Euro Area

[gaelic cowboy]

As you have so eloquently pointed out if a country leaves the euro "the ECB may require all member states to pay for the shortfall as per there share of the overall ECB". Well the Spanish and Italians can't pay and France is not too healthy so who makes good the shortfall?.

Thats why no one will be asked to leave at least not big countries anyway, although it has still not been shown how someone can leave yet by countries who talk about forcing such things.

Thats why Germany is growing it's Target 2 credit by engaging in a massive trading surplus with EZ members, this will give it the credit at the ECB to pay for it's 18% share of the ECB.

Of course The ECB can print as many Euro as it likes and frankly it doesnt have to take a blind bit of notice of the Bundesbank cos were talking about a winding up of the Euro here.

As for the printing money option the ECB tried that with the LTRO 1 and 2 cash injections into banks. The banks then bought their Governments debts and now face massive losses. Germany, for historical reasons (the hyper inflation of the 1920s) will not alow the ECB to print endless money. Mario Draghi says it is not the job of his institution to sort out the finances of EMU states. Its task is to ensure "price stability" ie. inflation.

At the minute were experiencing massive deflation which is just as deadly and Germany is one member of a larger board, they cannot stop every decision just like they couldnt stop LTRO.

It now transpires that the Spanish bank bailout is to be guaranteed by the sovereign so in effect it was a 'full fat' bailout just that the bailout money doesn't take precedence over other investors (as it did with Greece). Spanish papers say Spain may leave the euro but no doubt this is a threat for softer terms.

Indeed just as I said could potentially happen about 50-60 pages back when I created this thread originally.

At the time I warned that if sovereigns were not separated from things like bank debt or the said debt was not inflated away then we were only going one way.