Thread: After the Euro crash and some News

Latest attempts at solving the unsolvable: "Commission president Barroso to put forward eurobonds"

I give you a snippet: "Eurobonds have been backed by Italian Finance Minister Giulio Tremonti and investor George Soros.However, Germany has repeatedly expressed its opposition to the idea." See: BBC News - Commission president Barroso to put forward eurobonds

DE the Euro is over already barring Divine intervention. It is just a matter of when the politicians will admit it.

PS Moodys report: http://www.moodys.com/research/Moody...ocid=PR_225834

I wonder how much Soros stands to loose if the Euro goes down....

Originally Posted by Parihaka

I wonder how much Soros stands to loose if the Euro goes down....

I wonder how much he gains.He kinda smells living corpses.And if Soros(or anyone in this league)says something,usually they do the opposite.

Originally Posted by snapper

On 12th August I warned: "If or when the Eurozone falls apart the French and German banks will be hit worst as they have the most invested in 'PIGS' bonds" (Post EU?).

You have to separate the banks from the governments though*. Even if German banks sit on say 250 billion of debts Greece can't pay back there's a bank rescue fonds already in place to cover that if necessary (leftover guarantees are for about 300 billion iirc). Don't even need ESFS for it. ESFS is about Germany paying off banks in other countries.

* the German federal bank never bought any bonds of other governments on principle. This is one thing currently being criticized in Germany about the ECB, as they are planning to do that.

Originally Posted by snapper

"However, Germany has repeatedly expressed its opposition to the idea."

Actually, that's a rather mild expression for it.

See Another 'Nein': Merkel Renews Euro Bond Rejection - SPIEGEL ONLINE - News - International

Originally Posted by Parihaka

I wonder how much Soros stands to loose if the Euro goes down....

Hmm, all this FUD makes the euro cheap to buy.

He made a billion by shorting the pound, isn't this the same game with the euro.

All this euro gonna crash talk is bunk, its just propaganda by the short sellers.

The Euro is still worth more than it was at least two-thirds of the time in the past 10 years. Compared to its low point in those 10 years against the USD it currently stands at 162% (!), compared to its initial trading against the USD in January 1999 it still stands at 115%.

It's only cheap to buy if you have a ton of Yen or CHF sitting around.

katao, so you say there is no way to profit from the euro with all this FUD for a large currency speculator.

Originally Posted by Double Edge

The euro isn't going to go away

..there ain't gonna be a 'euro crash' as the thread title suggests.

You're gonna pull your socks up and keep it afloat.

We have our own currency over here, but it's win-win situation if the euro survives.

Originally Posted by kato

You have to separate the banks from the governments though*. Even if German banks sit on say 250 billion of debts Greece can't pay back there's a bank rescue fonds already in place to cover that if necessary (leftover guarantees are for about 300 billion iirc). Don't even need ESFS for it. ESFS is about Germany paying off banks in other countries.

* the German federal bank never bought any bonds of other governments on principle. This is one thing currently being criticized in Germany about the ECB, as they are planning to do that.

German banks have 3-4 billion Euros in Greek bonds alone, don't be mistaken - you are in - not as badly as the Frogs but in more than the UK to Greek debt and far more in Italian debt (aprox 17 bln Euros from my amateur calculations).

Currently we have, it seems, a German arguement. Merkel and the Frogs say 'Greece is integral to Eurozone' etc (BBC News - Greece 'integral' to the eurozone, say European leaders), then we have Herr Roesler saying 'nah let them fry'/'orderly default' (or words to that effect). In the meantime we have the President of the Commission (Mr Barruso) saying he's going to propose Eurobonds and take away everyones vote.. (but Merkel rejects this plan). Meanwhile we have the Polish Finance Minister saying 'war in Europe in 10 years' (Polish Finance Minister Warns of European War within 10 Years | What Do You Believe?). Who should we believe?????

I shall try to take a breath from giggling and work this out with a bottle of fine Frog plonk.

The tragedy keeps unfolding:

"The calm at the start of the week on the markets has given way to renewed turmoil. Currency strategist Simon Derrick argues this may not just be a short-term hiatus, but could mark a tipping point for the eurozone and the single currency."

"We've been negative about the outlook for the eurozone for some time and have struggled to explain the euro's relative strength in the face of rapidly mounting concerns.

Indeed, there have been times, particularly over the past week, when the euro's performance has reminded us of the point where Wile E Coyote runs off the edge of the cliff and fails to fall simply because it does not occur to him to look down.

Of course, all this changes the moment his forward momentum runs out, he finally glances into the chasm below and then falls to his fate.
Tightening the screws
Chancellor Angela Merkel and President Nicolas Sarkozy Markets were disappointed with the outcome of the Merkel-Sarkozy meeting this week

Perhaps the point at which we felt that solid ground ran out for the euro to be replaced by thin air was at the end of Chancellor Angela Merkel and President Nicolas Sarkozy's press conference on Tuesday evening.

By rejecting the idea of eurobonds or an increase in the size of the 440bn-euro rescue fund, the European Financial Stability Facility, and, in addition, promoting the idea of balanced budgets, it seemed that France and Germany were pushing for extremely tight fiscal conditions for the periphery at a point where confidence in local markets was already ebbing away rapidly.

If this were not enough, they also proposed to remove any comparative advantage that nations such as the Irish Republic might enjoy by looking to harmonise corporate tax rates.

The message was clear enough: Germany and France have scant interest at this point in doing anything other than protecting the credibility of their own markets and therefore have little to offer their weaker non-core partners such as Portugal and Greece, except even more austerity whether they like it or not.

Despite this, it seemed that for a brief moment markets were convinced that this represented a genuine breakthrough.

The day after the press conference, the Italian stock market hit its highest level in a week (a good 12% above the trough seen the previous Thursday), while the yield gap between Italian 2-year paper and its German equivalent reached its narrowest point since 25 July (i.e. just after the Greek bailout was announced).

In line with this, the euro briefly traded back above US$1.45.

Although it might have seemed that the reaction had been sanguine, there was one small sign that something was wrong.

In particular, it was apparent that the yield gaps between Greek and German debt were starting to move out again in the aftermath of the comments from Chancellor Merkel and President Sarkozy.

This was telling. It seemed to us that the press conference had left peripheral nations with a stark choice: They either accepted the harsh economic conditions that the press conference implied would be prevalent or decide that it is simply too much of a burden to bear.

This price movement suggested that others might be thinking the same thing.
Fragile recovery over

Yesterday seemed to be the point that when the eurozone finally looked down.

The catalyst appeared to be a combination of the report in the Wall Street Journal that Federal Reserve officials were "very concerned" about European banks facing potential funding difficulties in the US and a rising wave of demands from Northern European nations for collateral from Greece.

Whatever the case, the heavy losses seen on European bourses suggested that the fragile recovery in confidence was well and truly over.

Particularly telling was the heavy losses seen in the stock prices of a number of high-profile European banks.

Given that this occurred after the imposition of the short selling ban, this seemed to indicate that this was something more than just a speculative attack.

Tellingly, the euro began to come under pressure as well.

With gold now at $1,849 an ounce and the Italian stock market under renewed pressure this morning it feels that we are not the only ones that have concluded that we are at (or very close to) the tipping point." http://www.bbc.co.uk/news/business-14588326

Originally Posted by Double Edge

Deja vu the last time as well.


That puts showtime in the first week of October. You say Germans & others refuse second bailout then Greece has to exit.

I think they will make the bailout so the above isn't necessary. As this domino theory was used as the basis for the first bailout. Which when you think about it must be true. If there is no unity here then what does that say about the euro ? Not much and then confidence drops.


IOW a bad situation. Idea is to hold that away for as long as possible in the hope of overcoming the smaller problems. Otherwise there is a bigger problem to deal with.

Oh contrare, the euro is based on solvency of the currency, if it becomes insolvent the currency dies. That's what is happening with all these bailouts.

The reality is if the insolvent countries are not bailed out the solvent countries move on, yes they will suffer some small downturns with those partners due to their fiscal problems but those will roll over fairly quickly (within a year or two if total wipe out of debt occurs). The problem is that French and German banks hold Greek debt and their own fiscal systems may become insolvent by a few (Greek/Portuguese etc... defaults) the proper thing would be to backstop the deposits of the local population and let the institutions fail (ergo: not nationalizing the private debt but letting it get wiped out).

Originally Posted by cyppok

Oh contrare, the euro is based on solvency of the currency, if it becomes insolvent the currency dies. That's what is happening with all these bailouts.

Insolvent is a strong term to use, devalued might be more appropriate.

Originally Posted by cyppok

The reality is if the insolvent countries are not bailed out the solvent countries move on, yes they will suffer some small downturns with those partners due to their fiscal problems but those will roll over fairly quickly (within a year or two if total wipe out of debt occurs).

Then why did the EU offer the first bailout instead of letting Greece default ?

Originally Posted by cyppok

The problem is that French and German banks hold Greek debt and their own fiscal systems may become insolvent by a few (Greek/Portuguese etc... defaults)

We're talking about Greece alone for now so 'may' is 50-50.

Originally Posted by cyppok

the proper thing would be to backstop the deposits of the local population and let the institutions fail (ergo: not nationalizing the private debt but letting it get wiped out).

And that's what was said here before the first Greek bailout. That the IMF should do it alone, well the EU stepped in with 3:1. I think they have to do it to maintain confidence in the euro.

So, does Greece actually exist now, or is it Eurozone holdings PLC

Originally Posted by snapper

German banks have 3-4 billion Euros in Greek bonds alone, don't be mistaken

German banks hold roughly 24 billion in Greek bonds, not "3-4".

about 8 billion - private banks in Germany
about 8 billion - federal-owned/state-owned bad banks (HRE and WestLB)
about 8 billion - Federal Reconstruction Bank (KfW)

The 8 billion held by bad banks are write-offs anyway, the 8 billion held by the KfW were intentionally bought as financial assistance to Greece and are write-offs too. The private banks are steadily selling (and cashing) Greek bonds, about 20 million Euro worth per day over the past year or so. By the end of the year they're probably down to around 6 billion.

And honestly, whether 3, 6 or 24 billion? Peanuts. The German bank rescue fonds can hand out guarantees for 480 billion total.