Author Topic: Is the Euro Zone in an "Endgame?"  (Read 6391 times)

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Offline P-N

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Re: Is the Euro Zone in an "Endgame?"
« Reply #15 on: 22:24 19-Jun-2012 »
Oh don't worry.  After Spain it will be Italy and then France by default as it holds so much Italian debt.

It'll roll on and on, one crisis nation after another, one fire fight at a time.

As nothing has been accomplished since 2008 within the EU regarding the financial crisis and we are now in 2012, there is a good chance the Eurozone will still be dealing with this in 2014 if the Eurozone still exists then.

Bailouts are pointless and don't work.  The choices are debt forgiveness (and deciding who loses out and how much) or allowing some banks to go under and then dealing with the repercussions.  As large scale multinational debt forgiveness seems unpalatable and allowing banks to go under seems to be taboo, this will obviously just roll on, crisis nation to crisis nation.

ECB lender of last resort is still a long way off if ever, now a situation reinforced by the highest German national courts which yesterday warned Merkel over her recent actions and lack of consultation with the German parliament, telling her to cease and desist making decisions without proper debate and scrutiny by German MPs, thus slowing down any German reaction (ergo EU reaction)  to whatever happens next.

So far, a summary of the EU position at the G20 has been "you are all a bunch of currency manipulators, undemocratic regimes, crisis starters and minnows compared to us - Now having said that, we'd like to borrow Euro 500 billion from you."

In the meantime, Greece is now sorted after an election?  I don't think so!

This will just rumble on and on and on until it eventually gets sorted some years from now or it implodes (again).
"When surrounded by the dark void of the willfully blind, it does not excuse those that are a spark of light their duty to shine" - Me

Online David Rochlin

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Re: Is the Euro Zone in an "Endgame?"
« Reply #16 on: 07:44 20-Jun-2012 »
Western Europe isn't going to starve, but...
Ukraine just had an economic Depression.  A generation of Ukrainians lost their money, lost their futures and live on diminished expectations.  Ukraine actually did fairly well though, as compared with similar events in history, globally.    I don't think Western European culture is flexible enough to deal as well with the changes that a shortage of Euros outside of Germany, would impose. 
   In Ukraine, industry responded to the 2008-2009 financial crisis by cutting factory wages in half, enabling them to remain open and in production.
Imagine how this sort of solution might go over in France...   Of course it won't happen, the factories will simply close, with a lot of drama to be sure.
   

Offline Tis_me

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Re: Is the Euro Zone in an "Endgame?"
« Reply #17 on: 17:41 21-Jun-2012 »
Euro itself is rolling over from recent corrective move, should see it sell off down to 11,700(Usd) area over the next month or two...
« Last Edit: 18:30 21-Jun-2012 by Tis_me »
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Online David Rochlin

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Re: Is the Euro Zone in an "Endgame?"
« Reply #18 on: 19:05 23-Jun-2012 »
What to expect from the Forex, on currency exchange rates is certainly one of the most intriguing issues relating to this.  The common wisdom in Ukraine, is that the U.S. dollar will strengthen and be one dollar to Nine Hryvna in less than one year.  The industrial slump in Western Europe absolutely has to hurt the UAH, as a strong currency these days, tends to be tied to exports.  On the other hand, a weak Euro should spur manufacturing if a cheap Euro increases demand for Eurozone products. 
The other big issue, though, is that if the Euro loses standing, globally, and member countries lose standing (Greece just got demoted to an "Emerging Market,"  then Ukraine could also be demoted in the investment world, along with much of Eastern Europe.  There are reasons for this not to happen, but, well, if Ireland, Spain, Italy, etc., etc., are risky, then where does Ukraine stand?  Will Ukraine be elbowed over the edge of the "Periphery?"
   And as Greece is actually retreating from first world status, to "Emerging Market," perhaps the lexicon needs to be expanded to encompass the retreating or receding market, so that it describes the direction or momentum of the failed states of the future.
« Last Edit: 22:22 23-Jun-2012 by David Rochlin »

Online David Rochlin

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Re: Is the Euro Zone in an "Endgame?"
« Reply #19 on: 16:44 30-Jun-2012 »
The markets have responded favorably toward a deal agreed to in principle but not detail, for zone countries, perhaps even countries outside the single currency zone, to surrender rights to a central banking authority, in exchange for, not quite Eurobonds, but ability for that authority to lend to strapped banks without obligating the governments regulating them.   
   Germany is ever concerned that irresponsible governments will get bottomless credit cards, like they used to have in the first decade of the 21st century.   But, on the other hand, they were such good customers...  And if the Euro is circling the drain, well that would be the German currency too.   
   So, they have made a deal, but a deal that might bog down in details.  Apparently this is triggering a minor constitutional crisis in Germany, as legislators are suing at the constitutional court over this.
   But, what happened to Greece, seemingly forgotten in the larger scale drama of the Eurozone?
Germany's Finance Minister has warned the government, off the record, to expect a Greek exit from the Euro. 
http://www.reuters.com/article/2012/06/30/us-eurozone-greece-schaeuble-idUSBRE85T0B220120630

As a special little gift for those of you who are investors who had faith in the bonds of countries receiving bailout loans, your bonds will be subordinated to newer bailout bonds. 
One of the driving forces, of the Euro Crisis is confidence.  And the worst mistake by the financial authorities of the Zone was to allow default on any, any Euro Government Bonds, because this started the dominoes falling and brought it to a point where there may be no stopping them.  It was disasterous to allow it to happen that Euro authorities could even participate in the scheme to force bondholders to accept huge losses.   And wouldn't it have been cheaper to guarantee Greek bonds at the beginning, than it has been to loan more and more?
What this mistake has done is allowed investors to know that the great powers of Europe will not only allow other Eurozone Governments to default, but will even abuse its powers to cheat investors, lure banks and even pensioners  into buying bad bonds, then pull the rug out from under them.  It's ridiculous. 
« Last Edit: 17:05 30-Jun-2012 by David Rochlin »

Offline P-N

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Re: Is the Euro Zone in an "Endgame?"
« Reply #20 on: 18:18 30-Jun-2012 »
As I said, this will roll on and on and on. 

It will be years, y - e - a - r - s, before the devil in the detail is thrashed out between the Eurozone member states, if it is ever thrashed out remotely properly.

The Eurozone issue, as I have said, is simply one of a number of enormous icebergs awaiting the EU and it is actually probably not the biggest one, even if it is getting all the headlines.

By far the biggest and probably the hardest issue is that of political union vis a vis national sovereignty as each nation has different red lines that it simply won't cross when subordinating currently sovereign issues to Brussels .  The problem is those red lines are not all in the same place and thus the lowest common denominator is all that can be achieved without the EU as it is currently constructed member nation wise, changing radically.  It should be remembered that every single EU member state has the power to veto.  (Just as Poland did not long ago over further climate reductions issues).

Add to that the circles of hell that are the European Commission, European Council and European Parliament, all who need to agree......anything.....for it to happen, and all of whom hold very different positions (see ACTA which the parliament looks likely to scupper despite European Commission and European Council approval), plus in some circumstances the need for sovereign debate and even occasionally public referendum amongst some or all 27 (soon 28) members and even the most simple issues can take years, yes y - e - a - r - s, to go from proposal to statutory reality.

Further to that, you have the sovereign constitutions and laws that have to be navigated and that is not always successful, many statutory articles passed by the EU then being struck down thus as unconstitutional in nation x, y or z.

If you get past all these issues, there is then the voting public to convince who are quite likely to kick out national politicians who ignore their sentiment towards any EU issue if it irks them enough. 

That brings with it the issue of short term and somewhat necessarily populist thinking of national politicians mandated by public vote on national policies, into varying forms of confrontation with appointed (not elected) European Commissioners who hold no direct public mandate and represent the interests of no sovereign nation but the well-being of the EU as a whole - which is not necessarily the same  interests of sovereign nation x, y or z.

However, when all of these planets are aligned, the lowest common denominator will move from idea to reality by way of statute or regulation.  The ideas that set the bar high, will naturally never see the light of day as long as the EU (not just the Eurozone) exists in its current form.  To achieve anything where the bar is set high, well, that will be tantamount to more than just the planets aligning, it will be the creation of an entirely new universe.

If they ever solve the Eurozone issue, rather than the Eurozone issue simply working itself out as Nero fiddles in Rome Brussels, there are far bigger hurdles ahead that have far less public goodwill behind them than exists over the Eurozone problems.

The EU entities (rather than the EU overarching ideals from whence they came) have a major legitimacy problem with the EU citizenry and that crisis is far greater than that of the Euro in the short, medium and long term.



"When surrounded by the dark void of the willfully blind, it does not excuse those that are a spark of light their duty to shine" - Me

Online David Rochlin

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Re: Is the Euro Zone in an "Endgame?"
« Reply #21 on: 07:20 02-Jul-2012 »
Well, of course you are right P-N, that there are too many issues, too many venues to air them in, and agree on anything, and too many conflicting national interests.  Yet, there were big promises of quick action from leaders who know better at the Summit.
   In the political game at the Summit, Merkel was generally regarded as a loser, France's Hollande and particularly Italy's Monti were named winners.  But, Germany got agreement to proceed with a European bank supervisory body that would supercede national level institutions.  And direct loans to banks throught he bailout mechanism, it was agreed, would be contingent on this loss of local sovereignty.  I don't really see the big loss for Merkel, and how did she get such an quick, easy rubber stamp of the deal, from German Parliment on her return, if she was such a loser?
   Meanwhile, Greek politicians are going to try to steal Spain's wind, and renegotiate their own bailout to make it as attractive as Spain's deal.  This won't work, because Greece has not made the big show of cooperating with Austerity that Greece has done, and because Spanish problems relate to a classic real estate bubble that virtually every European nation can empathize with.  Greek problems relate to, well, mostly fraud...
I would say that Germany's legislature went along with the idea of bailing out Spain, partly because German politicians were promised raw meat and the raw meat is Greece!
   

Offline P-N

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Re: Is the Euro Zone in an "Endgame?"
« Reply #22 on: 09:18 02-Jul-2012 »
No the German Chancellor certainly didn't lose despite the media take on it.  Let's be honest, the media just want to give her a bit of a kicking whenever possible, but they write for the day whilst Merkel debates and agrees for the longer term.

There will be no direct loans to banks for some time as there will now be the long and slow process of agreeing exactly what this new entity will do in very fine print and the whole process going through all I wrote above.  A further irritant will be who will lead this new entity.  There will be much debate over who is acceptable to all member nations by way of politics, personality and ability.

Maybe Monti, if Italy is ever returned to a nation that has elections and he is thus removed by public mandate after being inserted without one?  :D  He does have an EU entity pedigree relating to EU financial institutions after all.

So no immediate injection of money directly into banks because the mechanism, entity and entity figurehead is currently just an agreed idea - but no more than that - and thus will be at least 1 year down the road before it becomes a reality.  Probably longer. 

During this time Mrs Merkel will have been through the German elections on the horizon and will either remain in office to oversee the implementation of what has always been the German position over financial oversight or will have been removed and can at least claim not to have folded on the German position whilst Chancellor.

I really don't see how this can be spun as a significant loss as far as she or Germany is concerned.  At best if you are a hack with an editor wants to attack Germany and Mrs Merkel it could possibly be stretched to seem as a lost battle, but quite clearly the regulatory and oversight war has been won by Mrs Merkel.

Really though, what did the 19th summit produce that the previous 18 have failed to do with regards to action today?  Nothing of consequence.  Spain was propped up as it was always going to be, as will the next and the next.  Anything radical and new from the 19th summit is still about 12 months down the road at the earliest if all the planets are aligned, and thus the lowest common denominator over powers, structure and personnel relating to the new entity come into being.

Just how robust those powers will be when created by the lowest common denominator of consensus - that remains to be seen.
« Last Edit: 09:21 02-Jul-2012 by P-N »
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Online David Rochlin

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Re: Is the Euro Zone in an "Endgame?"
« Reply #23 on: 21:13 04-Jul-2012 »
Hollande made his post electorial statement, raising a host of taxes in France.  For those of us tempted by low prices of French companies, on the stock market, there is a tax on Dividends, although unless you go to a lot of trouble to get a refund, withholding was probably more than this anyway.
There is not an income, but a "Wealth tax" on assets.  "One time only..." sure...   And quite a high tax on stock options, a higher corporate income tax.  The goal is to raise Euro 9 Billion, the amount of the projected deficit.  At the same time, "Austerity" is somewhat reversed, with many of Sarcozy's reforms undone, the retirement age lowered and Sarcozy himself facing the traditional, criminal investigation...
   It will be interesting to see if "Growth" trumps "Austerity," in France.  Will France's credit improve over time, or suffer, because of this spend, but tax to pay for it all, strategem? 
   Itally's Monti announces that Italy won't be needing a bailout.  Familiar bravado? 
   And outside the Zone in that periphery, Russia is under increasing pressure from lower oil prices, and seems unlikely to be able to pay for the Kremlin-based midget's election promises, and plans for reviving the military. 
And here in America, we seem to be lurching toward recession, yet oddly, or perhaps characteristically optimistic about the future, in spite of the dire statistics.   Wall Street has become addicted to Fed Stimulus, but the returns from  this are diminishing.  A QE3 or QE4 if you want to count "Operation Twist," will only give the economy a "Sugar high," some say.

Offline P-N

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Re: Is the Euro Zone in an "Endgame?"
« Reply #24 on: 00:00 07-Jul-2012 »
Well, Chancellor Merkel appears not to have even lost the battle, let alone the war.

Having made German concessions, Finland has stated it will veto Eurobonds or anything similar and leave the Eurozone if necessary.  Therefore Germany will not be the financial Saviour as Finland will block the concept.

Really should have seen it coming.  When it comes to matters fiscal within the EU, the first nations Germany talks to are The Netherlands and Finland.  It has always been the case.

It really isn't hard to cede ground and look like the good guy when you really don't want to, if you know very well in advance that somebody else is going to veto the mechanism that would leave you holding the financial can you never wanted in the first place.  :D

Very clever bit of German diplomacy on the assumption they knew the Finnish position ahead of time - which is quite likely.  Mrs Merkel now has nations committed to agreeing to fiscal oversight from their original position of "no way" and Finland has today announced it will scupper Eurobonds meaning no shared (in effect German backed) EU debt mechanism.

Having shifted from a principled sovereign "No way" to fiscal oversight, it is quite impossible to return and stay there again.  Everybody now knows they can be moved from that position.

Hat's doffed to the German diplomats that worked this in private conversations behind closed doors.
"When surrounded by the dark void of the willfully blind, it does not excuse those that are a spark of light their duty to shine" - Me

Online David Rochlin

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Re: Is the Euro Zone in an "Endgame?"
« Reply #25 on: 05:30 07-Jul-2012 »
I see global financial markets have expressed some dissatisfacion with FInland apparently scuttling the EUrobond deal.  UK was as usual, planning to ask for changes favoring UK, should the EU itself, not just the Eurozone, have to modify its treaties.  With the inclusion of Spain, Italy and perhaps other nations at risk, I don't think Finland, however many letter A's in its credit rating, is going to be dictating the future of the Eurozone, but there are sure to be others who dislike the concept of Eurobonds. 

Offline P-N

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Re: Is the Euro Zone in an "Endgame?"
« Reply #26 on: 10:16 07-Jul-2012 »
There is no way to bypass the Finnish veto on the matter without rewriting the EU treaties (forget the Eurozone bit), just as there was no way to bypass the Polish veto on carbon emission targets earlier in the year or the European Parliaments veto on ACTA last week.

Rewriting the EU treaties, once eventually done and agreed between members, will mean referendums in several nations.

Add on another year or two to my "y - e- a - r - s" mentioned above if that happens.  :D

Meanwhile if the Finns are forced to veto and decide to leave the Eurozone as well, I'll put money on other nations leaving the Eurozone once one has been brave enough to do so.  Depending upon which nations those are, it could make the whole concept of Eurobonds pointless anyway.
"When surrounded by the dark void of the willfully blind, it does not excuse those that are a spark of light their duty to shine" - Me

Carlusha

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Re: Is the Euro Zone in an "Endgame?"
« Reply #27 on: 11:59 07-Jul-2012 »
Don't forget in this thread we are referring to bonds backed collectively by all eurozone countries - ie Euro-issued Eurobonds!  ::)

Real Eurobonds existed (1960s) well before the EEU, EEC, Eurozone or whatever fancy name applies. The term was meant to refer to bonds issued in Europe (any country) in a non-native currency. For example, the first ever was issued on behalf of the Italian Autostrade in USD. My late father was involved in the legal documentation side of this issue during his spell at the London solicitor, Allen & Overy.


Online David Rochlin

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Re: Is the Euro Zone in an "Endgame?"
« Reply #28 on: 14:34 07-Jul-2012 »
The Euro has hit a two year low, because the warm fuzzy glow from the Summit deal has turned into a hangover.  They must have overserved the Schnapps!
 
 Probably a good time to gather old Eurobond coupons from failed companies and sell them as souvenirs.

Offline P-N

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Re: Is the Euro Zone in an "Endgame?"
« Reply #29 on: 22:38 07-Jul-2012 »
And here is Walter Russell Mead with an article dated yesterday, very much underlining all I have said about the Eurozone crisis being a small iceberg compared to that of political union last week:

http://blogs.the-american-interest.com/wrm/2012/07/07/europes-problems-are-bigger-than-the-euro/

As I've said, the Eurozone crisis is nothing compared to the other far greater issues facing the EU and those consequences on the global stage.

"When surrounded by the dark void of the willfully blind, it does not excuse those that are a spark of light their duty to shine" - Me