Bye Bye Euro. So long EU...

Farewell, European Union -- The Political World As We Know It Is Ending


Jul. 7, 2011, 2:20 PM

...We’re in the process of watching Greece default. Portugal’s Next. Ireland’s after that. In fewer than 16 months, the European Union will be no more.
As we predicted on June 29, and the Moody’s ratings service essentially confirmed by dropping the country’s rating to junk-status, Greece is set to default (even the current “best case” French scenario means is predicted to end in a “selective default” situation). And soon. Given that the “not-possible-to-think-about is suddenly exactly what we’re-thinking-about-and-planning-for", we have to wonder who’s next – now that default is suddenly an option?...

So…looking at these facts, it’s easy to see: as goes Greece, goes Portugal, follows Ireland, then Spain and Italy (though not necessarily in that order). This is happening. And it’s happening soon. And not in a “well, if we pull ourselves together we can delay or possibly eliminate this possibility” soon; but more in a “this is happening, let’s try and stem the inevitable financial and political bleeding of a failed European Union.” For while one or two country defaults a disunion does not make, a six-country mass-fail does.

The European Union’s “core” members – Germany and France – would do well to stop financially finagling bail-out-package-after-bail-out-package for first Greece, then Portugal, then…and should instead start focusing on what’s next post-European-Union as we know it. Delaying the inevitable economic and financial pain will be a financially expensive, politically explosive, and potentially globally dangerous and destabilizing exercise. The world has to start planning for a defaulted currency, and stop hoping it simply won’t happen.


Read more: http://www.businessinsider.com/fare...ts-been-nice-knowing-you-2011-7#ixzz1Sh9zSPIe


Maybe the article is an exaggeration, maybe they will be able to force a political union and solidifying a European Federation (a superstate), but IF it is correct, if it means the end of the Euro and EU all I have to say is....:bravo:
:yay::thankyou:

 

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A few minutes away lives Tassos Alexandris, who was laid off from Perama in 2008. The hall of his flat is decorated with needlepoint; inside are pictures of the Virgin Mary put up by his wife, Nikki. She is ill, and his 26-year-old daughter has worked for six months in her entire career. How do they make ends meet? Nikki snorts with laughter.

"The electricity connection is inside the flat; otherwise the board would have cut us off," begins Tassos. His mother-in-law lives upstairs and, while he is too ashamed to ask her for food, she allows him to raid her fridge at night. They had a small green Citroen, but couldn't afford to keep it. Now he runs a motorbike, although with no plates and no taxes. "I can't sleep at night for worry," he says. "It has affected every part of our lives: personal, sexual, the lot." How many families in this block do they think are in a similar situation? Nikki tots them up: "80%."
​

 

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Businesses in the U.S. are still closing so tax revenues have to be off. With debt rising at an unprecedented rate it can't be good for Joe's economic recovery either. You know Lucy I wish Joe was right . Oh how I wish , but reality will be knocking at the door soon . I hope I am wrong and all the businesses with uncertainty are wrong too . Not looking good at all .

 

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Well I know it would have a domino affect on the US as well but no one is hoping the US economy crashes. I'm happy about this because the EU Federation superstate Sarkozy is so keen on would end sovereignty and is undemocratic and as we have seen financially corrupted. They shoved the Lisbon Treaty down Ireland's throat and now Ireland is paying for it, you have people confronting the police in Greece, Spain and the UK. I never supported the dream of a United States of Europe, hey at least in the US you get to vote for your president. No average citizen votes for the EU president in Brussels and many don't even know his name. I don't approve in how they are trying to fix the economic catastrophe in Greece and I am glad they will default, better for the people.

 

I suspect news of the demise of the EU is slightly premature.

 

I agree, but the Drachma may come back, as bailouts are not saving Greece.

Germany and France are planning "Transaction tax" - not yet clear to what it would apply - to help save the Euro. It sounds like it could be an internal version of the "Tobin tax" which needs to be universal on all major economies, but could save their "fiat money" skins.

More on it at old post here: http://www.sciforums.com/showpost.php?p=2550966&postcount=38

 

No kidding, there's just a wee bit too much at stake there for the whole thing to collapse just because of a currency crisis. When the working poor are starving and homeless, and the middle class has become the lower class, that's when Europeans might start thinking about shaking things up. Thank goodness I live in Canada, I just hope the trouble doesn't spread here too.

 

Well, wait - isn't a currency crisis exactly in scale with the stakes of a currency union?

If the EU were a more robust political (or, at least, fiscal) union I'd tend to agree - but what is, is exactly a currency union with aspirations of eventually becoming something more. The easy assumptions underpinning which, are now being challenged.

Which isn't to say that I'm not also skeptical about the prospect for big fireworks in the near term, but I think this crisis does raise some pointed questions. It's not two years ago when it was just a question of bailing out Greece and going back to business as usual - that bailout failed, and now the fiscal standing of France is coming into question, German growth has ground to a halt, etc. There doesn't seem to be any way out that doesn't involve radical changes of some flavor.

 

That's terrifying.
Let's face it, the world is in mess, and heading to a bigger mess, not the hoped Utopia.
(propably, but i hope not)

 

What radical changes did you have in mind?

 

Well, the ones that seem to get suggested the most (at least, credibly) would be stuff like making the EU more of a real fiscal union (basically with Germany in the driver's seat and writing the checks), splitting the EU into 2 or more currency blocs according to similar monetary policy needs, the withdrawl of a handfull of at-risk countries from the Euro, intervention by the IMF/G20, or of course complete melt-down and revision to national currencies. Probably there's some other, less obvious machinations that can be pursued. But what doesn't seem to be on the table is simply gutting it out and continuing the current structures - the bond markets will eat the whole project alive in a nasty sovereign debt crisis. The idea that, say, Greece should borrow at low rates because they share a currency with Germany is a fiction that is now in the rear-view mirror.

 

I agree - it never made sense. In post 6, I suggest that Greece may become two currency nation -Still use the Euro for imports (by importers that have Euros), but due to Gresham's Law, the Drachma is used for internal trading and nearly all issue of bonds. -i.e. New Greek bonds promise to pay X Drachma after Y years, and of course offer high interest rates to find any lenders.

I think formation of any fiscal union is out of the question for many years, but France, Germany, and a few others, could announce that there will be "Hair Cuts", not bail outs for the buyer of any Greek bonds promising to re-pay in Euros.

I.e. only EU economies that are under the agree debt to GDP limit can tell the buyers of their Euro bonds that the "strong EU countries" the SEUCs, stand behind repayment. - Buyer of bonds issued by non-SEUCs do so at their own risk - Defaults can be expected to occur.

I think something like this will exist in about year or less. The-ant like German voters are growing tired of feeding the grasshopper-like parasites.

 

"... After being shaken to its core by the sovereign debt crisis, the entire Eurozone now runs the risk of blowing up within a week.

Germany's highest court, the German Federal Constitutional Court, on Sept. 7 rules on the legality of German participation in the euro rescue fund that was established to bail out Greece. If the court rules that Berlin's commitment to the European Financial Stability Facility(EFSF) goes against EU law, or worse, against the German constitution, the entire Eurozone could collapse. ...

Peripheral Eurozone countries like Portugal, Ireland, Greece, Spain, and Italy (the PIIGS) are in serious trouble and European banks face monumental liquidity and balance sheet issues. ...

What's at issue for the Constitutional Court is whether Berlin broke the EU's Maastricht Treaty, which unequivocally stipulates that member states cannot assume each other's debts. And, more germane to German citizens and the center-right coalition government, will be the Court's ruling on whether German Chancellor Angela Merkel's decision to fund the bailout facility circumvented constitutional requirements to put such fiscal matters before the German parliament. ..."

From: http://moneymorning.com/2011/09/01/...ean-union-may-be-decided-in-less-than-a-week/

Billy T comment: The Chinese curse: "May you live in Interesting times." seems to be working on the global economy.

Added by edit the next day (to show numerically how bad things are):

“… Greek 1-year debt yields surged 10.4 percentage points, or more than 1,000 basis points, to a record 72.05 percent. Rates on the nation’s two- and 10-year debt also reached all-time highs, while the yield on the benchmark German bund dropped 14 basis points to a record low 2.01 percent. The euro weakened against 10 of 16 major peers, losing 0.5 percent to $1.4194.
The International Monetary Fund opposes European plans to force Greece to put up collateral in its second rescue, .... The use of collateral, a concession to win Finland’s backing for 109 billion euros ($155 billion) of loans pledged by euro leaders in July, would deny the IMF priority creditor status and violate Greek bondholders’ rights, …

IMF objections threaten to snag Europe’s crisis-management effort after aid of 256 billion euros for Greece, Ireland and Portugal failed to restore order. Europe also faces hurdles in trying to widen the powers of its rescue fund, with German lawmakers demanding a veto over its operations. …”

From: http://www.bloomberg.com/news/2011-...-u-s-futures-drop-franc-climbs-oil-falls.html and more details here: http://www.bloomberg.com/news/2011-09-02/imf-said-to-oppose-push-for-greek-collateral.html

 

Note on post 13: Bullet dodged -The German court said so long as the German parliament OKs it, loans to Greece, etc. are constitutional.

big news coming this week-end?

"...Lagarde {new IMF chief} argued Friday that if growth continues to fade, balance sheet problems will worsen, fiscal sustainability will be threatened and the ability for policies to help contain the damage will disappear*. Lagarde had made a similar public plea earlier in the week and the Morgan Stanley has opined that the G-7 would act in a coordinated fashion as early as this weekend. ..."

* Another bullet to dodge. Do you think the G-7 can? Here are some facts and views:

"... Every G-7 member is fighting on multiple fronts to prevent the slowdown from turning into a global slump. Central bankers are signaling easier monetary policy. President Barack Obama last night announced a renewed effort to cut the 9.1 percent jobless rate. Japan is struggling to prevent a stronger yen from undermining exports. Benchmark interest rates are already at record lows and public debt at unprecedented highs.

“Things are getting worse and the big difference between now and a few years ago is that this time around we’re running out of policy bullets,” Nouriel Roubini, chairman of New York- based Roubini Global Economics LLC, said in a Sept. 6 interview. “There is a 60 percent probability of another economic contraction in most advanced economies.”

Credit-default swaps on Greek debt yesterday surged to a record, signaling a 91 percent chance the nation will fail to meet debt commitments. A measure of banks’ reluctance to lend to each other in Europe this week rose to the highest in almost 2 1/2 years and about $5 trillion has been wiped off global equity markets since the start of July as debt fears rippled around the world. ..." From: http://www.bloomberg.com/news/2011-09-08/ghost-of-lehman-haunts-g-7-amid-debt-crisis.html

Billy T comment:
There is a logical flaw with the most common idea: Not every member of the G-7 can export more and import less, unless some big buy orders come in from Mars.

By Edit, news breaking minutes ago: "In an exclusive interview with Bloomberg while in France, U.S. Treasury Secretary Timothy Geithner said that there would be “no coordinated global policy” coming out of the G-7 meeting this weekend. ..." From: http://www.stateofthemarkets.com/re.../1/0/b898954a20f49f2a3372cf3e4b94ca80a62eac20

 

A little before noon NY time, stocks started to crash down as Germany is taking steps to save its banks holding Greek debt from collapse - Greece may default late today or this week end is the rumor.

 

oh shit . O.K. don't know , Don't know . Keep your heads up and eyes going every direction . Don't know . Hope not . Could be big changes with big impacts world wide? You know the trickle will take a while to get to a lot of the little people. Ground zero could be catastrophic ? Well we got a saying in the small business community . Plan for the worst and shoot for the best ! I would not go hoarding eatable goods just yet like Glen Beck preaches . My best advice is to watch what happens at ground zero of the event . Pigs flying out the door , fuck god almighty anyway . Next you know hell freezes over

Were is Joe ? Joe dude give us your analysis . We need another opinion. Doctors of economics need each other . Not that I am a doctor ? Doctor of love maybe ! Learned it from prostitutes . Very good teachers ! Professors with whips

 

Well not so soon anyway with today's deal on Greece (banks to take 50% hair cut, leveraged bail out fund, etc.) but:

"... President Nicolas Sarkozy plans up to 8 billion euros ($11 billion) in additional budget cuts to protect France’s AAA credit rating, after he said growth next year will slow to about 1 percent. ..."

From: http://www.bloomberg.com/news/2011-...save-france-s-aaa-rating-as-growth-slows.html

But there is stress, even in France and sticky politics in Germany that may bring Merkel down.

 

Interesting Billy . I wonder if that has anything to do with today's rally in the stock market ? I am feeling inflation pressure . Across the board . It is not here yet but it sure feels like is on the way .

 

Yes, closely related. France will need to help its banks to eat the 50% hair cuts on Greek debt. They have the greatest of all exposure. That will put more financial pressure on France, which was already under review for possible down grade from AAA - If it were down graded, then the interest cost on France's debt would climb, perhaps in negative feed back way, making even more financial pressure.

President Nicolas Sarkozy's new budget cuts are to try to stop that downward spiral from even getting started.

 

There are reports being made that China will be involved in the European debt crisis solution.

See the cnn report: China could play key role in EU rescue

This could give China additional clout in international politics, especially in countering the US push against Chinese "currency manipulation". It is interesting to note that the article states the Chinese banking officials are very worried about making a mistake with the national wealth and angering the Chinese citizens. When was the last time you heard this line from banking officials in the US (a democratic country supposedly "by the people and for the people")? All we hear are "too big to fail" and "more bailouts needed".