Euro Area

[Tellos Athenaios]

@Furunculus: that would be true if the EU debt weren't so interlinked and locked up inside the EU itself. For instance if Germany suddenly decides it really doesn't care about what some RA thinks about Greece, then it means Greece doesn't need to either. That's obviously a stupid example, but the point is that the creditors have gorged themselves so much on the worthless bonds that they are in turn reliant on the EU not to let them drown in it. At which point it is no longer clear who is indebted to whom.

[Furunculus]

There are many ways in which they can ignore the ra's. For instance most European institutional investors are now legally obliged to sell holdings if their rating drops beneath a certain level, but laws can be repealed and incentives granted or taken away.

Most importantly we should realise that a Greek default is not nearly as dramatic as that of Lehman's. It's only our bankers and big investors who keep telling us that is it.

AII

those nations still have to borrow, so i ask you who will lend to them?

Italy has to roll-over £60b alone in the next eighteen months! note that i said "roll-over" and not "pay off".

You can ignore the ratings agencies, or kill them as the messenger of ill news, but that will only chase away capital to asia, not solve europes problems.

I really will let rip with a throaty guffaw if the continent starts mucking around with the ratings agencies, for while it is possible to pity tragedy, i have only contempt for farce!

[gaelic cowboy]

Uh oh thats three dominoes down how long for the next one

[Adrian II]

those nations still have to borrow, so i ask you who will lend to them?

Those same creditors wil. It's in their interest.

Look, the US is in profound doodoo with it's national debt, right? Yet it isn't. The Chinese are committed to propping up the US till kingdom come because they have a huge stake in the US economy and in international financial stability. The same goes for banks, institutional investors and major hedge funds that have significant holdings of European debt. If the GIPS nations go, they go.

By the way, the irony which you don't seem to appreciate is that the big three ra's helped to get us here in the first place.

AII

[Centurion1]

Those same creditors wil. It's in their interest.

Look, the US is in profound doodoo with it's national debt, right? Yet it isn't. The Chinese are committed to propping up the US till kingdom come because they have a huge stake in the US economy and in international financial stability. The same goes for banks, institutional investors and major hedge funds that have significant holdings of European debt. If the GIPS nations go, they go.

By the way, the irony which you don't seem to appreciate is that the big three ra's helped to get us here in the first place.

AII

The US is more vital on the international scale than the nations most direly affected by the current economic climate. if a couple of those default or even all of them the impact will be far less that the fallout from a US default or rating slip.

[Adrian II]

The US is more vital on the international scale than the nations most direly affected by the current economic climate.

Exactly. Yet even there we see no genuine panic. The powers that be will find a way to deal with most of these debt issues and you and I as tax payers will find a way to foot the bill. In the end we're all to blame for the credit bubble, despite all the childish protests about 'them' robbing 'us' blind. My greater worry is that necessary changes to the system take so long in this interdependent world. And real shocks to the system cannot be excluded. Even China's economy isn't exactly rock solid; what if they suffer a major depression and the Chinese financial bubble bursts like the Japanese bubble did in 1992?

AII

[Furunculus]

Those same creditors wil. It's in their interest.

By the way, the irony which you don't seem to appreciate is that the big three ra's helped to get us here in the first place.

no they won't, china was notable in its support of non-threatened eurozone debt in buying from hungary last week, it didn't throw money in the direction of athens or madrid!

sure, the ratings agency got things wrong, lifes a bitch, but the reason why it has resulted in an existential threat is due directly to the absurdities of the eurozone and its governance. to quote someone famous; don't throw the thermometer away when the temperature rises.

To repeat; I really will let rip with a throaty guffaw if the continent starts mucking around with the ratings agencies, for while it is possible to pity tragedy, i have only contempt for farce!

[Centurion1]

Exactly. Yet even there we see no genuine panic. The powers that be will find a way to deal with most of these debt issues and you and I as tax payers will find a way to foot the bill. In the end we're all to blame for the credit bubble, despite all the childish protests about 'them' robbing 'us' blind. My greater worry is that necessary changes to the system take so long in this interdependent world. And real shocks to the system cannot be excluded. Even China's economy isn't exactly rock solid; what if they suffer a major depression and the Chinese financial bubble bursts like the Japanese bubble did in 1992?

AII

The problem being as always that you can only patch a blown life tube with duck tape so many times. At what point will this current concept of an economic hotfix simply backfire and we are actually all screwed. Besides that obvious problem which politicians like to ignore is the more personal issue of how absolutely wrong (but I'm not naive so wth should I bother bringing morality and ethics into politics) and irritating it is to have to pay for irresponsible people who on 40 grand a year decided they deserved a 500k home. Why shouldn't I be irresponsible and buy my girlfriend expensive jewelry, upgrade from my seiko watch to a rolex, and buy a BMW. Hell I'm only 18 but i literally have the money to do all three of those things. But I do not because I am a damn responsible person with my finances and do not blow them all on frivolous things. In the end every bubble must pop and eventually the entire global economy which has been growing dramatically since WW2 will pop all the same as a child's soap bubble.

[Ronin]

no they won't, china was notable in its support of non-threatened eurozone debt in buying from hungary last week, it didn't throw money in the direction of athens or madrid!

but it has just a month or so ago....

[Furunculus]

but it has just a month or so ago....

i would be surprised if such purchases continue given the shift to countries like hungary.

[Adrian II]

To repeat; I really will let rip with a throaty guffaw if the continent starts mucking around with the ratings agencies, for while it is possible to pity tragedy, i have only contempt for farce!

Oh please, not even the Chinese give a hoot about what Fitch & Co think.

AII

[Fragony]

Yay junk status for Ireland, thankfully eurocrats know for a fact that it simply isn't true. NEINNEINNEIN

[Tellos Athenaios]

Oh please, not even the Chinese give a hoot about what Fitch & Co think.

AII

... Which I would say is 10/10 for the Chinese in considering the actual financial circumstances of whatever it is they're rating. Assuming that the job of a rating's agency is to give a fair gauge of the financial situation of their ratings' subjects anyway.

[Adrian II]

Yay junk status for Ireland, thankfully eurocrats know for a fact that it simply isn't true. NEINNEINNEIN

Eurocrats are raising a 1500 billion emergency fund for the GIPS precisely because they do know. Jawohl!

I appreciate your criticism of the EU for what it's worth, but a few facts now and then would make it more relevant.

You want an interesting factoid? Herman van Rompuy who was Belgian finance minister during the run-up to Greek accession to the eurozone (and is now President of the European Council) recently said in an interview that already in those days the EU finance ministers knew that Greece was a major financial risk. They're nobody's fool, you know, but they operate in an almost surreal environment called the City of Debt which is like a Gotham City build from paper. And with no Batman around.

AII

[gaelic cowboy]

Yay junk status for Ireland, thankfully eurocrats know for a fact that it simply isn't true. NEINNEINNEIN

Such a laugh watching them on the telly talking about how there baffled by the RA junking Irelands bonds, "But but Ireland is sticking to the plan"

The plan is the reason Irelands bonds are junk.

[Furunculus]

Oh please, not even the Chinese give a hoot about what Fitch & Co think.

AII

you can't have it both ways adrian, either the RA's make a difference, and caused financial armageddon, or they are an irrelevance totally ancillary to China's own judgement on the likelihood of its foreign investments going down the pan. which is it to be?

[Adrian II]

either the RA's make a difference, and caused financial armageddon, or they are an irrelevance

Both, sadly. We have legally and politically committed ourselves to their ratings, but behind the screens we all know better. If we stop granting them credibility, as they amply deserve, we'll all be better off.

I already mentioned the example of the EU finance ministers who were perfectly aware of Greece's troubles by 2002 when Fitch & Co were still giving Athens an AAA rating. Think Enron, subprime crisis, Lehman Brothers. Their credit ratings are as toxic as any Greek bond is nowadays. It is quite possible that they are speculating against the euro in the interest of some large clients, who knows. The SEC is still investigating them over their shady role in the subprime crisis and Lehman's demise. Yet you want to trust them? Dream on, bro, dream on.

AII

[Furunculus]

i feel like my false consciousness is be being called into question.

[Adrian II]

i feel like my false consciousness is be being called into question.

I have that every day. Luckily my Bourjwah-Fu is strong enough.

AII

[Furunculus]

european banks to take a hammering when markets open on monday morning:

http://www.telegraph.co.uk/finance/f...ving-test.html

no doubt the fault of the vile speculators and their neo-liberal running-dogs the ratings agencies!

[Fragony]

I don't know nearly enough about economy to join in, but I didn't they call for more stern control after the Enron stuff when it suited them. If rating buro's are madness than the world must be mad

[InsaneApache]

Not mad. Insane.

[Ronin]

european banks to take a hammering when markets open on monday morning:

http://www.telegraph.co.uk/finance/f...ving-test.html

no doubt the fault of the vile speculators and their neo-liberal running-dogs the ratings agencies!

so the test were too easy...like the earlier tests that were too easy also.

let me take a gander at what the yard stick would be for a "good test"...if all the banks failed it would be a good test I guess.

[gaelic cowboy]

Ireland's banks passed this time if you can believe that, How did they pass you ask, well tis simple really we set stricter targets for a pass.

[Furunculus]

so the test were too easy...like the earlier tests that were too easy also.

let me take a gander at what the yard stick would be for a "good test"...if all the banks failed it would be a good test I guess.

nonsense on stilts!

there are recognised flaws, and fundamental ones at that, with the euro bank tests. like not accounting for the potential of a sovereign default, something of an oversight you might agree given that greece is about to restructure its debt any day now............ which is a default in anyones language.

the tests serve two purposes:
1. so europe and its nations can assess the scale of the problem
2. to provide certainty to lenders in order that they should continue to lend with confidence

the tests have failed the second criteria, and the markets will feel that lack of confidence when they open on monday.

it is that simple.

http://www.telegraph.co.uk/finance/f...ess-tests.html

[Philippus Flavius Homovallumus]

Incoming Portugese PM identifies budget hole left by outgoing government (sound familiar) and now he's getting angry at the EU.

http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100010873/portugal-loses-patience-with-europe/

[Adrian II]

european banks to take a hammering when markets open on monday morning:

So when's the hammering?

AII

[Louis VI the Fat]

So when's the hammering?

AII

Taking place right now, banks are being hammered as we speak in Wall Street. From Bank of America to Goldman Sachs. Serves the Yanks right for joining the Euro, I've warned them all along that nothing good would come out of that currency.

[Vladimir]

It's the old colonial masters and their one world gobermnt trying to impose the NWO on us.

[InsaneApache]

I thought this anecdotal. I was talking to my dads wife last week and she was telling me how bad things had got in Greece this last year or so. She mentioned that when they first moved there crime was virtually unknown. She said that when she went into shops she would leave the car unlocked and nowt would be pinched.

All that has changed. In the last few months, a lot of her friends had been burgled. A thing unknown on the island. She now makes sure that everything is locked all the time. She sounded quite fazed about it.

I listened and we chatted for a while. I thought no more of it. Then I read this...

Greece is tightening its belt -- and the number of people living in poverty is surging as a result. Thousands line up in front of food banks and resort to rifling through rubbish bins. The country's financial crisis is rapidly turning into a social one -- while wealthy tax evaders manage to get off scot-free.

http://www.spiegel.de/international/...html#ref=nlint

Are we really looking at people starving in Europe? Not since the second world war has any population in Europe been faced with starvation.

Then Barrosso says this....

(Reuters) - European Commission President Jose Manuel Barroso warned on Wednesday that the euro zone was facing a very serious situation that could have repercussions for the global economy but said a solution was still possible.

In a statement ahead of a summit of the 17 euro zone leaders on Thursday, Barroso said it was essential the meeting comes up with an agreement that improves the sustainability of Greek public debt, provides liquidity to the European banking system and secures the involvement of the private sector in a deal.

"Nobody should be under any illusion: the situation is very serious. It requires a response, otherwise the negative consequences will be felt in all corners of Europe and beyond," Barroso said.

"The elements for a solution are known," he said, adding that the ingredients had to include: measures to ensure the sustainability of Greek public finances, the feasibility of private sector involvement, scope for more flexible use of the euro zone's bailout fund, the EFSF, and the repair of the region's banking system with more liquidity.

http://www.reuters.com/article/2011/...7IB02120110720

Grim. Very grim.