End game Europe approaching.

temene · - Bertie Ahern 04/07/07

Finland to consider exiting eurozone if they are saddled with debt from other countries

Quote:

Finnish Finance Minister Jutta Urpilainen: “Finland is committed to being a member of the eurozone, and we think that the euro is useful for Finland. Finland will not hang itself to the euro at any cost and we are prepared for all scenarios. Collective responsibility for other countries' debt, economics and risks; this is not what we should be prepared for. We are constructive and want to solve the crisis, but not on any terms,” http://www.independent.ie/business/european/debt-crisis-finland-warns-of-euro-exit-rather-than-pay-debts-of-others-3160735.html

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

Apologies if this has been posted elsewhere. Eurozone breakup has been on the cards for a few years but the political consensus appears that it 'cannot' happen. There is no mechanism in place to allow it.

The recent awarding of the Wolfson Economics Prize to Roger Bootle and his team for their opinions on how it could happen is interesting reading for anybody interested in the topic.

http://www.policyexchange.org.uk/images/WolfsonPrize/wolfson%20economics%20prize%20winning%20entry.pdf

Many of the scenarios have been covered on the Pin, but there are some new angles and options. It should mandatory reading for the staff at the department of finance.

Me&Mi · **Joined:** Jan 12, 2008 **Posts:** 278

Enoch Root wrote:

Apologies if this has been posted elsewhere. Eurozone breakup has been on the cards for a few years but the political consensus appears that it 'cannot' happen. There is no mechanism in place to allow it.

The recent awarding of the Wolfson Economics Prize to Roger Bootle and his team for their opinions on how it could happen is interesting reading for anybody interested in the topic.

http://www.policyexchange.org.uk/images/WolfsonPrize/wolfson%20economics%20prize%20winning%20entry.pdf

Many of the scenarios have been covered on the Pin, but there are some new angles and options. It should mandatory reading for the staff at the department of finance.

Thanks for this. Just a matter of when I suppose. Would love to know the answer to that question.

TheEmigrant · **Joined:** Sep 14, 2009 **Posts:** 1392

The reason governments are considering exiting the euro is because they realise that they need to default on their current debt obligations. But then any euro exit would involve a "redenomination" into the new currency - which is itself also a default.

Both are defaults, but one involves huge upheaval. So why not just stay in the euro and default?

I also disagree with the whole premise of leaving the euro in order to apply more "appropriate" interest rates. If people want to lend governments money at ridiculously low rates then governments should grab that money with both hands.

Any government debt level above a certain amount (say 60% of GDP) should automatically trigger a default under an "Odious Debt" clause in the constitution. Lenders would soon stop lending to incompetent governments, and incompetent governments would be forced to stop overspending.

Everyone wins.

dolanbaker · **Posted:** Tue Jul 10, 2012 4:37 pm

Quote:

Any government debt level above a certain amount (say 60% of GDP) should automatically trigger a default under an "Odious Debt" clause in the constitution. Lenders would soon stop lending to incompetent governments, and incompetent governments would be forced to stop overspending.

Everyone wins.

Except the population of that country who may take matters into their own hands if the government is seen as weak!

BoyRacer · **Joined:** Jul 26, 2009 **Posts:** 10066

Euro States Lay Groundwork for Bond Buys, Speed Spanish Aid - -> http://www.bloomberg.com/news/2012-07-1 ... h-aid.html

Quote:

European governments laid the groundwork for possible purchases of Italy’s bonds and fast tracked aid for Spain’s banks, trying to shield the euro area’s third and fourth largest economies from the resurgent debt crisis.
Finance ministers worked out a way for the euro bailout funds to intervene in bond markets and said the first 30 billion euros ($37 billion) of 100 billion euros in rescue loans will start flowing to Spanish banks this month.
“It’s always useful to have a certain reserve for possible unexpected developments,” European Union Economic and Monetary Affairs Commissioner Olli Rehn said of the frontloaded Spanish loans at a press conference after a two-day meeting in Brussels.

there is more

onlyone · **Posted:** Tue Jul 10, 2012 10:50 pm

On VB tonight so the deal is the ESM buys the banks off us, for their market value, 15bn, per the examiner, and that's the Kenny debt relief.

Bizarre, if true.

TheEmigrant · **Joined:** Sep 14, 2009 **Posts:** 1392

onlyone wrote:

On VB tonight so the deal is the ESM buys the banks off us, for their market value, 15bn, per the examiner, and that's the Kenny debt relief.

Bizarre, if true.

Wha?!

Have the banks' debt obligations also been transferred from the Irish state to the ESM?!
:shock:

That would be the biggest news of the last few years if true. I'm not holding my breath though.

BoyRacer · **Joined:** Jul 26, 2009 **Posts:** 10066

It is now official: The Eurozone’s monetary transmission system is broken -> http://yanisvaroufakis.eu/2012/07/17/it ... is-broken/

Quote:

Under normal conditions, the interest rates that you and I must pay on a home loan, a car loan, our credit card, a business loan are pegged onto two crucial rates. One is the rate that banks charge one another in order to borrow from each other. The other is the Central Bank’s overnight rate. Alas, neither of these interest rates matter during this Crisis. While such ‘official’ rates are tending to zero (as Central Banks try to squeeze the costs of borrowing to nothing), the interest rates people and firms pay are much, much higher and track indices of fear and subjective estimates of the Eurozone’s disintegration.

there is more

HCMh · **Joined:** Nov 19, 2008 **Posts:** 931

This thread is now 20 months old.

Is it reasonable at this stage to ask how we define the terms "End Game" and "approaching"?

dolanbaker · **Posted:** Thu Jul 19, 2012 10:12 am

HCMh wrote:

This thread is now 20 months old.

Is it reasonable at this stage to ask how we define the terms "End Game" and "approaching"?

If it was a football compttition, we would be past the group stage and into the knockout round.

dolanbaker · **Posted:** Thu Jul 19, 2012 2:45 pm

HCMh wrote:

This thread is now 20 months old.

Is it reasonable at this stage to ask how we define the terms "End Game" and "approaching"?

End Game, when Eurozone countries revert to their national currencies.
approaching, the tide advancing over several "lines in the sand" that had previously been crossed, despite being told "that'll never happen". The bailouts for example.

It's only a matter of time now.

http://blogs.telegraph.co.uk/finance/je ... h-of-doom/

Quote:

What it shows is the now extreme flight of foreign capital from Spain and Italy. As you can see, the graph only goes up to the end of January, but we know that the phenomenon has got, much, much worse since then. This Credit Suisse graphic (below) tells much the same story. Anyone who can has been getting their money out. Likewise, any foreign company doing business in Spain and Italy removes the money as soon as they get paid, driven both by concern over the safety of the domestic banking system and the possibility that these countries might end up leaving the euro. This has been pretty much one way traffic.

jmc · **Joined:** Feb 21, 2008 **Posts:** 2834

HCMh wrote:

This thread is now 20 months old.

Is it reasonable at this stage to ask how we define the terms "End Game" and "approaching"?

So early days yet. The last time around it took thirteen years from the first serious manifestation of the problem to the first concrete steps to fix the problem. (1968-1981).

The End in this case is the end of the Euro in its current configuration. Of the five potential scenarios a continuing of the status quo in the medium / long term (5 years plus) is the least likely one by this stage. Next comes complete breakup. Then partial breakup with a DM center and revision for the rest. Next a DM exit, Finally we have a soft / hard euro split with a DM anchored strong euro and a FFr anchored weak currency. This is the mostly likely short term fudge solution if the politicians remand in control of the situation.

As of now my best guess is that it is around 50/50 that the euro will survive 3Q/4Q 2012 in its current config. We'll know when the pols get back at the end of next month if they are still in control otherwise expect an attack on the French bonds and / or an Italian political crisis courtesy of Sig. Bunga Bunga soon after the traders and the pols get back from their hols.

One way or another this will be a busy thread over the next few months.

bokonon · **Joined:** Aug 12, 2009 **Posts:** 438

onlyone wrote:

On VB tonight so the deal is the ESM buys the banks off us, for their market value, 15bn, per the examiner, and that's the Kenny debt relief.
Bizarre, if true.

Wonder what'll happen the (anecdotal) non-recourse policy for PPR mortgages if the banks are taken over by the ESM?

Disgruntled voter · **Joined:** Mar 28, 2010 **Posts:** 79

AEP in the Telegraph - IMF Loses All Faith in the Euro Project

http://blogs.telegraph.co.uk/finance/am ... o-project/

End game Europe approaching.

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