Thursday, 8 December 2011

The Pain of the Euro

Day 542 of the Euro Crisis and the leaders of Europe are meeting today with statements such as 'everything has to be done to save the euro" (From the President Baroso no less). However, the chance of a meaningful deal is less clear. Germany and France are determined to press through with their wishes - but these are entirely self-interested.

The German-French plan is based on the following key provisions:

- the European Commission to have the power to impose penalties for nations that run excessive budget deficits

- all 17 eurozone nations should amend their national legislation to require balanced budgets

- the eurozone countries to have common corporation and financial transaction taxes

- any future bailouts would not require private investors to absorb part of the costs, as happened in the Greece case"

Translated this means:

- Germany will not allow anyone else to invest in their economy or try and alleviate economic difficulties in any other way than domestic austerity
- see above point, multiply by 2
- Ireland and other countries trying to grow through either competitive tax rates or in financial services can go hang - All tax rates will be aligned with Germany and France to help their economies.
- German and French banks are very weak and are not able to suffer any more haircuts, therefore we want these outlawed.

Not a recipe for success so far, where is the discussion of assitance to the Countires on the brink of insolvency?


measured said...

It is a joke. The markets see that. I am going to love the off balance sheet instruments that evolve and Germany ending up owning mainland Europe.

Still, not our problem so we shouldn't meddle.

Anonymous said...

You mean that after a 70-80 year process of germany spending a little less than it earns, it looks like they will end up owning alot of europe.
Isn't that the capitalist system in action?

Steven_L said...

Glad I closed by positions out last night!