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

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

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speedy_thrills

6,254 posts

140 months

Sunday 26th February 2012
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AndrewW-G said:
Yet, like many things before it, the BBC's issue with this, is a lack of understanding that working hard does not on its own make something successful and that there is a difference between the public and private sectors . . . .in the case of Greece, the workers could be the most productive and hard working on the planet, but if they don’t pay tax and what little they do pay, is frittered away on a bloated, corrupt and inefficient public sector, then the public sector debt will destroy the whole country.
Actually that's an excellent point. If you look at OECD data tables most countries with the highest GDP per hour and total hours per year most developed European countries have broadly the same value in the latter and the former makes a much bigger difference to total GDP.

Disagree on the latter however, Greece's public sector is now better trimmed than most other European countries.

LongQ

11,045 posts

130 months

Monday 27th February 2012
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Guam said:
Tbh given the history of currency Unions and the Greeks part in their demise, this has all been done before. There was an excellent progr on Radio 4 yesterday morning itemising the failure of EVERY attempt at currency Union.

Steffans only error has been attempting to put a date on it, the reality is, that history shows that it WILL fail and there would be a nearly 100% certainty on its subsequent collapse.

Cheers
Not if you can make the 'merger', er, permanent in a political sense. (But then you may need to determine the boundaries of the meaning of 'permanent').

JagLover

18,976 posts

132 months

Monday 27th February 2012
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tertius said:
Driller said:
The question is when do we get to let fly with the classic "this thread isn't going the way the OP intended"? wink

It would be funny if it wasn't for the fact that Greece staying in the Euro is bad news for the rest of us.

The trouble with this thread though is that there are too many naysayers and not enough yays. It's just tedious.

It goes like this:

"Morning, blimey the Euro's in st isn't it? So and so country's going to default soon, have a look at this link"

"Well said, and that link of yours is bang on"

"I concur, Europe is in the st, have a pat on the back for such a well thought out argument".

"We are rather good aren't we? We've got it all worked out and everyone else is on cloud cookoo land, they will all default and it will happen soon. This afternoon in fact"

Afternoon comes.

"Well they've managed to wing it again but it will all come crashing down soon, tomorrow probably"

"Same time tomorrow then?"

"Yep, see you then"

etc etc
I agree actually.

I almost posted something similar a day or two ago, but decided it would get pretty well the response that, well, your post got.

And to be clear its not that I think posters are wrong with regard to the outcome necessarily just that it is all so repetitive.

I think use of the word "soon" should be banned from this thread - if you are going to predict something, put a timetable on it.
I think the issue is this is a slow motion crises, which sovereign debt crises can be.

I recently read "Too big to fail" which was a very interesting account of the start of the financial crash. There the remaining life of the various investment banks was measured in days, or less towards the end, without intervention, as they were dependant on short term funding.

Countries are a very different proposition, particularly where they share a currency and therefore don't suffer a foreign exchange crises. The issue then becomes whether it can meet debt repayments as they become due and whether ongoing government expenditure can be financed.

This could drag on for years, but without a fundamental change in growth and competitiveness within the Eurozone the outcome remains inevitable for many.

Bing o

15,184 posts

116 months

Monday 27th February 2012
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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)

don4l

5,206 posts

73 months

Monday 27th February 2012
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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
--


Edited by don4l on Monday 27th February 11:23

Digga

15,273 posts

180 months

Monday 27th February 2012
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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.

Steffan

10,114 posts

125 months

Monday 27th February 2012
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There are more cracks in this edifice than there are in a chocolate Easter egg dropped from 10,000 feet onto concrete.

Common sense and any understanding of the reality of the Greek position confirms default is inevitable.

Timing is the difficult call. But default is a certainty.

Mikeyboy

5,018 posts

132 months

Monday 27th February 2012
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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.

Mikeyboy

5,018 posts

132 months

Monday 27th February 2012
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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.

Steffan

10,114 posts

125 months

Monday 27th February 2012
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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.

Digga

15,273 posts

180 months

Monday 27th February 2012
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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 fks 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.

mondeoman

7,986 posts

163 months

Monday 27th February 2012
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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 fks 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.
Ouch!!! Thats gotta hurt on a personal level for the owners.


Mikeyboy

5,018 posts

132 months

Monday 27th February 2012
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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.
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.

bosscerbera

8,182 posts

140 months

Monday 27th February 2012
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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. wink

Digga

15,273 posts

180 months

Monday 27th February 2012
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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.

1point7bar

1,091 posts

45 months

Monday 27th February 2012
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The degree of jeopardy is inconceivable in a default scenario.

$32,409 billion otc notional amount outstanding cds (BIS estimate June 11)

$32,409,000,000,000

Greek debt pales in contrast.

Mikeyboy

5,018 posts

132 months

Monday 27th February 2012
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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. wink
I tink I know what you mean.
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.

Digga

15,273 posts

180 months

Monday 27th February 2012
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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>

Bing o

15,184 posts

116 months

Monday 27th February 2012
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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.

Mikeyboy

5,018 posts

132 months

Monday 27th February 2012
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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.
I can see that. I suspect that what is happening is that the central banks are puttng in place the mecahnisms and the 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.
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