End game Europe approaching.

boomshackala · **Joined:** Dec 29, 2008 **Posts:** 1718

johnnyone234 wrote:

jmc wrote:

Larry wrote:

Coles2 wrote:

Hopefully it'll be possible to have a mature debate on the issue without it getting waylaid by cranks and oddballs.

I see what you did there.

I'm trying to work out if I'm the crank or the oddball?

In other news a very interesting interview in Der Spiegel with Herr CSU..

http://www.spiegel.de/international/germany/bavarian-governor-seehofer-insists-on-conditions-for-euro-bailouts-a-839560.html

Lots of interesting stuff but this bit most interesting of all..

Quote:

SPIEGEL: At what point do you believe Germany should abandon the current bailout approach?

Seehofer: There is a red line. If Germany's top credit rating were threatened, we could no longer grant new billions in loan guarantees. Then it would become more expensive for us to borrow money, and we would be endangering our economy. Germany is a haven of stability in a troubled world. It has to stay that way. Our economic strength is insufficient to help finance all debt-ridden European countries. The paramedic cannot become the patient.

SPIEGEL: So you'd rather throw the patient out of the ambulance?

Seehofer: It doesn't do anyone any good if no one can be taken care of anymore.

My take is that if Hollande tries to bump Germany into some kind of Eurobond, which would most definitely effect Germanys credit rating, then the Germans will bail.

I think we may have our exit mechanism...

For all the posturing, politicians are bluffers and cowards
Germany would not pull out of the euro as to do so would destroy their credit rating

When the choice is: 1 - do a little more; 2 - Tear apart the euro, they will always do a little more
Outcome of the next few weeks - Do a little more

The crisis has brought about the possibility of a fiscal and political union forward about 50 years
Most are secretly happy with this
Lower interest rates, ESM banking license, banking supervision, more LTRO etc will be provided provided commitments are met
Nations not complying and too small to matter may be booted out

Pulling OUT will destroy their credit rating? You're going to have to explain that one. It will damage their trade prospects, but tbh their host has been bled dry. I think they need greener pastures

JMG has a word or 2 to say about the German wealth pump in this weeks post

Quote:

Since the foundation of the Eurozone, in particular, European economic policy has been managed for German benefit even—as happens tolerably often—at the expense of other European nations. The single currency itself is an immense boon to the German economy, which spent decades struggling with exchange rates that made German exports more expensive, and foreign imports more affordable, to Germany’s detriment. The peseta, the lira, the franc and other European currencies can no longer respond to trade imbalances by losing value relative to the deutschmark now that it’s all one currency. The resulting system—combined with the free trade regulations demanded by economic orthodoxy and enforced by bureaucrats in Brussels—has functioned as a highly efficient wealth pump, and has allowed Germany and a few of its northern European neighbors to prosper while southern Europe stumbles deeper into economic collapse.

In one sense, then, it’s no wonder that German governmental officials are insisting at the top of their lungs that other European countries have to bail out failing banks and then use tax revenues to pay off the resulting debt, even if that requires those countries to follow what amounts to a recipe for national economic suicide. The end of the wealth pump might not mean the endgame for Germany’s current prosperity, but it would certainly make matters much more difficult for the German economy, and thus for the future prospects not only of Angela Merkel but of a great many other German politicians. Now even the most blinkered politician ought to recognize that trying to squeeze the last drop of wealth out of southern Europe is simply going to speed up the arrival of the populist politicians mentioned a few paragraphs back, but I suppose it’s possible that this generation of German politicians are too clueless or too harried to think of that.
http://thearchdruidreport.blogspot.ie/2 ... tment.html

Mossy_Heneberry · **Joined:** May 18, 2009 **Posts:** 2641

johnnyone234 wrote:

jmc wrote:

Larry wrote:

Coles2 wrote:

Hopefully it'll be possible to have a mature debate on the issue without it getting waylaid by cranks and oddballs.

I see what you did there.

I'm trying to work out if I'm the crank or the oddball?

In other news a very interesting interview in Der Spiegel with Herr CSU..

http://www.spiegel.de/international/germany/bavarian-governor-seehofer-insists-on-conditions-for-euro-bailouts-a-839560.html

Lots of interesting stuff but this bit most interesting of all..

Quote:

SPIEGEL: At what point do you believe Germany should abandon the current bailout approach?

Seehofer: There is a red line. If Germany's top credit rating were threatened, we could no longer grant new billions in loan guarantees. Then it would become more expensive for us to borrow money, and we would be endangering our economy. Germany is a haven of stability in a troubled world. It has to stay that way. Our economic strength is insufficient to help finance all debt-ridden European countries. The paramedic cannot become the patient.

SPIEGEL: So you'd rather throw the patient out of the ambulance?

Seehofer: It doesn't do anyone any good if no one can be taken care of anymore.

My take is that if Hollande tries to bump Germany into some kind of Eurobond, which would most definitely effect Germanys credit rating, then the Germans will bail.

I think we may have our exit mechanism...

For all the posturing, politicians are bluffers and cowards
Germany would not pull out of the euro as to do so would destroy their credit rating

When the choice is: 1 - do a little more; 2 - Tear apart the euro, they will always do a little more
Outcome of the next few weeks - Do a little more

The crisis has brought about the possibility of a fiscal and political union forward about 50 years
Most are secretly happy with this
Lower interest rates, ESM banking license, banking supervision, more LTRO etc will be provided provided commitments are met
Nations not complying and too small to matter may be booted out

How does pulling out of the euro destroys Germany's credit rating?

johnnyone234 · **Posted:** Fri Jun 22, 2012 2:57 pm

boomshackala wrote:

Pulling OUT will destroy their credit rating? You're going to have to explain that one. It will damage their trade prospects, but tbh their host has been bled dry. I think they need greener pastures

JMG has a word or 2 to say about the German wealth pump in this weeks post

Quote:

Since the foundation of the Eurozone, in particular, European economic policy has been managed for German benefit even—as happens tolerably often—at the expense of other European nations. The single currency itself is an immense boon to the German economy, which spent decades struggling with exchange rates that made German exports more expensive, and foreign imports more affordable, to Germany’s detriment. The peseta, the lira, the franc and other European currencies can no longer respond to trade imbalances by losing value relative to the deutschmark now that it’s all one currency. The resulting system—combined with the free trade regulations demanded by economic orthodoxy and enforced by bureaucrats in Brussels—has functioned as a highly efficient wealth pump, and has allowed Germany and a few of its northern European neighbors to prosper while southern Europe stumbles deeper into economic collapse.

In one sense, then, it’s no wonder that German governmental officials are insisting at the top of their lungs that other European countries have to bail out failing banks and then use tax revenues to pay off the resulting debt, even if that requires those countries to follow what amounts to a recipe for national economic suicide. The end of the wealth pump might not mean the endgame for Germany’s current prosperity, but it would certainly make matters much more difficult for the German economy, and thus for the future prospects not only of Angela Merkel but of a great many other German politicians. Now even the most blinkered politician ought to recognize that trying to squeeze the last drop of wealth out of southern Europe is simply going to speed up the arrival of the populist politicians mentioned a few paragraphs back, but I suppose it’s possible that this generation of German politicians are too clueless or too harried to think of that.
http://thearchdruidreport.blogspot.ie/2 ... tment.html

if Germany left the Euro it would affect the peripheral countries less than Germany
Germany and German banks would suffer huge losses
The german banks are already undercapitalised and hugely leveraged
The german banks would need to be recapitalised a la Ireland and German debt to GDP would rise while at the same time exports would collapse

Quote:

Now, what would happen if a financially sound country like Germany decided to leave the euro, in order to maintain its own currency? Even that would hurt. A lot. Germany wouldn’t default on its national debt — in fact, its new currency would likely be worth more than the old euro — but its banks would suddenly have assets in the old, devalued currency. Balance sheets would be thrown out of whack, and Germany would have to pour an enormous amount of money into bailing out its banks. What’s more, the country’s exports would likely collapse. All told, UBS estimates, the cost of secession to a country like Germany would likely reach 20 percent to 25 percent of GDP, and remain at about half that for a few years thereafter.

http://www.washingtonpost.com/blogs/ezr ... _blog.html

Tell me what the German Credit rating would be then?
Whats below Junk rating?

boomshackala · **Joined:** Dec 29, 2008 **Posts:** 1718

german exports to bankrupt europe are collapsing anyway. theses countries will default on their debt anyway. the question for germany is what is bad and what is worse. If I were them I would get out

jmc · **Joined:** Feb 21, 2008 **Posts:** 2838

johnnyone234 wrote:

For all the posturing, politicians are bluffers and cowards
Germany would not pull out of the euro as to do so would destroy their credit rating

When the choice is: 1 - do a little more; 2 - Tear apart the euro, they will always do a little more
Outcome of the next few weeks - Do a little more

The crisis has brought about the possibility of a fiscal and political union forward about 50 years
Most are secretly happy with this
Lower interest rates, ESM banking license, banking supervision, more LTRO etc will be provided provided commitments are met
Nations not complying and too small to matter may be booted out

You missed the whole gist of the interview. Read the Landesbank bail out reference very carefully.

What this tells me is that the eventual pulling of the plug will be a purely *political* decision, driven completely by domestic political considerations. The short term economic cost is pretty much irrelevant by this stage.

Looking at the political dynamics behind reunification would be instructional at this stage. Kohl was warned in the starkest terms that any exchange rate less than 6 Ostmark to 1DM would be catastrophic for the East German economy. But Kohl had an election to win and the CDU were well set up to do well as one of the 4 collaborationist parties in the old DDR. They already had a party structure on the ground in the east. But Kohl want to make sure the easties voted CDU so he decided on an exchange rate of 1 Ostmark to 1DM. He won a landslide in the east driven by easties who thought they were now rich. Of course the East German economy promptly collapsed and the resulting financial debacle has cost the German taxapayers around 1.5 *trillion* euro in the decades since. And they will be paying the solidarity tax for decades to come.

So compared with the the complete and total financial fuck-up that was German Reunification the worst case scenario for the cost of Germany leaving the Euro is small change. A few hundred billion to temporarily nationalize some of the bigger German banks. It would be mostly monetary system money not financial system money so the kind of bail out they could live with.

But the cost to Germany of mutalization of Club Med debt over the next few decades would easily dwarf the cost of reunification. Its not just the debt incurred so far, its all those unfunded pensions in the other countries that the Germans are looking at. We are talking trillions here..

The Germans know they are facing the same demographic future as Japan, just two decades behind, so a euro bailout is a long term cost they absolutely cannot afford. They will be hard put to avoid a Japanese future without the dead weight of the Club Med hanging around their necks dragging them down too.

Enoch Root · **Joined:** Aug 13, 2009 **Posts:** 916

The German people may be starting to back the concept of a German pullout of the Euro.

http://www.independent.ie/business/european/germans-tiring-of-euro-and-they-want-to-see-greece-exit-3147770.html

18 months to go to see if this is going to become the major political issue in Germany.

Mossy_Heneberry · **Joined:** May 18, 2009 **Posts:** 2641

Enoch Root wrote:

The German people may be starting to back the concept of a German pullout of the Euro.

http://www.independent.ie/business/european/germans-tiring-of-euro-and-they-want-to-see-greece-exit-3147770.html

18 months to go to see if this is going to become the major political issue in Germany.

I don't think the Germans ever agreed with the euro since its introduction.

Precisely why we will never have a fiscal and political union becuase the German populace won't have it.

Braighni · **Joined:** Feb 27, 2007 **Posts:** 1452

http://www.google.com/hostednews/ap/art ... e785efb930

Germany Downgraded

Quote:

BERLIN (AP) — Egan-Jones credit ratings agency says it has downgraded Germany by one notch from AA- to A+ and has issued a negative watch for the country's sovereign debt amid Europe's lingering debt crisis.

Objective Investor · **Joined:** Jun 28, 2011 **Posts:** 261

boomshackala wrote:

german exports to bankrupt europe are collapsing anyway. theses countries will default on their debt anyway. the question for germany is what is bad and what is worse. If I were them I would get out

Perhaps but leaving would make that collapse even worse, also Germany is currently winning the 'my currency is worth less than yours' export war by sharing a currency with countries much worse off and less competitive than them. If they leave the euro it'll take a lot more Dollars or Yuan to buy a BMW and inversely a lot fewer DMs to buy an ipad.

kennyb3 · **Joined:** Mar 3, 2010 **Posts:** 1117

http://www.thelocal.de/money/20120627-43399.html

Pretty strong headline

'Merkel: No eurobonds 'as long as I live'

Rick Flair · **Posted:** Thu Jun 28, 2012 8:52 am

kennyb3 wrote:

http://www.thelocal.de/money/20120627-43399.html

Pretty strong headline

'Merkel: No eurobonds 'as long as I live'

Thank fuck she's up for election soon.

boomshackala · **Joined:** Dec 29, 2008 **Posts:** 1718

Rick Flair wrote:

kennyb3 wrote:

http://www.thelocal.de/money/20120627-43399.html

Pretty strong headline

'Merkel: No eurobonds 'as long as I live'

Thank fuck she's up for election soon.

thank fuck you wont be standing for it

dolanbaker · **Posted:** Thu Jun 28, 2012 10:34 am

Quite frankly the "SS Euro" is listing so much now it won't take much for it to tip, no matter what the politicians do!

With all the debtors on one side and all the creditors on the other, how the hell do they expect it to stay afloat without a massive cash (cargo) rebalancing project.

Might be easier to abandon ship!

Puck may be Famous · **Joined:** May 3, 2008 **Posts:** 2040

Rick Flair wrote:

kennyb3 wrote:

http://www.thelocal.de/money/20120627-43399.html

Pretty strong headline

'Merkel: No eurobonds 'as long as I live'

Thank fuck she's up for election soon.

Ya, I hear that the German public are screaming for an alternative leader who will agree to eurobonds.

Basicly a joint account with all the PIIGS, with an unlimited overdraft facility, and each country given a debit card. Don't go mad now ye Greek bastards - ye've learned your lesson now, haven't ye?

yoganmahew · **Posted:** Thu Jun 28, 2012 11:14 am

Puck may be Famous wrote:

Rick Flair wrote:

kennyb3 wrote:

http://www.thelocal.de/money/20120627-43399.html

Pretty strong headline

'Merkel: No eurobonds 'as long as I live'

Thank fuck she's up for election soon.

Ya, I hear that the German public are screaming for an alternative leader who will agree to eurobonds.

Basicly a joint account with all the PIIGS, with an unlimited overdraft facility, and each country given a debit card. Don't go mad now ye Greek bastards - ye've learned your lesson now, haven't ye?

+1 I was just thinking the same - she's guaranteed her re-election.

End game Europe approaching.

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