Is the end nigh for the Euro? [vol. 3]

[Claudia Skies]

RYH64E said:

And are we expecting to get our money back from RBS?

One imagines not. But they have the name "royal" and aren't "foreigners" so PH probably aren't too concerned about it.

[anonymous-user]

Digga said:

Zero sum gain though, in reality - wherever the bailout is directed, the magnitude would be the same.

No it isn't that's the point. Financial contagion. Big losses trigger waves and waves of selling in completely unrelated assets. A bank losing 20bn on greece doesn't just lose 20bn, it loses 100bn on all the other unrelated positions it holds that get crushed in anticipation of them having to sell to cover their losses.

[anonymous-user]

RYH64E said:

fblm said:

OK I see your logic but think you are wrong. Certainly they arn't going to get their money back from Greece but the alternative of letting the banks drown then rescue them could precipitate far greater losses. Financial markets are contagious. You might well get back half your 'investment' rescuing the banks but the losses could very easily balloon far greater then double the original loss leaving you out of pocket. The decision was pretty simple, massive known loss to Greece or massive unknown, potentially catastrophic, loss rescuing the banks. The UK made the same choice with RBS for the same reason.

And are we expecting to get our money back from RBS?

All I am doing is explaining the logic. You put roughly 120bn into RBS, can't be arsed looking up what it is worth now half maybe, I dont know. Call it a 60bn loss. No, call it the full 120. Can you even imagine how much rescuing everyone after bankrupcy would have cost? Rescuing individual and corporate depositors alone would have cost 4 times that. I am not making a call what is right or wrong, I'm saying you have a choice, massive known loss, or massive potentionally catastrophic, unknown loss. Takes your pick.

Edited by anonymous-user on Friday 30th January 15:36

[Andy Zarse]

RYH64E said:

fblm said:

RYH64E said:

Had Greece defaulted in 2010 the banks would have been stuffed but the EU taxpayer largely unaffected

I agree the loss has effectively been transfered from the banks to the state but in what scanario would bankrupting almost every bank in the EU not massively fvck the EU taxpayer?

If the EU had to bail the banks out (again) there would at least be some prospect of getting their money back eventually, they're never going to get anything back from Greece.

And what about Italy? Their banks are absolutely stuffed full of Italian debt, which the Italian Govt. has been issuing like crazy. Debt to GDP is over 133%, and despite the most imaginative and audacious book-cooking imaginable, it's heading north fast. Italian banks buying Italian debt seems to me to be a particularly parasitic relationship, both gorging off each other's blood.

So when the time comes, do you think the ECB will utilise the "shock and awe" vehicles such as the EFSF to help when Italy is in the soup? Or will they let it go to the wall and walk away? And where does either of these scenarios leave the Euro?

My view is that a lot of the cans which were kicked up the road three years ago are now starting to be caught up again...

[YankeePorker]

At the last debt write down (for Cyprus) the troika used weasel words to prevent the application of credit default swaps, presumably to prevent protect the financial institutions that had made money insuring the debt. I wonder how they'll do the same this time if a great swathe of debt is written off?

I don't know if the original CDS's held by the lending banks who bought Greek debt will still have any validity now that the debt has been passed over to the ECB, or whether the ECB has purchased any CDS's for the tranche of debt that it has taken on. Presumably not, as who would have been fool enough to insure that debt given the unviability of the Greek economy?

[turbobloke]

Andy Zarse said:

RYH64E said:

fblm said:

RYH64E said:

Had Greece defaulted in 2010 the banks would have been stuffed but the EU taxpayer largely unaffected

I agree the loss has effectively been transfered from the banks to the state but in what scanario would bankrupting almost every bank in the EU not massively fvck the EU taxpayer?

If the EU had to bail the banks out (again) there would at least be some prospect of getting their money back eventually, they're never going to get anything back from Greece.

And what about Italy? Their banks are absolutely stuffed full of Italian debt, which the Italian Govt. has been issuing like crazy. Debt to GDP is over 133%, and despite the most imaginative and audacious book-cooking imaginable, it's heading north fast. Italian banks buying Italian debt seems to me to be a particularly parasitic relationship, both gorging off each other's blood.

So when the time comes, do you think the ECB will utilise the "shock and awe" vehicles such as the EFSF to help when Italy is in the soup? Or will they let it go to the wall and walk away? And where does either of these scenarios leave the Euro?

My view is that a lot of the cans which were kicked up the road three years ago are now starting to be caught up again...

Will a new type of kick be forthcoming...new rules are waiting to be made to be broken

[RYH64E]

fblm said:

All I am doing is explaining the logic. You put roughly 120bn into RBS, can't be arsed looking up what it is worth now half maybe, I dont know. Call it a 60bn loss. No, call it the full 120. Can you even imagine how much rescuing everyone after bankrupcy would have cost? Rescuing individual and corporate depositors alone would have cost 4 times that. I am not making a call what is right or wrong, I'm saying you have a choice, massive known loss, or massive potentionally catastrophic, unknown loss. Takes your pick.

Edited by fblm on Friday 30th January 15:36

What I'm saying is that it would have made more sense to put the money into the banks directly rather than lend it Greece so that they could put it into the banks. Greece would have been able to default and been spared 4 years of pain, and the EU would have something to show for it's money in the form of some credit worthy debtors. Instead, the banks have got away scot free, they don't owe anything in return for their under the counter bail out. They didn't have to wait until the banks were bust then rescue them, it could have been done in the same way the UK banks were re-capitalised.

[Andy Zarse]

RYH64E said:

fblm said:

All I am doing is explaining the logic. You put roughly 120bn into RBS, can't be arsed looking up what it is worth now half maybe, I dont know. Call it a 60bn loss. No, call it the full 120. Can you even imagine how much rescuing everyone after bankrupcy would have cost? Rescuing individual and corporate depositors alone would have cost 4 times that. I am not making a call what is right or wrong, I'm saying you have a choice, massive known loss, or massive potentionally catastrophic, unknown loss. Takes your pick.

Edited by fblm on Friday 30th January 15:36

What I'm saying is that it would have made more sense to put the money into the banks directly rather than lend it Greece so that they could put it into the banks. Greece would have been able to default and been spared 4 years of pain, and the EU would have something to show for it's money in the form of some credit worthy debtors. Instead, the banks have got away scot free, they don't owe anything in return for their under the counter bail out. They didn't have to wait until the banks were bust then rescue them, it could have been done in the same way the UK banks were re-capitalised.

But that would mean Germany admitting it had a systemic banking problem (other than Commerzbank ) and landing the German tax payer with a massive and obvious bill to sort out the whole jolly mess. This would have impacted on Germany's famous balanced budget, raised its borrowings. Bust banks don't do much lending to industry either.

Worse still, Germany would no longer be in no position to lecture lazy scrounging southerners...

I trust you are beginning to understand this whole Euro business is a bit more complicated than just being a currency denomination which you trade in.

[RYH64E]

Andy Zarse said:

But that would mean Germany admitting it had a systemic banking problem (other than Commerzbank ) and landing the German tax payer with a massive and obvious bill to sort out the whole jolly mess. This would have impacted on Germany's famous balanced budget, raised its borrowings. Bust banks don't do much lending to industry either.

Worse still, Germany would no longer be in no position to lecture lazy scrounging southerners...

I trust you are beginning to understand this whole Euro business is a bit more complicated than just being a currency denomination which you trade in.

I'm not sure I follow your logic.

On the one hand, the EU has managed to turn the banks problem into a problem for the EU taxpayer. On the other hand, and completely unrelated as far as I can see, I make money by selling to my EU customers (which makes me happy). And on the third hand I don't see what it's got to do with the euro per se, it doesn't matter if the debt is in eur, gbp, usd or whatever, the Greeks haven't got it.

Lazy scrounging southerners have been lent money so that they can repay their debts to hard working and deserving bankers, who shouldn't have lent to them in the first place and who should be paying the price for so doing, instead the long suffering tax payers have to pick up the tab, again.

[Borghetto]

RYH64E said:

And on the third hand I don't see what it's got to do with the euro per se, it doesn't matter if the debt is in eur, gbp, usd or whateve

Actually it does matter which currency the debt is denominated in. If the Draghi can majic up a trillion by way of QE, another 280 billion isn't likely to phase him.

[craig7l]

^^ time and time again I see "Lazy PIGS".... an average Greek worker in a job works more hours on average than an North American and more than many North Europeans.
Its not that say a Portuguese is lazy is more to the point they are in general useless non productive s...

[Andy Zarse]

RYH64E said:

Andy Zarse said:

But that would mean Germany admitting it had a systemic banking problem (other than Commerzbank ) and landing the German tax payer with a massive and obvious bill to sort out the whole jolly mess. This would have impacted on Germany's famous balanced budget, raised its borrowings. Bust banks don't do much lending to industry either.

Worse still, Germany would no longer be in no position to lecture lazy scrounging southerners...

I trust you are beginning to understand this whole Euro business is a bit more complicated than just being a currency denomination which you trade in.

I'm not sure I follow your logic.

On the one hand, the EU has managed to turn the banks problem into a problem for the EU taxpayer. On the other hand, and completely unrelated as far as I can see, I make money by selling to my EU customers (which makes me happy). And on the third hand I don't see what it's got to do with the euro per se, it doesn't matter if the debt is in eur, gbp, usd or whatever, the Greeks haven't got it.

Lazy scrounging southerners have been lent money so that they can repay their debts to hard working and deserving bankers, who shouldn't have lent to them in the first place and who should be paying the price for so doing, instead the long suffering tax payers have to pick up the tab, again.

Again I don't disagree with any of that...

I just don't think you're seeing the bigger picture. Your narrative all along on this thread has been the Euro is safe, it's weathered the storm and the end isn't nigh. Many others on here recognise the politics behind it and its flawed design (you know all this anyway). All the machinations and imbalances behind the Euro are papered over, but the cracks eventually show through and thus you end up with your Syrizas threatening to pull the pin.

So on our fourth mutual hand (which perhaps one of us has sat on to make it go numb) we have a currency based on an unbalanced Eurozone economy where natural money flows are blocked and which destroys the weaker economies. It's not sustainable. Now, it could be we end up with the only remaining members of the Euro being Germany and the Benelux countries, but that's not really the same thing as we have now is it.

[RYH64E]

Andy Zarse said:

Again I don't disagree with any of that...

I just don't think you're seeing the bigger picture. Your narrative all along on this thread has been the Euro is safe, it's weathered the storm and the end isn't nigh. Many others on here recognise the politics behind it and its flawed design (you know all this anyway). All the machinations and imbalances behind the Euro are papered over, but the cracks eventually show through and thus you end up with your Syrizas threatening to pull the pin.

So on our fourth mutual hand (which perhaps one of us has sat on to make it go numb) we have a currency based on an unbalanced Eurozone economy where natural money flows are blocked and which destroys the weaker economies. It's not sustainable. Now, it could be we end up with the only remaining members of the Euro being Germany and the Benelux countries, but that's not really the same thing as we have now is it.

I agree that the euro is deeply flawed, I don't agree that it's end is nigh because whilst the political will to maintain it is there it will continue to be.

This latest debate has been mostly about Greece, and I don't agree that Greece's problems have been caused by the euro. Greece's problems existed long before the euro and will continue with whatever currency they adopt in the future.

[Andy Zarse]

RYH64E said:

Andy Zarse said:

Again I don't disagree with any of that...

I just don't think you're seeing the bigger picture. Your narrative all along on this thread has been the Euro is safe, it's weathered the storm and the end isn't nigh. Many others on here recognise the politics behind it and its flawed design (you know all this anyway). All the machinations and imbalances behind the Euro are papered over, but the cracks eventually show through and thus you end up with your Syrizas threatening to pull the pin.

So on our fourth mutual hand (which perhaps one of us has sat on to make it go numb) we have a currency based on an unbalanced Eurozone economy where natural money flows are blocked and which destroys the weaker economies. It's not sustainable. Now, it could be we end up with the only remaining members of the Euro being Germany and the Benelux countries, but that's not really the same thing as we have now is it.

I agree that the euro is deeply flawed, I don't agree that it's end is nigh because whilst the political will to maintain it is there it will continue to be.

This latest debate has been mostly about Greece, and I don't agree that Greece's problems have been caused by the euro. Greece's problems existed long before the euro and will continue with whatever currency they adopt in the future.

Ignore Greece, it's just a little Eu300BN side show. Whilst there's some interesting lessons to be drawn, it's really nowt more than a dry run for the main performance.

So tell us, what about the other countries?

You just think Italy will miraculously come out of its ten year recession, and its debts will stop getting bigger and will all simply go away?

Or that the Germans will shell out again and again and again, even though they realise they will never ever get their money back?

Or Mutti Merkel will allow QE to go on for ever, or even contemplate signing up to allow debt mutualisation?

Well, jolly good luck to you with all that!

[anonymous-user]

RYH64E said:

What I'm saying is that it would have made more sense to put the money into the banks directly rather than lend it Greece so that they could put it into the banks. Greece would have been able to default and been spared 4 years of pain, and the EU would have something to show for it's money in the form of some credit worthy debtors. Instead, the banks have got away scot free, they don't owe anything in return for their under the counter bail out. They didn't have to wait until the banks were bust then rescue them, it could have been done in the same way the UK banks were re-capitalised.

I understand but we both know pre-emptive transparent bank bailouts are simply not politically (or probably legally) possible. As an aside as a practical matter do you imagine your glorious Eurocrats could actually organise a massive bailout and nationalisation of most of the continents Banks in total secrecy? Once the cat was out the bag there would be no going back. Economically, politically and practically I just don't see what other routes were remotely possible let alone 'better' than the deceitful can-kicking they opted for. Like it or not the financial system is too big to fail, in disaster it will always end up in tax payers laps.

[Borghetto]

Greece refuse to negotiate with the troika - that'll go down well with their creditors.

http://www.bbc.co.uk/news/world-europe-31055069

[Mermaid]

craig7l said:

^^ time and time again I see "Lazy PIGS".... an average Greek worker in a job works more hours on average than an North American and more than many North Europeans.
Its not that say a Portuguese is lazy is more to the point they are in general useless non productive s...

Apple should move production to Greece - problem solved

[NicD]

Can anyone translate this into English?
Mr Tsipras said
“Our first action as a government will not be to reject the rationale of questioning this programme through a request to extend it.”

[craig7l]

NicD said:

Can anyone translate this into English?
Mr Tsipras said
“Our first action as a government will not be to reject the rationale of questioning this programme through a request to extend it.”

Not really but if you read in back again out loud with a greek style accent it sounds wonderful

[fido]

NicD said:

Can anyone translate this into English?

Referring to the same subject twice in a sentence. Tutty tut!

"Our first action as a government will not be to reject the rationale of questioning the [€240bn bailout] programme through a request to extend it."

So he's basically saying he doesn't want to discuss extension of the bailout with the EU at all. He wants to question how they got there in the first place. I assume in preparation for telling the ECB they won't be getting back some of that €240bn!

Edited by fido on Friday 30th January 19:06