Six Weeks To SaveThe Euro ..

[oecarb]

i bet the us economy collapses before the euro goes down.

http://www.guardian.co.uk/business/2...nomy-faltering

If Greece defaults, them hedge funds in real trouble.

[miktay]

i bet the us economy collapses before the euro goes down.http://www.guardian.co.uk/business/2...nomy-faltering

US economy faltering...Euro crisis affects global bourses...Monetary policy not a sustainable soltn...protestors unhappy...hi unemployment...Nothing new here.Central Banker speeches are filled with things ppl already know...

[oecarb]

I think this sheds light on the German attitude (Merkel speaking):

Solidarity is always cheaper than if we were to go it alone and wind up with the problem Switzerland has -- that the currency level is so high that you can’t export any products anymore. Today, going it alone is no path to a better future.”

“We must press ahead with the task” begun by former Chancellor Helmut Kohl when he made the political decision in favor of the euro after German reunification in 1990, she said.

http://www.bloomberg.com/news/2011-1...rea-bonds.html

[miktay]

I think this sheds light on the German attitude (Merkel speaking):

A few acquaintances does not make a strong community.Many countries would wish to have the "problems" of Switzerland.A strong currency, hi GDP per capita, referenda on key political issues, a hi standard of living, and recognized export brands.These are qualities to be admired. Ms Merkel cannot make the EMU/Euro look better by disparaging Switzerland or CHF.This is not a good comparison.

[oecarb]

A strong currency, hi GDP per capita, referenda on key political issues, a hi standard of living, and recognized export brands.

Perfect description of Germany before unification and in the days of the deutschmark - downside being the world's second strongest currency. The owners of the strongest currency (USD) started exporting their jobs. Germany did not do this and is still reliant on exports.

She is decribing what Germany would face if they pulled out of the euro and did not have a common currency that other countries shared. It is a fair comparison.

[miktay]

Carbs: Am missing something here. Are u implying Germans joined the Eurozone to have a weaker currency?

[oecarb]

Carbs: Am missing something here. Are u implying Germans joined the Eurozone to have a weaker currency?

No. But now they are in and such a large amount of their exports go to other Eurozone countries.

If they pull out now, they would find themselves in a similar position to Switzerland which is now fighting to keep the CHF down so that other countries acn afford to buy thir goods.

[sacky]

wasnt the reson the money was giving to the banks in 08 was to stimulate growth and provide lending,it didnt happen,so look what they did next.

http://www.guardian.co.uk/business/2...ank-of-england

[miktay]

No. But now they are in and such a large amount of their exports go to other Eurozone countries. If they pull out now, they would find themselves in a similar position to Switzerland which is now fighting to keep the CHF down so that other countries acn afford to buy thir goods.

Fighting to keep CHF 'down' iz mercantilistic folly. It iz one reason why we are in a global debt crisis.A strong currency upsets exporters but makes imports cheaper. To keep exporters happy central banks print money. Nations that print to mometize deficits 'encourage' exporters to use subsidies. This creates distortions. This creates bubbles.I doubt the Swiss can keep CHF in sync wit the Euro.

[miktay]

wasnt the reson the money was giving to the banks in 08 was to stimulate growth and provide lending,it didnt happen,so look what they did next.http://www.guardian.co.uk/business/2...ank-of-england

Banks get bailouts to shore up their balance sheet.They hold many overvalued assets.They are highly leveraged.A slight decrease in asset values would require capital Infusions. Otherwise the banks would go insolvent.The banks may or may not lend the bailout money.If they lend it inflation will go higher.

[oecarb]

This thread was started four weeks and two days ago. A lot has happened since then. We are now in the end game methinks.

[greall]

'Merkozy' are still in talks while Greece burns...literally...

Greg

[oecarb]

'Merkozy' are still in talks while Greece burns...literally...

Greg

Yes Greall. But at least the talks now have much more definite aims.

The euro has risen about 4% in that time so some people seem to believe there is hope.

The euro price of gold has dropped by €5.47 per ounce while the dollar price has increased by $59.60.

http://goldprice.org/gold-price.html

As I understand it, the status quo is as follows:

• There will be a write down of Greek debts (a haircut) of between 40% (the creditor stance) and 60% (the EU stance). It is expected that the actual figure would be 50%, which is what the market has priced in, according to Bloomberg.
• It is not clear whether this will qualify as a default. If it does, hedge funds could take a big hit. Many American banks/institutions could be affected way beyond the Greek debts as, apparently there has been widespread naked short selling.
• EU banks are to try to raise private investment capital.
  If they cannot, the individual countries would stump up cash but there would be strict conditions including tighter regulations and additional taxes and could also include share acquisitions.
• The EFSF which stands at €400 billion (US $550 billion) is to be leveraged with or without ECB involvement. This would increase its power by about $1.5 trillion to $2.2 trillion.
• Italy, as the biggest EU debtor, has been ordered to get their house in order. This would greatly reduce the risk of contagion and might mean that the ESFS need not be leveraged as much.

But hey! The six weeks are not over yet.

[miktay]

Carbs:

Per ur boy Ambrose Evans-Pritchard...the status quo iz wobbling...

http://www.telegraph.co.uk/finance/f...lfs-Italy.html

Greek vote sets off 'pandemonium', engulfs Italy

Greece's startling decision to call a referendum on last week's EU summit deal has set off wild tremors across the eurozone, pushing Italy to the brink of a perilous downward spiral.

The country's ruling Pasok party appeared to be splintering on Tuesdsay night, leaving it unclear whether the governent of premier George Papandreou can survive a parliamentary vote of confidence on Friday.

Signs that the EU's pain-stakingly negotiated Grand Plan is unravelling within days has been a profound shock to confidence.

A frantic search for safe havens led to the second biggest one-day fall ever recorded in Europe's AAA bond yields. Ten-year German Bund yields tumbled 25 basis points to 1.77pc, with similar moves in non-EMU Swedish and Danish debt. British Gilt yields fell to 2.2pc.

Italy took the brunt of the punishment. Spreads over Bunds spiked to a crisis-high of 459 basis points before the European Central Bank came to the rescue. Spanish spreads reached 384.

Andrew Roberts from RBS said Italy's debt stress is "dangerously close to a level that could cause pandemonium in financial markets".

The point of no return - judging from the sequence in Greece, Ireland and Portugal - would most likely be if LCH Clearnet imposed higher margin requirements. This trigger is 450 points over a basket of AAA benchmark bonds. The spread reached 388 on Tuesday. "We're two more days of violence from this point, but we're not there yet," he said.

The Greek move - denounced by France's Elysee as "irrational and dangerous" - raises the serious possibility that a euro member could soon be forced out of the monetary union, setting a precedent with explosive ramifications for other states in trouble.

"I would have liked to do without this piece of news," said Eurogroup chairman Jean-Claude Juncker. "It is something that brings a great nervousness, that adds great insecurity to already great insecurity."

Mr Juncker said a "no" vote by Greek citizens would set in motion events that could lead to bankruptcy and threaten Greece's foothold in Europe.

"If the Greek people say no to everything that has been agreed so far, then I don't see either how we can continue with the Greeks on good terms," he said.

If is far from clear how Greeks might vote. A Kappa Reserach poll found that 80pc oppose the EU-IMF "Memorandum", but far less would vote against it, and 70pc want to stay in the euro. The EU's haircut deal leaves Greece with debt of 120pc of GDP in 2020 - if all goes well - after nine years of austerity and slump.

However, quest for membership of every part of the EU system has been central to Greece's foreign policy since the return to democracy in the 1970s. For Greeks, cut off in the furthest corner of the Balkans, and cheek by jowl with the Near East, European identity has almost sacred importance.

While it is likely that the Greeks would vote "yes", the referendum ensures weeks or months of eurozone chaos and calls into question every component of the EU rescue package.

China, Japan, Russia and Brazil have already reacted coldly to calls to rescue Euroland by playing a direct role in the EU's bail-out fund (EFSF). They are likely to keep an even wider berth now that monetary union is once again proving unmanageable without an economic government to back it up.

Yu Yongdin, a former Chinese rate-setter, told Europe not to expect too much. "Eurozone countries will have to save themselves. Expectations of a 'red knight' are sorely misplaced."

Jacques Cailloux, Europe economist at RBS, said the Greek demarche is an ugly turn of events. "This added uncertainty will likely block any new potential financial support from countries outside monetary union to the EFSF," he said

"In the current situation, the ECB remains the only credible backstop and will be forced to step up massively its bond purchases to prevent a new escalation of contagion risks."

The crisis in Italy is a nightmare debut for the ECB's new president Mario Draghi, who took over on Tuesday from Jean-Claude Trichet - viewed by Frankfurt as more German than the Germans.

Mr Draghi, former head of Italy's central bank, is in an awkard position where his first act in office is to oversee the purchase or "monetisation" of Italian bonds. If he presides over a cut in interest rates on Thursday - as demanded by the OECD and a chorus of global voices - the move will inevitably fuel suspicions among German and Dutch hardliners that the ECB has turned Latin.

"He had better find himself a German grandmother fast," said Hans Redeker, currency chief at Morgan Stanley.

The collapsing credibilty of Silvio Berlusconi's coalition in Rome is bringing matters to a head. The Democrat opposition called on Italy's president to appoint a salvation government immediately. "This is an urgent necessity to face the coming storm," it said.

The bail-out machinery was already under scrutiny before Greece's move. Plans to leverage part of the EFSF four or five times to €1 trillion, by using it as a "first loss" bond insurer, concentrates risk for the six AAA states that underpin the fund. The danger is that this will cost France its AAA rating, accelerating contagion to the eurozone core.

Critics say this is a massive design flaw in the concept and will never gain market acceptance. Mounting evidence that Europe is tipping back into slump may, in any case, finish off the idea. Standard & Poor's has warned that it will cut France's rating by up to two notches if there is an EMU recession.

John Higgins from Capital Economics said events are closing in on Euroland. "We expect the crisis to build, prompting a prolonged recession in the eurozone, and at some point the end of the euro itself in its current form.

[trini123]

What's up with the Greek Referendum? PPl offerring a bail out and you swing around to ask if it is acceptable. Are these Greeks retarded? What is they say no? There is no plan B.

[edyle]

What's up with the Greek Referendum? PPl offerring a bail out and you swing around to ask if it is acceptable. Are these Greeks retarded? What is they say no? There is no plan B.

If somebody borrows money then says you borrowed it, are you going to say ok, ok, ok, I'll just pay back half?

[trini123]

The bailout is not free money? ***** if they are just lending I can see why this would be turned down. I wouldn't borrow more money if I were already is debt up to my @rse.

[edyle]

The bailout is not free money? ***** if they are just lending I can see why this would be turned down. I wouldn't borrow more money if I were already is debt up to my @rse.

I'm not entirely sure what the situation is but my impression from the news is
- Greece is supposedly in debt
- the creditors have offered a deal to cancel half the debt plus impose AUSTERITY on the POPULATION.

By the way, part of the reason for all this is that Greece joined up with the EURO.
As a result, they can't just do what Argentina did a decade ago.

Seems the banksters learnt their lesson from the Argentina experience, and maybe that was part of the reason for the development of the EURO in the first place.

[oecarb]

• The Greek govt hid their debts so they could be allowed to join the euro.
• After joining the euro, the Greek govt found they could borrow at even better interest rates - which they did.
• They then could not repay these debts.
• The EU offered a bailout which allowed Greece to be excused 50% of their debts.
• But part of the conditions was that the Greek peoples' salaries and standards of living, pensions etc should be cut.
• The govt is calling a referendum to ask the people if they would accept these conditions. There have already been riots.
• If they vote no, the bailout will not be implemented and Greece might default.
• This could trigger payments by hedge funds of about six times the Greek debt and result in them having to pay out some $1.1 trillion.
• Many of the hedge funds have cross-hedged so other firms will have to reimburse them.
• Many of these hedge funds are US based so there can be a colossal collapse across the US.

Greece might then have to exit the euro. This could cause a complete collapse of the Greek economy.

Could be real marse.

However, it is possible that they would vote yes, given the consequences of voting no. Just.

This what the Greek PM is hoping, methinks.

[lexbarker]

• The Greek govt hid their debts so they could be allowed to join the euro.
• After joining the euro, the Greek govt found they could borrow at even better interest rates - which they did.
• They then could not repay these debts.
• The EU offered a bailout which allowed Greece to be excused 50% of their debts.
• But part of the conditions was that the Greek peoples' salaries and standards of living, pensions etc should be cut.
• The govt is calling a referendum to ask the people if they would accept these conditions. There have already been riots.
• If they vote no, the bailout will not be implemented and Greece might default.
• This could trigger payments by hedge funds of about six times the Greek debt and result in them having to pay out some $1.1 trillion.
• Many of the hedge funds have cross-hedged so other firms will have to reimburse them.
• Many of these hedge funds are US based so there can be a colossal collapse across the US.

Greece might then have to exit the euro. This could cause a complete collapse of the Greek economy.

Could be real marse.

However, it is possible that they would vote yes, given the consequences of voting no. Just.

This what the Greek PM is hoping, methinks.

But, ah tort in an earlier post you said that the Greek economy was miniscule to the rest of the EU and would not have too much effect if it falls apart.

[oecarb]

But, ah tort in an earlier post you said that the Greek economy was miniscule to the rest of the EU and would not have too much effect if it falls apart.

The Greek economy is miniscule. A default or a Greek exit from the EU/euro, as I understand it, will not greatly affect the EU or the euro.

But all the derivatives/hedging attached to a default are massive and would affect mainly US institutions, as I understand it.

And it could have a grave effect on the Greek people.

[miktay]

The bailout is not free money? ***** if they are just lending I can see why this would be turned down. I wouldn't borrow more money if I were already is debt up to my @rse.

Nothing iz free....ESP money...

The 'bailouts' come with strings attached called austerity...

Austerity will be bourne by the Greek ppl...

But at this stage it iza moot point...

Greece will default. There are no other viable alternatives.

[Redman]

The Greek economy is miniscule. A default or a Greek exit from the EU/euro, as I understand it, will not greatly affect the EU or the euro.

But all the derivatives/hedging attached to a default are massive and would affect mainly US institutions, as I understand it.

And it could have a grave effect on the Greek people.

Quite a bit of German banks are loaded up to carb,

And there is counterparty risk that would be a indirect issue-I know of one hedge fund that had to close for a while-they had their cash at A which folded because A invested money in a fund that went belly up.

So its really open ended

Later

[miktay]

The current era of cross cascading leveraged global finance needs but one major counterparty to reneg 2 choke the liquidity beast.

At such a point gubmint wud step in to 'grease' the system.

But most gubmints are insolvent. This iz not news.

What iz alarming iz just how badly insolvent most gubmints really are after decades of Keyensian excess.

This leaves few alternatives.

Weak minded politicians and their banker masters will likely inflate 2 mitigate debts.

This comes at a hi cost that neither gubmint nor politicians will have 2 pay.

But the people will pay.

And they will pay dearly.

[oecarb]

And there is counterparty risk that would be a indirect issue-I know of one hedge fund that had to close for a while-they had their cash at A which folded because A invested money in a fund that went belly up.

So its really open ended

Later

Redman, this where the real risk is. Add an unknown amount of naked short selling to the mix and you could be talking trillions and trillions.

But it now looks like the credit event will not take place. So we can all breathe easier.

Papandreou will have to go. There is talk of elections, but I don't think that is necessary as a new coalition can be formed and a leader, who could become the new PM, chosen. Greece will accept the medicine, the poor will suffer a bit more. Loads of regulations will be introduced and there will be business as usual.