THE Eurozone Economics Thread pt 1 (merged) Archived

[Daniel_Plainview]

Europe: Grimmer by the minute

NEW YORK (CNNMoney) -- European leaders insist they are making progress on a comprehensive plan to tackle the eurozone's debt and banking crisis. But the details are foggy and last-minute delays suggest that significant disagreements remain unresolved. ... "The sovereign debt crisis threatens the very existence of the eurozone," said Howard Archer, chief European economist at IHS Global. "It is therefore absolutely imperative that European policymakers finally deliver a major package." ... Some experts have already dismissed Wednesday's meeting as a prelude to the Group of 20 summit in early November, when the world's most powerful leaders will gather in Cannes, France. "We have no confidence at all that the various proposed strategies will provide any effective fix for Europe's ills," said Ian Gordon, an analyst at investment bank Evolution Securities in London.

CNN

When the wheels fell off the capitalist bandwagon back in 2008, it was decided by politicians and bureaucrats to save the "too greedy to fail" banks, bondholders and large shareholders, by stuffing their insufferable losses under the mattresses of various national hosts, rather than let them die, as such institutions have, many, many times in the past, when faced with similar circumstances.

The fervent belief, as advised by economists, being that the "business cycle" would soon resume and economic growth would take care of all that poisonous debt now festering on the balance sheets of those countries, through the fullness of time (i.e. inflation), without recourse to any organic, structural change. In other words, a full commitment to the policy of "Party on dudes!"

It was a gamble, the biggest, running as it was into the strengthening headwinds of peak debt, peak oil and climate change. Now, it seems as if they are about to lose that bet, lose it big. Instead of just the parasitic banks going down they are in danger of seeing entire countries go under.

"When you stare at the abyss, the abyss stares back." - Nietzsche

Yes, all true. Tens of trillions have been misallocated for the sole purpose of preserving the criminal cartel's status quo ... if only for a few extra months ...

[Daniel_Plainview]

German parliament backs more EFSF firepower

FRANKFURT (MarketWatch) -- The German Bundestag on Wednesday passed a motion effectively giving Chancellor Angela Merkel permission to work toward a plan to boost the lending power of the 440 billion euro ($613 billion) European Financial Stability Facility when she meets with fellow European leaders at a Brussels summit in the evening. The measure outlined two strategies for levergaing the fund that won't require additional contributions from member states. It also excludes a role for the European Central Bank in funding the EFSF. "Germany cannot live well if Europe is doing badly. That is why it is our main intention that Europe comes out of the crisis much stronger," Merkel told lawmakers ahead of the vote.

[Daniel_Plainview]

Banks Willing to take Larger Haircuts to Break Greek Deadlock

Oct. 26 (Bloomberg) -- Financial firms sweetened their offer to cut Greece's debt load as they try to end a deadlock with European leaders over the size of losses creditors will have to accept as part of the country's bailout.

The Institute of International Finance, which lobbies on behalf of 450 financial firms, yesterday proposed investors make a larger writedown than the 40 percent the group offered last week, said two people with knowledge of the talks. The European Union is calling on investors to forfeit as much as 60 percent, a person familiar with the talks said last week.

The latest proposal includes a 50 percent writedown on the net present value of Greek debt, said one of the people who declined to be identified because the talks are private. Another person cautioned that the writedown may be closer to 45 percent. It's still uncertain whether EU leaders will accept even the increased offer, both people said.

...

[peripato]

Banks Willing to take Larger Haircuts to Break Greek Deadlock

Oct. 26 (Bloomberg) -- Financial firms sweetened their offer to cut Greece's debt load as they try to end a deadlock with European leaders over the size of losses creditors will have to accept as part of the country's bailout.

The Institute of International Finance, which lobbies on behalf of 450 financial firms, yesterday proposed investors make a larger writedown than the 40 percent the group offered last week, said two people with knowledge of the talks. The European Union is calling on investors to forfeit as much as 60 percent, a person familiar with the talks said last week.

The latest proposal includes a 50 percent writedown on the net present value of Greek debt, said one of the people who declined to be identified because the talks are private. Another person cautioned that the writedown may be closer to 45 percent. It's still uncertain whether EU leaders will accept even the increased offer, both people said.

...

Daniel, but even this is no way near enough according to some...

IMF Sees 60% Greek Debt Writedown Too Small

The IMF thinks that 60% haircut is not enough--they want more," the official told Dow Jones Newswires. "It should be 65% or more."

(It) didn't rule out a haircut of as much as 70% to 75% in the value of private sector creditor's holdings. The IMF couldn't immediately be reached for comment.

Of course, such a large write-down would spell the end, end, end, for all pigmen!


Doesn't Mel look young?

[Daniel_Plainview]

Of course, such a large write-down would spell the end, end, end, for all pigmen!


Doesn't Mel look young?

Make it so ...

[peripato]

Of course, such a large write-down would spell the end, end, end, for all pigmen!


Doesn't Mel look young?

Make it so ...

Max Rocks!

Speaking of which, have you seen this excellent.two part video with Max Keiser which discusses the French experience with rampant fiat money printing, credit binges and speculative bubbles during the 18th century? The same tactics as being used now were tried back then, twice! Money printing, currency debasement, toxic asset stuffing of the public purse, mark-to-fantasy accounting practices, austerity measures, deliberate commodity and equities inflation, kicking the can down the road, again and again - to no avail.

All the same shit as today, even similar kinds of nefarious characters and corrupt organisations (except there was the guillotine, now there's a good idea). Once you've seen these short videos, you'll realise that there's truly nothing new or different about this particular crisis from that perspective, except for the conceit of the "Modern Age" that somehow believes that the pigmen of today are wiser than those of the past.

[Daniel_Plainview]

Money printing, currency debasement, toxic asset stuffing of the public purse, mark-to-fantasy accounting practices, austerity measures, deliberate commodity and equities inflation.

That is a strangely familiar pattern ... I will watch the videos this evening ...

[peripato]

Money printing, currency debasement, toxic asset stuffing of the public purse, mark-to-fantasy accounting practices, austerity measures, deliberate commodity and equities inflation.

That is a strangely familiar pattern ... I will watch the videos this evening ...

You won't know whether to laugh or cry at first. But then, just reach for your trusty pitchfork and you will be soothed.

[peripato]

Money printing, currency debasement, toxic asset stuffing of the public purse, mark-to-fantasy accounting practices, austerity measures, deliberate commodity and equities inflation.

That is a strangely familiar pattern ... I will watch the videos this evening ...

You won't know whether to laugh or cry at first. But then, just reach for that trusty pitchfork and you will be soothed.

[dolanbaker]

Eurozone emergency deal: Key elements
http://www.bbc.co.uk/news/world-europe-15472679

The key elements of an emergency "three-pronged" deal to fix the eurozone's debt crisis, which was clinched after marathon talks in Brussels.
Greek debt

Private banks holding Greek debt will accept a write-off of 50% of their returns.

The move is expected to cut the nation's debt load to 120% of its GDP in 2020. Under current conditions, it would have grown to 180%.

Reluctant banks had initially offered a 40% "haircut", but the deal was finally agreed after German Chancellor Angela Merkel and French President Nicolas Sarkozy joined direct negotiations on the issue on Thursday morning.
Bailout fund

The firepower of the main euro bailout fund - known as the European Financial Stability Facility (EFSF) - is to be boosted from the 440bn euros set up earlier this year to 1tn euros.

There is about 250bn euros left available in the EFSF, which the summit statement said could be leveraged 4-5 times.

This can be done in two ways:

By offering insurance to purchasers of eurozone members' debt - in principle making their bonds more attractive to investors and thereby lowering governments' borrowing costs.
And by setting up a special investment vehicle which big private and public investors, including countries such as China, could contribute to.

Both means could be used simultaneously depending on circumstances, the summit statement said.

The framework for the new, increased fund should be in place in November.
Bank recapitalisation

European banks will be required to raise about 106bn euros in new capital by June 2012.

It is hoped that this would help shield them against losses resulting from any government defaults and protect larger economies - like Italy and Spain - from the market turmoil.

"We have reached an agreement which I believe lets us give a credible and ambitious and overall response to the Greek crisis," was how Mr Sarkozy summed up the deal.

Sorted!

Well just delayed anyway.

[Daniel_Plainview]

Max Rocks!

Speaking of which, have you seen this excellent.two part video with Max Keiser

Those vid's are very good (you get bonus points if you can identify the 6 excerpts of classical music in the two videos ). There's no such thing as a free lunch, and all fiat currencies eventually die ... the dollar's days are severely numbered.

[Daniel_Plainview]

Eurozone emergency deal: Key elements
http://www.bbc.co.uk/news/world-europe-15472679

The key elements of an emergency "three-pronged" deal to fix the eurozone's debt crisis, which was clinched after marathon talks in Brussels.
Greek debt

Private banks holding Greek debt will accept a write-off of 50% of their returns.

The move is expected to cut the nation's debt load to 120% of its GDP in 2020. Under current conditions, it would have grown to 180%.

Reluctant banks had initially offered a 40% "haircut", but the deal was finally agreed after German Chancellor Angela Merkel and French President Nicolas Sarkozy joined direct negotiations on the issue on Thursday morning.
Bailout fund

The firepower of the main euro bailout fund - known as the European Financial Stability Facility (EFSF) - is to be boosted from the 440bn euros set up earlier this year to 1tn euros.

There is about 250bn euros left available in the EFSF, which the summit statement said could be leveraged 4-5 times.

This can be done in two ways:

By offering insurance to purchasers of eurozone members' debt - in principle making their bonds more attractive to investors and thereby lowering governments' borrowing costs.
And by setting up a special investment vehicle which big private and public investors, including countries such as China, could contribute to.

Both means could be used simultaneously depending on circumstances, the summit statement said.

The framework for the new, increased fund should be in place in November.
Bank recapitalisation

European banks will be required to raise about 106bn euros in new capital by June 2012.

It is hoped that this would help shield them against losses resulting from any government defaults and protect larger economies - like Italy and Spain - from the market turmoil.

"We have reached an agreement which I believe lets us give a credible and ambitious and overall response to the Greek crisis," was how Mr Sarkozy summed up the deal.

Sorted!

Well just delayed anyway.

Oh goody, they've kicked the can for about 2 or 3 weeks. Let's celebrate.

This is lame; it raises a myriad of issues and likely solves nothing:

1. Is a 50% haircut even adequate, given that 60-70% seems to be the consensus minimum, and given that 50% still represents a suffocating 120% debt/GDP ratio?

2. Will the 50% Greek haircut trigger a "credit event"? Probably not if it's "voluntary"

3. Will the 50% Greek haircut trigger higher interest rates and/or widespread writedowns of Italian, Portuguese, Spanish, etc., debt?, which will in turn require even greater Greek haircuts?

4. Will this increased 1 trillion "firepower", and the attendant monetary commitments of France and Germany cause a risk transfer unto France and Germany, thereby raising their debt costs?

5. There are arguments that a €1 trillion EFSF is a mere "peashooter", and is wholly inadequate

6. How soon until Greece requires another 25% haircut? Followed by a 15% haircut ...

7. The EFSF guarantees apply only in the event of a default, but the whole point is to avoid defaults which trigger CDS's

8. Since the root problem is too much debt and not enough money, this does nothing to address the deep, festering problems in the PIIGS nations.

[peripato]

Greece won't reach that debt to GDP ratio (120%) until 2020! Not to mention the loss of sovereignty, with the Troika permanently ensconced in Athens to oversee the 'fire sale', as dictated by the Germans.

The last time Germany tried to mess with Greek homeland and liberty this happened...

[cephalotus]

Eurozone emergency deal: Key elements
http://www.bbc.co.uk/news/world-europe-15472679
...

I would say that this looks quite ok from a German point of view.

But I assume that finally the Greece bureaucracy needs help from the EU during the next years to get a working tax system, efficient institutions and so on...

They will have to give something back for all those billions and this is sovereignty over their own finances until those are sorted out.

If you can't pay the creditor you can't simply live on as before, just with a "haircut".

[EnergyUnlimited]

Eurozone emergency deal: Key elements
http://www.bbc.co.uk/news/world-europe-15472679
...

I would say that this looks quite ok from a German point of view.

But I assume that finally the Greece bureaucracy needs help from the EU during the next years to get a working tax system, efficient institutions and so on...

They will have to give something back for all those billions and this is sovereignty over their own finances until those are sorted out.

If you can't pay the creditor you can't simply live on as before, just with a "haircut".

Tell me, how do you feel, as a German, when you learn that your taxes go for financing of European mess.

You will work hard and save but Greeks, Italians and Spaniards will enjoy plenty of good wine, beautiful women, retirement at 50 and plenty of other niceties.
However once they run out of money, you will chip a bit in to help party going.
And all what you have to do is to work hard and don't complain.
European Commission knows better what to with your money than you do.

How do you feel about that?

[cephalotus]

8. Since the root problem is too much debt and not enough money, this does nothing to address the deep, festering problems in the PIIGS nations.

dept rate in relation to GDP for state / private housholds / enterprises / banks / sum

P ortugal: 106% + 106% + 149% + 61% = 422%
I reland: 109% + 123% + 245% + 689% = 1166%
I taly: 121% + 50% + 110% + 96% = 377%
G reece: 166% + 71% + 74% + 22% = 333%
S pain: 67% + 87% + 111% + 192% + 457%

for comparison

Germany: 83% + 60% + 80% + 98% = 321%
UK : 81% + 101% + 118% + 547% = 847%
US: 100% + 92% + 90% + 94% = 376%

http://www.manager-magazin.de/finanzen/ ... 82,00.html


interest rate:



http://de.wikipedia.org/wiki/Staatsschu ... m_Euroraum

[cephalotus]

Tell me, how do you feel, as a German, when you learn that your taxes go for financing of European mess.

Yes, I pay a significant amount of taxes, but as a typical German I'm not against my own government/state
Taxes are ok, because you have to finance lots of things by public, but of course it depends WHAT you do finance...

You will work hard and save but Greeks, Italians and Spaniards will enjoy plenty of good wine, beautiful women, retirement at 50 and plenty of other niceties.

I also enjoy wine, women, many holidays, beer and so one. Nothing wrong with that, nobaody is forced to work 60 hrs a week, not even in Germany...

Real retirement ages are quite similar within Europe, no need to envy anyone about that and it is quite logical that retirement has to come alter and later with more old people and less young and the older ones becoming more and more healthy.

If I want a free year to travel through the world I would take it now and would not wait 40 years until my retirement. You have to live now.

However once they run out of money, you will chip a bit in to help party going.
And all what you have to do is to work hard and don't complain.

So far my tax rates have not increased, unemployment rate is lower than in the past 20 years, I have more than enough money, so far the Euro problem does not hurt my directly. I would not be opposed to even higher tax rates to get our national dept below 60% again.On the other hand interst rate for German bonds are so low now that new dept seems to be only a little problem for us.

What I do not accept is a tranfer to Greece without any plan how to end that. I have zero sympathie for the Greece demonstrations against cutting several payments. Of course it hurts if you have to give up those privileges, but If you want to live on a certain living standard you have to do something for that and just can't ask others to pay for you forever. We have this experience with the Eastern part of Germany. If you establish a transfer sheme you have to cut the transfer quickly, otherwise people will get used to it and live on a standard that is not sustainable.
It will be very difficult to get Greece back to a sustainable living standard, which would be maybe more in the region of Albania than in the region of Italy, if you compare the productivity of the country.

European Commission knows better what to with your money than you do.

To have the EU is imho a very good thing because it can act without to look with fear on every single national interest. This is a risk but also a huge chance.
The EU is bigger and better than just the sum of its states.

How do you feel about that?

A transfer of money from rich to poor is a key componente of EU politics and imho it is a wise one. I rather help Poland to improve its infrastructure and experince rising wages than to have Poland that has to compete with very low wages that will undercut also my living standard. This is a very simplified position, but my English is not good enough to explain it better.

The same is with Greece...

I have no interest in starving people in Greece, burning cities, dieing enterprises. why should I have?
I have an interest that Greece will be able to establish a country that is able to provide its people with a good living standard. But I expect the people to accept that this does mean that you need some productive jobs, that you must be competitive on wages, that you have to pay taxes and so on. At least this is the European way.
If you prefer another way I would expect Greece to not only leave the Euro, but also to leave the EU with all consequences. (any with paying back all of the dept)

The same goes for Ireland. When the speculation went well with the celtic tiger during 2000-2008 they didn't like the EU, but when their banks collapsed the EU was fine to help. I hope that there will be a more positive view on the EU when they will prosper again and I accept a more fair policy for example on tax rates for enterprises.

If my(?) tax money goes to a more stable and better Europe I do not have a problem with that. If it is just used to fill gaps in the Greece budget because the Greece government is not able to collecttaxes from its own citizens I do have a problem with the transfer.

We ALL do not live sustainable, we have 1-10% of the rich which will accumulate more and more of the money and expect higher and higher interest rates. So far there is no solution on that problem of wealth accumulation, which is able to destroy entire societies.
There is not solution on the problem of to complicated finance products which are "to big to fail" and which are controlled by computers. This has the potential to destroy nations. And we have no solution on our use of natural resources.
We lived beyond our possibilities in many conutries for decades and I assume that most of use that have enough money and wealth (80-90% of the population in Europe) should expect to lower the "material" wealth expectations for the coming decades.

This does NOT mean a lower living standard or less happiness. People have been more happier 30 years ago with significantly less money a resource consumption compared to now.

Final word: Get the current situation in Europe under control, develop strategies for a sustainable live (money / resources), try to help those in trouble.
If this would cost 1/4th of my income but provides a good live for my live and coming generations: Let it happen!

A new flatscreen makes you happy for 2-3 days, living secure and healthy between other happy and wealthy people will benefit you every day of your live...

Maybe not the answer that you expected.

[Revi]

Mister market seems to think the crisis is over. The price of everything is up about 5% today. Silver is up about 2 bucks, copper about a buck and even oil is up a couple of bucks already. Happy days are here again, unless you are buying heating oil for the winter...

[peripato]

Eurozone emergency deal: Key elements
http://www.bbc.co.uk/news/world-europe-15472679
...

I would say that this looks quite ok from a German point of view.

But I assume that finally the Greece bureaucracy needs help from the EU during the next years to get a working tax system, efficient institutions and so on...

They will have to give something back for all those billions and this is sovereignty over their own finances until those are sorted out.

If you can't pay the creditor you can't simply live on as before, just with a "haircut".

Tell me, how do you feel, as a German, when you learn that your taxes go for financing of European mess.

You will work hard and save but Greeks, Italians and Spaniards will enjoy plenty of good wine, beautiful women, retirement at 50 and plenty of other niceties.
However once they run out of money, you will chip a bit in to help party going.
And all what you have to do is to work hard and don't complain.
European Commission knows better what to with your money than you do.

How do you feel about that?

How do you know that Greeks by and large live this way? Are you Greek? Have you ever lived and worked there to make such cavalier statements?

[peripato]

Mister market seems to think the crisis is over. The price of everything is up about 5% today. Silver is up about 2 bucks, copper about a buck and even oil is up a couple of bucks already. Happy days are here again, unless you are buying heating oil for the winter...

The big money (.e. investment/mutual funds) doesn't want to miss out on the rally and are panicking to buy in at this stage, even if the fundamentals of the economy still suck. The stock market is about sentiment, not reality. Some, but not much, short squeezing would have also acounted for today's action. Most of the bears would have been taken out by the huge rally that took place in early October, which reversed the certain plunge into official bear market territory - a peak to trough decline of 20%. The DOW was down 19% on the day of the huge intervention, when the index rose 400 points in the last 45 minutes of trading, courtesy of the Fed and the Plunge Protection Team. The Fed did this by killing the dollar. Debase the currency and you get inflation in equities and commodities, simple as that.