22 September: What Happens Next?

 
In case you hadn't clocked it, the German go to the polls on that day.  We are told that everything has been put on hold in the EU for fear of startling the Pferde, but that all manner of horrors will be unleashed thereafter.

So - what do we reckon will happen after that - by the end of the month ?  By Christmas ?   We'll be taking notes and checking back as our fate unfolds.  Or perhaps more imminently, the fate of the Greeks ...

ND

Don't Mention The War ... Slovenia & Germany

It would be a bit tactless for a visitor to mention the War, but the locals in Slovenia still fixate on which side their families lined up with - red or white.  Here's a red memorial, commemorating the liberation of Capodistria - the town of Koper, Slovenia's only port - from the 'Nazifascista locale', as late as April '45.

Koper is just around the coast from Trieste, and the people of the area are bilingual:  you probably won't need a translation engine for this.

Fast-forward to 2013, and Koper once again has a German connection, and an equivocal one at that.  The Slovenian economy is on the brink and German banks have been to the fore in lending to keep them afloat.

Only now they want collateral, and guess what ?  They've taken the port at Koper as security.

Port of Koper

What goes around, comes around.  Good luck to them at bail-out time.

ND

Cyprus: Not So Much A Haircut ...

How much would you like off?

Under a headline 'Bank of Cyprus Executes Depositor Bail-In', the DTel gives us the ghastly numbers.

• 37.5% of deposits over €100k converted to equity
• a further 22.5% held in reserve 
• yet a further 30% frozen

(The core phrase there seems highly apposite, doesn't it ?   '...Cyprus Executes Depositor ...')

Now then, you Scotties, how about independence and joining the Euro ?

I was also interested to read a couple of weeks ago that Germany's 'Council of Wise Men' have declared that deposits are all too easily spirited away (and depositors are all too often German); so that the next rescue should be based on property levies.  They've noticed that when property holdings are taken into account, Germans are by no means the wealthiest folk in Europe.

That's all well and good on paper, O Wise Ones, but (a) you'll need to mark those property values to market quite carefully; and (b) who has the liquid assets to pay property levies on the required scale ?  And if they do, pray where do they keep them ?

ND

The Next Bailout - Slovenia? Postcard From Portorož

Slovenia - not Venice

Never been to this country before, which is a shame because it's a really nice place. At least I made it here before it all falls apart: Slovenia seems to be on everyone’s shortlist for the next eurozone casualty. They are earnestly hoping to see the Troika here soon: they do not want to be behind Spain in the queue, for fear the EC/ECB/IMF will have nothing left by then. Also, they want to be sorted well before their southerly neighbour joins the EU (which makes matters rather urgent ...): Croatia, they say, will bring the entire show down for sure – a real basket case, deeply indebted, deeply corrupt and completely dysfunctional.

What will precipitate a Slovenian crisis ? It may be the impending loss of the Prime Minister, who has said she’ll resign if it can be proven that she copied-and-pasted her Masters dissertation. A panel of two professors armed with Google are convening. Google Maps has already brought down one minister, who claimed a non-permitted building development on his land was already there when he bought the site. It was the work of a few clicks to prove it wasn’t ... 

So what am I doing here ? Energy of course.  Slovenian energy users are suffering badly from the fact (previously unknown to me) that the single-market reforms in gas and power (which – despite what Budgie says – are working pretty well in most countries and really well in some) have passed them by. No-one can be arsed to bring EC sanctions to bear on the bad actors in a country as small as this (pop. 2 million). So, despite nestling between the fairly good market of Austria and the improving market of Italy, they are stuck in a pre-competitive, illiquidity time-warp. I can only offer a few palliative suggestions, and the unhelpful comment that it took more than a decade in Germany ... Hopefully, energy-market liquidity will trickle across their borders soon and they can break out of the state-dominated inefficiency trap with some spot-priced gas imports to undercut the ubiquitous Gazprom oil-indexed contracts. 

Winged Lion - omnipresent

Ah, but how will they transact in international energy markets if they go tits-up ? Well, for starters the private sector already uses Austrian banks for all significant deals, it’s only a short drive to the nearest Austrian town from wherever you are. Prepayment generally does the trick, however bad for the working capital. And they’ll need to do their business under an external jurisdiction, because you can’t get a Slovenian commercial-court judgement, bent or otherwise, in under three years.  But people will always need electricity ... well, right up until the point where it doesn’t matter anyway.

Anyway – it’s the weekend and just the weather for a bit of sight-seeing. This region was of course Venetian territory in years gone by, and Slovenia avoided the post-Yugoslavian fighting, so there are plenty of unspoiled things to see, overseen by the old winged lion. The country is still fixated by which side your family was on in WW2 – were you red or white ?  So - don’t mention the war ... Good luck to them: white and red, they are a pleasant bunch. 

ND

Where art thou, Eurofudge?

Has it really comet his this? Ever since 2009 the favourite nibble across Euroland has been delicious eurofudge. Everywhere from Italy, to Spain, Ireland, Greece and Portugal there has been plenty of fudge; enough to sate even global appetites and keep the euro bandwagon well fed and on the road.

But now tiny Cyprus could see and end to fudge distribution and dark day for the euro-fudge industry - another tale of woe for European industry.

Of course, Euro-Fudge is resilient and production runs over the weekend have been known to many times unblock seemingly difficult conditions.

This time though, perhaps it is different? Cypriot politicians face the prospect of voting to nick all the money from their pension funds AND from some rather unsavoury Russian types - normally the sort of people who you would try very hard never to meet, let alone cross.

Or they can go for just stealing money out of everyones bank account at the Eurogroup's behest.

Or they can abandon the euro, print new Cypriot pounds and see what happens as their banks collapse.

If you had to vote on any of the above what would it be? All maybe of direct personal consequence to your financial and physical well being too. maybe they will panic and do the wrong thing.

Maybe Euro-fudge will come to the rescue, I think a Country leaving the Euro would be a bad precedent for the europhiles to accept as it would surely lead to more over time...

Cyprus; the penny drops

Just in case the citizens of Europe were in any doubt about who is in charge and what their fate maybe, the EU decision to try and impose a 9.9% levy on Cypriots - via closing down their banking system, will perhaps wake a few more people up to the ugly reality.

In a fatally flawed move the EU is trying to get Cyrpus to pay for 50% of its own bailout directly from its tax payers. No doubt this will be very popular in Germany and the Nordic states, who want to see less of their own money wasted in pointless bailouts and more 'input' from the locals.

But this weekend's decision shows up some many of the difficult and complex realities of a single Euro system. Firstly, the foreigners who have invested in Cyprus are hit hard, even the British armed forces are. Plus if you have not voted for the current Government or the past ones you are having your money expropriated without much in the way of personal legitimacy.

Perhaps the EU thinks people should leave badly run states to avoid the consequences? This could have interesting consequences for Portugal and Spain in the near future. The few people who have survived with money are now fully incentivised to take it off shore or indeed leave the Country themselves.

As much as the EU says this is a special one-off measure, it sets a precedent - something in the UK we take very seriously as it is the basis of our legal system.

Even more deeply, it may tip the Euro-scepticism debate in further away from being pro-Euro. If the Northern states don't want to underwrite transfers, then they should not allow the Southern states in. If the Southern states want to run inflationary basket case economies, then they too should not join a single monetary system.

But overall, way to go EU, just as you had calmed the crisis, back it comes for the sake of a few couple of billion euro's! I thought they were meant to be all-powerfully intellectual supreme beings.....

Running out of time.

Cameron and Obama have called for the Eurozone to do something 'quickly'.

They have indicated that the lack of a really strong, panic ending, response over the last 4 years, has just left the crisis simmering and they are worried that it might now boil over.

They might even be right. We tend to believe that because things are OK, they will remain OK. 

We, as people, to tend to think it will all turn out all right, even though there is no real reason that it should. It might just as easily get worse.

 When civilisation collapses, it does so very quickly. When empires end, they end unbelievably fast.

The Austrian empire  had been existence as a major European power since 1804. Merged with the also powerful Hungarian empire in 1867, central Europe was dominated by the Austro-Hungarian empire. It seemed a pretty secure and settled state, albeit probably the weakest of the great powers.

At the end of the great war, in 1918, it dissolved completely. 

The Ming Dynasty (1368–1644) of China, "one of the greatest eras of orderly government and social stability in human history" collapsed in just 10 years, bought down by a financial crisis.

The Roman empire. In Britain it was a slow decline, over some 100 years. But in Italy, one day the richest nation, next day the city is overrun by barbarians.

Take our own empire. The British empire was at its peak in 1930, even though we'd lost the thirteen colonies of the USA a century and a half earlier. 1930 was just before dominion status was granted to the senior nations and the self governing commonwealth came into existence. 458 million people, one fifth of all the people on the planet and quarter of the earth's land area was under more or less direct British control. Just thirty years later the mightiest empire the world had ever known was gone. Today, 80 years on, we don't even like to talk about it. It seems so ..distant.

Winston Churchill was under no illusions about why Britain should fight on in 1940. To protect the empire. Clearly, he failed in his goal.

In truth the British empire, and all those other empires, had been in decline for a long time. They looked fine, and maintained their  surface image of greatness, but underneath there were weaknesses that only later would appear so obvious. 

The British Empire, ever since the Boer war of 1899, had really been losing market share. It was being out produced in steel, coal, and food. British Empire power, influence and preeminence was waning, though few would have believed it. America already had more economic power, and Germany, in some areas, too. And Germany had only been a united country for the previous 30 years, since 1871. 

We tend to think of empires and civilisations ending gradually. A decline in power over decades and decades. A tipping point occurs from which there is no return. 

A shortage of silver did in the Mings. Defeat in war did for the Aztecs and the Austo-Hungarians.

Financial ruin did for the British empire. Rigid, inflexible state control did for the Spanish empire.

  But the end can also be very quick.

The USSR. Born of revolution. Beset by enemies. Became one of only two global superpowers and terrified the west. Fell to bits in 1991 so suddenly and unexpectedly that it was years before world leaders really acknowledged it was gone for good.

So it would probably be for the best if Mrs Merkel could be a little more flexible in the current euro crisis. Just because the EU has been around for 50+ years is no guarantee of anything.

Germany: Never a borrower or a lender be

How exactly are we to deal with the Eurozone crisis? It's been going on a long, long time now. Without much sign of coming to a conclusion. The Euro leaders response has been poor. 

Initially,when the UK and USA bore the brunt of the credit crisis, their response was it was not really a Eurozone problem. It was contagion that was the worry. The Darling/Brown plan of bailouts reassured the planet, albeit at great expense, and the world began to look for ways of tackling recession. But as we know, the Eurozone had not dealt well with the credit crunch. In fact for almost 18 months the EU did not even acknowledge there was a problem. The can was kicked along the road by too small and too stringent bailouts. Ireland and Portugal and Italy and Greece and Spain were all in serious trouble and needed serious help.

But each time the euro countries came up with the same solution. Mostly nothing. Followed by a bit of silence. Then denial. Followed by severe market pressures, followed by near panic, limited bailout and a huge sigh of relief when it sort of worked. And back to nothing.

 Now, 4 years after the trouble began, the euro can has finally reached the end of the road and proper action is needed. At present this seems to be the usual mix of fingers crossed that the Greeks will accept the already agreed deal or a firewall to protect the rest of the EU if the Greeks inexplicably don't take the cash, the bitter medicine of the spending cuts and decide to go it alone.

The Greek elections will decide it. I strongly suspect a big dose of reality to emerge at the next election. A no vote to the bailout means an end to its EU safety net and hello to the world of Chinese and Russian cars at German prices. Mrs Merkel is probably counting on the same. Fear of a worse alternative narrowly averts the latest Greek exit.

 But there are no guarantees. And just because Greece stays in only means a worse problem need not be faced. The existing problem still remains. 

The EU says the Grexit firewall is ready. But It's not even properly agreed. And even if it was ready, it's too small. What is really needed is an end to the crisis. Not just words about how the euro is for ever and no one is quitting and everything is in hand. A real gesture is needed.  That has to come from Germany. And it's going to cost Germany. But that is the price for the Euro. 

Germany might resent having to bail out Europe. They've already rebuilt their country from two world wars. Reunified the inefficient, neglected communist half. Created a new Europe wide currency. Established a whole new Europe wide government and a brand new way of inter European trading. Helped make the backward club med countries modern democracies with modern infrastructures and financial systems and governments. And all the while maintained their position as number one on the league table of most successful European economy since 1961. 

But that is what it comes down to. Its plan for break up or fix the Euro. No one else will do it. Certainly not for for free. Sarkozy said the Euro nations could borrow from their own banks. "Each state can turn to its banks, which will have liquidity at their disposal." He pointed out that earning 6% on Italian bonds that could then be financed at 1% from central banks was a "no brainer".

 But that is causing a decade long recession. The interest on the debt is choking. Indebted countries need cheap credit. Really cheap. AAA cheap. They need even more than that. They need a write off. 

The Road to nowhere says The total debt of the PIIGS (Portugal, Ireland, Italy, Greece and Spain) plus Belgium is more than Euro 4 trillion. A writedown of around Euro 1 trillion in this debt is required to bring the debt levels down to sustainable levels (say 90% of GDP).

I expect even more is required. 

So, Germany needs to agree to finance sick Europe. Germany puts its industry behind its guarantees. 

Never mind the EU constitution and the regulations. Its crisis time everyone. Time to do what is needed.

Today Germany can borrow at 1.6%. It borrows as much as it can. Say 2 trillion Euros, backed up by..well Germany. If Germany's borrowing costs goes up, so be it. If the Euro devalues, so much the better. The Euro needs to devalue. 

Germany loans that money to the PIGS at 0.2%- 0.5% more than it borrowed,  for 10 years. No country need go to the markets at 5-6% when they can get cash for 2%., fixed, for 10 years.

Further, about half of the loan is over a 50 year period.  Fixed at an absurdly low rate. The repayments are more than manageable.

After can come all the agreements on Eurobonds and different risk spreads across the different nations. But if the crisis is going to end something has to end it. Germany has gained  out of the Euro. The Euro trades at $1.30. If the Mark was back in place would it be so low? When it was last in circulation it was around $2.00. If Germany really wants to keep the Greeks in the club its going to have to swallow its frustration with them and bail them out. Properly.

Afterwards, when recovery is on the way, they can reorganise the EU to be on a more realistic financial footing with proper financial institutions, and conditional Eurobonds and a joint pooling of liabilities , mutualised debts among members, and federal banks and so on.. But they've waited far too long, doing far too little and just hoping the problem would somehow sort itself out. 

If they can get the French to come in on the deal, so much the better. But if not, they will have to do it alone. 

Enough is enough. The G8 is saying Europe needs to mutualise its debts. Essentially Germany taking on a share of the burden. A German loan or indeed a German 'foreign aid' program is quicker. 

Mrs Merkel knows that German taxpayers won't stand for it any more than UK ones would. Why should hard working Hans bail out his feckless, chav neighbours?

But  Germany is the fourth largest economy, world’s second-largest exporter... its largest markets are its European neighbours.  Germany has avoided recession so far. But for how much longer?

So now Germany must pony up and take on the role of the real lender.

Well, that's my fantasy entry for save the Euro.

Germany doesn't even have the appetite for Euro bonds. Never mind actually taking on the debt.

No doubt Chancellor M has a proper plan B. Just in case the Greeks do inexplicably vote themselves out of the Euro.

The fear is its another do the minimum possible to quell the panic and so the problems of Spain and Portugal and Ireland and Belgium and France and UK continue bumping along.
Until the next crisis. And the whole panic, rinse, repeat cycle kicks in again.

Not one more penny

COPENHAGEN

--Compromise falls short of EUR 1 trillion target set by G-20

--Crisis lending expanded to EUR700 billion

--Europe facing criticism not doing enough on its own

U.K. Chancellor of the Exchequer George Osborne told his European Union colleagues Friday that his government will reserve judgment on whether an increase in the region's firewall is enough to win extra U.K. funding for the IMF

An increase in the bailout fund's resources was seen as key to winning further funding for the IMF from other leading non-euro zone economies, including the likes of China and Brazil, as well as the U.K. Fresh IMF funds could be used to further boost the euro zone's firewall if the debt crisis intensifies

TO GEORGE OSBORNE,
CHANCELLOR OF THE EXCHEQUER
SECOND LORD OF THE TREASURY
HEADQUARTERS
HM TREASURY
2/W1,
1 HORSE GUARDS ROAD,

LONDON,

SW1A2HQ.

SECRET

March 30,2012

Sir, regarding the meeting of euro finance ministers,

I have the honour to refer to the very serious calls which have recently been made upon the Home Nations taxpayers in an attempt to stem the collapse of the Euro on the Continent.

2. I hope and believe that our European Allies may yet be
victorious in staving off necessary bailouts for France and Belgium, but we have to face the possibility that they may be defeated.

3. In this case I presume that there is no-one who will
deny that England should carry on, even though the remainder of the Continent of Europe is dominated by the Germans.

4. For this purpose it is necessary to retain some
minimum financial strength in this country and I must request that the Monetary Policy Council will inform me what they consider this minimum strength to be, in order that I may make my dispositions accordingly.

5. I would remind the Monetary Policy Council that the last estimate which they made as to United Kingdom cash necessary to send to defend the Euro was 7 billion pounds, yet the latest estimates are now possibly the equivalent of one trillion euros.

6. Once a decision has been reached as to the limit on
which the Monetary Policy Council and the Cabinet are prepared to stake the existence of the euro, it should be made clear to the Euro Zone leaders on the Continent that not a single penny from British taxpayers beyond the limit will be sent across the Channel, no matter how desperate the situation may become.

7. It will, of course, be remembered that the earlier estimate of 100 billion euros was based on the assumption that the collapse would come from just Irish, Greek and Portuguese banks. We have now to face the possibility that default may come from Spain, Italy or even from the North coast of France and Belgium. The result is that the necessary bailouts become very much extended at the same time as our own coffers are much reduced.

8. I must point out that within the last few months the
equivalent of £7 billion pounds have been sent to France, and that the more pounds which are sent to France the higher will be the wastage and the more insistent the demands for further monetary reinforcements.

9. I must therefore request that as a matter of
paramount urgency the Monetary Policy Council will consider and decide what level of sterling reserves are to be left to the Treasury for the running of this country, and will
assure me that when this level has been reached, not one
more penny will be sent across the Channel however urgent
and insistent the appeals for help may be.

10. I believe that, if an adequate economy remains in this country, if the coalition remains in being, and
if sterling is not diverted into the International Monetary Fund we should be able to carry on single handed for some time, if not indefinitely.

But, if the financial reserves are drained away in desperate attempts to remedy the situation in Europe, defeat in France will involve the final, complete and irremediable defeat of this country.

I have the honour to be,

Sir,

Your obedient Servant,

William C. Quango

Select Committee,
Her Majesty's Revenue and Customs.

{Apologies to Sir Hugh Dowding - CIC Fighter Command - 1940}

Osborne: 6 Weeks to Sort the Euro - I feel a song coming on ...

So - Boy George has given 'em their marching-orders ! I'm sure they will snap to it. The *more mature* reader may know the wistful tune ... or should that be wishful ?




Try to dismember Greek debt by November
That ton of cash they beg and borrow
Serial offenders, they’ve been on a bender
They spent like there was no tomorrow
Tried to pretend they could endlessly fend off
The austerity which must surely follow
But in the end, ah, it’s something they’ll just have to swallow …

On the agenda of Eurozone members
To print more cash to make things mellow
New legal tender in all of its splendour
“Keep printing !” - hear Tim Geithner bellow
Who’s the defender of small private lenders ?
Joe Public is a luckless fellow
And in the end Euro-promises tend to be hollow …

ND

National Politics of the Bailout

Breaking news everywhere that at last a major plan for a Euro area bailout is coming together, a mere year after one was urgently needed. Perhaps the most interesting part is the role that the politicians of each nation are playing:

America - Led by Tim Geitner the US has performed its cavalry role. Coming up with the idea of leverage to help increase the EFSF bailout fund and to knock the heads together at the G20 to push forward a solution before the world markets meltdown in the abscence of any leaderhsip. Stereotypically, America provides leaderhsip and clever thinking, althought this time no money....

France - The IMF leader Christine lagarde if French, unsurprisingly she has been very down on the chances for the World Economy in recent days. She knows that France has the greatest exposure to Greece and unlike the Head of the Bank of France knows that, Common Agricultural Policy style, the only thing that is going to save France is tying everyone else into her future and getting external funds to assist.

Italy - In Berlusconi they have comedy leader of a comedy economy. Run by a mix of mafia and state backed businesses, the people have little chance of being successful entrepreuners - instead the girls queue outside the presidents office. Farcical and sad.

Britain - Not being in the Euro allows the ususal position of commenting from the side, whislt also knowing that our own economy is so weak that not finding a solution will condemn us to an even grimmer future than we know about. At least our downcast politicians have a grasp on reality, thanks to the death-experience of 2008.

Germany - The pride of leading Europe has now given way to a continual estimate of the costs of this leadership. Merkel and others come out badly, refusing to give to anyone else whilst running their own surplus, berating everyone else for not being German. In the end, all rests with them committing Germany either to fund the saving of the Euro or to walk away to a rerun of the late 1930's.


I find it both re-assuring and odd at the same time that crisis after crisis, the same national stereotypes play themselves out.

Germany, Greece & Interpreting the Bailout

Some great threads here this week, reminds me of 2008 ...

There are a couple of important additional points to make. Firstly, with adroit financial engineering - and access to some AAA muscle - it is always possible to defer a problem. Enron did it many times (AAA provided by banks); British Energy in 2002 (HMG); and now the PIIGS (Germany). The term in vogue is 'kicking the can down the road', but a better one is that used by Enron: it's a snowball, getting bigger and bigger, going downhill at an ever-increasing rate but, for the time being, gathering up all the snow in its path. And its principle tool is 'blend & extend' - in this case, averaging down the PIIGS' interest rates and extending repayment to infinity and beyond. Simples, when you know how. Sometimes it works, sometimes ...

For the second point we start with the bailout document itself + a little interpretation. Of course, it's a blend-&-extend snowball alright:

"We have decided to lengthen the maturity of future EFSF loans to Greece to the maximum extent possible from the current 7.5 years to a minimum of 15 years and up to 30 years with a grace period of 10 years … We also decided to extend substantially the maturities of the existing Greek facility … The EFSF lending rates and maturities we agreed upon for Greece will be applied also for Portugal and Ireland"

It's also a chest-beating exercise to warn off the wicked speculators with the usual battle-cry: our pockets are deeper than yours

"to do whatever is needed to ensure the financial stability of the euro area as a whole and its Member States … we will provide adequate resources to recapitalise Greek banks if needed … Member States and the Commission will immediately mobilize all resources necessary … We are determined to continue to provide support to countries under programmes"

There is also a warning-shot across the bows of the rating agencies. Of course, Soros et al have heard this all before. They - and some altogether nastier people, more in a later post - are rolling out their strategies for all this even as we write. But fair enough, Germany is a pretty ugly gorilla in its own right.

Then there are the pieties:

"All other euro countries solemnly reaffirm their inflexible determination to honour fully their own individual sovereign signature and all their commitments to sustainable fiscal conditions and structural reforms ... All euro area Member States will adhere strictly to the agreed fiscal targets"

Yeah, yeah. This, of course, is the classic formula of blend + extend + pretend: readily more available to governments than to businesses, who must observe less forgiving disciplines. But then we come to a really important bit, & my second point.

"We call for a comprehensive strategy for growth and investment in Greece … We will mobilise EU funds and institutions such as the EIB towards this goal and relaunch the Greek economy. Member States and the Commission will immediately mobilize all resources necessary in order to provide exceptional technical assistance to help Greece"

This, dear readers, is the thing we don't really grasp on this side of the Channel: Euro-solidarity. And this is where the German takeover comes in, albeit with a slightly (only slightly) different perspective to the 'they couldn't do it by force so they're doing it by stealth' line. Because we (they) have been here before, most notably the re-unification project. The Deutsche Einheit is a lesson in what Germany will do, when mobilised under the banner of solidarity (if you don't believe it, read this): and Greece is a commensurate task.

Solidarity comes with sticks as well as carrots. So the document also contains a warning-shot across Ireland's bows on the subject of Corporation Tax rates (paying attention, Salmond ?). Which leads us neatly to the sinister stuff.

"To improve the effectiveness of the EFSF and of the ESM and address contagion, we agree to increase their flexibility linked to appropriate conditionality, allowing them to act on the basis of a precautionary programme, finance recapitalisation of financial institutions through loans to governments including in non programme countries (and) intervene in the secondary markets: ... to improve working methods and enhance crisis management in the euro area ... our determination to reinforce convergence, competitiveness and governance"

Increase flexibility ... precautionary programme ... intervene ... convergence ... governance ... the sound of Emergency Powers being devised. They ain't gonna brook much opposition within the wider EU.

It's going to get ugly for Cameron.

ND

Euro debt crisis.

Quickie for the euro debt-crisis-mountain-rescue-bailout-default plan.
FTSE loves it. Closed up 46.07 points to 5,899.89

Telegraph has a nice live blog. The ever assessing Alphaville have the detail and are churning through the doublespeak. But it looks like the Euro is saved for today! Greece saved and much cheaper repayments, and we can all go/stay on holiday and there is no need to talk about a collapsing Euro ever again.

Shall we agree now to meet here in November to discuss the next euro crisis?

William Hill not playing the game either.
Bailout odds...
5/4 Italy, 2/1 Spain, 4/1 Greece, 4/1 Portugal, 4/1 Montenegro, 6/1 Cyprus, 7/1 Belgium, 10/1 Slovenia, 12/1 Slovakia, 12/1 Estonia, 20/1 Malta, 40/1 Holland, 50/1 Luxembourg, 66/1 Austria, 100/1 France, 150/1 Finland, 500/1 Germany

Enter The Dragon: The Chinese Right On Cue

"There will come a moment - who knows when, but China plays a long game - when some ghastly, Europe-threatening crisis arises (Iran? Turkey? or another financial meltdown?) and Europe is confronted squarely with its own flabby uselessness. Couldn't face down Libya unaided: & certainly can't face this putative future challenge, without contemplating some seriously bloody bayonet-work (and/or precipitous standard-of-living reduction). No stomach for that - and the US has decided it's had enough.

And then ... and then China or India has a quiet word in Brussels. Leave it to us, they say: and all we want in return is ..."

C@W, 12 June 2011

"The Chinese premier, Wen Jiabao, has thrown the eurozone a vital lifeline and pledged to buy billions of euros of European debt to keep the single currency project alive. The move, which will be a relief to struggling eurozone countries, was announced as Mr Wen continues his four-day trip to Europe ... He added: 'China is ready to work with Europe to share opportunities, cope with challenges and achieve common development and to make unremitting efforts for stable development of the world economy and an in-depth development of China-Europe ties.' "

Telegraph, 26 June 2011


ND

Why wait until 2013 to default ?

Germany’s power is a threat to the Eurozone

The First Post thinks similar to CU's Beam me up Scotty post a few days back. Why don't the weakest indebted nations, Portugal, Ireland, Greece utilise their power?

Betting market opens.

So Portugal had to take the bailout.
{Peston had the market's price for financing a bad credit nation yesterday. Portugal had run out of options on ways to service its debt.}

So - bets on Spain to have to a euro bailout.

1. 1 months
2. 6 months
3. 12 months
4. 18 months
5. never.

Next steps in the Euro Crisis

As said here many times previously, the euro is a currency union that was never going to survive its first real crisis. Well today, here we are right in the eye of the storm. People like William Buiter are feeling free to chuck around assertions that the periphery countries of Europe are all insolvent.

The crisis, which I fully expected to subside with the irish bailout until Q1, is continuing. Goldman Sachs' intervention suggests that the US is keen to keep the Euro area in focus for a while and see what damage it can inflict on Germany and France. German bonds are now tracking the perphery bonds, the crisis is everywhere.

There are though only 2 real options left now:

1. Massive Quantitative easing from the European Central Bank. The bailout funds are not big enough or accessible quickly enough so a one off debasement will really help here. Of course, this is great for German exports and less good for the US where it is itself using quantitative easing to try and devalue its currency.

2. Full Fiscal Union - the other approach is to end nation state soveriengty over their own fiscal affairs. Bonds issued centrally would be of better able to finance the periphery and only marginally more costly to Germany and France.

However, which of these is easier to implement politically and practically. Number one by a mile; more QE it is then....