Euro Woes
My stopover in Brussels on the way to the Balkans last week proved less than illuminating on the issue of the eurozone crisis and Greek debt. The real decisions are made further east, in Frankfurt and Berlin, but the EU apparat appears confident that there will be no Greek default in the short term and that Athens will not leave the eurozone.
What will happen later in the course of 2012 is harder to predict, however. “The crisis has reached a systemic dimension,” European Central Bank President Jean-Claude Trichet told European lawmakers in Brussels on Tuesday. “Sovereign stress has moved from smaller economies to some of the larger countries. The crisis is systemic and must be tackled decisively.” For his part the president of the European Commission Jose Manuel Barroso says that all 27 EU nations have a stake in the Greek rescue—not just those in the eurozone—because a tumbling common currency would be a calamity for all.
Greece is in the grip of a recession and yet it is forced to accept further austerity measures to reduce a public debt which will exceed 160 percent of the country’s gross domestic product this year. It is evident that it cannot repay its sovereign debt, and the political will in the eurozone for further bailouts is wearing thin. The situation is untenable regardless of what the government in Athens does. On the other hand, the holders of Greek bonds would have to settle for a cut of more than 60 percent in what Greece owes them, according to Jean-Claude Juncker, the head of the eurozone’s finance ministers. This was the first admission by a high-ranking EU official that just how drastic the “haircut” will need to be. The original figure was only 21 percent.
Juncker’s statement would have caused a storm only a few months ago, but today it is accepted that Greece is entering bankruptcy proceedings under whatever name. Many European banks holding Greek debt will be hard pressed to stay afloat without injections of government liquidity. Where will it come from? The ECB prefers government guarantees rather than the central bank’s money market operations. The ECB says governments should use the 440-billion-euro ($600 billion) European Financial Stability Facility to insure a portion of new bonds issued by debt-strapped nations. That would theoretically leverage the amount available to protect member states such as Spain and Italy from following in Greece’s footsteps. The trouble is that even this amount will be woefully inadequate to overcome M. Trichet’s “systemic weaknesses.”
The elephant in the room is the future of the European Union itself. It is to be feared that “saving the euro” and averting further financial woes will be used by the proponents of the EU superstate as a means of imposing ever tighter political controls on the member-states. That superstate is an evil concept devoid of political, economic, historic or moral logic; which is why Sr. Barroso and the rest of the Brussels Machine will do their best to make it a reality.
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Dr. T, what amount will be woefully inadequate?
The amount briefly blocked as guarantees?
Or the amount raised from private investors on the backing of those guarantees?
The $600 billion put forth as guarantees might raise $1.5 trillion in fresh bond issues, hypothetically speaking. (I am going by Juncker's quote that only 40% amount can be guaranteed)
Anyway, nobody mentioned this anywhere:
When bailouts happened in the US, the confiscated incomes of security guards, textile workers, door-to-door salesmen, and other working people were used to bail out the banks.
When this Greece bailout happens in EU, the government is going to raise maximum money from wealthy private investors and financial institutions only, in order to bail out wealthy private investors and financial institutions. Financial markets will have to lift their own weights to save themselves.
Due credit goes to the EU for not engaging in the same broad daylight robbery and dishonesty as the American government did.
Is the EU destined to collapse? It would appear to inevitable with the Greek crisis only being a precursor to the larger countries such as Italy, Spain and Portugal following a similar fate. What will take its place? Hard to say at this point from everything that I have read but it would appear that the solution will fall somewhere between complete political and financial union and complete separation (dissolution of the EU). Perhaps the UK's position will be adopted by the rest of the countries and the EU will exist as a free trade zone with open borders and a Brussels bureaucracy to make every country 'feel' like it is part of something much larger and make life difficult for the ordinary citizen. Bureaucracies are like cockroaches.......they have survived asteroid hits that have wiped out 99% of the earth's species.
... the EU apparat appears confident that there will be no Greek default in the short term and that Athens will not leave the eurozone...
... what amount will be woefully inadequate?...
Oh, the EU apparat is well aware there will be a Greek default. They know Athens will leave the Eurozone. But they're not going to let it happen until the entire EU collapses, to the benefit of their own cronies.
Due credit goes to the EU for not engaging in the same broad daylight robbery and dishonesty as the American government did.
Are you joking?
No, I am not joking.
The European Union is trying very hard to ensure that as little of taxpayer's money is being used to bail out Greece.
Instead, they are raising money from private markets and lending it to Greece through a special purpose vehicle.
Does that not make sense?
Are they not using money from financial markets to protect financial markets? Are they not avoiding putting the financial burden on the larger European public? Is this not how the American bank bailouts should have been done?
Instead of a taxpayer bailout, there is merely a taxpayer guarantee. That's a world of a difference.
"superstate is an evil concept devoid of political, economic, historic or moral logic;"
Examples abound of the pernicious consequences of this concept of holding nothing in common but the search for bread alone and although the experimental results are voluminous our scientific age refuses to recognize them. Ilana Mercer has written about its effects on South Africa, "Into The Cannibal's Pot", Southern writers of these United States have pointed to their own experience of forced superstates and Europe without its faith will soon add its own experiment. Our own national elections have become little more than financial antidotes about how to civilize a people who have lost their "political, economic, historic and moral logic."
Politicians in America would do well to realize sooner rather than later the old country song writer's advice when they are speaking to the current dwindling remnant of citizen voters who care about what they say:
Close your eyes and think
of others (bankers?) that you love,
Because when I turn out the lights,
It ain't you I'm thinking of !!!
" Oh, the EU apparat is well aware there will be a Greek default. They know Athens will leave the Eurozone.
A kind of default is possible but leaving the eurozone : no way.
The euromasters will allow Greece to leave the "eurozone"
the same way as Abe Lincoln allowed the southern states to leave the Union.
The Eurosovjet is like "Hotel California" of the "Eagles" :
"You can checkout any time you like,But you can never leave!"
best regards,
MTD
(Belgium)
Perhaps, Mr. Sanjay, I missed the operative word, "in broad daylight." Although in the end what they are doing will have the same result.
A kind of default is possible but leaving the eurozone : no way.
They may not want that, but it can hardly be avoided if the imposter-Bruxelois powers that be keep pushing the euro the way they are.
This is just like the Greeks. The easiest, and best, measure they could adopt for both themselves and all Europe is to default yet they can't even do that.
Iceland should be congratulated for its marvellous precedent, and that precedent's effect of discomfiting internationalist finance.