Is the end nigh for the Euro? [vol. 2]
Discussion
Being in banking ops, I'm still intrigued as to how you go back to your own currency from being in a currency union when you have no reserve bank, no central clearer, no FX market, all your EPOS units are set-up for Euros, all your bank accounts are denominated in Euros etc. etc.
The only remotely orderly way for Greece to exit the Euro will take years, and will assume that blind panic doesn't set-in in the interim (a big and incorrect assumption I fear).
My predecessors earnt very good money over several years putting the Euro together in the late 90s, to think that you can break it up again over the course of a weekend Brussels summit is humpty-dumptyism of the highest order...
The reason european politicians are so keen on keeping the Euro together is because Greece exiting will cause civil war in Greece, mass immigration as Greek citizens leave for other EU countries, and may well spread to other SGIP* countries as market confidence dries up in the entire Eurozone.
Like others, I won't put a date on this, but there are fundamental issues that will need to be resolved at some point, and will lead to some pretty nasty outcomes for those involved.
The denialists seem to think they live in a world where all the bad things happened in the past, and nothing bad will ever happen again, seemingly unaware of what happens when a banking system stops, and people get very very hungry....
(*lest I offend the precious)
The only remotely orderly way for Greece to exit the Euro will take years, and will assume that blind panic doesn't set-in in the interim (a big and incorrect assumption I fear).
My predecessors earnt very good money over several years putting the Euro together in the late 90s, to think that you can break it up again over the course of a weekend Brussels summit is humpty-dumptyism of the highest order...
The reason european politicians are so keen on keeping the Euro together is because Greece exiting will cause civil war in Greece, mass immigration as Greek citizens leave for other EU countries, and may well spread to other SGIP* countries as market confidence dries up in the entire Eurozone.
Like others, I won't put a date on this, but there are fundamental issues that will need to be resolved at some point, and will lead to some pretty nasty outcomes for those involved.
The denialists seem to think they live in a world where all the bad things happened in the past, and nothing bad will ever happen again, seemingly unaware of what happens when a banking system stops, and people get very very hungry....
(*lest I offend the precious)
Some cracks are appearing in the edifice.
This morning, the German Interion minister was on R4 calling for Greece to leave the Eurozone.
Story here...
Don
--
This morning, the German Interion minister was on R4 calling for Greece to leave the Eurozone.
Story here...
Don
--
Edited by don4l on Monday 27th February 11:23
don4l said:
cracks
Some Germans may be offended by your referring to their fellow countrymen and ministers as cracks...don4l said:
This morning, the German Interion minister was on R$ calling for Greece to leave the Eurozone.
Story here...
The 'deal Greece cannot refuse' might well address some of Bingo's very well raised comments regarding reserve capital.Story here...
Bing o said:
Being in banking ops, I'm still intrigued as to how you go back to your own currency from being in a currency union when you have no reserve bank, no central clearer, no FX market, all your EPOS units are set-up for Euros, all your bank accounts are denominated in Euros etc. etc.
The only remotely orderly way for Greece to exit the Euro will take years, and will assume that blind panic doesn't set-in in the interim (a big and incorrect assumption I fear).
My predecessors earnt very good money over several years putting the Euro together in the late 90s, to think that you can break it up again over the course of a weekend Brussels summit is humpty-dumptyism of the highest order...
The reason european politicians are so keen on keeping the Euro together is because Greece exiting will cause civil war in Greece, mass immigration as Greek citizens leave for other EU countries, and may well spread to other SGIP* countries as market confidence dries up in the entire Eurozone.
Like others, I won't put a date on this, but there are fundamental issues that will need to be resolved at some point, and will lead to some pretty nasty outcomes for those involved.
The denialists seem to think they live in a world where all the bad things happened in the past, and nothing bad will ever happen again, seemingly unaware of what happens when a banking system stops, and people get very very hungry....
(*lest I offend the precious)
I would assume that at certain levels, over the past few months that this has been going on the infrsatructure has been put in place to ease the process. That being said it will still not be an overnight affair, even if it has to be.The only remotely orderly way for Greece to exit the Euro will take years, and will assume that blind panic doesn't set-in in the interim (a big and incorrect assumption I fear).
My predecessors earnt very good money over several years putting the Euro together in the late 90s, to think that you can break it up again over the course of a weekend Brussels summit is humpty-dumptyism of the highest order...
The reason european politicians are so keen on keeping the Euro together is because Greece exiting will cause civil war in Greece, mass immigration as Greek citizens leave for other EU countries, and may well spread to other SGIP* countries as market confidence dries up in the entire Eurozone.
Like others, I won't put a date on this, but there are fundamental issues that will need to be resolved at some point, and will lead to some pretty nasty outcomes for those involved.
The denialists seem to think they live in a world where all the bad things happened in the past, and nothing bad will ever happen again, seemingly unaware of what happens when a banking system stops, and people get very very hungry....
(*lest I offend the precious)
I had a friend over for the weekend from Spain.
He was interviewing for jobs here and was very positive about our economy. This was in stark comparison to his view of the Spanish economy.
Almost all of our freinds there are now out of work. some for the third time in 2 years.He thinks the official unemployment rate is maybe a little low due to the people who won't sign on out of pride or are living off thier pay-outs from redundancy.
The housing market in Madrid is held at unsustainable levels while the rest of the country sees the market fall away, most people in Madrid expect the market to fall very quickly very soon for them too.
Shops restaurants and Bars are empty or closing early. People eat at friends houses now when socialising, if you know anything about Spain, this is just not normal.
wages are dropping. Jobs in other words are re-advertised after downsizing and the wages have taken a 10-20% drop from what the last person was paid.
Any recovery in the Spanish stock market is done simply by the companies that have most of their dealings outside of Europe, like Inditex and Santander. Otherwise all other stocks just will not recover from last years falls.
He went on a bit more into the statistics he had seen, most of which I can't remember. Depressing stuff.
He knows what hes talking about too. Hes a fund analyst
This is the country that we should worry about more than Greece. Its in a very bad way and has been for some time, and yet I tink the view from the north is that it will only be in trouble if Greece goes. I think that it won't even take that much for it to become the next basket case. It'll just need a heavy set of "austerity" to kill the last vestiges of growth in their economy and then it will all kick off on the Costa Blanca.
He was interviewing for jobs here and was very positive about our economy. This was in stark comparison to his view of the Spanish economy.
Almost all of our freinds there are now out of work. some for the third time in 2 years.He thinks the official unemployment rate is maybe a little low due to the people who won't sign on out of pride or are living off thier pay-outs from redundancy.
The housing market in Madrid is held at unsustainable levels while the rest of the country sees the market fall away, most people in Madrid expect the market to fall very quickly very soon for them too.
Shops restaurants and Bars are empty or closing early. People eat at friends houses now when socialising, if you know anything about Spain, this is just not normal.
wages are dropping. Jobs in other words are re-advertised after downsizing and the wages have taken a 10-20% drop from what the last person was paid.
Any recovery in the Spanish stock market is done simply by the companies that have most of their dealings outside of Europe, like Inditex and Santander. Otherwise all other stocks just will not recover from last years falls.
He went on a bit more into the statistics he had seen, most of which I can't remember. Depressing stuff.
He knows what hes talking about too. Hes a fund analyst
This is the country that we should worry about more than Greece. Its in a very bad way and has been for some time, and yet I tink the view from the north is that it will only be in trouble if Greece goes. I think that it won't even take that much for it to become the next basket case. It'll just need a heavy set of "austerity" to kill the last vestiges of growth in their economy and then it will all kick off on the Costa Blanca.
Mickeyboy is, of course, quite correct in his concern for Spain. So was his Investment analyst friend. Spain and Portugal will inevitably default.
These defaulting countries are insolvent. Sadly the failure in their economies is the essential problem. It cannot be massaged better.
The same applies ultimately, I fear to Italy.
There can be no improvement whilst the countries remain in a currency that is completely unaffordable to those countries. The basic economics is nonsense.
Default is the only way that Spain and Portugal can recover.
Even then recovery will be slow and take years.
These defaulting countries are insolvent. Sadly the failure in their economies is the essential problem. It cannot be massaged better.
The same applies ultimately, I fear to Italy.
There can be no improvement whilst the countries remain in a currency that is completely unaffordable to those countries. The basic economics is nonsense.
Default is the only way that Spain and Portugal can recover.
Even then recovery will be slow and take years.
Steffan said:
The same applies ultimately, I fear to Italy.
I can add an anecdotal about Italy.An engineering firm we've dealt with for about 15 years now has reached the point where they can only afford to do work for us if they take a deposit payment. For years, we simply transferred money 30-60 days after goods had shipped from them, then the credit crunch hit. We met them on a number of occasions and the story was grim; they'd expanded aggressviely in the boom to a brilliant, huge production facility and then when the crunch came their bread and butter OEM supply work dried up.
At first, they'd request payment when good were ready for despatch - even then the factory was effectively mothballed in between jobs, with workers not just on reduced hours but only coming to work when there was an order to complete - but then they wanted a deposit. This year they need payment up front...
We're a bit torn because it's f
ks with our cashflow and the risk of loss is not inconsiderable, but then they've been an excellent supplier and there is a degree of loyalty. However, we're now taking most of the work in-house as the writing is on the wall - if Italy and it's banks decline further, the firm is sadly not likely to remain in business.Digga said:
Steffan said:
The same applies ultimately, I fear to Italy.
I can add an anecdotal about Italy.An engineering firm we've dealt with for about 15 years now has reached the point where they can only afford to do work for us if they take a deposit payment. For years, we simply transferred money 30-60 days after goods had shipped from them, then the credit crunch hit. We met them on a number of occasions and the story was grim; they'd expanded aggressviely in the boom to a brilliant, huge production facility and then when the crunch came their bread and butter OEM supply work dried up.
At first, they'd request payment when good were ready for despatch - even then the factory was effectively mothballed in between jobs, with workers not just on reduced hours but only coming to work when there was an order to complete - but then they wanted a deposit. This year they need payment up front...
We're a bit torn because it's f
ks with our cashflow and the risk of loss is not inconsiderable, but then they've been an excellent supplier and there is a degree of loyalty. However, we're now taking most of the work in-house as the writing is on the wall - if Italy and it's banks decline further, the firm is sadly not likely to remain in business.Steffan said:
Mickeyboy is, of course, quite correct in his concern for Spain. So was his Investment analyst friend. Spain and Portugal will inevitably default.
These defaulting countries are insolvent. Sadly the failure in their economies is the essential problem. It cannot be massaged better.
The same applies ultimately, I fear to Italy.
There can be no improvement whilst the countries remain in a currency that is completely unaffordable to those countries. The basic economics is nonsense.
Default is the only way that Spain and Portugal can recover.
Even then recovery will be slow and take years.
Italy is however fundamentally capable of paying its money back, even if their economy had never really performed as well as it should. It had a balanced budget and by the simple expedience of raising a little more in tax, while unpopular still acheievable it could have begun to pay back what was basically a historic debt rather than one based upon an ongoing budget deficit.These defaulting countries are insolvent. Sadly the failure in their economies is the essential problem. It cannot be massaged better.
The same applies ultimately, I fear to Italy.
There can be no improvement whilst the countries remain in a currency that is completely unaffordable to those countries. The basic economics is nonsense.
Default is the only way that Spain and Portugal can recover.
Even then recovery will be slow and take years.
The banks and EU though have panicked and set them onto the path of "austerity" and what will be an inevitable shrinkage in their output.
Italy is no-where near the basketcase Spain has been since 2009. As you say I believe Spain will have to default, Italy doesn't. It just needs someone to put their foot down at the EU and with their lenders.
Mikeyboy said:
Italy is however fundamentally capable of paying its money back, even if their economy had never really performed as well as it should. It had a balanced budget and by the simple expedience of raising a little more in tax, while unpopular still acheievable it could have begun to pay back what was basically a historic debt rather than one based upon an ongoing budget deficit.
The banks and EU though have panicked and set them onto the path of "austerity" and what will be an inevitable shrinkage in their output.
Italy is no-where near the basketcase Spain has been since 2009. As you say I believe Spain will have to default, Italy doesn't. It just needs someone to put their foot down at the EU and with their lenders.
Nice theory. The banks and EU though have panicked and set them onto the path of "austerity" and what will be an inevitable shrinkage in their output.
Italy is no-where near the basketcase Spain has been since 2009. As you say I believe Spain will have to default, Italy doesn't. It just needs someone to put their foot down at the EU and with their lenders.
mondeoman said:
Ouch!!! Thats gotta hurt on a personal level for the owners.
Yep. It's a family firm - I know the owner and his daughter who now works in the firm and they have always been a pretty sensible, steady business. Re-investment has been massive, into a very specialist field, but I guess there was an element of over-reaching in the boom. Easy to say with the benefit of hindsight, but I guess at the time there was a risk they could loose their share of the OEM market through lack of supply.I shudder to think what may happen to them and other italian businesses if it is true that Eurozine banks have yet to fully unwind themeselves.
bosscerbera said:
Mikeyboy said:
Italy is however fundamentally capable of paying its money back, even if their economy had never really performed as well as it should. It had a balanced budget and by the simple expedience of raising a little more in tax, while unpopular still acheievable it could have begun to pay back what was basically a historic debt rather than one based upon an ongoing budget deficit.
The banks and EU though have panicked and set them onto the path of "austerity" and what will be an inevitable shrinkage in their output.
Italy is no-where near the basketcase Spain has been since 2009. As you say I believe Spain will have to default, Italy doesn't. It just needs someone to put their foot down at the EU and with their lenders.
Nice theory. The banks and EU though have panicked and set them onto the path of "austerity" and what will be an inevitable shrinkage in their output.
Italy is no-where near the basketcase Spain has been since 2009. As you say I believe Spain will have to default, Italy doesn't. It just needs someone to put their foot down at the EU and with their lenders.
Yes there are flaws in their economy, and its pretty corrupt, but there is no getting away from the fact that Italy has had a budget surplus in real terms after inetrest payments are discounted.
Its really only Berlusconi's fault that he kept the debt goign rather than use the income and maybe a little more to pay it off. This was a right wing version of the Blair/Brown years here.
Spain though has never run a surplus. And with 22% uneployment at least, it seems unlikely that austerity and yet more unemployment is going to help that.
Mikeyboy said:
I would assume that at certain levels, over the past few months that this has been going on the infrsatructure has been put in place to ease the process. That being said it will still not be an overnight affair, even if it has to be.
From what I understand, my company (one of the largest Euro clearers) won't look at the possibility of a breakup because if news got out that we were looking at the possibility, the news in itself would pretty much be the end. A self fulfilling prophecy if you like.Bing o said:
Mikeyboy said:
I would assume that at certain levels, over the past few months that this has been going on the infrsatructure has been put in place to ease the process. That being said it will still not be an overnight affair, even if it has to be.
From what I understand, my company (one of the largest Euro clearers) won't look at the possibility of a breakup because if news got out that we were looking at the possibility, the news in itself would pretty much be the end. A self fulfilling prophecy if you like.There has to be contingency planning, there always will be, even if its kept so far behind closed doors that even the board doesn't know its happening.
Digga said:
Mikeyboy said:
Yes there are flaws in their economy, and its pretty corrupt...
<cough>the Mafia is the biggest single business in the country</cough>Mikeyboy said:
Digga said:
Mikeyboy said:
Yes there are flaws in their economy, and its pretty corrupt...
<cough>the Mafia is the biggest single business in the country</cough>Granted the country is, in itself, an almost perfect mirror of the north-south EU divide and has only been a nation as such for about 150 years IIRC, but I wonder to hwat extent the government is able to generate tax with so much of the economy in this stranglehold?
Gassing Station | News, Politics & Economics | Top of Page | What's New | My Stuff