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zhiao
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Financial Crisis Now Shifts To Italy

Tue Nov 08, 2011 2:59 am

What a surprise--the parasites have moved on to another country.

Bond yields about to hit an incredible 10%!

This may make Greece look like nothing.

http://www.reuters.com/article/2011/.../us-eurozone-idUSTRE7A63QJ20111108
 
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DeltaMD90
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RE: Financial Crisis Now Shifts To Italy

Tue Nov 08, 2011 3:11 am

Ok, I admit I am a little uneducated on the crisis in Europe, in a sentence or two, can someone explain the problem and Greece / Italy? Thanks!

How has the Euro remained so high through all these rough waters? I mean it has fallen a bit but is pretty high up there for a "crisis"
 
lewis
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RE: Financial Crisis Now Shifts To Italy

Tue Nov 08, 2011 3:37 am

Quoting DeltaMD90 (Reply 1):
Ok, I admit I am a little uneducated on the crisis in Europe, in a sentence or two, can someone explain the problem and Greece / Italy? Thanks!

The problems with Greece, Italy, Spain, Portugal and Ireland have different roots but the same result (each country on a different level), deficits above what would be considered OK and debts mounting while growth remains low - or negative. All these countries are using the Euro and the monetary policies are dictated by the ECB and not the governments and ECB's policies may not be ideal for the needs of each economy. While their problems were "manageable" before, the governments have no monetary control to deal with them.
 
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DeltaMD90
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RE: Financial Crisis Now Shifts To Italy

Tue Nov 08, 2011 3:52 am

Quoting lewis (Reply 2):

Gotcha. So basically the US without the ability to control the dollar? Ugh
 
lewis
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RE: Financial Crisis Now Shifts To Italy

Tue Nov 08, 2011 3:53 am

Quoting DeltaMD90 (Reply 3):
Gotcha. So basically the US without the ability to control the dollar? Ugh

Exactly!
 
zhiao
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RE: Financial Crisis Now Shifts To Italy

Tue Nov 08, 2011 5:37 am

Quoting DeltaMD90 (Reply 1):
How has the Euro remained so high through all these rough waters? I mean it has fallen a bit but is pretty high up there for a "crisis"

Mainly because of interest rates, and the ECB usually being much conservative about lowering interest rates. If this dynamic changes, plus Italy, the Euro should fall to 1.20 at the very least.
 
zhiao
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RE: Financial Crisis Now Shifts To Italy

Tue Nov 08, 2011 5:44 am

and here's what Berlusconi is doing:

http://www.youtube.com/watch?v=4XSBr7nPlWE

LOL.

I kind of like the guy for being so out there.
 
janmnastami
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RE: Financial Crisis Now Shifts To Italy

Tue Nov 08, 2011 10:33 am

Quoting zhiao (Thread starter):
Bond yields about to hit an incredible 10%!

Italian bond yields are about 6.60%, far from 10%.

Quoting DeltaMD90 (Reply 1):
Ok, I admit I am a little uneducated on the crisis in Europe, in a sentence or two, can someone explain the problem and Greece / Italy? Thanks!

With regard to Italy, the main problem is the high public debt (the public debt is the 120% of the GDP) and the low growth.
 
slz396
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RE: Financial Crisis Now Shifts To Italy

Tue Nov 08, 2011 4:02 pm

Quoting DeltaMD90 (Reply 1):
in a sentence or two, can someone explain the problem and Greece / Italy? Thanks!

In a sentence or 2:
it's a combination of high public debt as well as a budget deficit in a low growth environment...
Mind you however, sovereign debt levels in Europe are on average lower than then are in the US, while the budget deficits are too, so there must be something else happening too, but what?

Well, the main issue in the fact this debt crisis is lingering on for so long is to be found in the ECB's refusal to step in and do what any other central bank would normally do in this case: i.e. to be the buyer of last resort of government bonds and thus fund the working of the state with newly printed money, even though this means all those having money loose some of the value of their money in this process, mostly unnoticed to them.

As I've said before: the deficit and debt numbers in the US are looking less good than those in most European countries, yet there's no dollar crisis for the simple reason dollars are printed to cover any public deficit as we speak..

In Europe however, creating more money is completely out of the question (hence the euro being so strong against the dollar, because contrary to the US, we're not printing more money here) because Germany is opposed to the idea as it causes inflation (the loss of value of the money you may have, as I've talked about) and they are completely obsessed with having the lowest possible inflation numbers (because of WWI, you know, even though in this case their fear is completely irrational as we are in the middle of a recession), but for as long as the ECB can not play its role as a lender of last resort, governments will have to borrow money elsewhere and thus be at the grace of the markets, which prefer to invest their money in the best countries only, to the detriment of those who have less optimal statistics, thus making the interest rates on those country's bonds go up, causing fear of default, which in turn begs higher interest rates, which in turn increases the risk of default, which in turn... well, you got it, don't you?

That's why the ONLY solution is to make the Germans give in on the issue of the ECB becoming the lender of last resort, because this is a game without end really: after Italy, it will be Spain, then Cyprus, then Belgium, then France etc... till in the end nobody will be able to fund itself, but maybe Germany, which is definitely not in their interest too...

At least, the good thing here is that the Italian economy is so big, it can not be bailed out with the same methods smaller countries like Portugal, Ireland or Greece have been bailed out with, so Germany may soon have no other option but to give in and let the ECB do what any other central bank does: lend money not only to banks, but also to the government!

This combined with a more serious approach to budgettairy discipline in southern European countries is the only way out really!

[Edited 2011-11-08 08:05:39]
 
zhiao
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RE: Financial Crisis Now Shifts To Italy

Tue Nov 08, 2011 4:36 pm

Sorry for the mistake---I meant close to 7%
 
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DeltaMD90
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RE: Financial Crisis Now Shifts To Italy

Tue Nov 08, 2011 10:22 pm

Quoting slz396 (Reply 8):

Ah ok. Thanks for catching me up to speed. And leaving the Euro is out of the question for most/all countries because the benefits outweigh even these negatives? I can see why Germany is mad though
 
prebennorholm
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RE: Financial Crisis Now Shifts To Italy

Wed Nov 09, 2011 2:03 am

Quoting slz396 (Reply 8):
In Europe however, creating more money is completely out of the question

Not so. Letting the ECB create more money is exactly the plan for restructuring Greece. Partly to lend more money to Greece, partly to "save" some creditors (banks etc.) which are forced to write off parts of Greek debt.

But it comes with conditions. Conditions which haven't all been met at this moment.

The conditions are basically that Greece accepts the plan and starts acting in accordance with it.

Borrowing money (a state, a company, a person) is losing absolute control over own situation. You remain in control as long as the lenders believe that they get their money back.
 
lewis
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RE: Financial Crisis Now Shifts To Italy

Wed Nov 09, 2011 3:16 am

Quoting prebennorholm (Reply 11):
Not so. Letting the ECB create more money is exactly the plan for restructuring Greece.

I thought that money was coming from the pockets of the European tax payers and not from the printing machines... at least that is what they keep telling us.

Quoting prebennorholm (Reply 11):
the plan

There is no plan, just a set of targets that have to be met. I hope that the actual new plan is more effective than the previous plan that was implemented.
 
slz396
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RE: Financial Crisis Now Shifts To Italy

Wed Nov 09, 2011 10:38 am

Quoting DeltaMD90 (Reply 10):
And leaving the Euro is out of the question for most/all countries because the benefits outweigh even these negatives?

Leaving the euro is no solution at all, since all the debt will remain in euro even after those countries have left the eurozone: Greece may re-introduce (and devaluate) the old currency allright, but it isn't going to shrink their debt.
In fact, it is even going to inflate it to the point where they will have to default on it for sure!
Seriously, allt he talk about leaving the eurozone is just to be found in British (and thus also US) media: it's just not an option, not only for the reason it is not possible under the treaty, but also because it is economically impossible, unless you want to ruine the entire eurozone, something which is not the aim here, of course.

Quoting prebennorholm (Reply 11):
Letting the ECB create more money is exactly the plan for restructuring Greece.

No it isn't, the ECB isn't doing anything, hence the EFSF being created, which is taking over the task of being the lender of last resort from the ECB, but not with newly created money as a national bank would normally do, but with 'real' and 'existing' money given to it from the other eurozone countries!

Quoting lewis (Reply 12):
I thought that money was coming from the pockets of the European tax payers and not from the printing machines... at least that is what they keep telling us.

Indeed and the reason for that is that Germany rather forks out a couple of hundred billion euro and give it to the EFSF, rather than let the ECB print a few hundred billion euro of newly created money, all out of fear that giving up the principle that euros can not be created out of nothing could possibly mean countries like Italy or Greece would immediately let go of all budgettairy discipline and count on a constant printing of more money to pay all their bills in future, something which then indeed would not be a good idea in the long run either!

But the way out must be a combination of the 2 methods: strict rules need to be imposed to avoid the same mess to reoccur on those less strict countries, but at the same time the ECB must be allowed to print more money too help control and solve their problems from the past...
the current method with the EFSF is just not good enough really as it has a limited volume, whereas the ECB has unlimited resources: just push the print button.
 
MD11Engineer
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RE: Financial Crisis Now Shifts To Italy

Wed Nov 09, 2011 11:20 am

Quoting zhiao (Reply 5):
Quoting DeltaMD90 (Reply 1):
How has the Euro remained so high through all these rough waters? I mean it has fallen a bit but is pretty high up there for a "crisis"

Mainly because of interest rates, and the ECB usually being much conservative about lowering interest rates. If this dynamic changes, plus Italy, the Euro should fall to 1.20 at the very least.

Historically during the early 20th century Germany has three times been thrown into political chaos through hyperinflation (first when the post-WW1 German government was forced to use the printing press to pay for the reparations demanded mainly by France or face occupation of the german industrial heartlands or a renewed war in the early 1920s, then during the world economic crisis of the late 1920s, early 1930s, which brought Hitler to power, and then during the years beween the end of WW2 and the introduction of the Deutschmark). In all cases a large part of the population, those who didn´t own big pieces of real estate or factories, lost everything and therefore turned to radical politicians. When the Deutschmark was introduced, a key element was the introduction of the independent Bundesbank (German federal bank), which´s only job was to keep the currency stable and which was completely independent of political influences.
When the Euro was introduced, this system was teken over as ECB on Germany´s insistence.
This means that politicians can´t manipulate the currency for short term gains. Just printing money to get out of debt is impossible.

Jan
 
slz396
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RE: Financial Crisis Now Shifts To Italy

Wed Nov 09, 2011 12:40 pm

Quoting MD11Engineer (Reply 14):
When the Euro was introduced, this system was teken over as ECB on Germany´s insistence.This means that politicians can´t manipulate the currency for short term gains. Just printing money to get out of debt is impossible.

It can be made possible and it will have to be, as it's the only way to save the euro: everybody knows it, but the German politicians don't want to see the light on this... the fact this crisis has been lingering on for so long, is entirely due to them really and the longer it takes to make a U-turn, the more widespread this crisis will get and the more dangerous it will be, not only for those countries in turmoil right now, but also for Germany...

Letting the ECB do what EVERY OTHER NATIONAL BANK in the word does, is not going to be the end of the world, you know: in the end there needs to be somebody who's a credible lender of last resort for government bonds in a financial crisis, otherwise nobody is willing to lend money anylonger (other than at unsustainable high rates), yet the EFSF is not able to be that credible lender of last resort given its limited volume of 'just' 1BN euro. In fact it doesn't really matter whether the EFSF has 200BN, 440Bn or 1TN or more, the fact there's a limit set to its commitment and guarantees make that investors start to calculate and say: "Hey, if we combine this eurocountry with this country and that one too and then that one, the EFSF is not big enough, so there's still a risk of not getting our money back!"
This is exactly what we see happening, hence the domino effect... first Greece, then Portugal, Ireland, and now Italy, with others in the waiting room, till even Germany will be called in, you know?

The European Central Bank is the only institution in the whole world which has UNLIMITED firing power as it can print as much euros as are needed to pay back everybody (at least nominally).
If the ECB were to just say they will do what other banks like the BoE or the FED do for their currency, you'd quickly see interest rates on the bondmarket drop, allowing European governments the needed time to reform and ironically this would be costing far less to the EU than what the EFSF mechanism is costing us right now!
If the ECB does nothing however, and remains obsessed with fighting inflation alone (while it is going to take a dip in the coming months, given stagnation has set in, also in Germany), then this financial crisis will rage on and we will see the EFSF having to be increased once more, after which the markets will simply look at other countries like Spain, Cyprus, Belgium and ultimately even others like France, just to weigh off the risks and see if there are scenarios which could outbid it, scenarios which then start to live their self-fullfilling life....

It's incredible to see how otherwise completely rational people like German politicians just don't want to grasp that they are absolutely wrong on this: right now, there's no other way to save the Euro but to allow the ECB to print money if needed; all other methods are nothing but a smoke screen aimed at buying more time and hope reforms can kick in.
I agree it is theoretically much better if your central bank doesn't need to act as a lender of last resort and as Germany has proven, it can be done provided you have your act together, but it takes time to get that act together and right now with so many eurocountries not having their act together, not willing to let the ECB be the last firewall, is simply insane as the EFSF is not able to buy them the time (as clearly demonstrated here).

This is no longer about being right in theory, it's about doing the right thing in practice!
And the right thing to do right now is to make sure the eurozone gets out of trouble, hence the ECB must be turned into a lender of last resort: that will calm the markets, and give countries time to reform.
Saying they should have done their reforms years ago (correct) is not helping them (and yourself) out of trouble in any way, quite on the contrary even, it's even augmenting them.

The way forward is quite simple as only a 2 way solution is going to solve this problem:
1/The ECB must finally be turned into the lender of last resort and step in with newly created money where needed so as to calm the markets and buy time,
2/at the same time deep reforms need to be implemented in those countries where the ECB needs to step in, so that in future it needn't be stepping in any longer.
Doing only 1 of the 2 is not going to solve the problem: so far we've only done the second thing (and that's not helping as reforms need time and calm to bear fruits) and doing only the first isn't going to solve it either obviously as Germany rightfully insists: yet the 2 things combined however are a perfect method.

BTW, it is said that if the ECB were to annouce it was going to act as lender of last resort, it wouldn't have to do so for Italy for instance (at least not now, let it drag on for a few weeks and it will), so the amount of money printed would be fairly limited... inflation would rise by not even half a percentage point on a European level, which given the low inflation expected isn't going to be the end of the world you know, while at the same time it would weaken the euro to around 1.25 to 1.30 against the dollar, thus giving some extra fresh air to our economy as it may stimulate our export and guess who's the biggest exporter in the EU? Indeed: Germany!

[Edited 2011-11-09 04:54:59]
 
MD11Engineer
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RE: Financial Crisis Now Shifts To Italy

Wed Nov 09, 2011 1:37 pm

Quoting slz396 (Reply 15):
It can be made possible and it will have to be, as it's the only way to save the euro: everybody knows it, but the German politicians don't want to see the light on this... the fact this crisis has been lingering on for so long, is entirely due to them really and the longer it takes to make a U-turn, the more widespread this crisis will get and the more dangerous it will be, not only for those countries in turmoil right now, but also for Germany...

Remember what the Drachma and Lira were before the introduction of the Euro? Mickey Mouse money.
Simply because the politicians in these countries used the banknote printing press whenever they had to buy votes and favours to stay in power. Tax enforcement was hugely unpopular (and acc. to an Italian journalist, who wrote an article in the ultra serious German Zeit weekly, tax enforcers are still being held back for political reasons in Italy) and at the same time wellpaying jobs had to be provided to keep the masses happy, so that they wouldn´t question the corruption of the political class. Just look at Alitalia just before their umpteenth "bankruptcy". The airline was bloated with unnecessary staff, because it was used to park either incompetent politicians or to get wellpaid jobs to relatives, friends etcv.

Jan
 
MadameConcorde
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RE: Financial Crisis Now Shifts To Italy

Wed Nov 09, 2011 1:40 pm

What have the damned banksters and politicians done to our countries?? We have been ruled by a bunch of irresponsibles and liars. How many years will it take and what is the price we will have to pay?

The Rothschilds, Rockefellers, Goldman Sachs, JPMorganChases don't care... they have their pockets full... they're at no risk... we've been fooled by all these crooks!!!

 Wow!

And Now: France
9 November 2011, by Tyler Durden (Zero Hedge)
http://www.zerohedge.com/news/and-now-france

Excerpt:

French Bund spreads have just crossed 147 bps as the "cash bond long yet unable to hedge with CDS" crowd realizes that the Italian contagion is about to hit Paris.

 
 
baroque
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RE: Financial Crisis Now Shifts To Italy

Wed Nov 09, 2011 1:49 pm

Quoting MD11Engineer (Reply 16):
Remember what the Drachma and Lira were before the introduction of the Euro? Mickey Mouse money.

We do and for another star, have a look at the Indonesian Rupiah.

But I think part of what Slz was saying is that if the ECB said that printing money was part of its remit, then it would not have to do it.

There is another worry though, and that is how high can Germany afford the Euro to rise. It is fairly obvious that the US is trying to debase its own currency as part of a debt reduction strategy. Can the Eurozone, or Germany, whichever, allow this to go on indefinitely. Germany would be in a real pickle by now were it not for basket cases like Greece and now Italy. Without them along for the ride, the Euro would likely be where, about USD 1.60 by now. My guess would be, 1.63. That comes from the long plateau for the Euro at 0.63 to the Aus $. The Aus $ is now 1.04 to the USD, so that makes about 1.63 absent Greece and co.

What would Daimler Benz and EADS have to say about 1.63????

Life post the GFC is not at all pretty.

[Edited 2011-11-09 06:39:32]
 
MD11Engineer
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RE: Financial Crisis Now Shifts To Italy

Wed Nov 09, 2011 1:50 pm

Quoting MadameConcorde (Reply 17):
The Rothschilds, Rockefellers, Goldman Sachs, JPMorganChases don't care... they have their pockets full... they're at no risk... we've been fooled by all these crooks!!!

What about the Berlusconis, Andreottis, Papandreou Seniors etc.?

Jan
 
baroque
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RE: Financial Crisis Now Shifts To Italy

Wed Nov 09, 2011 1:59 pm

Quoting MD11Engineer (Reply 19):
What about the Berlusconis, Andreottis, Papandreou Seniors etc

It might be the crooks that were elected as opposed to the ones that appointed themselves might it not?
 
Derico
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RE: Financial Crisis Now Shifts To Italy

Wed Nov 09, 2011 2:11 pm

The problem is that governments have too much debt, and that markets are irrational and subject to massive speculation, as they have been for the last 10-15 years really. It used to be that markets where there to balance risk, pool resources and provide capital for expansion and venture, but since about 1992-1995 markets have become more of a game of placing bets, and not investing in sound companies.

Quoting MadameConcorde (Reply 17):
French Bund spreads have just crossed 147 bps as the "cash bond long yet unable to hedge with CDS" crowd realizes that the Italian contagion is about to hit Paris.

So what after France, go after Germany too? I mean at this point it's speculators gone wild.

I mentioned in another thread that bankers have shown themselves to be completely irresponsible with risk. Aided by governments, companies and individuals too eager to take such risks, but ultimately it was the banks with the yes/no power and they chose to lend, lend, lend.

I have always thought (even before 2007), that banks should be broken up when they reach X% of market share in a common market (regional, country, economic trade block). That prevents ''too big to fail" scenarios and also decentralizes risk. If it means more boring banks, GOOD. I totally disagree with free market folks on this one. Banking should be the one industry that should be tightly regulated, not just by government (which can be bought), but with competing authorities that can make money by keeping the banks honest. If banks are small enough, this can be left to the free market.

What we are seeing now is actually that but perversed by hedge funds, and the banks are so big and the debts so large they threaten everything. Which is why the industry needs to be kept at bay, because it's the only economic branch that can affect all the others. Brake up banks, insure deposits worldwide, bring hedge funds to the light, and beyond that let the free market work and allow things to fail.
 
slz396
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RE: Financial Crisis Now Shifts To Italy

Wed Nov 09, 2011 2:35 pm

Quoting MD11Engineer (Reply 16):
Remember what the Drachma and Lira were before the introduction of the Euro? Mickey Mouse money, simply because the politicians in these countries used the banknote printing press whenever they had to buy votes and favours to stay in power. Tax enforcement was hugely unpopular

I know that and I fully agree with you in theory, yet things are what they are now and merely repeating over and over again how things should have been done from the start in order to prevent us from ever being where we have sadly ended up now in the eurozone nevertheless, isnn't going to change today's reality, is it?

The bottom line is nobody, not even Germany, cared much about the very strict convergence criteria set out in the Maastricht treaty once the single currency was successfully introduced and ironically it was even Germany which first broke the rules on fiscal austerity and budgettairy discipline...

Besides, let's be pragmatic here for a second: it seems to me like politics are changing for the better in many of the infected eurocountries recently, even though this goes with much drama and it takes some/too much time still.
In this context, one needn't be too strict and stand by irrational dogma's like Germany is doing right now, as one must give time for these changes to come into effect.

Let's face it, we're all in the euro and in the end the ultimate question will come to the table sooner than you may think: Are we going to safe the euro together the conventional way, or are we all going to go bust together (including Germany, believe it or not), by sticking to our own national dogma's even though they are not even in our own interest any longer?
If you're not ready to answer that question the obvious way, then you shouldn't have joined the euro in the first place...

Quoting Baroque (Reply 18):
But I think part of what Slz was saying is that if the ECB said that printing money was part of its remit, then it would not have to do it.

If we let the Italian problems linger on for a couple of weeks, the mess will have spread from Italy to Spain and even France, after which in 6 months time, Germany itself will start to be infected (through France), believe it or not!
it's really time to act NOW for the ECB... And they can, there's nothing more powerful on the markets than the ECB, it's merely a matter of letting them do what needs to be done to preserve our wellbeing!

Quoting Baroque (Reply 18):
There is another worry though, and that is how high can Germany afford the Euro to rise. It is fairly obvious that the US is trying to debase its own currency as part of a debt reduction strategy. Can the Eurozone, or Germany, whichever, allow this to go on indefinitely. Germany would be in a real pickle by now were it not for basket cases like Greece and now Italy. Without them along for the ride, the Euro would likely be where, about USD 1.60 by now.
What would Daimler Benz and EADS have to say about 1.63????

That's the irony of it all: letting go of the dogma the ECB can not act as lender of last resort would actually be beneficial to the whole of Europe (including Germany), not only as it would help ease the debt crisis in the short term, but also because it would help stimulate our economy, which would help solve the debt crisis in the long term too, by increasing growth! And given Germany is by far the biggest exporting country of the eurozone, they can expect the most industrial benefits from such a move!

Seriously, there is no rational reason not the let the ECB do what ANY OTHER NATIONAL BANK would do under the given circumstances.... the dogmatic stance of the Germans is going to bring the whole eurozone into a decade long recession, just because they absolutely want to preserve the full value of their currency no matter what: it's becoming insane, to say the least, in the light of the events as well as the current exchange rate of the euro indeed.

[Edited 2011-11-09 06:37:57]
 
wolbo
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RE: Financial Crisis Now Shifts To Italy

Wed Nov 09, 2011 3:20 pm

This weekend I'm going to try and catch a cow. With the economy going down the drain it's high time I brush up on my hunter-gatherer skills.

Also working on my job interviews: http://youtu.be/b56eAUCTLok
 
MD11Engineer
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RE: Financial Crisis Now Shifts To Italy

Wed Nov 09, 2011 3:38 pm

Quoting slz396 (Reply 22):
The bottom line is nobody, not even Germany, cared much about the very strict convergence criteria set out in the Maastricht treaty once the single currency was successfully introduced and ironically it was even Germany which first broke the rules on fiscal austerity and budgettairy discipline...

By a few percentage points behind the comma due to the burden of re-unification, and, while it was technically a breach of the agreement, it was at a level, which Germany´s economy could easily compensate for. And it was followed by solid austerity measures, which got the German economy from being "the sick man of Europe", back on it´s legs.
The problem with countries like Greece was that they could not compensate their budget deficits with state income and let their deficit run into more than 100% of the GNP.

Jan
 
slz396
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RE: Financial Crisis Now Shifts To Italy

Wed Nov 09, 2011 3:58 pm

Yes indeed, and Germany (and others) stood by and allowed it to happen...

Look I am not trying to blame anybody here really, just trying to make it clear that whatever happened now belongs to the past and we need to have a forward looking solution in place soon, rather than play a dogmatic blame game and waste time.

The point remains: we're in this mess together now, like it or not (I certainly don't, and you neither I am sure), and we can only move out of it in the way I've explained: i.e. draconic reforms in those countries that need it and an ECB that act as a lender of last resort in the mean time to allow those countries ample time to put these much needed reforms in place...

If you're not going to have the ECB buy the time needed here, then there's no way you're going to have enough time to put reforms in place, regardless any will to do so, which I think is finally genuinely present now.

It is in the interest of all involved, including Germany, for these reforms to succeed, because otherwise, we all go down together: I hope you realize no eurozone country is going to be spared if the zone crumbles. The idea you can somehow wallk away from this unscratched is unreal. Even the UK has understood that should the eurozone collapse, even they are going to be hit by it (and they don't even have the euro) and so Cameron is now almost begging to be move involved, so why on earth German politicians thjink they can still preach nice dogma's that don't solve the current problem is beyond me: it's your currency too, you know??? Isn't it ironic others like the UK or China are more preoccupied with its stability than Germany?!

If Italy ends up in a situation like Greece, France will follow due to their strong involvement in the Italian industry, after which they'll come and knock at the door in Berlin too... Remember that even many first class passengers on the Titanic drowned.

Time to get off the high horse and just let the ECB step in: better to lose some buying power gradually, than lose a decade of growth and risk a global recession which will cost us all much more than any potential loss of buying power we possibly face, I should think? It's time to be pragmatic, me thinks!
 
MadameConcorde
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RE: Financial Crisis Now Shifts To Italy

Wed Nov 09, 2011 4:44 pm

Quoting slz396 (Reply 25):
draconic reforms in those countries that need it

Nobody will buy austerity. No one wants to hear about more austerity. No one wants to hear about more taxes.

Sarkozy will get off the presidential chair in the next French presidential elections only because the people are naive enough to believe that the Socialists are going to give them a better life, create more social benefits, give away everything free, less working hours, lowering retirement age... and the good life for everybody.

People want more for less, it is well known. If the newly elected don't keep their (false) promises, then protests will come, along with street violence and strikes. They will just accuse the leaders of taking it all for themselves and giving more to the rich while forcing austerity on the poor - and supposed "middle-class".

Not talking about food prices that are taking crazy hykes - basic foods, not luxury stuff.
The times to come will certainly not be easy. Stacking up on basic foods that have a long shelf life is not a bad idea.
 
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RayChuang
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RE: Financial Crisis Now Shifts To Italy

Thu Nov 10, 2011 1:25 am

Quoting MD11Engineer (Reply 16):
Remember what the Drachma and Lira were before the introduction of the Euro? Mickey Mouse money.
Simply because the politicians in these countries used the banknote printing press whenever they had to buy votes and favours to stay in power. Tax enforcement was hugely unpopular (and acc. to an Italian journalist, who wrote an article in the ultra serious German Zeit weekly, tax enforcers are still being held back for political reasons in Italy) and at the same time wellpaying jobs had to be provided to keep the masses happy, so that they wouldn´t question the corruption of the political class. Just look at Alitalia just before their umpteenth "bankruptcy". The airline was bloated with unnecessary staff, because it was used to park either incompetent politicians or to get wellpaid jobs to relatives, friends etcv.

Oh great. Italy sounds like Greece writ large.  

In the end, let's face it: why is Germany, Netherlands and Austria WAY better financially than everyone else in the Eurozone? In my humble opinion, the answers are simple: 1) reasonably done social services; 2) reasonably business-friendly taxation; and 3) reasonably strong transparency between the government and its citizens.

What I see in Greece and Italy is that their overly generous social services, inability to collect taxes and just way too much corruption at the government level--which has been "papered over" because of strong economic growth in the past--is now coming home to roost, as the American saying goes. There needs to be MASSIVE reform of government size and services and a major overhaul of income taxation in both countries, and it has to be done very soon.

[Edited 2011-11-09 17:31:34]
 
NAV20
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RE: Financial Crisis Now Shifts To Italy

Thu Nov 10, 2011 2:44 am

Our stock market is open, of course, it's early afternoon here. The current situation is quite heavy selling (shares down about 5% so far, and the Aussie dollar - which has been the 'darling' of international speculators for some years - also falling sharply against the $US).

A 'new feature' today is that many commentators are now openly speculating that Italy is 'a bridge too far' - the EU simply can't afford to 'bail out' an economy that size - and that it looks increasingly likely that the EU will be 'restructured' - or, in plainer terms, that Germany and France will effectively pull out; do a deal between themselves, possibly including some of the better-run neighbouring countries, and leave the rest of Europe to fend for itself. This article is typical of current speculation here:-

"EU sources say discussions among politicians in Paris, Berlin and Brussels raised the possibility of one or more countries leaving the zone, while the core pushes to deeper economic integration.

"France and Germany have had intense consultations on this issue over the last months, at all levels," a senior EU official in Brussels said, speaking on condition of anonymity because of the sensitivity of the discussions.

"We need to move very cautiously, but the truth is that we need to establish exactly the list of those who don't want to be part of the club and those who simply cannot be part."

"French president Nicolas Sarkozy gave some flavour of his thinking on Tuesday, when he said a two-speed Europe - the eurozone moving ahead more rapidly than all 27 countries in the EU - was the only model for the future.

"The change has been discussed on an "intellectual" level but had not moved to operational or technical discussions, the EU official said."


http://www.abc.net.au/news/2011-11-1...y-explore-smaller-eurozone/3657090

[Edited 2011-11-09 19:31:47]
 
Flighty
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RE: Financial Crisis Now Shifts To Italy

Thu Nov 10, 2011 5:21 am

Quoting DeltaMD90 (Reply 1):
Ok, I admit I am a little uneducated on the crisis in Europe, in a sentence or two, can someone explain the problem and Greece / Italy? Thanks!

A country like Italy (without an explicit way to print its own money) is just like a company or a family under money pressure. Italian government has a debt just like a company might have. The creditors are getting pissed and demanding higher interest rate because they doubt they will ever be paid. Ordinarily, this can push a company into bankruptcy and collapse. Countries can do precisely the same thing....

... but Italy is so big, that if they do go bankrupt, (which is their fault essentially), they will drag other stuff down with them.

... But don't get too proud; the USA is in the exact same boat, with the fairly important difference that we control our money-printing system (via Dr. Bernanke in Washington). So we won't run out of dollars... but we're not exactly in an honorable or sustainable position, either. Nobody is too sure how the USA will survive the next 8 years... or how Italy will survive the next 1 year.
 
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DeltaMD90
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RE: Financial Crisis Now Shifts To Italy

Thu Nov 10, 2011 5:32 am

Quoting Flighty (Reply 29):
But don't get too proud; the USA is in the exact same boat

I'm not proud! I hope Italy and the rest of the EU get their act together! Not only do I care about their citizens, I also care about US citizens--Italy collapsing would hurt the US a lot too...
 
Pyrex
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RE: Financial Crisis Now Shifts To Italy

Thu Nov 10, 2011 5:34 am

Quoting zhiao (Thread starter):
What a surprise--the parasites have moved on to another country.

Look at you speaking! You somehow believe that Italy (or anybody else) is entitled to borrow however much money they want at whatever interest rate they dictate, is that it? And yet, the people who do not wish to lend you money are somehow "parasites"? Let's do one thing, why don't you walk up to your bank, get up to the teller, pound your fist on the counter and yell "I demand a mortgage, and I demand one in my own terms and at my own price", see how far that gets you.
 
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RayChuang
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RE: Financial Crisis Now Shifts To Italy

Thu Nov 10, 2011 5:37 am

Quoting NAV20 (Reply 28):
A 'new feature' today is that many commentators are now openly speculating that Italy is 'a bridge too far' - the EU simply can't afford to 'bail out' an economy that size - and that it looks increasingly likely that the EU will be 'restructured' - or, in plainer terms, that Germany and France will effectively pull out; do a deal between themselves, possibly including some of the better-run neighbouring countries, and leave the rest of Europe to fend for itself.

I had seriously thought recently that these countries would bail on the Eurozone to save themselves: France, Belgium, the Netherlands, Germany, Austria, Luxembourg, Finland and Estonia. And the United Kingdom, Denmark, Norway and Sweden will quickly work with these breakaway Eurozone countries to protect themselves, too.
 
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MillwallSean
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RE: Financial Crisis Now Shifts To Italy

Thu Nov 10, 2011 6:54 am

The anglosaxon press struggles to understand how the EU works. Its conclusions thus tend to be rather misguided. i don't know if it's because most copies from what the UK agencies write or just from pure indifference. Doesnt matter. i suggest your ead French or german etc news papers to get an understanding on how the Euro crisis is affecting Europe and how its politicians aims to solve this.

Quoting NAV20 (Reply 28):
A 'new feature' today is that many commentators are now openly speculating that Italy is 'a bridge too far' - the EU simply can't afford to 'bail out' an economy that size - and that it looks increasingly likely that the EU will be 'restructured' - or, in plainer terms, that Germany and France will effectively pull out; do a deal between themselves, possibly including some of the better-run neighbouring countries, and leave the rest of Europe to fend for itself. This article is typical of current speculation here:-

Ah this is an interesting interpretation from you. I disagree on it.

Its fairly clear that the EU is open to some countries leaving the Eurozone. It has been for sometime. Thats the stick.
the option for those leaving the Eurozone often isnt reverting back to their old currency either but that's for another debate.
But those leaving the Eurozone does not include France and Germany. To the contrary, it's the weaker economies without any control over its budgets that might be cut loose while the stronger moves to enhanced cooperation status.
The present Lisbon treaty allows for closer cooperation between memberstates and closer cooperation in taxes, borrowing and other areas are discussed.
We have seen an under table EU coordinated initiative handling the banks in the EU. The banks are what matters, they have to be functioning well to support Europe's export driven economy. A joint push made most banks with big exposure to Southern Europe take substantial write downs this quarter and this is bound to continue next quarter.

Italy, Greece, Belgium, Spain, Portugal, Ireland and Hungary are all in serious trouble. All but Hungary are part of the Eurozone here. They all suffer from to high debt. This crisis is the first and I will say not the last that comes from the same problem, lack of budget discipline. The Euro was built on the german model of financial stability, a vision and model shared by many other Northern European nations.

The solution for Greece, Italy and all others in trouble is there and has proven itself already in Europe.
They have to do what Estonia and Latvia did in 2008. Balance the books.
Cut until they produce surpluses at present income. It will hurt. It will be ten tough years.
But the idea that economies should trust growth to take them from 100% of GDP in debt to a maximum of 60% seems farfetched at best.

Greece is a very special case.
Its economy wasnt fit for the Euro from the beginning. But they hired a US investment bank, came up with a great way to cook the books and kept on cheating themselves, their people and the rest of Europe for a decade.

Then the bubble burst. It became unsustainable. they were bailed out with a promise of great reforms. the reforms hasn't happened in close to enough size. Greece is in debt, 180% of GDP and raising sharply. So now they need more money and since no lender can be found they have to turn to the EU and the IMF.

Most politicians would now be in crisis mood.
We are after all talking a month or so from default ie making Greece's ordinary citizens indebted for a generation. But not our greek politicians. they are instead arguing over technicalities and not one decision has been taken. There were conditions attached to a second rescue package. they havent been met (the conditions are surprisingly vague in my eyes)
Instead they have been discussing who should be the next PM for almost a week. The set up of the government is difficult to agree upon and the opposition seem to want a different rescue package put together. Astonishing.
They had a well respected economist recommended by its creditors as the right man for PM, he was quickly brushed aside for political reasons.
I wonder does the Greeks think of the rest of us Europeans that have to pay for their expenses now?
Do they see that as fair?
I don't. Why should we see Greek incapable politicians ruining a good country and taking a couple of 100 billion Euros of our taxmoney with them?


Italy is different. Many Italians have decent private savings.
The government there is a special case, also corrupt and not good at its job the tax collected is a lot less than in comparable economies. I doubt even the Italians trust its government. But Italy is a cornerstone, a key economy of Europe. Its large and one we can not do without. Italy has to be saved at any cost.
Question is if Italian politicians will understand this. it looks like it. Italy also has a lot more going for it. its size of the economy and a stable banking system. It has a large black economy and heaps of uncollected possible tax revenue. Italy needs governance and stability, some german budget discipline and they will do fine. Northern Italy is an important part of the European heartland, very closely aligned and involved in European trade it's not something that can be cut loose.

Whats interesting is that some states in the US sees worse financials than Italy. But with the US above them they cans till get cheaper borrowing costs. The Eurozone hasnt aligned enough of its economical positions to create this assistance to its memberstates.
Now while the anglosaxon media sees the destruction of the Euro and the Eurozone, Eurozone politicians are debating how to increase cooperation how to create a more unified economy. If the Eurozone survives this run at it, and most assumes itll be rocky for the coming two years, were bound to see a deeper cooperation and much more power going from the national governments to the EU under a formula of enhanced cooperation.
Europe is a bit like airplane safety its code is written in blood. Not until we have been through a very difficult struggle will we see change made.

Quoting Baroque (Reply 18):
What would Daimler Benz and EADS have to say about 1.63????

thats the thing, Europe was annoyed at the exchange rate before. With this crisis we still see 1.3 against the dollar. its not good thats for sure Europe need this to come down to 1.1 or similar. Doubt it will happen the US will print themselves out of that situation.
 
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shamrock604
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RE: Financial Crisis Now Shifts To Italy

Thu Nov 10, 2011 7:27 am

Quoting MillwallSean (Reply 33):
Italy, Greece, Belgium, Spain, Portugal, Ireland and Hungary are all in serious trouble. All but Hungary are part of the Eurozone here. They all suffer from to high debt. This crisis is the first and I will say not the last that comes from the same problem, lack of budget discipline. The Euro was built on the german model of financial stability, a vision and model shared by many other Northern European nations.


Ireland was a model of budgetary discipline right up until 2007. It had the lowest debt ration of any EU state, and ran large budget surpluses. It was bailing out its banks and the collapse of the property market which blew a hole in Ireland's budget.

Trichet's threats that he would ensure that the ECB cut off funding to Irish banks if the government did not "bail them out whatever it takes" led to the government to bring in the disastrous bank guarantee which brought this country to it's knees.

The facts are uncomfortable for many in the EU to face, but they are there. It's all too easy to lump us all in to the "budgetary indiscipline" group rather than face the fact that the banking sector now seems to run this continent.
 
baroque
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RE: Financial Crisis Now Shifts To Italy

Thu Nov 10, 2011 7:48 am

Quoting RayChuang (Reply 27):
Oh great. Italy sounds like Greece writ large.

And faster it seems.

Quoting MillwallSean (Reply 33):
The anglosaxon press struggles to understand how the EU works. Its conclusions thus tend to be rather misguided. i don't know if it's because most copies from what the UK agencies write or just from pure indifference. Doesnt matter. i suggest your ead French or german etc news papers to get an understanding on how the Euro crisis is affecting Europe and how its politicians aims to solve this.

Agreed, not a good idea to interpret the EU through the eyes of the Anglosaxon press. I have been trying to work out the provenance of that ABC article, but not very successful so far. Let's see what Sajit Das has to say, he is about as pessimistic as I like to go, but he is hardly pushing the Anglosaxon view.

The odd thing in all this is that some in the UK seem to think they will not suffer from all these woes. Maybe loss of sight in one eye is bad for the IQ?

I mean we clearly suffer from the Euro capers here 10,000 miles away in Aus, how can anyone in the UK expect the Channel to work its 1940 magic one has to ask?!!!!
 
janmnastami
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RE: Financial Crisis Now Shifts To Italy

Thu Nov 10, 2011 8:28 am

It's quite sure that Berlusconi will resign on Saturday or Sunday and that Mario Monti will be appointed to form a new government.
 
MadameConcorde
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RE: Financial Crisis Now Shifts To Italy

Thu Nov 10, 2011 9:07 am

Quoting janmnastami (Reply 36):
Mario Monti will be appointed to form a new government.

Who is Mario Monti... in brief
aside from being former President of the European Commission...

Mario Monti is the President of the Bocconi University of Milan and the first chairman of Bruegel, a European think tank founded in 2005.
He is also European Chairman of the Trilateral Commission, a neoliberal think tank founded in 1973 by David Rockefeller[2] and member of the Bilderberg Group [3].
On 15 September 2010 Monti supported the new initiative Spinelli Group, which was founded to reinvigorate the strive for federalisation of the European Union (EU). Other prominent supporters are: Jacques Delors, Daniel Cohn-Bendit, Guy Verhofstadt, Andrew Duff, Elmar Brok.
On 9 November 2011 Monti is nominated Senator for life by the Italian President Giorgio Napolitano.[5]

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

A "neo-lib" big wig who will meet a very strong opposition, especially from the powerful Lega Nord.
 
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MillwallSean
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RE: Financial Crisis Now Shifts To Italy

Thu Nov 10, 2011 9:26 am

Quoting shamrock604 (Reply 34):
Ireland was a model of budgetary discipline right up until 2007. It had the lowest debt ration of any EU state, and ran large budget surpluses. It was bailing out its banks and the collapse of the property market which blew a hole in Ireland's budget.

Trichet's threats that he would ensure that the ECB cut off funding to Irish banks if the government did not "bail them out whatever it takes" led to the government to bring in the disastrous bank guarantee which brought this country to it's knees.

The facts are uncomfortable for many in the EU to face, but they are there. It's all too easy to lump us all in to the "budgetary indiscipline" group rather than face the fact that the banking sector now seems to run this continent.

While I might agree with some of what you say, other parts I disagree with.

Ireland didn't learn from the lessons other overheated economies nor listen to those that warned her.
The failure is in my opinion governance and thus Ireland's own.

Sweden saw the same thing happen in the late 1980ies with an overheated property sector and banks borrowing without enough securities.

This was pointed out to the Irish at several EU ministerial meetings. The Irish proudly replied that its our growth rates, flat taxrates and business friendly envoronments that makes this possible and no there is no impeding problems.

Quoting janmnastami (Reply 36):
It's quite sure that Berlusconi will resign on Saturday or Sunday and that Mario Monti will be appointed to form a new government.

It seems Italy has gotten round to business. It's a pity they couldn't have done this a month or two ago when Berlusconi famously said Italy doesn't have a problem.
Hopefully the italians will put in reforms strong enough to make a difference. I havent read the proposals but I would assume the Italians have made their homework. Lets hope some politicians or local administrators doesn't find ways to undermine whatever that's been decided.

One thing we often overlook is the reforms quietly put in place by Spain a few months ago. I didn't read up on them just saw the short version. But they seem to have calmed the nerves in regards to Spain.
Will they be enough or will this circus move onwards to Spain?
Spain suffers from unemployment levels that's very high and that stands out in regards to the country. We shall see.

To a certain degree it also feels like there is a lot of speculation, a drive to make money from this from certain derivates players. Itll be hard to stop it and might require some more temporary legislation against certain derivates in Europe. We shall see.
 
slz396
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RE: Financial Crisis Now Shifts To Italy

Thu Nov 10, 2011 9:34 am

Quoting MillwallSean (Reply 33):
The anglosaxon press struggles to understand how the EU works. Its conclusions thus tend to be rather misguided. I don't know if it's because most copies from what the UK agencies write or just from pure indifference.

The thing is, there has been widespread dislike of the EU in the UK for decades, mainly because the UK still sees itself as a special country in the world, having some kind of a transnational alliance built around it, called the Commonwealth, in which they can play the first violin as before, even though the Commonwealth is of marginal importance globally.
Just you look at the official denomination of the Foreign Office in London: how pompuous and even out-of -touch, but very indicative as to the way the UK still genuinely sees the world.

This dislike for the EU is widely voiced in the local media, which have turned it into a habit of theirs blaming everything going wrong in their country on Brussels and who'd go as far as to almost pretend that Brussels is situated somewhere between Bagdad and Pyonyang, whereas reality is it is situated just 100 miles accross the British Channel!
Just listen to how the BBC talks about how 'the Europeans' are going to have to solve their problems, as if somehow they aren't Europeans! 

And of course, other media outlets in the anglosaxon world first look at what is written in British media for their reporting on Europe as they obviously see the Brits as Europeans, so it is no surprise that reporting on anything related to the EU or the eurozone is rather one sided if it comes from an English language source, to say the least...

For the last 6 months now, it sounds as if the euro is going to explode any minute if one is to believe British media, whereas reality is this is 'just' a sovereign debt crisis in some memberstates of the eurozone, and thus the 2 have nothing to do with each other really.... technically speeking a country could very well go bankrupt while staying in the euro, a concept which has apparently never even crossed the minds of all those journalists in the UK, who prefer to come up with the most insane exit scenarios which are not even forseen in any treaty, purely because it fits the mindset of them and their readers more, readers which then only awake to a disappointment soon after, after which they turn on their television to see what's going on now, with the journalist who got it wrong blaming it all on another backroom deal in Brussels....

I'll repeat it once more: an exit from the eurozone is simply not possible.
Besides, the only reason for such a move, would be because it would allow for a devaluation of the newly reintroduced currency, but if creditors want to take a haircut instead (like they are doing in Greece now), you don't need to revert ot the mechanism of a devaluation, which is exactly what is happening now in Greece. Big surprise to the Brits, logical outcome to everybody else!

Quoting Baroque (Reply 35):
Agreed, not a good idea to interpret the EU through the eyes of the Anglosaxon press

If you want to read everything about purely ficticious theoretical dramatical options in all possible details, then you should indeed read the British media; if however you want to know more about the most likely and common sense next step, you better focus on continental media...
In this context, in is interesting to see how for instance the British media have been talking about a Greek exit from the euro for the past 2 weeks now, wheres this scenario hasn't even made it to the negociating table!

As soon as the Greek PM annouced a referendum on the new bailout deal for his country, the French president quickly wiped the idea of the blackboard by saying any Greek referendum could only be on the issue of whether Greece wanted to stay in the euro or not, thus making it perfectly clear it was completely impossible to hold a referendum by suggesting a no-brainer question which is clearly out of touch with reality, but guess what??? British media actually thought this was a serious question being asked by the French president, titling that 'for the first time, the option of a Greek exit was officially considered in Paris and Berlin' ROTFL.

This was the ULTIMATE proof the Brits really don't understand how their own Union with Europe works...
in fact it took them over a week to figure out the referendum was off (something everybody in Europe knew the minute Sarkozy spoke) and even now, some media in the UK are only timidly admitting that the option of a Greek exit is non-existent indeed.... 'for the moment' as they say it.
 
MadameConcorde
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RE: Financial Crisis Now Shifts To Italy

Thu Nov 10, 2011 10:33 am

Looks like Mario Monti, nicknamed "SuperMario", will be chosen by the Italian President to form a new "technical" government.

Mario Monti was named Senator for Life last Sunday by President Napolitano.

http://www3.lastampa.it/politica/sezioni/articolo/lstp/429106/

He is the man to "reassure the markets".
Also he seems to have wide approval, from House President Fini (right wing) to Walter Veltroni former leader of opposition Democratic Party (left wing).

Calling for new elections would make 3 months without a Prime Minister from what I understand.

http://www3.lastampa.it/politica/sezioni/articolo/lstp/429115/

It seems likely that the President will name Mario Monti to be the next Italian Prime Minster after Silivo Berlusconi's resignation although there are other names circulating.
 
NAV20
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RE: Financial Crisis Now Shifts To Italy

Thu Nov 10, 2011 11:27 am

Quoting Baroque (Reply 35):
I have been trying to work out the provenance of that ABC article, but not very successful so far.

Reuters now have the same story, Baroque - sourced, like the ABC's one, to 'a senior EU official in Brussels....'. I think it has legs - indeed, if the leading lights of the EU haven't been exploring contingency plans of that sort I'd consider them guilty of 'dereliction of duty.'

http://www.reuters.com/article/2011/...ture-sarkozy-idUSTRE7A85VV20111109

Quoting slz396 (Reply 39):
I'll repeat it once more: an exit from the eurozone is simply not possible.

On the contrary, slz396, almost anything's possible over time. Indeed, short of those EU countries that remain reasonably prosperous propping up places like Greece for the next fifty years or so, I don't see any reasonable alternative to kicking the deadlegs out of the EU before the whole place goes bankrupt.......

You mentioned the ECB solving the problem by 'printing money' earlier on. But this can only be done by sovereign countries (like the USA, which is doing just that at the moment).

In point of fact they don't even print it nowadays - they just 'create' it by issuing bonds to the banks. The polite name for it is 'quantitative easing'; and what it amounts to is issuing banks with 'bonds' that amount to a promise to pay the stated sum, plus interest, after a term of years.

Thing is, sovereign governments can afford to do that because they are in charge of the national economy. So the banks can be 100% confident that they will eventually get paid - even if the government concerned eventually has to raise taxes to do it.

But that doesn't apply in the EU. Any sort of 'quantitative easing' in the EU would basically amount to the better-run countries having to raise their own taxes in order (continually) to repay the debts of the less organised ones. In other words, the taxpayers of Germany, France, and even possibly the UK would have to pay more taxes, for the 'long run,' to support bankrupt places like Greece and Italy.

Personally, I just can't see that happening in a month of Sundays........... Nor, more important, can I see it 'working' in terms of sorting the 'broken bits' of the EU out?

[Edited 2011-11-10 03:28:20]
 
MD11Engineer
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RE: Financial Crisis Now Shifts To Italy

Thu Nov 10, 2011 12:31 pm

Quoting slz396 (Reply 25):
Yes indeed, and Germany (and others) stood by and allowed it to happen...

Look I am not trying to blame anybody here really, just trying to make it clear that whatever happened now belongs to the past and we need to have a forward looking solution in place soon, rather than play a dogmatic blame game and waste time.

The point remains: we're in this mess together now, like it or not (I certainly don't, and you neither I am sure), and we can only move out of it in the way I've explained: i.e. draconic reforms in those countries that need it and an ECB that act as a lender of last resort in the mean time to allow those countries ample time to put these much needed reforms in place...

If you're not going to have the ECB buy the time needed here, then there's no way you're going to have enough time to put reforms in place, regardless any will to do so, which I think is finally genuinely present now.

It is in the interest of all involved, including Germany, for these reforms to succeed, because otherwise, we all go down together: I hope you realize no eurozone country is going to be spared if the zone crumbles. The idea you can somehow wallk away from this unscratched is unreal. Even the UK has understood that should the eurozone collapse, even they are going to be hit by it (and they don't even have the euro) and so Cameron is now almost begging to be move involved, so why on earth German politicians thjink they can still preach nice dogma's that don't solve the current problem is beyond me: it's your currency too, you know??? Isn't it ironic others like the UK or China are more preoccupied with its stability than Germany?!

If Italy ends up in a situation like Greece, France will follow due to their strong involvement in the Italian industry, after which they'll come and knock at the door in Berlin too... Remember that even many first class passengers on the Titanic drowned.

Time to get off the high horse and just let the ECB step in: better to lose some buying power gradually, than lose a decade of growth and risk a global recession which will cost us all much more than any potential loss of buying power we possibly face, I should think? It's time to be pragmatic, me thinks!

As a one time emergency measure it would be ok, but the worry is that the corrupt politicians and their supporters would see that they got away with their behaviour and would continue their spending spree, after all they would be covered by the ECB.

Quoting RayChuang (Reply 27):
In the end, let's face it: why is Germany, Netherlands and Austria WAY better financially than everyone else in the Eurozone? In my humble opinion, the answers are simple: 1) reasonably done social services; 2) reasonably business-friendly taxation; and 3) reasonably strong transparency between the government and its citizens.

I think it has climatic and historical reasons.
First, in northern Europe you always had to plan ahead. In the old farming societies you had to set food and firewood aside for winter or you wouldn´t have anything to eat and you would freeze to death. Latest by November the larders and pantries had to be full, there had to be hay in the barn to feed the animals over winter. Add to this the central European experience of the 30 year war and you´ll understand the wish for security by the Germans.
Then, we always had a strong influence by the bourgois class (same as the British BTW.), as opposed to the feudal class of e.g. the French. The bourgois prided themselves that they were more disciplined and austere than e.g. the aristocrats, who liked to copy the wasteful lifestyle of a Louis XIV. The Prussian kings, who influenced Germany for a big part, were also quite austere and shunned excessive displays of wealth. At the same time they created the image of the Prussian civil servant: professional, dedicated, loyal and totally adverse to corruption.

Quoting MillwallSean (Reply 33):
We are after all talking a month or so from default ie making Greece's ordinary citizens indebted for a generation. But not our greek politicians. they are instead arguing over technicalities and not one decision has been taken. There were conditions attached to a second rescue package. they havent been met (the conditions are surprisingly vague in my eyes)
Instead they have been discussing who should be the next PM for almost a week. The set up of the government is difficult to agree upon and the opposition seem to want a different rescue package put together. Astonishing.
They had a well respected economist recommended by its creditors as the right man for PM, he was quickly brushed aside for political reasons.
I wonder does the Greeks think of the rest of us Europeans that have to pay for their expenses now?
Do they see that as fair?
I don't. Why should we see Greek incapable politicians ruining a good country and taking a couple of 100 billion Euros of our taxmoney with them?

The capital flight from Greece has already started. Many Greeks try to get their savings out of Greece and bring it to countries like Switzerland, the UK or Germany. Greek customs officers are catching people every day at the airports, who carry large amounts of cash with them (anything larger than 10.000 Euros has to be declared). I´,m quite sure that most of the money comes from tax evasion. The moneys get largely invested in the real estate market of countries considered "stable".



Quoting shamrock604 (Reply 34):

Trichet's threats that he would ensure that the ECB cut off funding to Irish banks if the government did not "bail them out whatever it takes" led to the government to bring in the disastrous bank guarantee which brought this country to it's knees.

The facts are uncomfortable for many in the EU to face, but they are there. It's all too easy to lump us all in to the "budgetary indiscipline" group rather than face the fact that the banking sector now seems to run this continent.


Ok, again, what would have happened if the Irish banks (BoI, AIB, Ulster Bank etc.) would have been left to fail? Maybe a million Irish citizens would have lost all their savings, which were used by the banks to gamble with.
It would have seriously damaged Ahern´s government (which got damaged later anyway, because they couldn´t handle the crisis and were too much involved in the whole corruption affair).
Next, the Irish banks lied to the Irish people and to the government, first downplaying the crisis, and then, after the bailout, not letting the money go back into the circulation, but instead use it to gamble even more.
Then, who gambled in the Irish housing bubble? It was not the foreigners. Even today houses in Ireland are overpriced. Just because you spent a million on some little three up two down terrassed house, which got banged together by sloppy tradesmen out of cheap materials, doesn´t mean that it is worth it. You got suckered. Live with it.
I get sick if I hear the people complaining about "negative equity". You gambled on the housing market because you thought no matter how expensive a house is to buy, you could still sell it at a higher price.
Today there are lots of houses standing empty (and rotting away if they are not being maintained), because the owners still hope that they can at least get the price they paid for it. They rather let the house rot than to sell it below what they paid for it.
The people involved should have looked at the Japanese housing bubble of the 1980s-1990s.

As for the foreign banks, they loaned money to the Irish banks. Again, it is the DEBTOR, who is responsible to pay back the moneys loaned, it is not the duty of the CREDITOR to make sure that the debtor is able to do it, at least among professionals (most do it anyway just to protect themselves, but any banker can hide the status of his fnances in his books. This is where trust among the banks comes into play).
(German contract law distinguishes between a layperson, who is entiteled to certain protections, and a "Vollkaufman" (Professional merchant / business person), who is expected to know what he gets himself into. While a layperson can get away with certain things (and can get out of certain disadvantageous contracts) a professional business person (e.g. somebody who did an apprenticeship as a merchant or has a degree in business administration) can´t expect such a protection. By definition bankers ARE fully responsible persons.).
If I owe money to a bank and can´t pay it back, then I can´t excuse myself by saying that the bank should have checked my means better.

Jan
 
slz396
Posts: 1883
Joined: Tue Oct 02, 2001 7:01 am

RE: Financial Crisis Now Shifts To Italy

Thu Nov 10, 2011 12:34 pm

news flash:

Italy just raised 5bn euros from a new issue of bonds at an interest rate of 'just '6.087%, which is quite good, given that it replaces bonds issued at close to 5%.

The ECB declined to comment on the matter, but allegedly did not intervene on the markets as interest rates on Italian bonds have come down 'naturally' due to the hope of a quick political solution in Rome.

Seems that the rumour that 'Supermario' is indeed going to take over in Italy next week is enough to drive rates down by more than a percentage point...

Maybe a lesson for the Greeks too, because it's time they bite the bullet and name the former ECB VP Lucas Papademos as their new PM, just like the EU has been pushing for behind the screens.

[Edited 2011-11-10 04:54:25]
 
baroque
Posts: 12302
Joined: Thu Apr 27, 2006 2:15 pm

RE: Financial Crisis Now Shifts To Italy

Thu Nov 10, 2011 12:45 pm

Quoting NAV20 (Reply 41):
Quoting Baroque (Reply 35):
I have been trying to work out the provenance of that ABC article, but not very successful so far.

Reuters now have the same story, Baroque - sourced, like the ABC's one,

Reuters was the only source I could find for that article, which left me wondering where it did come from. Still does come to that.

I doubt if Europe is going to let go easily of achievements won over what, 60 years.

Just wish they had managed it more neatly to date!
 
slz396
Posts: 1883
Joined: Tue Oct 02, 2001 7:01 am

RE: Financial Crisis Now Shifts To Italy

Thu Nov 10, 2011 12:46 pm

Quoting MD11Engineer (Reply 42):
As a one time emergency measure it would be ok, but the worry is that the corrupt politicians and their supporters would see that they got away with their behaviour and would continue their spending spree, after all they would be covered by the ECB

Which is why there needs to be a 2-step solution, including deep reforms and why it is important not to revert to the mechanism of letting the ECB step in, too soon indeed;

I've been on the German line for a long time, because for as long as no reforms are done, it's just throwing good money after bad, but I think now the point has been reached where the desire to reform is genuine and irreversible, see for instance Spain and Italy only today, hence it might also be the time when Germany starts to let's go of its dogma the ECB should never ever step in, because somehow time needs to be bought to put in place those reforms: only the ECB can do so, without too much pain simply by injecting more cash.
 
slz396
Posts: 1883
Joined: Tue Oct 02, 2001 7:01 am

RE: Financial Crisis Now Shifts To Italy

Thu Nov 10, 2011 12:50 pm

Quoting slz396 (Reply 43):
Maybe a lesson for the Greeks too, because it's time they bite the bullet and name the former ECB VP Lucas Papademos as their new PM, just like the EU has been pushing for behind the screens.

Looks like I have quite good capabilities when it comes to predicting the next step, don't I?

http://www.bbc.co.uk/news/world-europe-15671354

Maybe I should be hired by some British Media because my track record for the last few days is way better than theirs' 

[Edited 2011-11-10 04:52:26]
 
MD11Engineer
Posts: 13899
Joined: Sun Oct 26, 2003 5:25 am

RE: Financial Crisis Now Shifts To Italy

Thu Nov 10, 2011 1:06 pm

Quoting slz396 (Reply 43):
Maybe a lesson for the Greeks to, because it's time they bite the bullet and name the former ECB VP Lucas Papademos as their new PM, just like the EU has been pushing for behind the screens.

Apparently the ultra-nationalist LAOS party walked out from the talks.

Jan
 
NAV20
Posts: 8453
Joined: Thu Nov 27, 2003 3:25 pm

RE: Financial Crisis Now Shifts To Italy

Thu Nov 10, 2011 1:13 pm

Quoting slz396 (Reply 46):
Maybe I should be hired by some British Media because my track record for the last few days is way better than theirs'

Which 'British Media' do you mean, slz396?

As far as I know the only media quotes put on here recently were from me? And they were Australian and American, respectively?
 
baroque
Posts: 12302
Joined: Thu Apr 27, 2006 2:15 pm

RE: Financial Crisis Now Shifts To Italy

Thu Nov 10, 2011 2:44 pm

Quoting slz396 (Reply 46):
Looks like I have quite good capabilities when it comes to predicting the next step, don't I?

http://www.bbc.co.uk/news/world-europe-15671354

Maybe I should be hired by some British Media because my track record for the last few days is way better than theirs'

Surely that is setting your sights a bit low slz!   

Quoting NAV20 (Reply 48):
Which 'British Media' do you mean, slz396?

As far as I know the only media quotes put on here recently were from me? And they were Australian and American, respectively?

Oh go on, not a bad line. It might even be true too if you were to go through the whole of the UK media.

In any case, tonight, they are all rather focused on that other fascinating "European" event where it appears the mafia finally got to appear at the HoC and Sonnie Jim confessed he did not know what Omerta means. I am referring to the reconvening of the "Court of Star Chamber" to go with Watson's colourful wording at the House of Commons to interview News Corp. Really quite funny as News has beeing doing a great imitation of Omerta for nearly a decade.

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