European Reality Check

ancona

Praying Mantis
Messages
3,370
Reaction score
1
Points
0
Location
Waaay south
Actually, it's round four! Most of eastern Europe is quite angry about the sanctions on Russia, primarily because the technocrats in Brussels never asked them their opinion before imposing them. The economic wound will be self inflicted and will quickly go gangrenous.

That's when the war goes hot.
 

ancona

Praying Mantis
Messages
3,370
Reaction score
1
Points
0
Location
Waaay south
Right out of the Bernanke playbook. I guess the plan is to set the world financial system on fire and end this magnificent experiment.
 

mmerlinn

Ground Beetle
Messages
633
Reaction score
0
Points
136
Location
Here, There, and Everywhere
It is a race to the bottom! Whoever gets there first WINS!

On a more serious note. If Europe continues down this road, things will get so bad, just like in the 30s, that the people will embrace ANYONE who claims that he can solve their woes. So, as the race to the bottom accelerates, watch for a new "Hitler" to come on the scene claiming to fix everything. Read the playbook of the 30s to see exactly where Europe is headed.

Never forget: MAJOR ECONOMIC UPHEAVAL ALWAYS LEADS TO MAJOR WARS!
 

pmbug

Your Host
Administrator
Messages
7,451
Reaction score
25
Points
203
Location
Texas
Greece looking at it's 3rd bailout...
...
One high-ranking EU official compared the situation to a patient who has survived intensive care but wants to leave the hospital early. A relapse is certain and the subsequent care will be much more involved than if the patient had stayed in the hospital long enough for full recovery. Greece's second bailout package officially ends in a month's time, but it is already certain that the country will require additional funding from its EU partners.
...
http://www.spiegel.de/international...ird-bailout-package-for-greece-a-1005977.html
 

ancona

Praying Mantis
Messages
3,370
Reaction score
1
Points
0
Location
Waaay south
That's too funny! Those Greeks are smart like a fox. The current government will collapse, Syriza will step in and occupy what has become a power vacuum, then they will repudiate the quarter trillion dollars they got from the Troika. Brilliant. I should have thought of it sooner.
 

rblong2us

Yellow Jacket
Messages
2,099
Reaction score
11
Points
153
Location
off world
Apparently its against the rules to default on your debt

Its not a problem to fail to meet a payment and have to borrow more though ........ :popcorn:
 

pmbug

Your Host
Administrator
Messages
7,451
Reaction score
25
Points
203
Location
Texas
AEP said:
The political centre across southern Europe is disintegrating. ...

As matters stand, Podemos is on track to win the Spanish elections in November on a platform calling for the cancellation of "unjust debt", a reversal of labour reforms, public control over energy, the banks, and the commanding heights of the economy, and withdrawal from Nato.
...
The revolt in Italy has different contours but is just as dangerous for Brussels. Italians may not wish to leave the euro but political consent for the project but broken down. All three opposition parties are now anti-euro in one way or another. Beppe Grillo's Five Star movement - with 108 seats in parliament - is openly calling for a return to the lira.

Mr Grillo proclaims that Syriza is carrying the torch for all the long-suffering peoples of southern Europe, as it is in a sense.

"What’s happening to Greece today, will be happening to Italy tomorrow. Sooner or later, default is coming," he said.
...
Currency guru Barry Eichengreen - the world's leading expert on the collapse of the Gold Standard in 1931 - thinks Grexit might be impossible to control. "It would be Lehman Brothers squared,” he said.

This is not the view in Germany, at least not yet. The IW and ZEW institutes both argue that Europe can safely withstand contagion now that it has a rescue machinery and banking union in place. It must not give in to "blackmail".
...
The fond hope is that the European Central Bank can and will smooth over any turbulence in Portugal, Italy and Spain by mopping up their bonds, now that quantitative easing is on the way. Yet the losses suffered from a Greek default would surely ignite a political firestorm in Germany.

Bild Zeitung has devoted two pages to warnings that Grexit would cost Germany €65bn, or much more once the Bundesbank's Target2 payments though the ECB system are included. The unpleasant discovery that Germany's Target2 exposure can in fact go up in smoke - despite long assurances that this could never happen - might make it untenable to continue such support.

It is unfair to pick on Portugal but its public and private debts are 380pc of GDP - the highest in Europe and higher than those of Greece - making is acutely vulnerable to toxic effects of deflation on debt dynamics.

Portugal's net international investment position (NIIP) - the best underlying indicator of solvency - has reached minus 112pc of GDP. Public debt has jumped from 111pc to 125pc of GDP in three years. The fiscal deficit is still 5pc. The country's ranking in global competitiveness is close to that of Greece.

"The situation in Portugal is very different," says Paulo Portas, the deputy premier. Sadly it is not. Once you violate the sanctity of monetary union and reduce EMU to a fixed-exchange system, the illusion that Portugal is out of the woods may not last long. Markets will test it.
...
http://www.telegraph.co.uk/finance/...choice-as-Greek-austerity-revolt-spreads.html

Uh yeah, compound interest is a bitch and there is no escape from the event horizon.
 

rblong2us

Yellow Jacket
Messages
2,099
Reaction score
11
Points
153
Location
off world
Every time we see something developing that looks like it could destabilise the system, the rule makers simply change the rules / create and position electronic digits to calm things down.

I mean ffs what happened to all those derivative bets that were going to trigger if oil fell below $30 ?

I reckon it will need something genuinely 'left field' to scupper the system.
 

pmbug

Your Host
Administrator
Messages
7,451
Reaction score
25
Points
203
Location
Texas
Latest Italian banking news: Italian govco's hands tied by EU regs on bailing out banks. Current proposal was not well received by capital markets (seen as too weak).

http://www.zerohedge.com/news/2016-...ink-bad-bank-plan-underwhelms#comment-7102036



~~~

Let's not forget about Greece:

http://www.seattlepi.com/news/world...ts-paralyze-ports-streets-markets-6787031.php

http://finance.yahoo.com/news/greek-pm-says-accepts-partners-104917569.html

http://news.yahoo.com/imf-cancels-rule-created-2010-bail-greece-210621086.html

tl;dr - EU wants Greece to adopt more pension reforms. Greek people have been protesting for last two days. IMF may be pulling out of bailout plan unless plan includes debt relief for Greece (as otherwise it's unworkable/unsustainable for Greece). Situation still in flux.
 

pmbug

Your Host
Administrator
Messages
7,451
Reaction score
25
Points
203
Location
Texas
See my comments from a couple weeks ago in post #174:
...
Greece, sources told MNI, "seems unable to deliver" on a number of measures Brussels says Athens needs to implement an effective fiscal consolidation plan. "We agreed to disagree," one official said. "Judging from (last week's) talks, the negotiations could drag for months. Anyway, I don't see any real funding needs for Greece until June," the official went on to note.
...
http://www.zerohedge.com/news/2016-...ack-recession-amid-riots-rewewed-grexit-calls

Tick tock...
 

pmbug

Your Host
Administrator
Messages
7,451
Reaction score
25
Points
203
Location
Texas
A new German plan to impose "haircuts" on holders of eurozone sovereign debt risks igniting an unstoppable European bond crisis and could force Italy and Spain to restore their own currencies, a top adviser to the German government has warned.

“It is the fastest way to break up the eurozone,” said Professor Peter Bofinger, one of the five "Wise Men" on the German Council of Economic Advisers.

"A speculative attack could come very fast. If I were a politician in Italy and I was confronted by this sort of insolvency risk I would want to go back to my own currency as fast as possible, because that is the only way to avoid going bankrupt,” he told The Telegraph.

The German Council has called for a “sovereign insolvency mechanism” even though this overturns the financial principles of the post-war order in Europe, deeming such a move necessary to restore the credibility of the "no-bailout" clause in the Maastricht Treaty. Prof Bofinger issued a vehement dissent.

The plan has the backing of the Bundesbank and most recently the German finance minister, Wolfgang Schauble, who usually succeeds in imposing his will in the eurozone. Sensitive talks are under way in key European capitals, causing shudders in Rome, Madrid and Lisbon.

Under the scheme, bondholders would suffer losses in any future sovereign debt crisis before there can be any rescue by the eurozone bail-out fund (ESM). “It is asking for trouble,” said Lorenzo Codogno, former chief economist for the Italian Treasury and now at LC Macro Advisors.

This sovereign "bail-in" matches the contentious "bail-in" rule for bank bondholders, which came into force in January and has contributed to the drastic sell-off in eurozone bank assets this year.

Prof Bofinger wrote a separate opinion warning that the plan could become self-fulfilling all too quickly, setting off a “bond run” as investors dump their holdings to avoid a haircut.

Italy, Portugal and Spain would be powerless to defend themselves since they no longer have their own monetary instruments. “These countries risk being hit by a dangerous confidence crisis,” he said.
...
More: http://www.telegraph.co.uk/finance/...vernment-bonds-risks-blowing-up-the-euro.html
 
Top