the “Euro building” is well and truly ablaze right now.
In my fanciful imagination it is a very tall building and Greece occupies the top floor which is engulfed in flames. Germany occupies the relatively safe ground floor and controls the water supply for the whole building. They are holding back the water that Greece desperately needs and telling them how to deal with the fire without water. Greece has to choose between doing it Germany’s way or else they can jump and take the consequences.
Even if the fire does get put out this time around, this particular building is going to smoulder and probably catch fire again for decades to come.
That’s the building you are suggesting the UK should lease a floor on!!
OK it’s a fantasy (I think I must have too much time on my hands) but IMHO the principle is correct.
I agree with both you and Ardun in that the only way the Euro can be made to work properly is if national governments cede all of their tax raising powers (with the possible exception of local property taxes) to Brussels who then redistribute the wealth on an, as needed basis rather than on a where it was created basis. I think we in the UK, and pretty much all of Europe are a long way from that at present.
Back to the building analogy; it means that each floor should be occupied by a pro-rata mix of all the nationalities so that everyone loses equally when things go wrong.
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I have said this before on here many, many times. Unhappily the Euro will survive. Why?
The Euro was created by politicians. Since WW11 generations of leading European politicians have staked their reputations and political capital convincing their populations it was a desirable idea. Without the Euro there is no European Union. They are in truth the same animal. It cannot be allowed to fail for political reasons. Politics in the end always supersedes economics.
No one goes to war for example for economic reasons.In economic terms once this recession is over The Euro will return to being a currency everyone wants to hold. I promise you Europe is not dead, just moribund for a few years, perhaps a generation.
That all said from a risk prospective it’s probably not a good idea to be holding Euro investments at the moment. This thing will take a long time to unravel.
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I beg to differ though logan on one part. Economics has a very large part of the problem when it comes to wars… without economic problems politicians can’t convince the people to go to war most often. The politicians used fear mongering to convince their voters to join the EMU. The start of the EU “ok I understand that the plan was for one state eventually” was a totally different thing because it was mostly about free trades somewhat.
Without economic problems someone like this would never be able to gain power. http://www.youtube.com/watch?v=E4AXJx3IzdY&feature=related
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@logan wrote:
No one goes to war for example for economic reasons.
Ardun.
What I actually meant was war is not a natural consequence of economic depression. Fascists and despots the world over have and do use those difficult economic circumstances to gain a foothold into power. They then go on to exercise their real intention of depriving the population of a voice to usurp the democratic process.War or more usually stalemate is then the result. Usually because dictators need a war or a permanent state of confrontation with other democratic powers to convince their military backers to retain their support.
In Europe it was decided since WW11 by a consensus of elected politicians to take another path and avoid confrontation and conflict. Laudable but misguided motives. They believed that their brand of politics was a more important loftier aim than economics or real national democracy. They see nationalism as a form of disease destined for conflict
You see that when any EU unelected politico speaks. “It’s the vision stupid, don’t you get it?” 👿
They have unfortunately inadvertently created a Frankenstein monster in the European Commission and all which comes with it, especially the Euro. It’s now inflicting on it’s populations, with a few exceptions notably Germany the same hardships which brought Hitler to power and which their political vision originally sought to avoid.
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Absolutely right – and that’s why Mandelson is right, as Chris says to remind us we should be looking for a good opportunity to join. If anyone saw Michael Portillo’s programme earlier in the week, he found a factory full of young German’s desperate for us to join. It clearly wasn’t what he expected to hear. He offered them Deutschmark or Euro and they all chose the Euro. With Greece etc in the Euro, the burning building analogy is hard to refute. Without them, it would be a different matter. Interesting question for this forum is whether Spain would be in or out of a new “hard” Euro.
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Well, short of a miracle, Greece will today announce that no coalition government can be formed until new elections have taken place.
Opinion polls indicate that the biggest winner of a new election would be the anti bailout left wing party Syriza, with 28% of the vote. Whilst this wouldn’t give them them an absolute majority it would almost certainly enable them to form a coalition with one or more of the other anti bailout parties.
So, supposing this anti-bailout government declared that they were going to default on all their loans but decline to leave the Euro. There is no legal mechanism for them to be expelled by the rest of the Eurozone.
Clearly Greece would not get any more bailout money or be able to borrow anywhere else but they wouldn’t be paying any interest either.
My question is whether Greece could function on a zero deficit basis if starting again with a clean sheet? I don’t know the answer to that and haven’t seen it discussed anywhere else, all the articles I’ve read assume that they would exit the Euro if they defaulted on their loans.
Of course if the Greeks could pull that one off (or get better terms just by threatening it) presumably the other Southern Europe populations e.g. Spain, would be queuing up to go down the same route.
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http://www.youtube.com/watch?v=HQ9GYPWnyQ4
The last day to create a goverment or choose reelection.
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@Costacraver wrote:
Absolutely right – and that’s why Mandelson is right, as Chris says to remind us we should be looking for a good opportunity to join. If anyone saw Michael Portillo’s programme earlier in the week, he found a factory full of young German’s desperate for us to join. It clearly wasn’t what he expected to hear. He offered them Deutschmark or Euro and they all chose the Euro. With Greece etc in the Euro, the burning building analogy is hard to refute. Without them, it would be a different matter. Interesting question for this forum is whether Spain would be in or out of a new “hard” Euro.
Of course the German factory workers like the euro – it makes their exports considerably cheaper than if they went back to the DM. Germany has done rather well out of the euro so far, at the expense of several other nations, so asking them if another victim would like to join the party is a bit pointless (especially one with an devalued currency). Ask the Germans whether they’d like a fiscal union within the eurozone and you might get a different answer.
As I’ve mentioned on here a few times, we already have the data to see what would have happened if the UK had joined the euro in 2002. Interest rates would have been half of what they actually were during the boom years, the credit bubble would have been much, much bigger, and the UK would not have been able to bail out the banks with printed money. We would not even be having this conversation right now because the UK would have already been ejected from the euro, swiftly followed by several other countries.
To suggest that the UK join the euro when we’ve got the facts staring us straight in the face is just crass. The only reason people like Mandelson want the euro is because they see themselves as part of the EU’s political elite, destined to rule alongside a load of “Sir Humpries” without having to bother about inconveniences like accountability (remember Mandelson was forced to resign twice when he was a member of the UK parliament)
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Completely agree with you Chopera on this, why would the UK want to join or even should join the Euro with all it’s current problems beats me, maybe one day a Northern Hemisphere Euro might be a fanciful wish and could happen, but it will be some way off. If the UK held a referendum it would probably be a resounding ‘No’ to joining. The UK’s contributions (already high) to Europe would increase dramatically, UK would be milked as usual whilst pouring monies into Spanish, Portuguese and others’ roads and infrastructure, whilst being told what to do by a bunch of corrupt Eurocrats lining their own deep pockets. 👿
As for Mandelson, well he is a fraudster and resigned because of it too, how he is allowed to keep his title beggars belief, as you say he fancies some power role in some elitist brotherhood of Europe. 🙄
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