Olli Rehn, EU economic and monetary affairs commissioner, warned Germany that it alone could not determine the eurozone's fate, Italy only managed to secure cover for a two-year bond worth €2bn by paying 7.8%. A six-month loan for €8bn cost it 6.5% compared with 3.54% only a month ago. Rehn admitted in Rome that contagion had now spread to the core of the zone. He was speaking after talks with Mario Monti, Italy's new technocratic prime minister, who has yet to convince markets he can deliver on his promises of structural reforms and savage cuts in national debt. Meeting in Berlin, the finance ministers of Germany, Finland and the Netherlands even hinted at the prospect of an enhanced role for the European Central Bank (ECB) if all other steps to save the euro collapsed. But they again ruled it out as an immediate solution. Meeting in Berlin, the finance ministers of Germany, Finland and the Netherlands even hinted at the prospect of an enhanced role for the European Central Bank (ECB) if all other steps to save the euro collapsed. But they again ruled it out as an immediate solution.
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Saturday, November 26, 2011
Ollie Rehn - incompetent, corrupt is part of the problem facing Europe today
Olli Rehn, EU economic and monetary affairs commissioner, warned Germany that it alone could not determine the eurozone's fate, Italy only managed to secure cover for a two-year bond worth €2bn by paying 7.8%. A six-month loan for €8bn cost it 6.5% compared with 3.54% only a month ago. Rehn admitted in Rome that contagion had now spread to the core of the zone. He was speaking after talks with Mario Monti, Italy's new technocratic prime minister, who has yet to convince markets he can deliver on his promises of structural reforms and savage cuts in national debt. Meeting in Berlin, the finance ministers of Germany, Finland and the Netherlands even hinted at the prospect of an enhanced role for the European Central Bank (ECB) if all other steps to save the euro collapsed. But they again ruled it out as an immediate solution. Meeting in Berlin, the finance ministers of Germany, Finland and the Netherlands even hinted at the prospect of an enhanced role for the European Central Bank (ECB) if all other steps to save the euro collapsed. But they again ruled it out as an immediate solution.
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Meeting in Berlin, the finance ministers of Germany, Finland and the Netherlands even hinted at the prospect of an enhanced role for the European Central Bank (ECB) if all other steps to save the euro collapsed. But they again ruled it out as an immediate solution.
Their talks, ahead of Tuesday's meeting of the 17-member Eurogroup in Brussels, came amid reports that Spain's new centre-right government might soon apply for aid from both the IMF and the European Union's main bailout fund, the European financial stability facility (EFSF). Spanish state borrowing costs earlier leaped to the dangerously high level of 6.7%.
We need to start allowing both Eurozone countries and European banks to default. Restructuring where possible, bankruptcy where not. The road we've been on for the past 3-5 years is a dead end street, always was. The wall at the end of it is now right in front of our faces. Want to risk running forward? Throw another, oh, $10 trillion at it to see if anything sticks? Doesn't seem wise, does it?
Moreover, Germany can't afford to risk that sort of money. Neither can the US, or China, or anyone else. Nor can they do it together.
All that's left to do is writing down debt, and let go under who owns too much of it. Deleveraging. There never was another choice.
The following reference articles are all worth reading that includes a list of European banks showing their exposure to PIIGS sovereign debt compared with their common equity. Very scary, with RBS and Barclays being in the top 20 exposed banks being 20th and 18th respectively, could have been worse for UK banks I suppose.
All in all It's all starting to look like the end game, with the contagion spreading beyond Europe
Be under no misapprehension who is to blame in this.
It is Germany.
The only thing to do is allow the EZ to come to an orderly wind-down. But Germany refuses to do it, because it has tried for over 100 years to get an EU wide trading block. It will not relinquish it so easily.
But it absolutely refuses to do the right thing to support that trading block - ie, full fiscal union, or allow the ECB to engage in QE.
For the third time in a hundred years, German continental ambitions look like bringing the whole of Europe to its destruction.
It is almost satisfying from the perspective of schadenfreude to see the entire edifice collapsing. But it is hard to task satisfaction in an impending catastrophe.
Everyone has to pile on the pressure to step up to the God damn plate, or drop this disasterous attempt to keep applying stop-gap fixes to this collapsing system.
Why can't the ECB just create 2t euro and distribute that within the EZ using a weighting that attempts to compensate the losers and does not reward the utter stupidity and lack of foresight that has lead many of the EZ countries into this mess.
This could buy a couple of years for all countries to consider their positions, and avoids a full explicit transfer union that has no hope in passing referenda in any country that can foresee itself avoiding a default. The weakest EZ members would still be forced to leave the EZ by their own choice
Jan Kees de Jager, Dutch finance minister, said the IMF's enhanced role would be a separate option, prompted by doubts over whether private investors would bring enough new money for the EFSF. "There is a lot of pressure about euro bonds or European Central Bank financing, and we said no, we have something else, and that is an increased role for the IMF," he said.
This "de Jager" certainly seems like a moron bent on causing misery and revolt in Europe with the precision of an atomic clock. Not surprising though - foolishness seems to be the orthodoxy in Europe these days.
The whole thing is a complete nightmare and, as the financial sector struggles, the effect will be felt through the real economy dragging counties into recession and possible depression. And all of this due to some stupid bone-headed bastards, who thought it would be a great idea to impose a common currency on continental Europe!
It is a nightmare, but Eurosceptics make too much political capital of this.
a) The inflation of credit we saw the last 30 years was global not European
b) The credit boom has been caused by mismanagement in the financial system but more importantly it reflects the inability of the Capitalist economy system to return enough incomes to labour & governments that could sustain a healthy level of economic activity and employment. Simply, without this debt stimulus hundreds of millions of jobs would not exist today. The problem is a problem of low global demand, and it is a structural problem of the Capitalist economy. With the levels of private and sovereign debt, it would have arisen with or without the Euro.
c) The crisis did not start in Europe, it started in the USA. The crisis of 2008 doubled and in cases trebled debt and/or deficits in most countries
d) Overall Europe has a relative low debt/GDP ratio and deficit. The crisis in Europe could have at least temporarily resolved last year if the ECB monetised the debt of small peripheral countries or if they issued Eurobonds. But the wrong policies were followed. Austerity was not the answer.
Schauble – Germany's finance minister – was still banging on today about how the way out of this crisis is for deficit countries to demonstrate fiscal discipline to overcome their indebtedness. In other words, the whole of Europe should become little Germanies. In other words, it's not just the Greeks who are feckless good-time Charlies, but the Italians, the Spanish, the Portuguese, the Irish, the Belgians, and soon the French, Hungarians, Maltese, Cypriots, and even the British – with all their private debt. Someone's got to take the Germans by the scruff of the neck, tell them to stop seeing the eurozone crisis in racial terms but as a crisis of their own making, of their attempts to design the eurozone in such a way as to guarantee German exports and surpluses at the expense of the rest of the European economy.
Europe is getting further into the mire. History will show just how bad the decisions by all in power have actually been. There now seems little chance of anything orderly and controlled happening. So it looks like financial chaos to me; when? I don't know, but likely to be soon. Meeting after meeting and nothing worthwhile happening; how long can it continue? For things to be as they are must indicate that the markets still think there is value left in Europe. Are they still hoping for a miracle? Why? The markets must realise now that Europe has a death wish. Surely they will soon, very soon, race for the exits.
Will it be a happy Christmas?
This is just an example of wanting to have your cake and eat it too. Germany::
1. Wants everybody to give up fiscal sovereignty.
2. Doesn't want to give up any sovereignty itself.
Germany shares a disease with my own country: it's called "exceptionalism." Germany cavalierly broke the fiscal rules itself, but now it wants Greece, Spain, etc. to follow the rules - blatant hypocrisy, and everybody in Europe knows it.
I think the fundamental problem is that, with good reason, Germany scares everybody. The Germans brought Europe to ruin twice in the last hundred years.
We have a similar phenomenon in the part of the world where I live (Vietnam). Everybody remembers Japan's "Greater East Asia Co-Prosperity Sphere." This makes people leery of even Japanese charities and NGOs. One difference, however, is that most Japanese understand their own history a little better than the German's do. Japanese proposals for economic assistance often include a reminder to Japan itself about the history of the Co-Prosperity scheme, and the need to be sensitive about this.
Merkel and Co. have a tendency act as if WW's I and II never happened, or if they did happen, they were just big misunderstandings.
So many stupid, ill informed comments.
Why would Germany risk the trust of its people by offering to underwrite (which is what using the ECB to support them amounts to) , without limit, southern European countries where they retire earlier, work less, pay less tax, collect less tax etc.?
No German government can do that to its people without their explicit consent - it's called democracy, and it's written into their constitution. Even if they could, why would they want to? The risk is far too great that the high spenders, early retirers, inveterate tax avoiders, over-protected employees, would avoid any reforms to their feckless and indulgent ways at all.
Italy has very low private debt, much lower than Germany's - which means they have higher savings, in fact the country is awash with cash - in private, untaxed hands. Why then should German taxpayers bail the Italians out, or take the risk of underwriting their sclerotic, dysfunctional society? Its up to the Italians to pay up themselves.
As for all the fools still advocating some sort of Keynesian nirvana, by throwing more money at the situation, well Keynes only advocated that as a short term boost to stimulate growth, not as a route to hyperinflation or snowballing future piles of debt for the coming generations
SPIEGEL: (Former German Chancellor) Helmut Schmidt charges that the European elites don't know what is at stake in this crisis, because they don't know enough about economics. Is he right?
Garton Ash: I don't think that this is a decisive aspect. What's more important is that leaders like Helmut Schmidt or Helmut Kohl, as well as François Mitterrand, could expect a passive consensus within the population. Perhaps people weren't particularly enthusiastic about Europe or in Germany about the monetary union, but they accepted it because the elites told them: In principle, this is important and it's the right thing to do. Today this passive consensus is missing throughout Europe. As a result, there is a great deal more persuading to do in each country and it's significantly more difficult. Very little happened in this area for 10 years, so Merkel and Sarkozy are also paying a price for the failings of their predecessors.
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