Europe

[Furunculus]

Hey Furunculus, this might be a stupid question.. but why don't they cancel eachothers debts with eachother, for example:

Spain owes Ireland $30, Ireland owes Spain $16, why don't they just make it so Spain owes Ireland $14?

As for the "Greek Bailout" why don't Germany+France+Britain just put an extension on their loan or similar or a temporary pause or at a reduced rate? Then there would be no need for the bail-out at all, or since the bail-out is basically giving Greece free money, why not just cancel part of the debt they owe instead?


All-in-all, why are they making it far more complicated then it needs to be?

because it is mostly private loaned debt, so each respective treasury would not only have to do a debt swap, they would also have to pay-out the private equity back to the lender in the country that lent the money in the first place, and i can well imagine that the larger creditor nation would be unwilling to transfer the additional risk inside their own economy, when really it belongs outside with the original debtor country.

[Beskar]

because it is mostly private debt, so each respective treasury would not only have to do a debt swap, they would also have to pay-out the private equity in their country that lent the money in the first place, and i can well imagine that the larger creditor would be unwilling to transfer the additional risk inside their own economy, when really it belongs outside with the original debtor country.

I am guessing this is government debt though, right? While not merge all the debt into the national bank (for example, Bank of Ireland and Bank of Spain), and where there is interest involved, make the required adjustments, to cancel out the lessers debt.

As it is the Euro-zone they could even take it a step-further, instead of interlending, they could establish the "Bank of Europe", where all debts get transferred to that. Then like banks in real-life, countries like Germany who did a lot of lending, does this through the "Bank of Europe". This means all the debt is also in the one place and not all over the show. Then these debts are transferred through the nations National Banks.

Makes sense to me, anyway.

[Furunculus]

I am guessing this is government debt though, right? While not merge all the debt into the national bank (for example, Bank of Ireland and Bank of Spain), and where there is interest involved, make the required adjustments, to cancel out the lessers debt.

As it is the Euro-zone they could even take it a step-further, instead of interlending, they could establish the "Bank of Europe", where all debts get transferred to that. Then like banks in real-life, countries like Germany who did a lot of lending, does this through the "Bank of Europe". This means all the debt is also in the one place and not all over the show. Then these debts are transferred through the nations National Banks.

Makes sense to me, anyway.

it is the transfer of risk that is the problem, why should one nation internalise the risk of another by assuming the burden of their debt?

and are the private creditors will to have their debt restructured?

and are the national economies willing to effectively print another £200 to act as a guarantee on the debt now owed to private lenders?

[Beskar]

it is the transfer of risk that is the problem, why should one nation internalise the risk of another by assuming the burden of their debt?

Well, they owed money anyway, having that cancelled or reduced is always a good thing, isn't it? All my money is in savings and I have no loans outside of my Student Loan. If it turned out the Student Loan company owed me money, wouldn't it simply be easier just for them to reduce it out of the loan I got from them, which ultimately just means, I pay less on that loan, as ultimately, this reduces the debt already got, it can only be a good thing.

and are the private creditors will to have their debt restructured?

and are the national economies willing to effectively print another £200 to act as a guarantee on the debt now owed to private lenders?

I am presuming this is the governments debt to private lenders (my whole talk is on about the government/states debt). I would say "Don't do it", akin to when a 'very nice man' is willing to offer you a loan.


I was always taught that "Debt is bad" and being honest, it is bad. Only times debt is justifiable is in those cases where you have to dip into it, such as when you want to buy a house, or perhaps help you through university. If you go into debt because you simply want to buy an xbox360 or go on a pub night out, you need a slap. It is amazing how many people go into debts over things like that, then they cry and whine the 30% APR they now have to pay ontop of the original costs. This is where the concept of "savings" come from. You do your hard-work, then you get your reward.

As such, if I was the Chancellor of the Exchequer, you would see Britain coming out of debt and getting "savings", which might go into doing investments or perhaps loaning myself. However, Britain would never lend more than it can afford to lose, as such, we would have an amazingly good looking bank balance.

[gaelic cowboy]

I am guessing this is government debt though, right? While not merge all the debt into the national bank (for example, Bank of Ireland and Bank of Spain), and where there is interest involved, make the required adjustments, to cancel out the lessers debt.

This has happened already the Government is now the full owner of Anglo Irish Bank this bank is the epitome of the credit crisis the mention of it drives people into a frenzy of rage here. Bank of Ireland and Allied Irish Bank are having there toxic debt taken off them by NAMA and they will recieve cash injections too if they require it which is likely. However thay have been given till the backend as we call it here to come up with there own money so they will likely sell prized banking assets in US, Uk and Europe.

[Furunculus]

that is a little different to arranging a debt swap with other nations.......

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anyway, excellent article on debt in the eurozone:

http://www.spiegel.de/international/...692666,00.html

[Beskar]

anyway, excellent article on debt in the eurozone:

http://www.spiegel.de/international/...692666,00.html

[Vladimir]

Something about that guy behind him makes that hilarious.

[Furunculus]

Britain to help bail out the eurozone, how awesome, i thought we had enough problems of our own:

http://www.telegraph.co.uk/finance/f...euro-deal.html

Alistair Darling has agreed to consult directly with George Osborne and Vince Cable as European leaders looked poised to push through a new multi-billion pound bail-out fund part-financed by British taxpayers.

By Edmund Conway and Bruno Waterfield
Published: 10:08PM BST 08 May 2010

Mr Darling, who is still officially Chancellor of the Exchequer, will represent Britain at an extraordinary meeting of European finance ministers in Brussels today, slated to adopt far-reaching new powers for the Commission and its fellow bodies.

The meeting is the first major policy test for the hung parliament, coming with Britain in limbo between two governments. In a sign of the highly unusual nature of the situation, the Chancellor has privately committed to consulting before the meeting with his counterparts in the Conservatives and Liberal Democrats.

However, despite the likelihood that Labour will be ejected from Downing Street imminently, Mr Darling will have the final say over Britain's vote on participation in the new scheme.

The proposal, tabled by Nicolas Sarkozy in an emergency meeting late on Friday night, will involve the creation of a €60bn "European stabilisation mechanism" designed to provide bail-out support for countries which may face similar strain to Greece in the coming months.

It is thought to be focused particularly on Spain and Portugal, both of whose leaders fear an assault by "bond vigilantes" in the market who have scented weakness within the eurozone. The plan will have fiscal implication for all European Union countries, including the UK. The key element is an extension of an existing bail-out package, already used to support Hungary and Latvia.

This involves extending an already-existing Lisbon Treaty clause originally designed to provide cash for economies hit by natural disasters. Under this, the European Commission will borrow directly from markets, with its own finances guaranteed by EU nations – something which would leave the UK public finances exposed if a country fails to repay the loan. It could also impact the UK's credit rating.

Another plan being considered is to create a permanent continent-wide equivalent of the International Monetary Fund. This proposal is being lobbied for energetically in Brussels by, among others, Mr Sarkozy and Spanish prime minister José Luis Rodríguez Zapatero, who is understood to have called Gordon Brown late on Friday to urge him to help it through the summit. He warned that British banks were also vulnerable to European financial turmoil.

The first element could be rushed through the summit without British approval, because the qualified majority voting system means Britain cannot strike down a plan that has the support of other major European nations. The second more far-reaching element may have to be passed unanimously by all European Union members.

The current Labour Government's position is understood to be against the creation of the European Monetary Fund. However, with the Conservatives and Liberal Democrats having yet to arrange a coalition or co-operation government, they can do little but lobby Mr Darling on their position over the Fund.

The sticking point goes to the heart of the controversy over a prospective Con-Lib coalition, since while the Tories oppose further European integration and exposure, the EMF could well be an institution of which the Lib Dems would approve.

Representatives from either party were unwilling to comment last night. The plan, which was only expected to be entirely finalised by lunchtime today, in time for the ministers’ arrival in the Belgian capital, must be completed in time for markets opening on Monday morning, according to Mr Sarkozy.

Traders are preparing for an extremely nervy start to the week. With the Conservatives having confirmed that there is unlikely to be a coalition formed before then, and economists expect further lurches in the pound when foreign exchange trading resumes in Australia this evening.

Attention is likely to focus on the Debt Management Office’s next auction of government bonds – a £2.25bn offering of mid-range debt on Tuesday.

The Treasury is still working under its pre-election “purdah” regime, which means the department is working on a non-political basis until the new government is formed, and both Mr Osborne and Mr Cable are briefed on all matters of economic importance.

However, under the British constitutional system, Mr Darling can carry on as Chancellor until the Queen forms a new Government. The uncomfortable situation was tested on Friday, when the US Treasury Secretary, Tim Geithner, called an emergency teleconference with other G7 finance ministers – something about which the would-be Chancellors were only consulted on by the permanent secretary at the Treasury, Nick Macpherson.

On the other hand, the opportunity for Cameron to bargain for the return of EU competences that I predicted is fast approaching, is all it requires is a tory administration in power to ask for those competences back, as opposed to Lab/Lib who will roll over and permit an EMF with no price-tag attached.