France wants the euro region's European Central Bank (ECB) to be a backstop for an expanded EFSF, currently guaranteed by eurozone governments. Germany, the eurozone's economic powerhouse, and the central bank itself are unwilling, seeing such as move as outside its role. "We think that clearly the best solution is that the fund has a banking licence with the central bank," Francois Baroin, the French finance minister, said on Wednesday. "Everyone knows about the reticence of the central bank. Everyone also knows about the Germans' reticence." Throughout the two-year debt crisis, Berlin has argued for solutions in which the private sector debt holders are more exposed to losses. "In Germany, the coalition is divided on this issue. It is not just Angela Merkel who we need to convince," Mr Sarkozy was reported to have told colleagues on Wednesday. A senior EU source said the negotiations were proving "very difficult", with the size of the haircut to be given on Greek debt held by private investors also an issue. The depth of the tension emerged even as markets were boosted by a report on Tuesday night that France and Germany had agreed, through an alternative plan, to expand the rescue fund's firepower to €2 trillion. Under this proposal, the rescue fund would guarantee the first 20pc or so of any losses of distressed governments' debt, meaning its stretch would be up to five times greater. Investors shrugged off the news that Spain's credit rating had once again been downgraded, with Moody's, one of the triumvirate of top rating agencies, cutting it by two notches to A1. The FTSE 100 closed up 40.14 points of 0.7pc at 5,450.49.
Access Investments-Building Awareness - European Union-ROMANIA
Thursday, October 20, 2011
France wants the euro region's European Central Bank (ECB) to be a backstop for an expanded EFSF, currently guaranteed by eurozone governments. Germany, the eurozone's economic powerhouse, and the central bank itself are unwilling, seeing such as move as outside its role. "We think that clearly the best solution is that the fund has a banking licence with the central bank," Francois Baroin, the French finance minister, said on Wednesday. "Everyone knows about the reticence of the central bank. Everyone also knows about the Germans' reticence." Throughout the two-year debt crisis, Berlin has argued for solutions in which the private sector debt holders are more exposed to losses. "In Germany, the coalition is divided on this issue. It is not just Angela Merkel who we need to convince," Mr Sarkozy was reported to have told colleagues on Wednesday. A senior EU source said the negotiations were proving "very difficult", with the size of the haircut to be given on Greek debt held by private investors also an issue. The depth of the tension emerged even as markets were boosted by a report on Tuesday night that France and Germany had agreed, through an alternative plan, to expand the rescue fund's firepower to €2 trillion. Under this proposal, the rescue fund would guarantee the first 20pc or so of any losses of distressed governments' debt, meaning its stretch would be up to five times greater. Investors shrugged off the news that Spain's credit rating had once again been downgraded, with Moody's, one of the triumvirate of top rating agencies, cutting it by two notches to A1. The FTSE 100 closed up 40.14 points of 0.7pc at 5,450.49.
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5 comments:
keep reading the same story, vainly and thinly disguised in various habits and colors with occasionally novel theatrics, a rattle or two heard in the background and much-needed fluff, when they report on the Debt Struggle and discuss the unbelievable and unreasonable comments from those political leaders who should understand this problem.
The debt is too high and there is NO WAY to raise funds to cover this debt even in the debt service segment, and any more QE will only hike the already absurd debt levels beyond 100% of the GDP of all players [and some past %160] and then some.
Here is some truth:
"Talking of a €2 trillion fund is Wizard of Oz smokes and mirrors," said Gary Jenkins at Evolution Securities. "If the funds are used to provide a first loss guarantee, there is no leverage of the EFSF, the funds committed remains the same."
Where does this 2 trillion come from? IF this money is used to forgive debt then the argument becomes circular as debt is used to erase debt, an absurdity. What investor would stick even a farthing or two into this furnace? The net debt-to-combined GDP of the EU members is pushing 80% now so what would another 2T do? 2T is 2/15T or another 13% added.
And, most of all: when does the growth come from to pay back this mountain of debt?
None of this works.
keep reading the same story, vainly and thinly disguised in various habits and colors with occasionally novel theatrics, a rattle or two heard in the background and much-needed fluff, when they report on the Debt Struggle and discuss the unbelievable and unreasonable comments from those political leaders who should understand this problem.
The debt is too high and there is NO WAY to raise funds to cover this debt even in the debt service segment, and any more QE will only hike the already absurd debt levels beyond 100% of the GDP of all players [and some past %160] and then some.
Here is some truth:
"Talking of a €2 trillion fund is Wizard of Oz smokes and mirrors," said Gary Jenkins at Evolution Securities. "If the funds are used to provide a first loss guarantee, there is no leverage of the EFSF, the funds committed remains the same."
Where does this 2 trillion come from? IF this money is used to forgive debt then the argument becomes circular as debt is used to erase debt, an absurdity. What investor would stick even a farthing or two into this furnace? The net debt-to-combined GDP of the EU members is pushing 80% now so what would another 2T do? 2T is 2/15T or another 13% added.
And, most of all: when does the growth come from to pay back this mountain of debt?
None of this works.
wonder why they even bother. The latest proposal is already dead in the water.
They actually imagined that it would be a smart move to insure newly issued debt against up to 20% losses. This is fatal in two separate ways.
First, it sets up a two-speed market, with new debt more attractive than existing debt, which will lead to the counter-productive process of old debt being shorted and sold off even more sharply than it has been.
And secondly 20% is a pointless number. No country is going to take the reputational damage of default just to save itself 20%. Look at Greece. While the EU leaders are offering to insure against a 20% loss they are proposing a 50+% haircut for Greek debt. Do they think investors are stupid?
If you give Greek debt a 20% haircut, Greece will still default, maybe a few months later, with 60+% losses.
Offering to insure the first 20% of losses is like setting fire to your house and hoping that only 20% of the structure will be damaged. That's not how fire works
Help us help put some courage and Back Bone into the Conservative Back Benches.
Let us remind them why they are UK Conservative MPs Let’s ALL email Conservative Party HQ (Contact us) http://www.conservatives.com/I... and inform them that their leader is the single most likely cause of the Labour Party returning to power in 2015.
No one person is Greater than the Party - perhaps it's time WE ALL reminded the Conservative Party who it is who ultimately has the power????
I already did. I hope that if you take the same time to tell them what you tell us daily that they will FINALLY get the message.
To save you some time - just cut and paste my message - I'm sure they will get our message and SO WILL DAVE!
"As a lifelong supporter of the Conservative Party, I'm stunned that David Cameron would choose a 3 line Whip to force Conservative MPs to vote against next weeks EU Referendum Debate - which over 100 THOUSAND UK taxpayers took the time to make happen.
If David Cameron and the UK Conservative Party can ignore us - then please believe me that we can and WILL ignore you - next time you expect our support.
You Represent US. Please remember this or face the consequences.
It took almost 13 years for the country to Despise Tony Blair – yet David Cameron is achieving the same in under 18 months – Choose another Leader, or join the LibDems on the permanent back benches of opposition at the next general election."
15 seconds of your action could save us another 3.5 years of Conservative inaction!
Stop moaning - take some action that might actually get us what we voted for - a real UK Conservative Government"!!!
"France's Nicolas Sarkozy and Germany's Angela Merkel hold crisis talks"
Again?
Angela, "Well Nick how nice to see you after all this time. Have you thought of anything useful since we last met?
Nick looking blank and harrassed at the same time, "Hello Angie, Yes I am thinking that UMP could have Open Primaries long after I am dead"
Angela, "Nein, Nein, Nick I meant about the fact that France has run out of money and wants the German taxpayer to bail it out - forever. You know that we Germans may be a bit slow but some members of the Bundestag think that this may be a good time to place a big order with Krupps"
Nick, "A big order? Why dont we make this a Franco/German project symbolic of our political will which we could locate in Toulouse?"
Angela, "Nein, Nein, Nick please pay attention - things are getting serious - that perfidious Albion, Sir Mervyn King has suggested that it is the socialist welfare state that has to be dismantled throughout the Western World. He is beginning to get the masses to believe that it is not the banks fault but us politicians"
Nick, rising to his full Napoleonic height, "I need to change my underwear"
To be continued at the next crisis summit...
Jonathan
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