Re: Re: Why did Ireland bother? Don’t they have Trojan horses?


@logan wrote:

I think it’s increasing likely sovereign debt investors in the Eurozone are going to face a substantial ‘haircut’ to their investments. Merkle has said as much in an interview yesterday, perhaps to pacify German public opinion. No investment is risk free and perhaps the morality of investors sharing some of the burden is right, otherwise the returns are free money. The question is on what scale. Markets are concerned it could be substantial and in the case of Spain huge.
I don’t agree with Rockets statement that Spanish banks are correct in keeping their none performing assets at pre recession levels. It makes no sense and is deliberately misleading. Recently the Bank of Spain tried to force the banks to come clean with their losses. However I think the scale of the disaster shocked even them so they have held off on that one for fear of spreading panic. Make no mistake Spanish banks are sitting on catastrophic loss and the markets smell blood.

Every business inflates its non-liquid assets on the balance sheets to present the best possible picture to investors; unfortunately the Spanish banks have no choice in the matter, the true figures would be horrendous and some of them would be technically bankrupt – and that wouldn’t help anyone, not even the euro-sceptics cheering from the sidelines, who are unable to think through what a European catastrophe would mean for their fortunes.

I listened to a distinguished economist being interviewed earlier today and he was very supportive of the Euro and explained that Spain was not in need of any support and had sound finances. He blamed the current speculation on unreasoned market panic, with no foundation in fact.

He also contrasted Spain with the UK, whose indebtedness is higher. I’m not sure I agree with his analysis, but it could explain why the pound is holding steady rather going through the roof against the Euro.

Selfishly, I would like the pound to rise, and all the indicators seem to point that way, but the currency markets don’t agree with me.