Is the end nigh for the Euro? [vol. 2]

[DJRC]

Wombat3 said:

DJRC said:

How long is this myth going to continue?

Frau Merkel has been jumping when the French say, not the other way round ever since this "Merkozy" pact has been going on!!!! Mr Buni losing is the biggest beak Angie has caught in the last 18months, hell, its her *only* break she has had in the last 18 months!!

Really? How far have the Germans actually moved from the position they held 18 months ago? Not very I think. What I think Angie has done is let Mr Bruni think he was in charge, but in reality she has not given in to any of the fundamental stuff that was being asked of Germany. We will see how brave /stupid Hollande is. If he really pushes the Germans it may actually give them (and us) the excuse they need to walk away.

OK, round the houses we go again. As Ive posted it several times over the last year, Ill keep it brief this time.

The French financial sector is heavily in hoch to the French and Greeks. It is in fact the most in hoch to them. Either/or the Greeks or Italians go bye bye in terms of defaulting, fking up or in any of the other ways that Steffan and the boys have been wking over for the last year, then the French financial sector is toast. By toast I mean watch 2 of their big banks cease to be "big banks" anymore. Think Parrot sketch but with added garlic. That happens and 25% of the French economy goes down the pan. That happens and the Euro, EU and Europe goes down the pan. In short...it cannot be allowed to happen.

Now, around about mid-late summer last year, this slowly started to dawn on Paris and Berlin just how potentially fked the French banks were. The massive pressure on Greece and Italy wasnt for their sake, it was for France's sake. The sudden production of the "Angie and Nic, arent we best mates club!" was entirely Mr Bruni telling/blackmailing Angie...do this or we are fked. You, me, the whole damn thing and that fks Germany oh and btw you and Germany will be blamed anyway despite it being non of your fault.

And there was fk all Angie could do. She was already looking at being toast in her own elections. Her domestic political capital is gone. She gambled everything on getting Greece bailed out, the initial deficit reduction conversations and everybody taking the hint about the shocks at the end of 2010 and riding out 2011 shifting the st, stabilising Europe and putting conditions down for growth to return. Instead she got buttfked by everyone of her European "partners" as nobody did a damn thing. So her gamble completely failed. She maxed out the German tax payers credit card...trust me, there is nobody left in Germany who will tolerate any pfennig being lent to anybody with a tan...and there is nothing left. Then Bruni blackmailed her into promising more when she didnt have it. Thats why the "Austerity Pact" was pursued so aggressively from her, it was free words!!! She could look tough to her domestic audience and even more importantly it didnt cost her any dosh!!

Mr Bruni being out on his arse and a socialist French President who "will stand up for France and re-negotiate with the Germans" is mana to Angie's ears. Hell, it might just give her an angle she can sell to her domestic audience and get herself re-elected! Nobody will dance more that Merkozy is dead than The Frau. Watch the hand of friendship fly between Berlin and London faster than La Carla to Milan fashion week!

[Steffan]

DJRC said:

Wombat3 said:

DJRC said:

How long is this myth going to continue?

Frau Merkel has been jumping when the French say, not the other way round ever since this "Merkozy" pact has been going on!!!! Mr Buni losing is the biggest beak Angie has caught in the last 18months, hell, its her *only* break she has had in the last 18 months!!

Really? How far have the Germans actually moved from the position they held 18 months ago? Not very I think. What I think Angie has done is let Mr Bruni think he was in charge, but in reality she has not given in to any of the fundamental stuff that was being asked of Germany. We will see how brave /stupid Hollande is. If he really pushes the Germans it may actually give them (and us) the excuse they need to walk away.

OK, round the houses we go again. As Ive posted it several times over the last year, Ill keep it brief this time.

The French financial sector is heavily in hoch to the French and Greeks. It is in fact the most in hoch to them. Either/or the Greeks or Italians go bye bye in terms of defaulting, fking up or in any of the other ways that Steffan and the boys have been wking over for the last year, then the French financial sector is toast. By toast I mean watch 2 of their big banks cease to be "big banks" anymore. Think Parrot sketch but with added garlic. That happens and 25% of the French economy goes down the pan. That happens and the Euro, EU and Europe goes down the pan. In short...it cannot be allowed to happen.

Now, around about mid-late summer last year, this slowly started to dawn on Paris and Berlin just how potentially fked the French banks were. The massive pressure on Greece and Italy wasnt for their sake, it was for France's sake. The sudden production of the "Angie and Nic, arent we best mates club!" was entirely Mr Bruni telling/blackmailing Angie...do this or we are fked. You, me, the whole damn thing and that fks Germany oh and btw you and Germany will be blamed anyway despite it being non of your fault.

And there was fk all Angie could do. She was already looking at being toast in her own elections. Her domestic political capital is gone. She gambled everything on getting Greece bailed out, the initial deficit reduction conversations and everybody taking the hint about the shocks at the end of 2010 and riding out 2011 shifting the st, stabilising Europe and putting conditions down for growth to return. Instead she got buttfked by everyone of her European "partners" as nobody did a damn thing. So her gamble completely failed. She maxed out the German tax payers credit card...trust me, there is nobody left in Germany who will tolerate any pfennig being lent to anybody with a tan...and there is nothing left. Then Bruni blackmailed her into promising more when she didnt have it. Thats why the "Austerity Pact" was pursued so aggressively from her, it was free words!!! She could look tough to her domestic audience and even more importantly it didnt cost her any dosh!!

Mr Bruni being out on his arse and a socialist French President who "will stand up for France and re-negotiate with the Germans" is mana to Angie's ears. Hell, it might just give her an angle she can sell to her domestic audience and get herself re-elected! Nobody will dance more that Merkozy is dead than The Frau. Watch the hand of friendship fly between Berlin and London faster than La Carla to Milan fashion week!

I have said before I agree with your assessment of Merkel and the likelyhood of her suffering election defeat. I still believe the Greeks et al will refuse to continue in the EU unless the EU offers substantial additional subsidy to enable the Greeks et al to continue t live beyond their means.

That I think is unlikely.

[bosscerbera]

HL Mencken said:

I enjoy democracy immensely. It is incomparably idiotic, and hence incomparably amusing. Does it exalt dunderheads, cowards, trimmers, frauds, cads? Then the pain of seeing them go up is balanced and obliterated by the joy of seeing them come down. Is it inordinately wasteful, extravagant, dishonest? Then so is every other form of government: all alike are enemies to laborious and virtuous men. Is rascality at the very heart of it? Well, we [Americans] have borne that rascality since 1776, and continue to survive. In the long run, it may turn out that rascality is necessary to human government, and even to civilization itself - that civilization, at bottom, is nothing but a colossal swindle. I do not know: I report only that when the suckers are running well the spectacle is infinitely exhilarating. But I am, it may be, a somewhat malicious man: my sympathies, when it comes to suckers, tend to be coy. What I can't make out is how any man can believe in democracy who feels for and with them, and is pained when they are debauched and made a show of. How can any man be a democrat who is sincerely a democrat?

[Steffan]

Here we go again the Greeks are revolting see:

http://www.bbc.co.uk/news/world-europe-17984805

Ms Merkel is thumping the drum of the EU barracking the Greeks into staying austere. Some hope given the election results. I think this is going to fall on deaf ears. All getting very interesting on whether Greece will default or the French will revolt.

Any suggestions which is more likely or whether both will happen?

[Puggit]

Telegraph:
A new eurozone crisis is looming as Spain signalled on Monday it was ready to bail out ailing banks after markets shrugged off the election results in France and Greece.

Prime minister Marian Rajoy indicated the Government was ready to intervene to save banks wrestling with the collapse of the housing market.

Bankia, Spain's fourth biggest bank, is the first in line for state aid. Rodrigo Rato, chairman and former IMF managing director, swiftly resigned after it was disclosed the finance ministry was preparing to refinance the bank and introduce legislation to protect the balance sheets of others.

Telegraph link

[hornetrider]

Further news from the Telegraph:

Article said:

09.29 The stalemate in Greece puts the disbursement of its next bailout tranche at risk. The country has to find €11bn in extra spending cuts for 2013 and 2014 in exchange for more aid.
Despite a recent transfer of €3.5bn to cover emergencies, officials told Reuters that without the bailout money, the country faces being unable to pay salaries next month.

They're fked!

[Steffan]

hornetrider said:

Further news from the Telegraph:

Article said:

09.29 The stalemate in Greece puts the disbursement of its next bailout tranche at risk. The country has to find €11bn in extra spending cuts for 2013 and 2014 in exchange for more aid.
Despite a recent transfer of €3.5bn to cover emergencies, officials told Reuters that without the bailout money, the country faces being unable to pay salaries next month.

They're fked!

I regret to confirm that the entire Western Economics system is bandjaxed. There may be individual winners like Soros but every businessman and individual citizen reliant on the incompetent, self serving Politicians of the Western world are definitely going to be struggling.

The spend, spend, spend approach of successive EU leaders and Western economies, whereby successive governments have overtaxed the citizens, made the Benefits Society remove the need or interest in work and unemployment and become an alternative lifestyle and the reckless overborrowing of the governments, which has reduced entire nations to penury, has to stop.

Unfortunately the consequences of that will probably be a huge recession across the western world which nay well go on for years. I do hope new leadership and responsible government will eventually replace the idiots in charge. It will be a painful and lengthy process but that has to be our best hope. This collapse has been creeping up for some time and is upon us.

It will be interesting to see how long the EU can hold this nonsense together. Many observers believe that this can continue for some time. I doubt it.

[Gargamel]

If the Greeks are payiong 22% for a ten year loan - then they are going bust (again)

[HundredthIdiot]

Gargamel said:

If the Greeks are payiong 22% for a ten year loan - then they are going bust (again)

They're not, AFAIK. That's the second-hand "price" of existing bonds. The Greeks are borrowing from other states, not the markets.

[HundredthIdiot]

Missed the last five pages but I expect there's been mention of exchange rates. £ is up to €1.24ish, highest for about a year and half way back to the pre-2007 level of about €1.50.

I'm running a small business in Ireland with costs in € and revenue in £. We're keeping most of our cash in UK banks in Sterling and seeing the paper value of that rise (relative to our costs).

It's a bit of a weird situation, since normally I'd keep cash in the currency of our costs so we don't risk not being able to meet payroll, but I'm being tempted (by stupidity or greed, possibly) to leave it in £.

Thing is, I am utterly unable to foresee what will happen to exchange rates if/when the Euro implodes. Maybe my employees will start asking to be paid in £ or USD to meet food/energy costs!

The French are talking up anti-austerity, the Spanish are about to bail out another bank, the Germans seem to be losing control of the message. At the end of the day, any kind of growthless "pro-growth" strategy has to create inflation, right?

I still can't shake off the idea of private pension funds being raided/nationalised like they were in Hungary last year. If I was coming up to retirement with a private pension I'd be feeling very twitchy right now.

[Steffan]

HundredthIdiot said:

Missed the last five pages but I expect there's been mention of exchange rates. £ is up to €1.24ish, highest for about a year and half way back to the pre-2007 level of about €1.50.

I'm running a small business in Ireland with costs in € and revenue in £. We're keeping most of our cash in UK banks in Sterling and seeing the paper value of that rise (relative to our costs).

It's a bit of a weird situation, since normally I'd keep cash in the currency of our costs so we don't risk not being able to meet payroll, but I'm being tempted (by stupidity or greed, possibly) to leave it in £.

Thing is, I am utterly unable to foresee what will happen to exchange rates if/when the Euro implodes. Maybe my employees will start asking to be paid in £ or USD to meet food/energy costs!

The French are talking up anti-austerity, the Spanish are about to bail out another bank, the Germans seem to be losing control of the message. At the end of the day, any kind of growthless "pro-growth" strategy has to create inflation, right?

I still can't shake off the idea of private pension funds being raided/nationalised like they were in Hungary last year. If I was coming up to retirement with a private pension I'd be feeling very twitchy right now.

One of the most disturbing features of this entire mess is that the Banks are being saved at any cost. Thus the young employed in Spain and Greece face a lifetime of miserable penury, with no hope of improvement for literally decades if then.

But the Banks, who have themselves contributed in no small part to their own demise, are to be saved without any real consequences to any if the Directors or Regulatory Officials. Or to the Treasuries or the Central Banks of the countries concerned. Or the politicians of the countries concerned. All retired on safe pensions or still in post.

Nice work if you can get it.

This is economic madness on a grand scale. And I suspect that it will engender large dangerous civil unrest. The electorate will be forced to face the crop sown by weak, grandstanding, feckless, self serving, politicians.

[bosscerbera]

I love the politely understated expression 'civil unrest'.

[HundredthIdiot]

Steffan said:

One of the most disturbing features of this entire mess is that the Banks are being saved at any cost

The left wing politicians are pushing the "anti-austerity, burn the bankers" line. If this gains traction, who are the losers?

Most people don't have much in the way of savings. Public pensions are "protected".

At what stage does "lender of last resort" become untenable and the banks (and their depositors) get cut loose by states that cannot afford to prop them up?

[bosscerbera]

HundredthIdiot said:

Steffan said:

One of the most disturbing features of this entire mess is that the Banks are being saved at any cost

The left wing politicians are pushing the "anti-austerity, burn the bankers" line. If this gains traction, who are the losers?

Most people don't have much in the way of savings. Public pensions are "protected".

At what stage does "lender of last resort" become untenable and the banks (and their depositors) get cut loose by states that cannot afford to prop them up?

It's been untenable for some time and states cannot afford to prop them up - that's what's so extraordinary.

[Andy Zarse]

Puggit said:

Telegraph:
A new eurozone crisis is looming as Spain signalled on Monday it was ready to bail out ailing banks after markets shrugged off the election results in France and Greece.

Prime minister Marian Rajoy indicated the Government was ready to intervene to save banks wrestling with the collapse of the housing market.

Bankia, Spain's fourth biggest bank, is the first in line for state aid. Rodrigo Rato, chairman and former IMF managing director, swiftly resigned after it was disclosed the finance ministry was preparing to refinance the bank and introduce legislation to protect the balance sheets of others.

Telegraph link

This is Shaun Richard's banking timeline, and describes the process of bank rescues. I posted it here in October last year when Franco-Belgian Dexia Bank was going under. I think Bankia has now got to point 6, other Spanish banks are between points 4 to 5. It is remarkably accurate, Belgium/Dexia is now at point 11...



1. The Board issues a statement accusing bloggers of spreading both irresponsible and factually incorrect rumours as the bank is sound and has no need of new capital.

2. The Bank issues a statement of confidence in its management.

3. The Bank tries to raise more private capital in spite of it having no need for it.

4. If this does not work the relevant government expresses complete confidence in the bank and tell us that it has a sound management structure and business model.

5. The relevant government tells us that they are stepping in to help the bank but the problems are both minor and short-term and are of no public concern.

6. The relevant government tells us that the bank needs taxpayer support but through clever use of special purpose vehicles there will be no cost and indeed a profit is virtually certain.

7.Part-nationalisation of the bank is announced and taxpayers are told that a profit will result from this sound and wise investment.

8. Full nationalisation is announced to the sound of teeth being pulled without any anaesthetic.

9. Debt costs of the relevant sovereign nation rises.

10. Consequently that nation finds that its credit rating is downgraded.

11. It is announced that due to difficult financial times public spending needs to be trimmed and taxes such as Value Added Tax need to be raised. It is also announced that nobody could possibly have forseen this and that nobody is to blame apart from some irresponsible rumour mongers who are the equivalent of terrorists. A new law is mooted to help stop such financial terrorism from ever happening again.

12. Some members of the press inform us that bank directors were both “able and skilled” and that none of the blame can possibly be put down to them as they get a new highly paid job elsewhere.

13. Former bank directors often leave the new job due to “unforseen difficulties”.

[hornet]

See Barroso has wasted no time in twisting Hollande's growth call...

Jose Manuel Barroso said: said:

...if we are serious about investment for growth, we need to agree an EU budget for the next seven years that shifts the focus of spending to growth enhancing measures, and focus also in competitiveness – and I would also add the budget for this year because some of the measures should indeed be frontloaded. I hope that Member States which are calling for more measures to support growth will reflect this in their positions on the EU budget. It will be a contradiction to support growth through investment and not be able to commit the funds necessary to work for that at the European level.

In other words, "give us more money". What a weasel. Demanding your member states make cuts whilst at the same time demanding yet more money to vanish into your unaudited budget pot strikes me as pretty represhensible. I know a few member states have made a thus far token gesture demanding the accounts get properly signed off, but surely those members feeling the bite of austerity measures are within their rights to withold any further payments? That's assuming they're net contributors, obviously, which is doubtless where the idea falls down...

[Steffan]

bosscerbera said:

HundredthIdiot said:

Steffan said:

One of the most disturbing features of this entire mess is that the Banks are being saved at any cost

The left wing politicians are pushing the "anti-austerity, burn the bankers" line. If this gains traction, who are the losers?

Most people don't have much in the way of savings. Public pensions are "protected".

At what stage does "lender of last resort" become untenable and the banks (and their depositors) get cut loose by states that cannot afford to prop them up?

It's been untenable for some time and states cannot afford to prop them up - that's what's so extraordinary.

I entirely agree with this post and the absolute madness of the State attempting to bail put completely unaffordable losses within Banks.

The Banks are in fact completely bulletproof to lunatic lending and able to live the life of Kings. The electorate are facing lifelong penury and unable to get a job. As I said before, nice work, if you can get it. But unsustainable.

Andy Zarse is also absolutely spot on with his accurate predictions which I remember from the original post. This really is unsustainable. It will not be sustained and the crunch is coming. However you look at it there is going to be one hell of a crunch.

[RichardD]

Steffan said:

...The Banks are in fact completely bulletproof to lunatic lending and able to live the life of Kings. The electorate are facing lifelong penury and unable to get a job. As I said before, nice work, if you can get it. But unsustainable.
...

Good analogies but I think we can do better!

The banks are like leaking bouncy castles, but the leaks aren't being repaired, instead they are being ignored and the castles re-inflated (nothing but air (printed central bank money geddit, groan)). But new leaks keep springing up!

[Andy Zarse]

Steffan said:

bosscerbera said:

HundredthIdiot said:

Steffan said:

One of the most disturbing features of this entire mess is that the Banks are being saved at any cost

The left wing politicians are pushing the "anti-austerity, burn the bankers" line. If this gains traction, who are the losers?

Most people don't have much in the way of savings. Public pensions are "protected".

At what stage does "lender of last resort" become untenable and the banks (and their depositors) get cut loose by states that cannot afford to prop them up?

It's been untenable for some time and states cannot afford to prop them up - that's what's so extraordinary.

I entirely agree with this post and the absolute madness of the State attempting to bail put completely unaffordable losses within Banks.

The Banks are in fact completely bulletproof to lunatic lending and able to live the life of Kings. The electorate are facing lifelong penury and unable to get a job. As I said before, nice work, if you can get it. But unsustainable.

Andy Zarse is also absolutely spot on with his accurate predictions which I remember from the original post. This really is unsustainable. It will not be sustained and the crunch is coming. However you look at it there is going to be one hell of a crunch.

DJRC is perfectly right in his assertion that the French banks are very important in this, specifically Credit Agricole. They own a very nasty little Greek bank called Emporiki, it's up to it's arse in bad loans to the tune of c £20BN so it is reckoned. CA booked a billion in losses on Emporiki last year, and it's only the tip of the iceburg.

If that socialist johnny gets to form the next Greek Govt, he'll refuse to bail out the banks any further which will be an inconvenience for France and all that goes with it. Then there will be a degree of concern in Berlin too when the Hausfrau is asked to write a fat cheque payable to nice Monsieur Hollande.

If the Greeks tell the Troika to butt out and to shove their bailouts, then there's a whole world of pain coming to Europe. The ECB assets bought under the SMP - for which they paid 70 but value at 100 on their balance sheet (even if they are worth about fk all on the open market) - will be worth zero. Oh and just remember these are the assets they are partly using to fund the EZ rescue mechanisms!

This is why I disagree with DJRC and find his thinking rather one-dimensional. He has stated the politics are a sideshow in this drama. Perhaps the Merkozy show was, and the forthcoming Merllande double-act will be. I however have always felt the greater European socio-political story will be the chief driver of the denouement, ahead even of money itself. To my mind, the Greek election has been a game changer, all because millions of poor little Stavroses (is Stavrosii a word?) went into a booth and put a cross in the wrong box last week. Lives destroyed, anger, national humilation, tear gas and cubes of broken shop window glass littering the streets are like that though aren't they?

[Mermaid]

So will it be Greece that makes the headlines from now, or France or Spain?