Bollitics - Ireland, the Euro and the future of the EU

[mjmooney]

While we're talking about matters financial, I'll put in a plug for my wife's blog about all things credit card related. She's only just started it, and would really appreciate some followers (hint, hint).

My World of Plastic

[peterms]

While we're talking about matters financial, I'll put in a plug for my wife's blog about all things credit card related. She's only just started it, and would really appreciate some followers (hint, hint).

My World of Plastic

The combination of the text about watching out for thieves and fraudsters, and the half-face photo like she's looking from around a wall, make me feel she's watching me.

Am I feeling guilty about something I have yet to confess?

On the post about using credit cards to open locked doors, in my view this is much exaggerated. They are just too small for many locks. What works better is to cut a longer length of more flexible plastic, like cut up one of those 2-pint plastic milk bottles. Ooh, sorry, didn't mean to get into that.

[peterms]

For example it would be far better for Ireland to have defaulted on everything. But it would do reputational damage.

No, it would be better for Ireland to refuse point blank to bail out any of the banks, but make it clear that it will not default on sovereign debt; withdraw from the euro; and launch immediate measures to create employment domestically, using its new-found powers and its suddenly unencumbered spending power to do so.

It would also help to have some criminal prosecutions of several high-placed bankers to boot.

[tonyh29]

The Euro was always a political romance rather than an economic project , the dream has died but this is the EU we are talking about so I've no doubt they will just plough blindly on all be it with some change ... no idea how that would work though

one the plus side at least we won't be joining it any time soon so for that we can be thankful

[mjmooney]

While we're talking about matters financial, I'll put in a plug for my wife's blog about all things credit card related. She's only just started it, and would really appreciate some followers (hint, hint).

My World of Plastic

The combination of the text about watching out for thieves and fraudsters, and the half-face photo like she's looking from around a wall, make me feel she's watching me.

Oh she is, Pete, she is.

I should add that the blog is meant to be fairly jokey, while still discussing "proper" issues. Her other blog, Much Twittering (linked on the main one) is even more silly, but her company hope it might get a bit of viral notice.

I've had a tip (from IanRobo as it happens) that she'd be better off using Wordpress than Google Blogspot, as it get more attention from the webcrawlers. Anybody else got opinions on that? (PM me if you like, keep this thread on-topic).

[tonyh29]

Anybody else got opinions on that?

only that Ian Robo is usually 100% wrong :winkold:

(sorry Ian I know you are watching :-) )

[mjmooney]

Anybody else got opinions on that?

only that Ian Robo is usually 100% wrong :winkold:

Well according to Trent, he's right in this instance!

[tonyh29]

meh Even a broken clock is right twice a day :-)

[mjmooney]

meh Even a broken clock is right twice a day :-)

Not necessarily...

[Meath_Villan]

Looks like Portugal has gone according to the news :S

[CVByrne]

For example it would be far better for Ireland to have defaulted on everything. But it would do reputational damage.

No, it would be better for Ireland to refuse point blank to bail out any of the banks, but make it clear that it will not default on sovereign debt; withdraw from the euro; and launch immediate measures to create employment domestically, using its new-found powers and its suddenly unencumbered spending power to do so.

It would also help to have some criminal prosecutions of several high-placed bankers to boot.

We need captain hindsight for this. Well letting than banks go under would have been a catastrophe of epic proportions. People and companies lose everything.

I think you mean nationalise AIB and BOI, default on their debt, run them as semi state for a few years and then sell them back into the open market. Obviously it would have been better.

But at the time they had to do the guarantee, to stop a run on the banks. They never ever should have given the guarantee to Anglo Irish Bank, and the people responsibly for that should fi too jail.

Also, as you know I work for AIB, but in the capital markets division so total other area from property lending, but my mate works for the back too, involved in the moving loans to nama part.

He told me that there has been deliberate lying going on, the valuations they priced the loans at have gone up from what they reported to their boss and what came out in the half year results. Someone needs to go to jail for that. There are criminals in the banks, they should have cleared out all the bank boards in the beginning and put honest people in charge.

[Awol]

For example it would be far better for Ireland to have defaulted on everything. But it would do reputational damage.

Brazil did exactly that not too long ago and look at them now. The markets have short memories, mate.

The same thing applies to Germany and France with their beloved euro. They will prop everything up. They can prop everything up too.

The French can't do it and for a view on zee Germans, see below:

EU rescue costs start to threaten Germany itself

The escalating debt crisis on the eurozone periphery is starting to contaminate the creditworthiness of Germany and the core states of monetary union

Credit default swaps (CDS) measuring risk on German, French and Dutch bonds have surged over recent days, rising significantly above the levels of non-EMU states in Scandinavia.

"Germany cannot keep paying for bail-outs without going bankrupt itself," said Professor Wilhelm Hankel, of Frankfurt University. "This is frightening people. You cannot find a bank safe deposit box in Germany because every single one has already been taken and stuffed with gold and silver. It is like an underground Switzerland within our borders. People have terrible memories of 1948 and 1923 when they lost their savings."

The refrain was picked up this week by German finance minister Wolfgang Schäuble. "We're not swimming in money, we're drowning in debts," he told the Bundestag.

While Germany's public and private debt is not extreme, it is very high for a country on the cusp of an acute ageing crisis. Adjusted for demographics, Germany is already one of the most indebted nations in the world.

Reports that EU officials are hatching plans to double the size of EU's €440bn (£373bn) rescue mechanism have inevitably caused outrage in Germany. Brussels has denied the claims, but the story has refused to die precisely because markets know the European Financial Stability Facility (EFSF) cannot cope with the all too possible event of a triple bail-out for Ireland, Portugal and Spain.

EU leaders hoped this moment would never come when they launched their "shock and awe" fund last May. The pledge alone was supposed to be enough. But EU proposals in late October for creditor "haircuts" have set off capital flight, or a "buyers' strike" in the words of Klaus Regling, head of the EFSF.

Those at the coal-face of the bond markets are certain Portugal will need a rescue. Spain is in danger as yields on 10-year bonds punch to a post-EMU record of 5.2pc.

Axel Weber, Bundesbank chief, seemed to concede this week that Portugal and Spain would need bail-outs when he said that EMU governments may have to put up more money to bolster the fund. "€750bn should be enough. If not, we could increase it. The governments will do what is necessary," he said.

Whether governments will, in fact, write a fresh cheque is open to question. Chancellor Angela Merkel would risk popular fury if she had to raise fresh funds for eurozone debtors at a time of welfare cuts in Germany. She faces a string of regional elections where her Christian Democrats are struggling.

Mr Weber rowed back on Thursday saying that a "worst-case scenario" of triple bail-outs would require a €140bn top-up for the fund. This assurance is unlikely to soothe investors already wondering how Italy could avoid contagion in such circumstances.

"Italy is in a lot of pain," said Stefano di Domizio, from Lombard Street Research. "Bond yields have been going up 10 basis points a day and spreads are now the highest since the launch of EMU. We're talking about €2 trillion of debt so Rome has to tap the market often, and that is the problem."

The great question is at what point Germany concludes that it cannot bear the mounting burden any longer. "I am worried that Germany's authorities are slowly losing sight of the European common good," said Jean-Claude Juncker, chair of Eurogroup finance ministers.

Europe's fate may be decided soon by the German constitutional court as it rules on a clutch of cases challenging the legality of the Greek bail-out, the EFSF machinery, and ECB bond purchases.

"There has been a clear violation of the law and no judge can ignore that," said Prof Hankel, a co-author of one of the complaints. "I am convinced the court will forbid future payments."

If he is right – we may learn in February – the EU debt crisis will take a dramatic new turn.

Endless German largesse is not as cut and dried as you may think.

[Gringo]

I think the one thing that can't happen is this idea of NorthernEuro and SouthernEuro - you can't manage that. You can't announce you're dissolving the euro either - it just gets trashed in the markets - and where are they going to print all the francs, DM, pesetas etc without anyone noticing. The only possibility is that countries are ejected (or eject themselves) one by one. There isn't any other convincing narrative (apart from continuing in the faerytale narrative upon which we are already travelling).

[theunderstudy]

I think the one thing that can't happen is this idea of NorthernEuro and SouthernEuro - you can't manage that. You can't announce you're dissolving the euro either - it just gets trashed in the markets - and where are they going to print all the francs, DM, pesetas etc without anyone noticing. The only possibility is that countries are ejected (or eject themselves) one by one. There isn't any other convincing narrative (apart from continuing in the faerytale narrative upon which we are already travelling).

This.

You can't create a Northern and Southern Euro, it's preposterous.

[Meath_Villan]

They expect that the rate on the imf/ecb loan to be 6.7% if thats true Ireland is well and truly toast

[peterms]

So, I see Fianna Fail have lost this seat for the first time ever and are now trying to get the loan agreed before Monday morning. Ratings downgraded, depositors panicking, interest rates on bonds at unsustainable levels.

It's like the last days of Saigon, people on the roof of the US embassy pleading for the helicopter to lift them out.

Still, in the face of all this madness, Spain has issued a call for calm:

Spain's prime minister, José Luis Rodríguez Zapatero, took to the airwaves early today in an attempt to shore up confidence. He urged speculators hoping to profit from a rise in its borrowing costs to stay away.

That'll work, then. Even now, traders will be thinking, "Hmmm, I was going to try to make millions tomorrow from the misery of others. But in view of the call for restraint from that chap in Spain, I think I'll go litterpicking instead, or maybe read stories to underprivileged children".

[Gringo]

The only time the bond yields hurt the state is when they go to sell new bonds - so all they have to do when the time comes is get germany to sell the bonds for them and borrow the money from germany instead of the insolvent banks supported by the insolvent govts. Simples.

[peterms]

The only time the bond yields hurt the state is when they go to sell new bonds - so all they have to do when the time comes is get germany to sell the bonds for them and borrow the money from germany instead of the insolvent banks supported by the insolvent govts. Simples.

Isn't that exactly what is worrying the Germans right now? The idea that their credit gets debased by being seen to bail out much weaker currencies?

[Meath_Villan]

They expect that the rate on the imf/ecb loan to be 6.7% if thats true Ireland is well and truly toast

Scratch that its going to be set at 5% and Fianna fail will declare they negotiated a great deal

[Gringo]

The only time the bond yields hurt the state is when they go to sell new bonds - so all they have to do when the time comes is get germany to sell the bonds for them and borrow the money from germany instead of the insolvent banks supported by the insolvent govts. Simples.

Isn't that exactly what is worrying the Germans right now? The idea that their credit gets debased by being seen to bail out much weaker currencies?

Sorry, my comment may not have been out of all seriousness apart from the bit in bold.