You know the problem with doing one of these roundups on the European Debt Crises? I can search for “Euro” just about anytime of the day and night on Google News and come up with a dozen things I could potentially include. So just consider this a Whitman’s European Despair Sampler of possible bad news, as there’s a lot more where this came from:
Posts Tagged ‘Spain’
EuroDoom Roundup: Waiting for the Inevitable Greek Default
Monday, January 30th, 2012EuroDoom Roundup for January 11, 2012
Wednesday, January 11th, 2012The race to a Euro-crackup seems to have slowed down to merely a jaunty saunter this week. Maybe once everyone made it to the New Year without a sovereign default, the Eurocrats might have breathed a sigh, confident that there’s still a few miles yet before they went over the falls…
Germany could create a parallel currency—a new D-Mark, pegged at 1.0 to the euro. The German government would guarantee that holders of German government bonds could convert euro securities to new-D-mark instruments on a one-to-one basis up to some designated date, perhaps two years in the future. Private German contracts expressed in euros would switch to new-D-mark claims over the same period. The transition would likely feature a period in which the euro and new D-mark circulate as parallel currencies.
Other countries could follow a path toward reintroduction of their own currencies over a two-year period. For example, Italy could have a new lira at 1.0 to the euro. If all the euro-zone countries followed this course, the vanishing of the euro currency in 2014 would come to resemble the disappearance of the 11 separate European moneys in 2001.
Of course, this would mean that any bonds from the PIIGS with a maturity date more than two years in the future would trade at a heavy discount, but that’s far preferable to the looming Euro crash. But a bigger problem to this proposal actually being implemented is that it reverses the drive to centralize European bureaucracy, and Eurocrats will never stand for that.
(Hat tips: Insta, Ace (most of the Greek stories), and Sundry.)
Could All Of Europe Declare Bankruptcy?
Tuesday, November 22nd, 2011That’s the option being openly talked about:
Europe may need to pull a Chapter 11 – a US-style bankruptcy, which would permit a market shutdown and Euro Zone reorganization before reopening for business.
The EU desperately needs a break from market pressures in order to allow the political apparatus to really gather its forces and finally move Europe and its debt crisis ahead of the curve. Here we are just a couple of weeks after the feeble attempt to apply an EFSF plaster on the problem and we’re already back to Square One: the EU debt crisis has reached the point at which none of the readily available tools or institutions are sufficient to match the magnitude of the crisis. This dictates the need for an out-of-the-box solution.
EU policy makers played the extend and pretend game for as long as they could – but now the writing is on the wall: popular outrage is on the rise and putting increasing pressure on the political process – as we are seeing increased demonstrations and grass-root activity taking over both the political agenda and the media. And markets are now balking as empty promises and now a real lack of funds are seeing bond yields beginning to spike out of control. The self-reinforcing cycle of downgrades and austerity and recession are taking us to the very brink of a full scale Crisis 2.0.
Or, alternately, the EU could just jetison all that inconvenient democracy to keep the Ponzi scheme going just a little bit longer, trying to hide the fact that Europe has run out of money.
Says Walter Russell Mead: “Right now the world’s largest economic bloc is running around like a chicken with its head cut off.”
So how could Europe possibly display the terminal bankruptcy of the high tax, high spending, highly unionized, cradle-to-grave welfare state, European/Blue State social model? How about if EU staffers went on strike?
Dear Greek Citizens: I hope you weren’t so foolish as to believe that the Swiss bank accounts containing the money you earned actually belong to you, do you? You’re going to have to return them to Greek banks so we can steal them. Love, the EU.
The Euro may have been great for Greek elites, but not necessarily great for average Greeks.
How are things in the rest of Europe? In Spain, unemployment is 22.6%.
The EU may crack before the Euro.
China is not coming to the rescue, as China is suffering from the same demographic maladies afflicting Europe: “A population that is no longer growing very fast and is quickly aging. The proportion of the population that depends on the state for pensions and medical care is overwhelming the proportion that works and pays taxes to the state.”
Plus, Chinese rating agencies just downgraded Greek debt.
The IMF has quitely changed its rules to make it easier to bail out Europe. With your tax dollars.
(Hat tips: Ace, Insta, and the usual suspects.)
Scenes from the EuroZone Summit
Sunday, October 23rd, 2011There have been high level Euro rescue talks going on all weekend. How are they faring? Not well.
Just when the eurozone governments thought it could not get worse for Europe’s single currency, it did.
Shell-shocked EU finance ministers meeting in Brussels on Saturday were already reeling from the worst Franco-German rift for over 20 years and a fractious failure to resolve the problems that have brought Greece, and the euro, close to the brink.
But then a new bombshell hit as a joint report by the EU and the International Monetary Fund (IMF) warned that, without a default, the Greek debt crisis alone could swallow the EuroZone’s entire €440 billion bailout fund – leaving nothing to spare to help the affected banks of Italy, Spain or France.
Of course, the problem with following this story from abroad is how the news of the summit gets distorted like some intercontinental game of telephone, especially when filtered through the dulcet-toned hearing aids of welfare state boosters. Thus this overly enthusiastic piece in left-wing newspaper The Guardian, citing that a deal was near based on unnamed “EU diplomats” becomes this blipvert in the left-wing Daily Beast stating that a deal had been reached, becomes this Fark thread in which clueless liberals crow that no one should ever have doubted the soundness of either the Euro or the glorious European welfare state. And also that ratings agencies are evil.
And yet, as of right now, this “done deal” to rescue the Euro has yet to materialize. How strange!
Somehow, how France (a country running a a $90+ billion dollar budget deficit) and Germany (a country whose ruling party has lost every local election since it started shoveling money down the Greek bailout chute), were to magically comes up with some €1.6 trillion Euros (the difference between the current bailout fund and the super-sized fund required to backstop the Euro following the inevitable Greek default) is nowhere specified. After all, it was hard enough for Chancellor Angela Merkel to get Germany’s contribution to the fund boosted from €123 billion to €211 billion in the first place.
As a result of all this happy, confident talk of how the Euro will never be allowed to falter? Moody’s downgraded Spain’s credit rating. They also threatened to do the same for France, especially if they decided to throw more taxpayer money into the Greek debt maw.
The Good Ship Europe bears its load of bailout guarantees straight for the center of the Greek Debt crisis.
And if you’re the EU, how do you prevent your debt from being downgraded? A.) Stop borrowing so much, B.) Increase your emergency reserves, or C.) Make it illegal for bond rating companies to downgrade your debt?
Yeah, that will work.
How badly awry has the Eruo project gone? The problem with this Hoover Institute piece on is what not to quote from it:
The champions of the European Union once touted it as a “bold new experiment in living” and “the best hope in an insecure age.” But these days “fear is coursing through the corridors of Brussels,” as the B.B.C. reported in September. Such fear is justified, for the nations of Europe are struggling with fiscal problems that challenge the integrity of the whole E.U.-topian ideal. Greece teetering on the brink of default on its debts, E.U. nations squabbling about how to deal with the crisis, debt levels approaching 100 percent of GDP even in economic-powerhouse countries like Germany and France, and European banks exposed to depreciating government bonds are some of the signposts on the road to decline.
A monetary union comprising independent states, each with its own peculiar economic and political interests, histories, cultural norms, laws, and fiscal systems, was bound to end up in the current crisis. All that borrowed money, however, was necessary for funding the lavish social welfare entitlements and employment benefits that once impressed champions of the “European Dream.” Yet, despite the greater fiscal integration created by the E.U., sluggish, over-regulated, over-taxed economies could not generate enough money to pay for such amenities. Now, the president of the European Council, Herman Van Rompuy, admits, “We can’t finance our social model.”
This financial crisis means the government-financed dolce vita lifestyle once brandished as a reproach to work-obsessed America is facing cutbacks and austerity programs immensely unpopular among Europeans otherwise used to amenities like France’s 35-hour work week, or Greece’s two extra months of pay, or England’s generous housing subsidies that cost $34.4 billion a year. No surprise, then, that from Athens’ Syntagma Square to Madrid’s Puerta del Sol, austerity measures attempting to scale back government spending have been met with strikes, demonstrations, boycotts, and protests, some violent, on the part of citizens for whom such government entitlements have become human rights. In fact, such transfers of wealth have been formalized as rights in Articles 34 and 35 of the E.U.’s Charter of Fundamental Human Rights.
The Euro crises will likely lead to another recession in the U.S. That is, if you think we ever came out of the Obama recession in the first place, which we didn’t.
Europe’s private sector shrank for the first time in two years last month.
Again: The question of a Eurozone collapse is not “if,” it is “when.” And how much of the losses European banks can put taxpayers on the hook for.
More Greek Default Rumblings
Sunday, September 25th, 2011Actually, less rumblings than the roar of an approaching train. And since I temporarily seem to be ahead of the latest Ace of Spades Doom roundup, I’m going to try and give you a nice clear view of the coming crash.
“No longer a question of if, but when – that is the tone of discussions over Greece which has dominated the summit of finance ministers in Washington over the weekend.” Former Britain’s former finance minister Alistair Darling agrees, calling default “only a matter of time.”
The talk now is of how to put in a “firewall” to prevent the contagion of an inevitable Greek default from spreading throughout the European banking system.
The Euroskeptics have been completely vindicated:
Very rarely in political history has any faction or movement enjoyed such a complete and crushing victory as the Conservative Eurosceptics. The field is theirs. They were not merely right about the single currency, the greatest economic issue of our age — they were right for the right reasons. They foresaw with lucid, prophetic accuracy exactly how and why the euro would bring with it financial devastation and social collapse.
I think at this point UK residents should be feeling vrey glad indeed that they didn’t abandon the Pound for the Euro.
Bret Stephens talks about the long line of deceit and fraud that lead Europe to the current crises. “What is now happening in Europe isn’t so much a crisis as it is an exposure: a Madoff-type event rather than a Lehman one.”
Mark Steyn, using the ever popular music and political metaphor gambit, compares the breakup of the Eurozone with the breakup of R.E.M. while bringing the usual Steyn goodness: “Attempting to postpone the Club Med welfare junkies’ rendezvous with self-extinction will destabilize internal German politics (which always adds to the gaiety of nations).” And this:
As its own contribution to the end of the world as we know it, the Obama administration has just released a document called “Living Within Our Means and Investing in the Future: The President’s Plan for Economic Growth and Deficit Reduction.” If you’re curious about the first part of the title — “Living Within Our Means” — Veronique de Rugy pointed out at National Review that under this plan debt held by the public will grow from just over $10 trillion to $17.7 trillion by 2021. In other words, the president’s definition of “Living Within Our Means” is to burn through the equivalent of the entire German, French, and British economies in new debt between now and the end of the decade. You can try this yourself next time your bank manager politely suggests you should try “living within your means”: Tell him you’ve got an ingenious plan to get your spending under control by near doubling your present debt in the course of a mere decade. He’s sure to be impressed.
Germany is near the limit of their willingness to bail out Greece.
There may even be a taxpayer revolt brewing in the Aegean.
And if the other PIIGS are doing better than Greece, it is only a matter of degrees: “Italy is the new Lebanon, Portugal the new Venezuela, Spain the new Vietnam, Ireland the new Argentina and nothing is more risky than Greece, according to today’s credit default swap market.”
But it’s not just Greece and Europe that are hitting the wall. China’s housing bubble may finally be bursting. Worse still: “growth in China may be zero [and] China has ‘European kind of numbers’ when it comes to debt.”
And the Chinese housing bubble isn’t just affecting China. It’s also affecting Canada.
And at least one observer has drawn parallels to a certain hopemonger currently residing in the White House:
Obama has no intention of really solving the debt crisis. And that brings us back to Greece. That government has been doing the same thing for a decade and the chickens have now come home to roost. Greece’s debt is 150 percent of its Gross Domestic Product. Our debt has just reached 100 percent of GDP and the debt is accumulating faster than it ever has. If we were looking out the windshield down the road, we could see the crash that’s just up around the bend.
But rather than put on the brakes, the president has chosen to pick a fight with the other passengers in the car he is driving. Talk about distracted driving! He is gambling that this fight will convince the passengers to let him stay behind the wheel for another four years. But we certainly can’t wait that long. He’s turned up the radio in hopes we won’t hear the ambulance sirens.
It looks like its going to be another rough week for world markets…