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The Eurozone Crisis  
User currently offlineNAV20 From Australia, joined Nov 2003, 9909 posts, RR: 35
Posted (2 years 1 week 15 hours ago) and read 3297 times:

The European Central Bank has just announced that it will henceforward buy 'unlimited' quantities of bonds issued by the weaker members of the Eurozone; subject to said weaker members adhering to prescribed austerity measures (basically higher taxes, lower wages, reduced government spending etc.).

http://www.bbc.co.uk/news/world-europe-19516810

I can see WHY the ECB has decided on these measures. The simple fact is that said weaker members are considered to be bad risks by private investors. Not only are the weaker countries having to pay ever-increasing rates of interest, there is a distinct possibility that, quite soon, their respective 'exposures' will reach such heights that private lenders will simply refuse to take the risk on them defaulting on their debts; a risk which will, of course, grow 'in step' with the ever-increasing rates of interest required by the market.

What I CAN'T see is how the ECB (and the leaders of the Eurozone, principally the German government) can have decided on such a stupid and self-defeating strategy. Not only will the wealthier countries have to pour more and more money into the treasuries of the 'lame ducks'; the very austerity measures they are insisting on will make it certain that that money can never be repaid.........

The Eurocrats' emphasis seems to be entirely on 'saving the Euro' - but the proposed strategy ignores the fact that the Euro is the problem, not the solution. Basically the stronger European nations export large quantities of products to the weaker ones; but the Eurozone has finally reached the point where the weaker countries can only go on buying said products if the sellers go on lending them increasing amounts of money to buy them with. Surely such a situation would amount to economic madness on the grand scale?

The only solution that will work in the long run is to phase out the Euro, at least among the weaker countries. They could then devalue their currencies in the 'normal' way; thus making their exports cheaper and their imports more expensive, so as eventually to correct their adverse balance of payments problems.

There would be nothing impractical about that strategy. A number of EU members (including, for example, the UK and Sweden) still retain their own currencies while remaining full members of the EU; it would just be a matter of adding the weaker Euro-users to the list, in as orderly a manner as possible.

Anyway, that's my 'prescription.' What do other people think?

[Edited 2012-09-09 07:25:33]


"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
43 replies: All unread, showing first 25:
 
User currently offlineKlaus From Germany, joined Jul 2001, 21461 posts, RR: 53
Reply 1, posted (2 years 1 week 14 hours ago) and read 3263 times:

Quoting NAV20 (Thread starter):
The Eurocrats' emphasis seems to be entirely on 'saving the Euro' - but the proposed strategy ignores the fact that the Euro is the problem, not the solution.

Nope. The Euro is a major boon to Europe overall.

Quoting NAV20 (Thread starter):
The only solution that will work in the long run is to phase out the Euro, at least among the weaker countries. They could then devalue their currencies in the 'normal' way; thus making their exports cheaper and their imports more expensive, so as eventually to correct their adverse balance of payments problems.

That is not what success looks like, but what failure looks like.

The ECB effectively draws the nuclear option to flatten rampant speculation against Europe on the financial markets. As long as the inflationary effects remain manageable (which is highly likely), speculation is largely out of the game.

By your account the USA should also immediately dissolve and let the weaker states fend for themselves with their own currency, as by that line of thinking they were just a drag on the stronger ones anyway (this applies to most federated nations). The EU is not as tightly integrated as a federal nation state, but the basic principles in this regard do still correlate.

The core of the matter is that the EU is a community, not just a loose free trade group.

Communities differ in that they do carry common burdens together and that they try to build up their weaker members with aid from the stronger ones in the expectation to lessen the disparities. That is where Europe is continuing to go, and I'm not alone in expecting that a united Europe including continued coherence funding (particularly if its effectivity is improved and if it is properly targeted) will in the end grow the total pie, not just a few of its pieces at the expense of the others with a loss in total, which a dissolution of the Euro would effectively cause.

It can be hard to look beyond short-term egoism (and many populist politicians in Germany and elsewhere clearly try to exploit that regressive tendency), but in the long term it is simply necessary to take both a wider and a longer view.

I know that it is fashionable to declare the "PIIGS" countries as bottomless pits devouring the hard-earned funds of the more successful countries like Germany, but reality is more complex. Our gains have a lot to do with the united european market, and prudently investing in rebuilding the flailing economies which have contributed to our recent success can reap massive gains for everyone down the road, clearly far above the results a fracturing and regressing Europe would have with all the unavoidable fallout.

It's quite similar to national social policy: Do you just kick the struggling citizens to the curb, or do you prudently and consistently invest in their education and in related infrastructure so they can build up their own productive contribution?

The running US presidential campaign is another example of that age-old battle, but here again I see much greater benefits in a longer view and in prudent investment relative to short-term greed and short-sighted egoism which is always easier to explain and understand, but for some reason fails to pan out in the longer run.

It's the same in Europe, and I am glad that the constructive approach is the currently prevailing position in EU matters (even though the single-minded concentration on national austerity programs is definitely too primitive to succeed if it isn't amended by constructive investment).

The ECB surely has crossed a line which in easier times it should not have crossed, but in times like these exceptional measures can become necessary. It is just critical that under these conditions the economic policies of the members are controlled and integrated accordingly as well – even the ECB bond purchasing cannot just be a free lunch.

We'll all benefit from it, but we still all need to contribute to it as well, one way or another.


User currently offlineeaa3 From United States of America, joined Sep 2007, 1015 posts, RR: 0
Reply 2, posted (2 years 1 week 13 hours ago) and read 3241 times:

Quoting NAV20 (Thread starter):
The simple fact is that said weaker members are considered to be bad risks by private investors

The ECB's move is exactly what is needed and for a simple reason. Let me explain. There are two problems in the eurozone:

1. The countries in the south have become somewhat uncompetitive with the North. This is however not the cause of the inability to refinance themselves. This problem is a medium term problem that needs to be solved but is not the reason for the panic.

2: The reason for the panic in the bond markets is that they are dysfunctional. They are not able to price the risk associated with eurozone government debt. But take a look at the amount of debt per person and as a percentage of GPD( which is off course the best way to compare debt):

Public debt:

USA: $50,000 per person ( 100% dept/GDP)
Italy: $42,000 per person ( 118% dept/GDP)
Germany: $38,000 per person ( 82% dept/GDP)
France: $38,000 per person ( 86% dept/GDP)
Spain: $22,000 per person ( 64% dept/GDP)
Portugal:$19,000 per person ( 83% dept/GDP)

So you can see that the debt of Germany is much higher both as a percentage of GDP and almost 2 times higher in absolute values. So why would you think that Spain is in a worse position than Germany. Keep in mind that unemployment doesn't have anything to do with this because the lower GDP already takes into account the economic situation. The reason is panic. Look at the United States. It owes more per person than anyone in Europe and more as a percentage of GDP as well, apart from Italy. But the debt markets treat US Treasuries as completely safe. The reason for that is quite simple. They think the US is sound but they also know that the US government can cheat and print money. This means that government will never default on Treasuries.

But in Europe this isn't the case. No one country can print money. This means that investors have to look at the balance sheets of the countries and try to evaluate whether the assets and liabilities match. They know what the liabilities are, they are just outstanding debt. But when you look at the assets they are not tangible. The assets are generally the ability to tax your economy and population. I believe that fundamentally the market is failing because it is not able to evaluate the assets of the countries and that's why you have panic in the markets where a country such as Spain, which is in a much better position than Germany with regards to debt, is considered bankrupt while Germany is considered safe. Then there's the fact that when the market refuses to refinance your debt, it's called a run, then the markets prophecy becomes a reality and you default not because you're actually bankrupt but because of a self fulfilling prophecy that panic in the market created and forces you to seek a bailout.

Essentially Spain is close to default because of market perceptions but not because of it's fundamentals.

So fundamentally the problem that needs to be solved that the countries cannot print money and unlimited ECB bond buying solves that. The problem of uncompetitiveness still exists but that's a longer term problem.

Quoting NAV20 (Thread starter):
Anyway, that's my 'prescription.' What do other people think?

You're prescription isn't aimed at the actual problem. The uncompetitiveness of Southern Europe has very little to do with the solution to the panic in the debt markets in the eurozone. The lesson is that markets are not able to price the risk of default of a country that is borrowing in a currency that it can't print itself and that this is causing panics. The downsides of abandoning the euro are much greater than the hassle of just fixing this problem


An interesting point about unlimited ECB bond buying is that there is no difference between it and Eurobonds in that with unlimited bond buying the eurozone is essentially saying that there is a common guarantee that no eurozone country will default.

Quoting Klaus (Reply 1):
The ECB effectively draws the nuclear option to flatten rampant speculation against Europe on the financial markets. As long as the inflationary effects remain manageable (which is highly likely), speculation is largely out of the game.

Inflationary pressures are off course a consideration but consider that the US uses the FED in this way but has very little inflation. The reason is that the point of being able to print money to circumvent the markets isn't really to do it but rather to be able to threaten it. The threat should be enough to jolt markets into functioning properly. But without the ability to threaten to use the "Nuclear option" you'll have panic in the market.

[Edited 2012-09-09 09:10:41]

User currently offlinegingersnap From United Kingdom, joined Aug 2010, 893 posts, RR: 5
Reply 3, posted (2 years 1 week 13 hours ago) and read 3236 times:

I have very little to say other than I wish they'd have listened way back, when they were told this could happen before the Euro was even in circulation.


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User currently offlineOzGlobal From France, joined Nov 2004, 2721 posts, RR: 4
Reply 4, posted (2 years 1 week 9 hours ago) and read 3180 times:

Quoting NAV20 (Thread starter):

We can debate how things should have been played at the out set of the Euro and argue that mistakes were made. That is an historical pursuit. All serious economists, including in UK and the US, agree that an exit of a country, not only Greece, but also Germany for different reasons, from the Euro would be catastrophic for that country. You can't just naively say, 'let's put the jeanie back in the bottle', it wont' go. You have to move forward and search for sustainable solutions. No one in France, Germany or the rest or Northern Europe want to pour their hard earned money into black holes on behalf of the south or anyone else, but they have the sense to recognise that you cannot just 'take you toys and go home' at this point either....



When all's said and done, there'll be more said than done.
User currently offlineAsturias From Spain, joined Apr 2006, 2153 posts, RR: 16
Reply 5, posted (2 years 1 week 8 hours ago) and read 3162 times:

Quoting eaa3 (Reply 2):
Let me explain.

  

Really good and informative post, eea3.



Tonight we fly
User currently offlineAesma From France, joined Nov 2009, 6651 posts, RR: 11
Reply 6, posted (2 years 1 week 8 hours ago) and read 3129 times:

I see this as a move in the right direction but the conditions imposed by Germany mean it won't work, Italy and Spain already said they don't want to hear about them. And even if they agreed, their economies would still be tanked and the next target would be France, at which point you can be certain of a breakup of the Euro and an epic economic disaster.

Germany's fear of inflation is irrational and as long as this hasn't been addressed there won't be a solution. Economists are saying that what the ECB is proposing would actually create deflation due to the depression it would cause in the eurozone.



New Technology is the name we give to stuff that doesn't work yet. Douglas Adams
User currently offlineKen777 From United States of America, joined Mar 2004, 8269 posts, RR: 8
Reply 7, posted (2 years 1 week 7 hours ago) and read 3111 times:

Quoting NAV20 (Thread starter):
A number of EU members (including, for example, the UK and Sweden) still retain their own currencies while remaining full members of the EU

I seem to remember when the UK was "turning down the opportunity to join the Euro". IIRC, they were pretty vigorous about retaining the Pound. I don't know how that impacts their commitment to helping their Southern Friends, but it seems that the Pound is going to end up a more desirable currency to invest in than the Euro.

Quoting Klaus (Reply 1):
By your account the USA should also immediately dissolve and let the weaker states fend for themselves with their own currency

There is still a lot of Confederate currency that you can get your hands on pretty cheaply.  


User currently offlineAesma From France, joined Nov 2009, 6651 posts, RR: 11
Reply 8, posted (2 years 1 week 7 hours ago) and read 3097 times:

Quoting Ken777 (Reply 7):
I seem to remember when the UK was "turning down the opportunity to join the Euro". IIRC, they were pretty vigorous about retaining the Pound. I don't know how that impacts their commitment to helping their Southern Friends, but it seems that the Pound is going to end up a more desirable currency to invest in than the Euro.

It's not like the UK is in great economic shape as a result.



New Technology is the name we give to stuff that doesn't work yet. Douglas Adams
User currently offlinegingersnap From United Kingdom, joined Aug 2010, 893 posts, RR: 5
Reply 9, posted (2 years 1 week 5 hours ago) and read 3062 times:

Quoting Aesma (Reply 8):
It's not like the UK is in great economic shape as a result.

True but we stand a better chance of a full scale recovery (signs are beginning to show already) than any nation tied to the Eurozone. Whilst we have perhaps had a harder time of it in many aspects, the Pound has allowed us to retain some financial credibility (even if it was reported here that the French were quite annoyed by that).

The Euro is a failed currency, that will soon disappear IMO. Such a system can't work across a variety of nations with varying economies. The ONLY way the Euro could ever work, would be to create a single Eurozone state which will never happen.

[Edited 2012-09-09 17:49:35]


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User currently offlineNAV20 From Australia, joined Nov 2003, 9909 posts, RR: 35
Reply 10, posted (2 years 1 week 1 hour ago) and read 3041 times:

Quoting Aesma (Reply 6):
I see this as a move in the right direction but the conditions imposed by Germany mean it won't work, Italy and Spain already said they don't want to hear about them. And even if they agreed, their economies would still be tanked

On the other hand, Aesma, surely you can't blame the Germans for seeking to impose conditions? Given that, if the proposed deal goes through, they will be 'paying the piper' - basically bankrolling not just Greece, but Portugal, Spain, Italy.........? As I said earlier, they'll basically have to go on lending increasing numbers of Eurozone countries 'unlimited' amounts of money so that they can go on buying German exports?

And it's possible, too, that the German Constitutional Court may 'throw a spanner in the works' as early as this coming week:-

"The German constitutional court cannot afford to be seen as not being independent, but it also cannot afford to be seen as the court that brought down the government," said Constanze Stelzenmüller, a senior transatlantic fellow at the German Marshall Fund in Berlin. "They're going to have to try to square the circle; in other words, not bring down the government at the same time as asserting their independence."

"The ruling, due on Wednesday, is expected to give the go-ahead to the ESM, a permanent bailout mechanism, and the fiscal pact, but with caveats such as constraints on future decision-making or a ruling that Germany's basic law has to be rewritten if there is to be further EU integration.

"A government insider told the Observer, on condition of anonymity, that the court "is very independent and always good for a surprise. Nobody knows what will happen on 12 September." A poll published on Friday on Spiegel Online showed that 54% of Germans were in favour of the court blocking the legislation, reflecting the degree to which public opposition to bailouts is increasing."


http://www.guardian.co.uk/world/2012...to-rule-on-euro-fate?newsfeed=true

The '54% against' figure doesn't surprise me in the least. It has to be dawning on the German people that, if these 'save the Euro at all costs' decisions go on, Germany is highly likely to end up paying the wages, unemployment benefits, and pensions of practically everyone else in the Eurozone........  



"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
User currently offlineeaa3 From United States of America, joined Sep 2007, 1015 posts, RR: 0
Reply 11, posted (2 years 1 week 1 hour ago) and read 3032 times:

Quoting NAV20 (Reply 10):
On the other hand, Aesma, surely you can't blame the Germans for seeking to impose conditions? Given that, if the proposed deal goes through, they will be 'paying the piper' - basically bankrolling not just Greece, but Portugal, Spain, Italy.........? As I said earlier, they'll basically have to go on lending increasing numbers of Eurozone countries 'unlimited' amounts of money so that they can go on buying German exports?

Why do you think that Germany would have to pay for it. Are you suggesting that they pay a higher amount per person than the other countries. That hasn't been the case up until now and no one is suggesting that they pay more then their fair share. It's just that they are the biggest economy with the largest amount of people. But no one is suggesting that they pay a higher proportion than their economy would suggest.

I feel that the Germans are the hindrance to the eurozone crisis being solved and it's because they fundamentally refuse to understand what the problem is. They are blinded by the hyperinflation of the 1930's to understand the importance of the ability of the state to self finance itself, if only for the sake of having that ability but not using it.


User currently offlineOzGlobal From France, joined Nov 2004, 2721 posts, RR: 4
Reply 12, posted (2 years 6 days 17 hours ago) and read 2994 times:

Quoting eaa3 (Reply 11):
Why do you think that Germany would have to pay for it. Are you suggesting that they pay a higher amount per person than the other countries. That hasn't been the case up until now and no one is suggesting that they pay more then their fair share. It's just that they are the biggest economy with the largest amount of people. But no one is suggesting that they pay a higher proportion than their economy would suggest.

I feel that the Germans are the hindrance to the eurozone crisis being solved and it's because they fundamentally refuse to understand what the problem is. They are blinded by the hyperinflation of the 1930's to understand the importance of the ability of the state to self finance itself, if only for the sake of having that ability but not using it.

     

I tire a little of hearing from the US and the UK press how the Germans are paying for everything here. Do the numbers: France pays it share proportionally and this in some cases differs only marginally from the German contribution, yet you don't hear France constantly complaining they are afraid of financing those incorrigible southern states.

There's a slightly schizophrenic response on the German side: they stand to loose it all if the Euro breaks up and their manufacturing is priced out of the market. They absolutely need the Euro to be maintained; At the same time, particularly in Bavaria, they cannot let go of their allergy to any inflation and printing money is the anti-christ; they also have cast themselves as the noble martyr of disciplined work, paying to support the junkie lifestyle of the southern states. A little more enlighted self-interest is needed and the ECB proposal offers it.



When all's said and done, there'll be more said than done.
User currently offlineNAV20 From Australia, joined Nov 2003, 9909 posts, RR: 35
Reply 13, posted (2 years 6 days 16 hours ago) and read 2994 times:

It now looks increasingly likely that the German Constitutional Court will delay its decision on the legality of the ESM ('European Stability Mechanism'), previously expected on Wednesday:-

http://www.telegraph.co.uk/finance/d...rt-may-delay-euro-ruling-live.html

The one thing we can all possibly agree on is that any further delay or indecision can only make a bad situation worse?



"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
User currently offlineAesma From France, joined Nov 2009, 6651 posts, RR: 11
Reply 14, posted (2 years 6 days 16 hours ago) and read 2996 times:

Klaus is talking about looking at the long term and I agree with him, except that I don't think Germany is doing that at all. Look at the German demography ! The long term danger is not Germans paying our pensions but the exact opposite.

Now I'm not saying the other countries are moral compasses, sure we got it wrong, but Germany was on that same bandwagon (with the debt to prove it), they just had the vision to jump off it a few years ago. Not enough vision to convince us to do the same, mind you, or to not push for Greece to enter the Euro.

As for the UK, well, it's so dependent on the City that a "full scale recovery" won't happen if the eurozone is in a depression.



New Technology is the name we give to stuff that doesn't work yet. Douglas Adams
User currently offlineeaa3 From United States of America, joined Sep 2007, 1015 posts, RR: 0
Reply 15, posted (2 years 6 days 14 hours ago) and read 2996 times:

Quoting OzGlobal (Reply 12):
At the same time, particularly in Bavaria, they cannot let go of their allergy to any inflation and printing money is the anti-christ; they also have cast themselves as the noble martyr of disciplined work, paying to support the junkie lifestyle of the southern states.

Yep.

The interesting thing is that if you look at public debt in Germany you'll find out that they took on way more debt that for example Spain both as a percentage of GDP and in absolute numbers.

i.e.

Germany: $38,000 per person ( 82% dept/GDP)
Spain: $22,000 per person ( 64% dept/GDP)

Germany owes way more than Spain.

So the Germans are totally misinterpreting the signals from the markets as saying that they are better than everyone else What the markets are really saying is this: "The Germans are the ones preventing the problem from being solved in Southern Europe but we're sure that if the problem comes to Germany that they will solve it i.e. allow the ECB to solve it".

I feel that the Germans have done a terrible job at every point of this crisis and have mixed up morals with economics. This is always a bad idea (because morals have nothing to do with economics) but furthermore in the example with Germany/Spain it's Spain that has behaved morally (if were associating being moral with low debt, which is a BS assumption btw.) and Germany has been piling on debt. At every point in this crisis the Germans have resisted sending out the fire engines because they've felt that letting Southern Europe burn will teach them an important lesson.

The Germans have run the show up until now and the solution to everything has always been to use austerity to "regain" the confidence of the markets. This has failed at every point. The reason it's failed is described in my first point i.e. it doesn't solve the fundamental problem of the panic. If markets are panicking then you can't expect them to behave rationally if you don't solve the panic.

Quite frankly I agree with George Soros in his latest opinion piece that it's the Germans who are unwilling to solve the problem and they need to either get onboard with a solution or leave the Euro. The euro will do better without Germany if the other members are willing to work towards a true solution, which they are. But for Germany they have much more to gain from being in the Euro than from being outside of it.


User currently offlineNAV20 From Australia, joined Nov 2003, 9909 posts, RR: 35
Reply 16, posted (2 years 5 days 22 hours ago) and read 2971 times:

Quoting Aesma (Reply 14):
The long term danger is not Germans paying our pensions but the exact opposite.
Great comment, Aesma, love it!  

Not so sure about comments like these, though.

Quoting Aesma (Reply 14):
Now I'm not saying the other countries are moral compasses, sure we got it wrong, but Germany was on that same bandwagon (with the debt to prove it), they just had the vision to jump off it a few years ago.
Quoting eaa3 (Reply 15):
feel that the Germans have done a terrible job at every point of this crisis

Early in life I was no fan of the Germans - given that my earliest memories were literally of being bombed by the Luftwaffe!   But this changed very soon, since we had a prison camp just outside the vlliage, full of German and Italian prisoners, who were very kind to us! Later on, I spent most of my holidays touring Europe, especially Germany; and during the Sixties and Seventies I was professionally involved in organising the funding, design, and construction of factories. So that I can claim to have been in at the very beginning of the Common Market, helping European firms (particularly German and Dutch ones) to set up factories in Britain, and British/Commonwealth ones to set up plants in Europe.

I particularly recall the generally 'penitent' attitude of the German business people I met and worked with during that period. Not so much towards us British - they'd never occupied us (except for the Channel Islands), so the general view in both countries (among us 'survivors,' anyway) was that WW2 had basically been a 'fair fight'  ; but all the German businessmen I worked with very much regretted the ordeal they had put Occupied Europe through, and made special efforts to assist with reconstruction. And, above all, they also made 'special efforts' never to 'throw their weight about.'

Now, judging by the sort of comments I've quoted above, you seem to be criticising Germany for not 'taking the lead'? Believe me, due to the collective German guilt about what they did to Europe (plus the Holocaust), that is highly unlikely to happen.

The current situation is that, of the 17 nations in the European Union, 7 (headed by the UK, Sweden, and Denmark) do not appear to be in too much trouble; arguably because they still have their own currencies, which they can support or devalue as necessary. Of the remaining 10, at least 5 (Greece, Ireland, Portugal, Cyprus, and Spain) are close to economic collapse. At least 2 more - Italy and Belgium - are in considerable danger too.

The sole reason for that is that they are all Euro-users - so they can't devalue. And the best answer - indeed, the only answer in terms of orthodox economics - is to phase out the Euro; so that they can revert to their own currencies, and be free to devalue as necessary to restore their competitive positions.

In terms of orthodox economic theory, there is no other available solution. The approach which the Eurozone appears currently to be favouring - literally 'printing Euros' - will prove to be not just useless, but (IMO) to be actively harmful; rapidly making a bad situation a great deal worse.

And leading, almost certainly, to an un-planned (and therefore uncontrollable) collapse of the whole Eurozone.

[Edited 2012-09-11 01:00:32]


"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
User currently offlinesabenapilot From Belgium, joined Feb 2000, 2714 posts, RR: 46
Reply 17, posted (2 years 5 days 20 hours ago) and read 2942 times:

Meanwhile, back in reality, the German constitutional court has just decided to throw out the requests to delay a decision on the ESM and will thus rule on the ESM tomorrow, just as planned.

Also, interesting details about the proposed banking union within the eurozone have emerged and it seems the ECB will be given not only full oversight over all eurozone banks as expected, but will also be taking over the voting rights of all euromember states in the EBA -the EU wide European Banking Authority which sets the rules all EU banks must adhere too-, in a first step towards a federal union.

However, this effectively means that the ECB will be in full control at the EBA and thus control banking standards not just in the eurozone, but throughout the wider EU even, as the ECB will hold more than a a 2/3rd majority of votes in the EBA and can thus push through anything it likes.

I am sure the UK will love this plan: the ECB regulating all of the UK banks indirectly, through the EBA


User currently offlinegingersnap From United Kingdom, joined Aug 2010, 893 posts, RR: 5
Reply 18, posted (2 years 5 days 20 hours ago) and read 2928 times:

Quoting sabenapilot (Reply 17):
I am sure the UK will love this plan: the ECB regulating all of the UK banks indirectly, through the EBA

The pressure for the UK to leave the EU from within it's own borders is growing. This will only make it worse.



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User currently offlineNAV20 From Australia, joined Nov 2003, 9909 posts, RR: 35
Reply 19, posted (2 years 5 days 16 hours ago) and read 2884 times:

Quoting sabenapilot (Reply 17):
I am sure the UK will love this plan

As far as I know, any such new regime would require the unanimous approval of the EU Council of Ministers. That would include those of the non-Euro countries. So, on the face of it, it can't happen if it seeks to include the non-Euro crowd........

http://euobserver.com/institutional/117495

Just as well, IMO...........



"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
User currently offlineAesma From France, joined Nov 2009, 6651 posts, RR: 11
Reply 20, posted (2 years 5 days 15 hours ago) and read 2875 times:

Quoting NAV20 (Reply 16):
Now, judging by the sort of comments I've quoted above, you seem to be criticising Germany for not 'taking the lead'? Believe me, due to the collective German guilt about what they did to Europe (plus the Holocaust), that is highly unlikely to happen.

The current situation is that, of the 17 nations in the European Union

It's 27, 17 is the number of eurozone countries. The UK is the only one of 27 not to have signed the agreement early this year, so I'd say the UK is indeed causing problems in the EU. Nothing new, since it always was the US Trojan horse.

As for Germany taking the lead, if you mean taking power, then indeed it won't happen, and not just because Germany is not willing. The problem is that currently it takes the tail, dragging it.



New Technology is the name we give to stuff that doesn't work yet. Douglas Adams
User currently offlineOzGlobal From France, joined Nov 2004, 2721 posts, RR: 4
Reply 21, posted (2 years 5 days 15 hours ago) and read 2874 times:

Quoting NAV20 (Reply 16):
The current situation is that, of the 17 nations in the European Union, 7 (headed by the UK, Sweden, and Denmark) do not appear to be in too much trouble; arguably because they still have their own currencies, which they can support or devalue as necessary. Of the remaining 10, at least 5 (Greece, Ireland, Portugal, Cyprus, and Spain) are close to economic collapse. At least 2 more - Italy and Belgium - are in considerable danger too.

I enjoyed your very thoughtful post in relation to Germany, but started to have problems at this point.... Come again?? The are 27 nations. The UK "heading" the group that are "not having problems"?? The UK may not be faced with the direct Euro problems, but it might as well be as its economy is completely intwinded with the Eurozone, so they stand or fall together. Even the Economist admits that. As for not experiencing its own problems: UK GDP contraction is significant and equal to that of Spain (whilst France for example is flat with pre-crisis levels), debt as % of GDP is one of the highest in all Europe and they are mired in recession. How can you make this statement?



When all's said and done, there'll be more said than done.
User currently offlinePyrex From Portugal, joined Aug 2005, 4022 posts, RR: 28
Reply 22, posted (2 years 5 days 3 hours ago) and read 2809 times:

Quoting NAV20 (Thread starter):
What I CAN'T see is how the ECB (and the leaders of the Eurozone, principally the German government) can have decided on such a stupid and self-defeating strategy.

It's called guilt. Look it up.

Or in the words of Robert Mugabe: "Print, baby, print"

Quoting NAV20 (Thread starter):
the very austerity measures they are insisting on will make it certain that that money can never be repaid.........

"Austerity"? What austerity? You can't be spending on yourself all the money you take in plus another 6% of GDP for good measure and call it austerity. That is like saying I live in austerity because I only blow 120% of my salary. Austerity is what the Germans face - when you are paying for someone else to spend, that is austerity.

Quoting NAV20 (Thread starter):
the Euro is the problem, not the solution.

You are implying that inflation (what would happen if these countries were not in the Euro in the first place) is a solution - it is not. Inflation is a hidden tax, that hurts the poor disproportionately. For all its ills, if Portugal, Greece, Spain, etc. were not in the Euro, their irresponsible governments would have inflated away any savings the responsible part of their population might have and kept spending like there is no tomorrow. Being in the Euro at least gave them a modicum of discipline and allowed their citizens to not see their life savings eaten away by inflation and currency devaluation.

Quoting NAV20 (Thread starter):
They could then devalue their currencies in the 'normal' way

Meaning, screwing their savers? Problem is you do that in one country and the next day you have lines going round the block 24/7 in every ATM of similarly fragile countries.

Quoting Klaus (Reply 1):
It's quite similar to national social policy: Do you just kick the struggling citizens to the curb, or do you prudently and consistently invest in their education and in related infrastructure so they can build up their own productive contribution?

Some chronic struggling citizens who have never shown an interest in reforming or getting a job should be kicked to the curb, yes. Or do you keep giving money to the junkie who is only going to blow it all on heroin?

Quoting Aesma (Reply 6):
Germany's fear of inflation is irrational

Remember what happened last time Germany had hyper-inflation? That should be a concern for the whole of Europe, not just Germany.

Quoting Klaus (Reply 1):
By your account the USA should also immediately dissolve and let the weaker states fend for themselves with their own currency

Well, California already started printing its own currency, paying tax refunds with IOUs...

Quoting Aesma (Reply 14):
Not enough vision to convince us to do the same, mind you

Oh, wait, now it is Germany's fault for not convincing you to cut spending when you had time?

Quoting eaa3 (Reply 15):
The interesting thing is that if you look at public debt in Germany you'll find out that they took on way more debt that for example Spain both as a percentage of GDP and in absolute numbers.

And how much of that debt was taken on to give billion of Euros of "structural aid" and similar transfer payments to Spain over the decades? How are you accounting for all the airports, highways, high-speed rail, etc. the Germans built in Spain?

Also, how are you accounting for the debt owed by the bankrupt, corrupt, government-controlled banks, the cajas?



Read this very carefully, I shall write this only once!
User currently offlinepu From Sweden, joined Dec 2011, 697 posts, RR: 13
Reply 23, posted (2 years 5 days 3 hours ago) and read 2801 times:

Quoting Klaus (Reply 1):
By your account the USA should also immediately dissolve and let the weaker states fend for themselves with their own currency

If the USA joined in a currency union with Canada and Mexico and one of the members committed fraud and deliberately spent/borrowed recklassly in violation of treaties, yes, your example would be valid, the offending country should get kicked out of their union and return to its original peso or dollar.

BUT, the USA is internally cohesive far more than the EU. Its currency has been in place longer than most EUropean states have existed in their current form. The USA has had one government for 236 years while, for instance, Germany has had 4-5 governments in the last 100 years alone - and Spain only discovered democracy in the 1970s.

Suggesting Greece leaving the eurozone is comparable to the USA ejecting a poor state like Mississippi is absurd; the USA is by design built on federalism amonga like-minded citizens, the EU is not.

For what its worth, I am fine with Germany bailing out Greece, and possibly others; but this will go on forever since the southern Eurpean government culture doesn't change and they are very aware of how desperately Germany wants (needs?) the euro.

Quoting eaa3 (Reply 2):
USA: $50,000 per person ( 100% dept/GDP)

The correct rigures for comparing USA debt to other countries is the 'debt held by the public' figure, found here:
http://www.treasurydirect.gov/NP/BPDLogin?application=np

::: the US per capita debt is aout $USD 36000, or ~70% of GDP. (if you are making comparisons to others)

Pu


User currently offlineeaa3 From United States of America, joined Sep 2007, 1015 posts, RR: 0
Reply 24, posted (2 years 5 days 2 hours ago) and read 2798 times:

Quoting Pyrex (Reply 22):
Or in the words of Robert Mugabe: "Print, baby, print"

You obviously don't understand how the monetary system and government financing works.

Quoting pu (Reply 23):

The correct rigures for comparing USA debt to other countries is the 'debt held by the public' figure, found here:
http://www.treasurydirect.gov/NP/BPDLogin?application=np

::: the US per capita debt is aout $USD 36000, or ~70% of GDP. (if you are making comparisons to others)

What you mean to say is that the United States has used Social Security funds and the FED has printed money for the rest. Just because it's owed through social security doesn't mean it isn't real debt.

[Edited 2012-09-11 20:06:25]

User currently offlinePyrex From Portugal, joined Aug 2005, 4022 posts, RR: 28
Reply 25, posted (2 years 5 days 2 hours ago) and read 2803 times:

Quoting eaa3 (Reply 24):

You obviously don't understand how the monetary system and government financing works.

So are you saying the ECB is not financing governments directly, i.e. monetizing debt?



Read this very carefully, I shall write this only once!
User currently offlineNAV20 From Australia, joined Nov 2003, 9909 posts, RR: 35
Reply 26, posted (2 years 5 days 2 hours ago) and read 2808 times:

Sorry for my lousy late-night typing/arithmetic, guys!  
Quoting OzGlobal (Reply 21):
As for not experiencing its own problems: UK GDP contraction is significant and equal to that of Spain (whilst France for example is flat with pre-crisis levels), debt as % of GDP is one of the highest in all Europe and they are mired in recession.

I'm not saying the the UK doesn't have its problems, OzGlobal - I'm just saying that, due to having retained its own currency, it is free to 'muddle through' in its usual way, and keep going. I say 'usual' because, ever since Britain bankrupted itself 'winning' WW2, there have been frequent 'sterling crises,' all of which have been 'solved' in the same way; devaluation of the pound, followed by deficit spending on infrastructure projects etc. to maintain employment and consumption, and hopefully result in reduced imports and increased exports - leading to a 'recovery' of sorts. Britain (and the other non-Euro countries) will always have that option open to them.

Quoting Pyrex (Reply 22):
"Austerity"? What austerity? You can't be spending on yourself all the money you take in plus another 6% of GDP for good measure and call it austerity. That is like saying I live in austerity because I only blow 120% of my salary. Austerity is what the Germans face - when you are paying for someone else to spend, that is austerity.

Misunderstanding, Pyrex - I don't think we're disagreeing. 'Austerity' - reduced spending by governments, including lower wages, pensions, benefits etc. - is exactly what the Eurozone is insisting on among the less prosperous Euro-users. This surely cannot fail to produce reduced investment and consumption etc., and therefore even higher unemployment (and a good deal of outright poverty); the direct reverse of what is needed to avoid an ever-deepening recession among the weaker EU countries?

Agree entirely with you, though, that any such policy would eventually hit Germany hard; since no other Eurozone country has the resources to finance the inevitable 'Phase Two' which will occur in a year or so - pumping in yet more money to save the Eurozone from a severe and deepening recession.

On a brighter note, regarding today's Constitutional Court decision, I found this article pretty convincing. Apparently the court faced a similar decision a year ago, when it was asked to approve the "European Financial Stability Facility." Basically they did in fact 'approve' it - but they stipulated that the final decisions on all payments should rest with the German parliament, not the Eurozone or the banks. Looks to me to be very likely that they will do the same thing with the proposed "European Stability Mechanism"?:-

"Without the ESM, countries such as Spain, which will need to be bailed out shortly, will not have access to the funding required, as the remaining funding available in the euro zone’s temporary bailout fund, the European Financial Stability Facility, is insufficient to meet likely demands.

"Most observers, myself included, believe that the Court will not prohibit the president from signing the bill authorizing the creation of the ESM. The Court may, however, impose certain conditions which, if restrictive, could well be viewed negatively by markets.

"A year ago, in response to case brought to the Court by Germans opposed to bailouts of a number of countries in the euro zone, the Court ruled positively on the creation of the EFSF, though it did impose conditions, which, in effect required the German parliament to become more involved in such matters.

"At the time, the Court stated that “it was a very close decision” and that it “should not be mistakenly interpreted as a constitutional blank check authorizing further rescue measures.”

"In essence, the Court has sought to retain the power of the German parliament over the European Union, to ensure that democratic control is retained by Germany, rather than transferring such powers to the EU."


http://www.marketwatch.com/story/eur...es-judgment-day-is-here-2012-09-11

[Edited 2012-09-11 20:49:45]


"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
User currently offlineeaa3 From United States of America, joined Sep 2007, 1015 posts, RR: 0
Reply 27, posted (2 years 5 days 1 hour ago) and read 2827 times:

Quoting Pyrex (Reply 27):
So are you saying the ECB is not financing governments directly, i.e. monetizing debt?

With this unlimited bond buying they are, although indirectly because they are only buying on the secondary market. My point is that the ability to do this is essential to the proper functioning of government bond markets. See reply number 2.

Quoting eaa3 (Reply 2):
2: The reason for the panic in the bond markets is that they are dysfunctional. They are not able to price the risk associated with eurozone government debt. But take a look at the amount of debt per person and as a percentage of GPD( which is off course the best way to compare debt):
Quoting eaa3 (Reply 2):


But in Europe this isn't the case. No one country can print money. This means that investors have to look at the balance sheets of the countries and try to evaluate whether the assets and liabilities match. They know what the liabilities are, they are just outstanding debt. But when you look at the assets they are not tangible. The assets are generally the ability to tax your economy and population. I believe that fundamentally the market is failing because it is not able to evaluate the assets of the countries and that's why you have panic in the markets where a country such as Spain, which is in a much better position than Germany with regards to debt, is considered bankrupt while Germany is considered safe. Then there's the fact that when the market refuses to refinance your debt, it's called a run, then the markets prophecy becomes a reality and you default not because you're actually bankrupt but because of a self fulfilling prophecy that panic in the market created and forces you to seek a bailout.

This is what they do in America, Britain, Japan and basically everywhere.

To the idea that monetizing debt= Mugabe I say (although this is not unique to the US):

Quoting pu (Reply 26):
monetizing debt, aka "printing money" has in no way hurt America since inflation remains mild. Demand for dollars outside of the USA puts it in a unique position to do this, you may as well take advantage od it.


[Edited 2012-09-11 20:56:25]

[Edited 2012-09-11 20:57:49]

User currently offlineNAV20 From Australia, joined Nov 2003, 9909 posts, RR: 35
Reply 28, posted (2 years 4 days 21 hours ago) and read 2794 times:

The Court appears to have approved Germany giving financial guarantees to the ESM - BUT only up to the current limit of E190B. If Frau Merkel and Co. want to guarantee more than that, it looks as if they'll have to go 'cap in hand' to the German Parliament.

"Andreas Vosskuhle, president of the court, stood up solemnly and put on his hat, to announce that the challenges had been rejected. Now he is sitting down again to read the full judgment, and spell out the court’s conditions. They will include an assurance that Germany’s financial guarantee for the ESM should be limited to the current Euro190bn that has been approved by the Bundestag."

I could be wrong, the judge is still talking - but that looks to me as if that kills the 'moneyfest' that the ECB has been dreaming of stone dead?

Minute-by-minute info. on the proceedings here, if people want to follow it in detail:-

http://blogs.ft.com/the-world/2012/09/eurozone-live-german-justice/



"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
User currently offlinesabenapilot From Belgium, joined Feb 2000, 2714 posts, RR: 46
Reply 29, posted (2 years 4 days 21 hours ago) and read 2792 times:

Watching live stream in German: The Court pretty much ruled identically as on the previous EFSF case: it approves the fund in full,, yet asks for an explicit mentioning of the need for further involvement of Parliament should there be a need for a future increase.

Very favourable copy-paste verdict really, just as expected, so an outright win for the German Government.

Far more interestingly, The Court also approved the Fiscal Compact, thowing out the claim this is to limit the power of Parliament to approve budget deficits AND turned down the complaint about ECB actions like bond buying, so in all a very bad day for the anti-government crowd in Germany: there's now a massive fund in place TOGETHER WITH the unlimited bond buying bazooka of the ECB.

The building bricks of a more integrated European Federation are slowly emerging indeed.

Merckel is to address Parliament soon...

[Edited 2012-09-12 02:28:30]

User currently offlineAsturias From Spain, joined Apr 2006, 2153 posts, RR: 16
Reply 30, posted (2 years 4 days 19 hours ago) and read 2760 times:

Quoting Pyrex (Reply 22):
And how much of that debt was taken on to give billion of Euros of "structural aid" and similar transfer payments to Spain over the decades? How are you accounting for all the airports, highways, high-speed rail, etc. the Germans built in Spain?

Seeing as those payments came from EU funds, you are implying that Germany is indebting itself to pay EU fees.

Quoting Pyrex (Reply 22):
Also, how are you accounting for the debt owed by the bankrupt, corrupt, government-controlled banks, the cajas?

Private debt, assumed in part or whole by the state to pacify the market, under pressure from big government socialists and ironically the ultra right-wing ostensibly supporters of the Austrian school.

The cajas that went bankrupt should have been allowed to die.



Tonight we fly
User currently offlinePyrex From Portugal, joined Aug 2005, 4022 posts, RR: 28
Reply 31, posted (2 years 4 days 18 hours ago) and read 2731 times:

Quoting Asturias (Reply 30):
Seeing as those payments came from EU funds, you are implying that Germany is indebting itself to pay EU fees.

Not specifically for that, but if they have been running budget deficits all this time, funded with new issue of debt, part of that debt is related to the structural aid, yes.

Quoting Asturias (Reply 30):
Private debt, assumed in part or whole by the state to pacify the market,

There was never anything private about the cajas. They are, and have always been, government vehicles controlled by corrupt local officials (a local, government-controlled, not-for-profit bank - something a OWS protester would love). Funny how when you read articles about the cajas on foreign newspapers they very rarely mention that fact, making it look like the private banking system is the one somehow at fault ("greedy capitalists").

Unless the retail investors who had Bankia preferred shares stuffed down their throats take actual losses on them then yes, at least part of the debt of the cajas is public debt.

Quoting Asturias (Reply 30):
The cajas that went bankrupt should have been allowed to die.

How else would local governments fund their re-election campaigns?



Read this very carefully, I shall write this only once!
User currently offlineAsturias From Spain, joined Apr 2006, 2153 posts, RR: 16
Reply 32, posted (2 years 4 days 16 hours ago) and read 2711 times:

Quoting Pyrex (Reply 31):
Not specifically for that, but if they have been running budget deficits all this time, funded with new issue of debt, part of that debt is related to the structural aid, yes.

Indeed, though that's a big if. There's no doubt Germany has been running up deficits, but I'm not entirely convinced that their EU membership dues are the cause of those deficits.

Quoting Pyrex (Reply 31):
There was never anything private about the cajas. They are, and have always been, government vehicles controlled by corrupt local officials (a local, government-controlled, not-for-profit bank - something a OWS protester would love). Funny how when you read articles about the cajas on foreign newspapers they very rarely mention that fact, making it look like the private banking system is the one somehow at fault ("greedy capitalists").

No argument there. The debts of the cajas is not public, however - until the state assumed some of their obligations under pressure.

Quoting Pyrex (Reply 31):
Unless the retail investors who had Bankia preferred shares stuffed down their throats take actual losses on them then yes, at least part of the debt of the cajas is public debt.

Bankia is a private bank, not a caja. It has received immense government bailouts, which of course indebt the state (public debt). If it had been allowed to collapse, no such government burden would exist due to Bankia or the cajas that it comprises.

Quoting Pyrex (Reply 31):
How else would local governments fund their re-election campaigns?

I guess they'd be in trouble, but I don't really lose sleep over it  



Tonight we fly
User currently offlineMD11Engineer From Germany, joined Oct 2003, 14026 posts, RR: 62
Reply 33, posted (2 years 4 days 16 hours ago) and read 2697 times:

Quoting NAV20 (Reply 28):
The Court appears to have approved Germany giving financial guarantees to the ESM - BUT only up to the current limit of E190B. If Frau Merkel and Co. want to guarantee more than that, it looks as if they'll have to go 'cap in hand' to the German Parliament.

"Andreas Vosskuhle, president of the court, stood up solemnly and put on his hat, to announce that the challenges had been rejected. Now he is sitting down again to read the full judgment, and spell out the court’s conditions. They will include an assurance that Germany’s financial guarantee for the ESM should be limited to the current Euro190bn that has been approved by the Bundestag."

I could be wrong, the judge is still talking - but that looks to me as if that kills the 'moneyfest' that the ECB has been dreaming of stone dead?

Minute-by-minute info. on the proceedings here, if people want to follow it in detail:-

http://blogs.ft.com/the-world/2012/0...tice/

The main reasoning was that the speculators forced the governments to react very fast without being able to consult the actual budget authority, the parliament. Now a parliamentary debate and vote takes time and markets are today computer controlled, with decisions made within seconds, but at least in Germany, the parliament is the authority, which gives or denies the government the budget and the court ruled that the parliament can´t be bypassed.

Quoting Pyrex (Reply 31):
They are, and have always been, government vehicles controlled by corrupt local officials (a local, government-controlled, not-for-profit bank - something a OWS protester would love).

Well, the German equivalents, the Sparkassen and Raiffeisen-Volksbanken went through the crisis very well. Unlike the big commercial banks they are by law prohibited to undertake high risk investment gambles with their customer´s money and were therefore not as much affected by the various bubbles. During the bubbles they were considered oldfashioned and not bringing in high yields, but the people who stuck with them, like me, are quite happy that they stayed conservative and boring.

Jan


User currently offlineAesma From France, joined Nov 2009, 6651 posts, RR: 11
Reply 34, posted (2 years 4 days 16 hours ago) and read 2685 times:

Quoting Pyrex (Reply 22):
"Austerity"? What austerity? You can't be spending on yourself all the money you take in plus another 6% of GDP for good measure and call it austerity. That is like saying I live in austerity because I only blow 120% of my salary. Austerity is what the Germans face - when you are paying for someone else to spend, that is austerity.

Austerity is not about how much you spend compared to your salary, but how that spending makes your life. If by spending 120% of your salary you can only live in a 10m² flat and eat pasta every day, that's austerity.

Quoting Pyrex (Reply 22):
Remember what happened last time Germany had hyper-inflation? That should be a concern for the whole of Europe, not just Germany.

But there is no risk of hyper-inflation at all. There is more risk of a deflation, and that also happened between the two world wars, in fact just before Hitler took power.

Quoting Pyrex (Reply 22):
Oh, wait, now it is Germany's fault for not convincing you to cut spending when you had time?

Germany had a vested interest in being the only country doing this while the rest of us kept buying their stuff.



New Technology is the name we give to stuff that doesn't work yet. Douglas Adams
User currently offlineMD11Engineer From Germany, joined Oct 2003, 14026 posts, RR: 62
Reply 35, posted (2 years 4 days 15 hours ago) and read 2664 times:

Quoting Aesma (Reply 34):
Germany had a vested interest in being the only country doing this while the rest of us kept buying their stuff.

Nobody would have stopped you from setting up your own manufacturing industry.

Jan


User currently offlineNAV20 From Australia, joined Nov 2003, 9909 posts, RR: 35
Reply 36, posted (2 years 4 days 14 hours ago) and read 2658 times:

Quoting Aesma (Reply 34):
But there is no risk of hyper-inflation at all. There is more risk of a deflation, and that also happened between the two world wars, in fact just before Hitler took power.

I have (cordially) to come to Germany's defence once again. Uncles/cousins of mine who helped conquer and occupy Germany told me that until about mid-1946, the place had virtually no 'working currency.' Except cigarettes, oddly enough - they could often buy a round of beers just by handing over a packet of Players bought (at cheap Army prices) in the NAAFI........

I had similar experiences touring the place early in the '60s - that was the age of 'Zimmer Frei' ('room available'). A high proportion of the houses in the villages we passed through had a sign saying that, and we could usually get a comfortable night's lodging, plus a truly warm welcome, and even breakfast, for about 'ten bob' (half a pound, 50 pence nowadays) a head.

I really don't blame the Germans at all for being 'careful about money,' with that sort of thing in their history.

I did a bit of research on the forthcoming 'European Stability Mechanism.' First of all, it applies to the Eurozone only. Secondly, as previously recorded (and accepted by the Constitutional Court), Germany is committed to providing E190Bn. of its total budget, over five years. But one aspect that I find very interesting is that the full (E700Bn.) estimated five-year budget of the ESB includes the following contributions from other countries:-

Italy - E125Bn.
Spain - E83Bn.
Greece - E20Bn.
Portugal - E18Bn.
Republic of Ireland - E11Bn.

http://en.wikipedia.org/wiki/European_Stability_Mechanism

So, on the face of it, the much-heralded 'European Stability Mechanism' is going to be 'still-born' - because quite a large proportion of the proposed 'contributors' are flat broke. And presumably won't be able to pay a cent unless - dare I say it? - the long-suffering Germans, plus maybe the Dutch and the French, lend them the money.....?

Really begins to look as if whoever is running the Eurozone - to re-awaken a phrase that was much used in my own business days - 'Couldn't organise a piss-up in a brewery.'

[Edited 2012-09-12 09:09:33]


"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
User currently offlinepu From Sweden, joined Dec 2011, 697 posts, RR: 13
Reply 37, posted (2 years 4 days 11 hours ago) and read 2615 times:

Quoting Aesma (Reply 34):
But there is no risk of hyper-inflation at all. There is more risk of a deflation, and that also happened between the two world wars, in fact just before Hitler took power

Exactly!

The morbid fear of inflation ingrained into Geman thinking is understandable given its role in the downfall of the "Weimer Repbulic" and rise of fascism. However, deflation is now set to happen which will be just as bad, if not worse.

Germany on the current path will create a two-tier EU, made up of debtor and creditor nations, which will eventually become intolerable politically to the debtor states (as they are governed from Berlin) and cause the breakup of the EU. Austerity saw Germany through recent troubles, but austerity imposed on Greece, Spain etc.., is just going to force contraction, which will make their debt burden worse, impair the whole continent/world economically, cause deflation and a good old fashioned 20th century style disaster in Europe.

The only non-catastrophic way out of this is Germany bankrolls the debtor nations, allows inflation to rise to 3 or 4 % and finances the troubled states so they can spend their way to growth, American style.

Pu


George Soros arguing that Germany's perpetual policy of doing 'just enough' to keep the euro from collapsing in the short term is building eventual disaster
http://www.spiegel.de/international/...y-must-lead-or-leave-a-855270.html


User currently offlinesabenapilot From Belgium, joined Feb 2000, 2714 posts, RR: 46
Reply 38, posted (2 years 4 days 7 hours ago) and read 2574 times:

Meanwhile in the Netherlands, the populist anti-EU freedom PVV party lost badly in the elections and saw its seat count in Parliament slashed all while pro-europe parties soared. The PVV opposed the eurozone bailout mechanisms and wanted to pull out of the EU. ROTFL.

Now that the day has come to an end, we can conclude that the much anticipated 12th of September brought nothing but positive news for the European integration which is clearly moving slowly but steadily in the right direction of ever more closer integration.

Just what was all the fuss about in the Anglosaxon press in the run-up to today?  Wink

[Edited 2012-09-12 15:17:24]

User currently offlineDano1977 From British Indian Ocean Territory, joined Jun 2008, 499 posts, RR: 0
Reply 39, posted (2 years 4 days 6 hours ago) and read 2546 times:

Quoting NAV20 (Reply 36):

So those countries which are flat broke, are going to pony up that money?

That doesn't make sense?

Just like Nigel Farage said a few months ago. When Spain needed assistance...

Italy borrowed money on the international markets at 11% interest, but then lent it to Spain for 3% interest, as part of the bailout/bank refinancing.

If the euro is still around at this point in 2013, I'll burn £20 in £5 notes for fun



Children should only be allowed on aircraft if 1. Muzzled and heavily sedated 2. Go as freight
User currently offlinePyrex From Portugal, joined Aug 2005, 4022 posts, RR: 28
Reply 40, posted (2 years 4 days ago) and read 2534 times:

Quoting MD11Engineer (Reply 33):
Well, the German equivalents, the Sparkassen and Raiffeisen-Volksbanken went through the crisis very well. Unlike the big commercial banks they are by law prohibited to undertake high risk investment gambles with their customer´s money and were therefore not as much affected by the various bubbles. During the bubbles they were considered oldfashioned and not bringing in high yields, but the people who stuck with them, like me, are quite happy that they stayed conservative and boring.

Actually, the closest German equivalents are not the Sparkassen and the Raiffeisen-Volksbanken, they are the Landesbanken, who are more directly controlled/influenced by regional governments and are in essence the wholesale arms of the ones you mentioned. And the Landesbanken did a piss-poor job of it - many went bust, some were bailed out by the States and their Sparkassen shareholders and some were wound down. Not quite as bad as the cajas, but still worse than pretty much all other banking sub-systems in Europe (with the possible exception of the also German Hypos).

Part of the reason for the abysmal failure of the Landesbanken lies in some of the same structural issues of the cajas (corrupt local government official influence, no need to make a profit and subsidized cost of funding due to implicit/explicit government guarantees leading to poor pricing of risk, etc.) but weirdly enough in Germany the issue is more cultural. Germany is an interesting case where there is one very good German bank (who, of German, has very little other than the name and a few buildings in downtown Frankfurt) and a very large set of horribly mismanaged banks. Part of the reason is that there is that for some reason there is this huge stigma against finance in Germany, as if it is something dirty and "Anglo-Saxon". That is why, while in the rest of the world banks at least try to hire reasonably intelligent people, bankers at most German banks end up being of the "village idiot" variety, guys who couldn't get a "dignified" job doing anything else in their towns so get sent by their neighbors to London or New York with a bag of cash and told to invest their excess savings in anything that produces a yield. That is why behind every Spanish covered (mortgage-backed) bond, every piece of Greek sovereign debt, every U.S. sub-prime CDO^2, every shadow-banking system instrument there is a German bank waiting to lose money.



Read this very carefully, I shall write this only once!
User currently offlineAsturias From Spain, joined Apr 2006, 2153 posts, RR: 16
Reply 41, posted (2 years 3 days 6 hours ago) and read 2454 times:

Quoting Dano1977 (Reply 39):
Just like Nigel Farage said

The second dumbest man in the UK?

Wow.



Tonight we fly
User currently offlineDano1977 From British Indian Ocean Territory, joined Jun 2008, 499 posts, RR: 0
Reply 42, posted (2 years 2 days 6 hours ago) and read 2352 times:

Quoting Asturias (Reply 41):

Not that high... But still within the top 25



Children should only be allowed on aircraft if 1. Muzzled and heavily sedated 2. Go as freight
User currently offlineNAV20 From Australia, joined Nov 2003, 9909 posts, RR: 35
Reply 43, posted (2 years 2 days ago) and read 2331 times:

Quoting Pyrex (Reply 40):
That is why behind every Spanish covered (mortgage-backed) bond, every piece of Greek sovereign debt, every U.S. sub-prime CDO^2, every shadow-banking system instrument there is a German bank waiting to lose money.

Very good observation, Pyrex.

In that context, this article strongly suggests that, beneath all the blustering, the 'Eurozone' (which in this case very largely just means Germany) will soon decide to (or rather be forced to) 'turn off the money tap':-

"A diplomat attending the Nicosia talks told AFP that the message ministers were sending out was that there would be no third package of loans to Greece.

"Obviously more time means some more cost along the way, but when ministers say no more money, they mean no third aid programme," he said.

"Turning to Spain, Lagarde rejected any idea that the IMF was already involved in "deep negotiations" with the ECB on a full sovereign bailout.

"I can assure you we are not," she told the press conference."


http://au.news.yahoo.com/thewest/bus...e-greece-time-but-not-extra-money/

Difficult to see how, if the much-heralded 'ESM' turns out to be a 'dead duck,' the Eurozone can survive for long in its present form.

PS Item on our radio news, just this minute; apparently the Eurozone is actively considering demanding that all sectors of the Greek economy institute a six-day week. A lot of good THAT will do, it'll just push Greek unemployment even higher.......

[Edited 2012-09-14 22:39:50]


"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
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