152 replies to this topic

[Allathar]

I really hope that the eurozone will still live.

Depends on what form. If it is a new, improved eurozone, with only the Northern European countries in it (and some Eastern European ones, as they do have a deficit that's healthy), then I'm all for it.

If it's a monstrosity that'll bring North and South European economies together with tape and a lot of goodwill on the Northern countries, on the other hand...

[Romanul]

I still think that Northern Countries will have some words about it, and that countries such as Germany will insist on putting some hard demands regarding the PIGS countries.

[Námo]

This is simply the most weird financial news I've ever seen. Looks like some Spanish banks really are in deep, deep trouble:

Football Legend Cristiano Ronaldo To Be Used As European Central Bank Collateral

We were pretty much speechless when we read this - it sure puts guarantees by Noyer, Trichet and all the other bureaumonkeys that the ECB does not accept just any collateral in perspective. From Presseurop.eu: "The most expensive footballer in history may now be used to guarantee the solvency of a Spanish bank. “Ronaldo in the bailout fund,” headlines Süddeutsche Zeitung. The daily reports that the Bankia group of savings banks, which financed Real Madrid’s acquisition of the Portuguese player, is now seeking to borrow funds from the European Central Bank. In response to the ECB’s demand for guarantees, Bankio are putting up... Ronaldo and the Brazilian Kaka, who also plays for the Madrid football club. In 2009, Real borrowed 76.5 million euros to pay transfer fees of 100 millions euros to Manchester United, and 60 million to Milan AC."

“Could we see a situation in which the ECB seizes one of the players?“ wonders the Munich daily. “In theory, it is possible. Bankia would first have to become insolvent. Thereafter, Real would have to default on its loans, which are secured by advertising and television revenues. It goes without saying that Real Madrid is in debt to the tune of several million euros. However, in Spain football clubs have a history of obtaining publicly funded bailouts — just like the country’s banks.”

This is beyond even The Onion's (and even Zero Hedge's) level of sarcasm.

There is nothing that can be added to this insanity. Furthermore, the fact that the "collateral" most likely has a virulent case of Paris Hiltonitis which will infect all the other worthless collateral, likely leading to the latest and greatest reality TV show, only adds to the complete farce that the global ponzi scheme has now become.

It's not a joke ... further links at Zero Hedge

[Allathar]

I don't know whether to laugh or cry on that news...

[Romanul]

^You can always dance.

[Námo]

??? ... are you hinting at the the possibility of the European Central Bank fielding a whole football-team of superstars, if this trend continues?

[Romanul]

No, I just find it amusing how the ECB does its stuff. Really.

[Allathar]

Seems like Cyprus is next, then Portugal. Who bet on Cyprus?

Edited by Allathar, 04 August 2011 - 07:25 PM.

[Námo]

I believe, that what we'll see now, is not just the different European nations struggling for economic survival, but the end game for the Euro-zone ... or maybe it's already "game over" ... monday may end up as a financial bloodbath.

Spain and especially Italy may have come from the frying-pan into the fire; they have both called off planned auctions of bonds, expecting the ECB to come to their rescue. However, the EFSF (European Financial Solidarity Facility) only has €440 billion, The European Commission wants it expanded to €1.5 trillion, but what really is needed is a whopping €3.5 trillion! ... who the hell are going to throw such an insane amount of money into a black hole, never to get them back again ... the Chinese are not that stupid.

That basically leaves only France and Germany to pull the trick, and France might be downgraded soon, so count them out.

Merkel had a lot of domestic resistance to the recent bail-out of Greece, and all the infighting in the EU did go on for weeks and months, before some sort of feeble compromise was reached ... but Italy and Spain are players in a totally different league, so expect Germany to step hard on the brakes this time ... the rumors are already out today:

From Zero Hedge, saturday evening: It Just Went From Bad To Far, Far Worse As Germany Says Italy Is Too Big For EFSF To Save, Refuses To Carry Euro Bailout Burden

Remember when we said (yesterday) that Germany will soon balk over the fact that it is pledging its entire economy to bail out an insolvent Europe? Well, that moment has come.

Dow Jones just hitting the tape referencing Spiegel:

• German Govt: Italy Too Big For EFSF To Save - Spiegel
• German Govt: Doubts Whether Tripling EFSF Would Help It Save Italy
• German Govt: Italy Must Make Savings, Reforms To Exit Crisis - Spiegel
• Italy Debt Guarantee Could Raise Doubts Over Germany's Finances - Spiegel
• German Govt: EFSF Should Only Help Small, Mid-Size Countries - Spiegel
  

As a reminder, yesterday's stopgap announcement by the ECB to expand its SMP purchases of secondary market Italian and Spanish bonds was merely as a precursor to full EFSF monetization until its comes fully online in September (or sooner) in a vastly expanded format (between €1.5 and €3.5 trillion).

If Germany is now against this, which appears to be the case, it pretty much means, well, game over.

Add the uncertainty over the unwind of the Europe rescue "gamechanger" as one of the more naive CNBC anchors said yesterday, and Monday is now guaranteed to be a bloodbath.

As for those saying China will gladly step in and fund a $5 trillion EFSF shortfall, they may want to read the following article from Reuters:

Italian Economy Minister Giulio Tremonti said on Thursday that Asian investors are reluctant to buy Italian bonds because it sees they are not being bought by the European Central Bank.

Speaking at a news conference, Tremonti also said it would be desirable for the central bank to follow the lead of the Japanese and Swiss central banks in taking expansionary steps to tackle the euro zone's crisis.

"I note that the Bank of Japan today launched quantitative easing and the Swiss Central Bank cut rates to zero, we are waiting for decisions if possible, but desirable (from the ECB)," Tremonti said.

When you talk to Asia they say: "We don't understand what Europe is," he continued. "The second point is that they say 'if your central bank doesn't buy your bonds, why should we buy them'"?

Zero Hedge, yesterday: Explaining How The Just Announced ECB Market Rescue Pledged 133% Of German GDP To Cover All Of Europe's Bad Debt

[Námo]

France is now in the crosshairs of the market; from Wall Street Journal:

French CDS spreads have widened sharply today, as the market starts to put core Europe in its crosshairs.

We noted earlier that France is a key candidate to be the next sovereign to lose its AAA rating, but S&P disagreed today, Stephen Bernard reports:

France’s long-term fiscal position should improve due to recently enacted pension reforms and the withdrawal of stimulus measures, Standard & Poor’s said in a conference call Monday.

The comments came amid questions about whether France could be in danger of losing its triple-A credit rating….

“Some of the fiscal indicators today of France are actually slightly worse than the U.S., particularly if you look at the debt position,” said John Chambers, chairman of S&P’s sovereign ratings committee.

However, raising the pension age and withdrawing stimulus should help in the fiscal consolidation process, Mr. Chambers said. France’s ability to enact such measures in the face of opposition also added to the French government’s credibility, he said.

The CDS market disagrees, pushing France’s five-year CDS spread out to nearly 160 basis points, Citi analysts note, almost three times as wide as US CDS spreads. The market thinks the US is more AAA than France.

Source: S&P vs. The Market: French CDS Spreads Blowing Out, US Staying In

Well, that leaves Germany as last man standing [sorry Nederland, I don't think you mind being counted out]

[Allathar]

Well, if only Nederland has the balls to take this as an excuse for less EU instead of more... But I already know how it will turn out.

[Námo]

Oh, but a slim majority did vote NO to the Lisbon Treaty, didn't they? ... but then, I just checked Maurice de Hond's latest poll on the issue, only 30% wants Nederland to leave the Euro. Too bad ... but if the Dutch people don't want to change their currency, then I wish for the them, that the Euro will leave Nederland. The prospects for that to happen might not look that bad at the moment.

[Allathar]

We didn't get to vote for the Lisbon Treaty. The was a referendum for the European Constitution (which is practically the same), however, with the response being largely negative. Our leaders signed the Lisbon Treaty anyway, though.

So much for democracy.

[Námo]

Relating to Van Rompuy's 2011 'State of the European Union' speech, in which he claimed that the Europe of EUSSR is "sexy" (see this post)

Reality check:

http://www.youtube.com/watch?v=dE-mCm3vQpY

Fail.

[Allathar]

Shit just got real - Sarkozy and Merkel have plans for a EU government which has control over ALL of the members' budgets, making them in control over the entire European economies. Committee will contain, of course, only France and Germany, and be led by (who else) Van Rompuy.

You'd almost think it was always the plan for it to become like this. Intertwine the European economies with a single currency, add some countries to the mix (Piigs) which, if you think critically, can no way hold their end of the bargain, wait for the inevitable crisis to come of that and the system to collapse, and use the chaos as an excuse to draw more power to themselves.

Well, at least Germany finally has control over Europe after two failed World Wars. Hitler would have been proud.

[Vortigern]

How delightfully Machiavellian of them, to have been planning for just such a crisis since the very foundation of the European Economic Community in 1957, when Merkel was just three years old, Sarkozy two. Now that's what I call planning for the future.

I would say that there's no way any government would agree to that, but then I remembered that the EU now basically owns Greece, Ireland, Portugal and Cyprus, and as for the rest of us, our governments don't seem to listen to us one way or another. You know, we were promised a referendum on the Lisbon Treaty because of the public outcry against it. In the end we didn't get a referendum and we did get the treaty. Thanks, politics. (Tholitics.)

[Námo]

wup ... here we go:

Greece Threatens To Unwind Second Bailout By Agreeing To Finland Collateral Demands

One of the biggest stories this morning is that European cohesion and solidarity is about to crumble after it was disclosed that Greece was pursuing a private deal with Finland in which Greece promised to collateralize Finnish contributions, in essence eliminating Finland's contribution to the Greek Bailout round 2. As Kathimerini reported, "Greece and Finland agreed on Tuesday to virtually cancel the latter’s participation in the former’s second bailout package, following three days of negotiations between Finance Minister Evangelos Venizelos and his Finnish counterpart Jutta Urpilainen.

Finland’s share in the 109-billion-euro package amounts to about 1 billion, which Helsinki will pay to Greece but Athens will repay it through a new loan contract to be signed for this purpose and which will be valid for the next 25 years (likely to be the maturing period of the new loans, too). This means in practice that Finland’s contribution to the new package will be returned in full and deposited in a special account to be created by the Finnish government." End result is that everyone else has immediately come demanding the same treatment: first the Austrians, next the Dutch, and last the Slovenians. And what happens if Finland backtracks on its collateral demand: will it back out of the Greek bailout as well?

It's not even for sure, that this deal will pass the Finnish Parliament. The story according to Finnish News (Yle): Finland and Greece agree on loan guarantees

Also, Finland's former PM Kiviniemi has this conclusion: Greece should quit the euro

The story seen from Greece: Greece will get loan of 1 billion euros but will return it with no favorable terms and with full interest. Finnish contribution rendered void and Austria kicks up fuss about Finnish collateral deal

George Sores has his own take on the crisis (well, he has his own political agenda, too): Soros says Greece and Portugal should leave euro, EU

This looks to become interesting. Various governments within the fragile glass-house of the Euro-zone throwing stones at each other. Some more panic in the markets might be expected tomorrow. Merkel and Sarkozy better keep their mouths shut, as their recent rendezvous made the markets nose-dive with more than 6% ... Epic fail. Oops.

Note: August 20 Greece will have to redeem about Euro 6.6 billion debt. Somebody got any cash to lend??

[Námo]

Breaking News: Holland wants Greek island as collateral

Dutch PM Mark Rutte has said, that Holland wants the same deal as Finland, or an even better one. He wants one of the Greek islands as collateral, preferable Kreta. There may however not be a majority in the Dutch parliament for this proposal, as the opposition prefer other parts of Greece. [please note, that this news has not yet been confirmed by international media ]

Source: Geenstijl Rutte wil eiland als Grieks onderpand (Dutch language)

[OmegaBolt]

Umm, what good would a Greek island do for the Netherlands? Guess they'd only sell it back to them in future. Oh well, I see the colonial days of the United Provinces never ended.

[Námo]

*Interlude*

Flashback to a historic day twenty years ago: The collapse of another political/economic union.

http://www.youtube.com/watch?v=EVg-aVs6aag

Such artificial super-states are bound to fail. They all do. History repeats itself, though in new ways.