Euro Area

[gaelic cowboy]

Yes, self-interest. Your hypothetical example works fine on paper, but let's say that amounts aren't 100 and 90, but 100,000 and 90,000 respectively. Let's say that Furunculus owns a small business where two of his children work and he needs that money to keep afloat in these difficult times.

In this case he has to choose whether he and his children lose their jobs and their incomes or to give you more money... Not a difficult choice really.

Or to give you another example, Furunculus might owe banks or other businesses some money and he's must get it. Or he needs it to finish his house and stop paying rent.

You can't really cancel out debts that easy.



If they accept the measures there would be no need to go back to drachma.

I don't think you guys fully appreciate the gravity of the Greek inflation if drachma is reintroduced. We're not talking 10%, 20%, 30% percent a year, but 50%.... 100%.... 500%...... sky is the limit really.

No economy can function in that kind of inflation. Besides businesses going bust, it's even easier for corruption to spread...

We might see massive violence, uprisings, potentially revolution... none of that sits well with the biggest Greek export - tourism.

As long as the ECB does nothing to squash this thing like a bug then this problem will not go away.

The balance sheets of banks will not be saved by heaping more debt onto already indebted sovereigns.

Essentially Greece needs to be allowed renege on it's debt or else no one will get any money back at all.

[Beskar]

will this be enough?
http://www.telegraph.co.uk/finance/f...edemption.html

That actually sounds like what I was proposing, but more limited. Perhaps the EU should have courted me for advice those years ago when I said about it on these forums.

[gaelic cowboy]

EU Weighs Direct Aid to Banks, Euro Bonds as Crisis Antidote

The European Commission called for direct euro-area aid for troubled banks, and touted a Europe- wide deposit-guarantee system and common bond issuance as antidotes to the debt crisis now threatening to overwhelm Spain.

The commission, the European Union’s central regulator, sided with Spain in proposing that the euro’s permanent bailout fund inject cash to banks instead of channeling the money via national governments. It also offered Spain extra time to squeeze the budget deficit.

The use of the rescue fund to recapitalize banks “might be envisaged” and would “sever the link between banks and the sovereigns,” the commission said today in Brussels. Jose Barroso, the commission’s president, said “it is important to use all possibilities offered in terms of flexibility.”

Spoiler Alert, click show to read: 

Proposals for more liberal use of European bailout money are likely to face resistance in creditor countries such as Germany, Finland and the Netherlands, the scenes of growing taxpayer opposition to more aid.

Signs of stress multiplied in financial markets today. Italy missed its target in a bond auction, driving its 10-year yields as high as 6.01 percent, the highest since Jan. 31. The yield was at 5.95 percent at 2:10 p.m. in Brussels. Doubts over the health of Spain’s banks pushed up Spanish 10-year yields as high as 6.70 percent, the highest since Nov. 28. That yield was last at 6.62 percent.

‘Exceptionally Tense’
After more than two crisis-filled years and 386 billion euros ($480 billion) in loan pledges to Greece, Ireland and Portugal, “markets remain exceptionally tense and vigilant and confidence is still weak,” the commission said.

The euro has tumbled 6 percent in May, hit first by concern that Greek voters will reject bailout conditions, then by worries that Spain will be forced to fall back on a European lifeline. The currency pared today’s decline after the commission floated the bank-recapitalization ideas. It last bought $1.2441.

Spain, the 17-nation euro area’s fourth-largest economy, is trying to simultaneously plug holes in regional budgets and detoxify its banks, all while struggling to lift the economy out of

Germany Leads Opponents
Current EU plans call for the 500 billion-euro European Stability Mechanism, set to start up in July, to funnel bank-aid money through national governments and, ultimately, require those governments to pay it back.

Germany is spearheading resistance to direct European financing for banks because that would let governments bypass the conditions set for full aid programs, such as deeper budget cuts and more European intrusion into economic management.

“Direct help for banks is out of the question, that won’t fly,” Norbert Barthle, the budget spokesman in parliament for Chancellor Angela Merkel’s Christian Democratic Union, said in an interview yesterday. Finland is in Germany’s camp, Martti Salmi, a Finance Ministry official, said in a telephone interview today.

The commission appealed for a “banking union” that would more tightly integrate supervision and create a pool of European funds to clean up banks with cross-border exposure and segregate their underperforming assets.

“It’s hard enough to bail out local banks let alone non- domestic banks,” said Harvinder Sian, a London-based fixed- income strategist at Royal Bank of Scotland Group Plc. “A crisis lesson so far is that big ideas coming from Brussels or the guys taking the money are noise up until the point that the Germans get on the same page.”

Transparency
Part of the solution lies in “correct and transparent risk recognition” instead of putting off the reckoning, the commission said. In the wake of the European Central Bank’s unprecedented 1 trillion euros in long-term loans, some banks are still using the funds to buy sovereign bonds, binding them more closely to financially shaky governments, the commission said.

The central bank’s “accommodative” monetary policy with interest rates at 1 percent limits its scope for spurring the economy, the commission said. It estimated on May 11 that the euro economy will contract 0.3 percent in 2012.

The debt crisis contributed to a greater-than-expected slump in economic confidence in the euro area in May, data showed today. The commission’s index of executive and consumer sentiment fell to 90.6, the lowest since October 2009, from a revised 92.9 in April.

More Austerity?

In an assessment by staff economists, the commission said there is little room for deficit-plagued countries to push back planned savings to a later date. Such an easing-up would be punished by markets, it said.

“Member states which face high and potentially rising risk premia do not have much room for maneuver to deviate from their nominal fiscal targets, even if macroeconomic conditions turn out worse than expected,” according to the document.

Still, Economic and Monetary Commissioner Olli Rehn said Spain might be granted an extra year, until 2014, to bring its deficit down to the limit of 3 percent of gross domestic product.

The commission would only make that concession if Spanish Prime Minister Mariano Rajoy’s government delivers a “solid, two-year budget plan for 2013 and 2014,” Rehn told reporters.

Credibility Factor
The commission, which gained new powers to police national budgets in response to the crisis, is trying to crack down on deficits without imposing policies that crimp the economy.

“Credibility of consolidation is one of the key factors,” it said.

The commission kept alive the debate over common borrowing by euro-area governments, already rejected by Merkel as at best a goal for the long term and not a way out of the current turmoil.

Debate over euro bonds flared at last week’s summit of European leaders, the first for French President Francois Hollande after he took office vowing to challenge the German- dominated budget-cutting creed that has marked the crisis response.

Ideas include a debt-redemption fund proposed by Germany’s council of economic advisers and different types of “stability bonds” sketched out by the commission last year. The commission is now working on more concrete proposals.

Passage of a deficit-limitation treaty and the adoption of two laws that further enhance central oversight of national budgets will help pave the way toward common bond sales, the commission said.

“The successful application of the new economic governance framework already in force and in the process of being put in place may be a significant step towards fulfilling the preconditions for common issuance,” the commission said.

The ECB will shoot this down right quick I expect.

[Fragony]

Highly inlikely that we will be playing even if Germany caves in.

The good part about the crisis, we have a 33% rise of foreign students, and there is more than enough work for them here. The problem here in the Netherlands isn't unemployment we are short on hands. So this is good for us. But not for southern-europe, how will they ever have a chance of recovering if the young and talented have no reason to stay there. The PIGS are truly doomed.

[Furunculus]

The only question that matters, exposing the central flaw of the project:

http://blogs.telegraph.co.uk/finance...pain-or-italy/

"If Spain’s governance model – based on a series of delicate compromises to reconcile different cultures and historical experiences – is so sensitive to any move in the direction of more centralisation, how easy will it be for the Eurozone to achieve fiscal federalism amongst 17 countries, with vastly different parliamentary and economic models, government structures, and cultural preferences?"

[Fragony]

Flaw in te project isn't economical, it's idealism. Barosso and that Rompuy guy who always looks like an owl that just fell out of it's tree will want to unite Europe in a socialist superstate at all cost. The 12th of september we will have new elections and the EU is on the menu. While I have always had respect for Wilders I would never vote on him but now I will. We need to get out of the EU or get dragged down by the garliczone.

[Philippus Flavius Homovallumus]

This was an interesting piece from Hannan: http://blogs.telegraph.co.uk/news/da...and-prejudice/

I largely concur - in the UK not supporting the EU and Euro was seen as a sign of "anti-Europeanism" or just "bigotry" - I have been there myself.

I suspect it is the same on the Continent - especially in Germany.

Don't mention the War! Just use it as a stick to beat Fritz for all eternity.

[Fragony]

Over here they call you a 'populist' if you aren't 100% sure about Europe. That those who they call populists get it right each and every time is meeted with europhiles being united in silence.

[Furunculus]

a reason for ireland to vote "no":
http://www.davidmcwilliams.ie/2012/0...e-things-worse

[gaelic cowboy]

a reason for ireland to vote "no":
http://www.davidmcwilliams.ie/2012/0...e-things-worse

As it is I think the government will scrape by in the vote but it will barely do so.

[Furunculus]

does look that way.

[Fragony]

a reason for ireland to vote "no":
http://www.davidmcwilliams.ie/2012/0...e-things-worse

Tne Irish will be the receivers. Here we supposed to absolutely adore giving away 40.000.000.000 to the EU, and they haven't even mentioned the worst part, that these 40.000.000.000 are just a pledge to loan 260.000.000.000 more

[gaelic cowboy]

Tne Irish will be the receivers. Here we supposed to absolutely adore giving away 40.000.000.000 to the EU, and they haven't even mentioned the worst part, that these 40.000.000.000 are just a pledge to loan 260.000.000.000 more

Well dont let them do it then Frag we must pray Ireland rejects the treaty so it is impossible for the ESM to lend to Ireland next year.

I have said a hundred times now that merely transfering these debts to soverigns is not working.

Time for a new solution.

[Fragony]

Well dont let them do it then Frag we must pray Ireland rejects the treaty so it is impossible for the ESM to lend to Ireland next year.

I have said a hundred times now that merely transfering these debts to soverigns is not working.

Time for a new solution.

First out, tnen forward. Keep the euro as a currency allongside our own, perfectly possible no? Let the euro fall and things will recover in th south, and here we won't even notice it

[Sarmatian]

Let the euro fall and things will recover in th south

And here is the core of all mistakes. No, they won't. They'll become worse.

Euro's not the cause of the crisis, dismantling it is not the solution, especially not for the countries like Greece.

[Fragony]

And here is the core of all mistakes. No, they won't. They'll become worse.

Euro's not the cause of the crisis, dismantling it is not the solution, especially not for the countries like Greece.

If we have our own currency then why not, we just keep the euro to pay for cocktails in the south.

[Sarmatian]

If we have our own currency then why not, we just keep the euro to pay for cocktails in the south.

Because the Greek debt isn't in drachmas, it's in euros. They have to pay it back in euros. They can't print drachmas to pay it.

Their import is bigger than their export, tourism included, which means constant inflation. Equilibrium will be reached when they stop importing more than they export, which means lower living standards in the end.

They've been living above their means for a looong time. Tightening the belt is what awaits them, euro or drachma.

[Fragony]

Because the Greek debt isn't in drachmas, it's in euros. They have to pay it back in euros. They can't print drachmas to pay it.

Their import is bigger than their export, tourism included, which means constant inflation. Equilibrium will be reached when they stop importing more than they export, which means lower living standards in the end.

They've been living above their means for a looong time. Tightening the belt is what awaits them, euro or drachma.

Kthbye these debts, we take our loss, we move on.

[gaelic cowboy]

And here is the core of all mistakes. No, they won't. They'll become worse.

Euro's not the cause of the crisis, dismantling it is not the solution, especially not for the countries like Greece.

Yes it is the cause of the crisis sure Greece is only a piddliing little bit of the entire eurozone and yet it is causing pure panic.

The reason is both electorates nad these "Market People" are only waking up to the fact the entire structure of the currency is defective.

As long as the present structure is maintained then Bailouts will not work as they presently are supposed to work.

[gaelic cowboy]

Because the Greek debt isn't in drachmas, it's in euros. They have to pay it back in euros. They can't print drachmas to pay it.

Their import is bigger than their export, tourism included, which means constant inflation. Equilibrium will be reached when they stop importing more than they export, which means lower living standards in the end.

They've been living above their means for a looong time. Tightening the belt is what awaits them, euro or drachma.

The you just have to draw a line under a bad investment in Greek private or public debt.

If you try to force Greec to attempt to pay these debts back you end up endangering the whole dam thing.

[gaelic cowboy]

If we have our own currency then why not, we just keep the euro to pay for cocktails in the south.

They told us currency differentials in value and interest rates were a bad thing between European countries.

now we know thats total lies and in fact outright idiocy.

[Fragony]

They told us currency differentials in value and interest rates were a bad thing between European countries.

now we know thats total lies and in fact outright idiocy.

You agree with a splitup, i will take your advice over an eurocat's dream of unicorns and rainbows every time.

Time to get serious imho, no matter how nasty it will be for some, we have no obligation whatsoever don't count on me. France lowers the pension age to 60, I say we go for 70 just to get out of the Great Suffocation. It is worth it imho.

[Philippus Flavius Homovallumus]

Because the Greek debt isn't in drachmas, it's in euros. They have to pay it back in euros. They can't print drachmas to pay it.

Their import is bigger than their export, tourism included, which means constant inflation. Equilibrium will be reached when they stop importing more than they export, which means lower living standards in the end.

They've been living above their means for a looong time. Tightening the belt is what awaits them, euro or drachma.

Greece may still be stuck paying debt in Euros but it will be able to sell it in Drachmas, that's the point.

Anyway, as Galic said, this isn't just about Greece - it's about the whole structure, Greece is just where the pus is nearest the surface.

[gaelic cowboy]

Yes, self-interest. Your hypothetical example works fine on paper, but let's say that amounts aren't 100 and 90, but 100,000 and 90,000 respectively. Let's say that Furunculus owns a small business where two of his children work and he needs that money to keep afloat in these difficult times.

In this case he has to choose whether he and his children lose their jobs and their incomes or to give you more money... Not a difficult choice really.

Or to give you another example, Furunculus might owe banks or other businesses some money and he's must get it. Or he needs it to finish his house and stop paying rent.

You can't really cancel out debts that easy.



If they accept the measures there would be no need to go back to drachma.

I don't think you guys fully appreciate the gravity of the Greek inflation if drachma is reintroduced. We're not talking 10%, 20%, 30% percent a year, but 50%.... 100%.... 500%...... sky is the limit really.

No economy can function in that kind of inflation. Besides businesses going bust, it's even easier for corruption to spread...

We might see massive violence, uprisings, potentially revolution... none of that sits well with the biggest Greek export - tourism.

There will be inflation for things like energy but apart from that it wouldnt be half as much as you think.

Hyperinflation has only every happened where you try to sustain a link with say the dollar or the gold standard within a depreciating currency. In this case the unsustainable link is the Euro which requires the economy to be deflated in order to pay interest.


All that really needs to happen is for the debt to be repudiated this will lessen the need for extra money supply to be created. Since the debt is unsustainbale anyway it should just be wrote off and the ECB should cover any Eurozone bank losses.

Hyperdeflation is every bit as bad as hyperinflation if not worse cos it's eroding confidence in the the currency with outsiders and northeren electorates.

[gaelic cowboy]

Greece may still be stuck paying debt in Euros but it will be able to sell it in Drachmas, that's the point.

Anyway, as Galic said, this isn't just about Greece - it's about the whole structure, Greece is just where the pus is nearest the surface.

If this craic continues it will rot the guts of the spanish banking system and then we all of us will be in a World of

Already I have seen figure quoted on bloomberg of 66 billion removed in april from spanish banks, likely both domestic and foreign multinationals safeguarding there accounts. It happened here too before the bailout our banks kept requiring emergency liquidity in order to sustain deposits for ordinary households. The ECB didnt like been on the hook hence the bailout.

Unfortunately for ireland we were small so they could ignore us, but listen to the talk now of banking unions etc etc direct lending to institutions from bailout funds, these are precisely the sort of measures that should have been implemented 2-3 yrs ago.

It would have stopped at Greece if it had been done earlier.

Also lets remeber the fiscal treaty actually doesnt do anything to fix the rotten state of eurozone banks, in fact it has nothing to say about them amazing seeing as they are at the core of both symptom and disease.

[Fragony]

For teh Dutchies, teh professor already predicted this in 1996 http://www.nieuwelan.nu/nieuws/fortu...panje-uit-1996 and they laughed at him, demonised him, and murdered him by proxy.

Who is right now

And now that Flemish ferret who always looks like an owl that fell out of his tree and his Portugese waiter and a German booksalesman come with a new plan, MOAR Europe.


"Let me be clear: there is no way back for the euro, only the way ahead towards more integration."

Que? Did I ever vote on you? Who are you? How did you get there? By what mechanism?


Insanity: doing the same thing over and over again and expecting different results.
Albert Einstein, (attributed)
US (German-born) physicist (1879 - 1955) #

[Furunculus]

A senior EU official said even Germany's Social Democrats are cooling on eurobonds. "They looked at the polling data and shivered. The German people are not willing to send money into a bottomless pit,"

http://www.telegraph.co.uk/finance/f...contracts.html

[Fragony]

http://www.telegraph.co.uk/finance/f...contracts.html

It would cost Germany and the Netherlands their tripple a status if we go for that. What does biggest supporter do, France lowers the retirement age when it should go up. Having to pay for the socialism, people are really fed up with it over here. Letting the socialism feed upon itself is an increasingly common thought here

[gaelic cowboy]

It would cost Germany and the Netherlands their tripple a status if we go for that. What does biggest supporter do, France lowers the retirement age when it should go up. Having to pay for the socialism, people are really fed up with it over here. Letting the socialism feed upon itself is an increasingly common thought here

Hmm time for an all night summit where we agree to another summit later on, then everyone can vote the Irish can vote on a new treaty that ignores the actual problem.

Yes worrying about a budget deficit in Austria, France or wherever else you care to mention will solve banks runs in Spain, Italy or Cyprus.



edit

'Risk premium' shows Spain locked out of markets: minister

We are these clowns have let Spain fall off a cliff they dont have enough money to bail her out, bailin knockout.

G7 to hold emergency euro zone talks, Spain top concern

This thing could actually go down now for it will only take one wrong step or press leak, I never in my wildest dreams believed they actually would let this happen. Foolishly I thought they actually were fearful of a eurogeddon collapse, hell it is like refusing to evacuate when a row of terraced house catches fire.

Are we even on the same planet as these people.

[Brenus]

"Insanity: doing the same thing over and over again and expecting different results." Do you mean e.g. 9 Austerity Plans for Greece and an even bigger debt than when it all started?

"France lowers the retirement age when it should go up" Why it should go up?" To kill people before retirement as it is happening in the 8 European Countries that just did it? That is a solution to resolve the pension, I grant you this. But for the youth unemployment, I doubt.
Of course 6 on 10 of the + 60 are yet out of job due to illness and employment. So to postpone retirement is just done in order to cut on cost, not because "we live longer so we have to work longer". Welcome in the Liberal? Capitalist Financial world where Profits trump Humans.
We lived longer because we stop to work earlier but apparently it is not allowed to live old and Healthy for the average person.