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2021: The New Europe

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  • #91
    Italian bond sales 29th December '11:

    "taly raised €7bn in four separate auctions after a successful short-term debt sale on Wednesday.

    However, this was below the maximum €8.5bn sought and it also had to pay an interest rates on ten-year bonds that was close to the 7pc threshold that markets regard as "unsustainable" for a country with debts of €1.9 trillion.

    The country paid 5.62pc to sell new three-year debt - a much lower yield than a high of 7.89pc paid only a month ago, but on 10-year bonds the yield only fell to 6.98pc from a record of 7.56pc at a sale in November.

    Bond traders, who said they had seen signs that the European Central Bank had been buying Italy's bonds after the auction to hold down yields, said such high borrowing costs would keep pressure on Italy as it prepares to raise €450bn on the debt markets in 2012 - €53bn of it next month."


    Italian prime minister Mario Monti urges united response to euro debt crisis as Italy scrapes through bond test - Telegraph

    Seeing as Italy is probably in recession now how much longer can they afford nearly 7% on 10yr bonds. 450bn Euros to be renewed this year at an average of say 6.3%... You can do the maths yourselves to work out how much they have to cut the budget or face a shortfall. Of course the fear is that the markets see this and just work out that Italy cannot repay it's debts so effectively cut them off. This is what happened to Greece; they couldn't borrow commercialy so had to be 'bailed out'. For Italy to grow at 6-7% is beyond ANY New Year wish so this shortfall will have to be found in cuts... more recession and the vicious circle repeats itself.

    Now that ECB had shored up the banks by providing €489bn in credit to banks (see Euroland euphoria on Mario Draghi bank rescue - Telegraph) maybe this would be a good time to cut the strings to Italy and the others before the whole lot comes crashing down.

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    • #92
      I guess not being in the Euro has its advantages too... Investors pay Denmark to lend them money.:confu:

      Denmark T-bill yields turn negative at auction

      COPENHAGEN, Dec 29 (Reuters) - Investors paid Denmark to lend it short-term funds for the first time on Thursday, reflecting increasing market stress in the search for safe havens away from the euro zone debt crisis.

      The central bank said it sold 2.32 billion Danish crowns ($404 million) of three-, six-, and nine-month treasury bills at an oversubscribed auction, with the two shorter maturities selling at negative interest rates.

      The rate at the cut-off price for the bill maturing on March 1 was negative 0.21 percent and the rate for the June 1 bill was negative 0.07 percent.

      The rate on the bill maturing on Sept. 3 was 0.03 percent.

      Ove Jensen, head of the debt management department at the central bank, said secondary market rates on the bills had been negative since the bank's last T-bill auction last month.

      "(But) this is the first auction we have had with negative interest rates," he added, referring to Denmark's issuance programme since the early 1990s, when it first sold T-bills in their current form.

      "There is a flight-to-quality argument...that the interest rate is not so important, what is important is that you get your money back," he said.

      Bids for the three series of bills totalled 6.62 billion crowns, the Nationalbank said. Settlement is on Jan 2.

      Nykredit chief economist John Madsen said it had become "more the rule than the exception" that Danish debt yields were below their German counterparts.

      The yield premium for holding 10-year Bunds over equivalent Danish bonds was around 20 basis points at 1150 GMT.

      "This is proof of investors' strong confidence in the stabilisation-focused fiscal policy here at home and Denmark's potential status as a safe haven in a troubled and debt-plagued Europe," Madsen said.

      UPDATE 1-Denmark T-bill yields turn negative at auction | Reuters

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      • #93
        Has nothing to do with Euro. Unless Germany went out before the end of November :whome:

        Yields On Short-Dated German Bonds Turn Negative
        No such thing as a good tax - Churchill

        To make mistakes is human. To blame someone else for your mistake, is strategic.

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        • #94
          Why am I not in such a position?People to pay me to take their money? Ohh Gods,why,why!!!

          By far not an expert in these matters,but fear seems to be spreading.Leaders in other fields in similar situations will step forward,take the most exposed position,grab a flag(I know it's old fashion),kick the crap out of fugitives,shoot 1-2 if needs be.The goal being to hold the line or at the very least conduct an orderly withdrawal.Panic is contagious.But so is coolness under fire.

          Here's another reason I don't hold my breath about this EU stuff.Nobody will do the above,even if in my scenario there's near 100% chance of being killed,while in theirs the worst risk one has is to be on receiving end of tomato throwers.
          Those who know don't speak
          He said to them, "But now if you have a purse, take it, and also a bag; and if you don't have a sword, sell your cloak and buy one. Luke 22:36

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          • #95
            Originally posted by Mihais View Post
            Why am I not in such a position?People to pay me to take their money? Ohh Gods,why,why!!!

            By far not an expert in these matters,but fear seems to be spreading.Leaders in other fields in similar situations will step forward, Sarkozy take the most exposed position,grab a flag(I know it's old fashion),kick the crap out of fugitives UK,shoot 1-2 if needs be UK again, maybe Hungary.The goal being to hold the line or at the very least conduct an orderly withdrawal.Panic is contagious.But so is coolness under fire.




            Here's another reason I don't hold my breath about this EU stuff.Nobody will do the above,even if in my scenario there's near 100% chance of being killed,while in theirs the worst risk one has is to be on receiving end of tomato throwers.

            If i only was so smart yesterday as my wife is today

            Minding your own biz is great virtue, but situation awareness saves lives - Dok

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            • #96
              Almost touche. How could I forget the mini-Napoleon? The glorious vanquisher in Libya,the peacemaker of Georgia,the master intriguer(see monsieur DSK) .
              Sorry,but kicking the can ain't leadership.He's more like Nivelle,sending good men against fortifications again and again.Luckilly for him,this time it's only money.Then he shoots those with enough common sense to say enough of this folly.
              Wanna be for real?Do something nobody else has the balls to.Admit what went wrong,quit wasting time and money,keep what worked flawlessly(free trade,free movement) and start to make a Europe of nations.
              Those who know don't speak
              He said to them, "But now if you have a purse, take it, and also a bag; and if you don't have a sword, sell your cloak and buy one. Luke 22:36

              Comment


              • #97
                the problem as i see it is that such EU is toothless, powerless, and in longer perspective even less sustainable than fiscal union/federal state. all this szchlachta democracy worked just fine, till the first crisis - which is now. something more federal is needed imo - be it rejuvenated Hanseatic League, New Swedish Empire or whatevs. I´m fully aware (i think) of dangers a semi-forced union would bring (see Sov.Un, Yugoslavia), BUT - and this is the crux - the current/former? loose union is not going to work out in longer term either. there´s going to be some enforcing to do, painlessly if possible. I´m not thinking of Borg hive or something, but when i some time ago wrote that EU might not look much atm, but come back in 200-300 years... and i mean it. of course i´ve drank just bit over a liter of red wine, so my quill is not running flawlessly, but i hope i got the point over
                If i only was so smart yesterday as my wife is today

                Minding your own biz is great virtue, but situation awareness saves lives - Dok

                Comment


                • #98
                  Originally posted by Doktor View Post
                  Niall Ferguson peers into Europe's future and sees Greek gardeners, German sunbathers—and a new fiscal union. Welcome to the other United States.

                  Welcome to Europe, 2021. Ten years have elapsed since the great crisis of 2010-11, which claimed the scalps of no fewer than 10 governments, including Spain and France. Some things have stayed the same, but a lot has changed.

                  The euro is still circulating, though banknotes are now seldom seen. (Indeed, the ease of electronic payments now makes some people wonder why creating a single European currency ever seemed worth the effort.) But Brussels has been abandoned as Europe's political headquarters. Vienna has been a great success.

                  "There is something about the Habsburg legacy," explains the dynamic new Austrian Chancellor Marsha Radetzky. "It just seems to make multinational politics so much more fun."

                  The Germans also like the new arrangements. "For some reason, we never felt very welcome in Belgium," recalls German Chancellor Reinhold Siegfried von Gotha-Dämmerung.

                  Life is still far from easy in the peripheral states of the United States of Europe (as the euro zone is now known). Unemployment in Greece, Italy, Portugal and Spain has soared to 20%. But the creation of a new system of fiscal federalism in 2012 has ensured a steady stream of funds from the north European core.

                  Like East Germans before them, South Europeans have grown accustomed to this trade-off. With a fifth of their region's population over 65 and a fifth unemployed, people have time to enjoy the good things in life. And there are plenty of euros to be made in this gray economy, working as maids or gardeners for the Germans, all of whom now have their second homes in the sunny south.

                  The U.S.E. has actually gained some members. Lithuania and Latvia stuck to their plan of joining the euro, following the example of their neighbor Estonia. Poland, under the dynamic leadership of former Foreign Minister Radek Sikorski, did the same. These new countries are the poster children of the new Europe, attracting German investment with their flat taxes and relatively low wages.

                  But other countries have left.

                  David Cameron—now beginning his fourth term as British prime minister—thanks his lucky stars that, reluctantly yielding to pressure from the Euroskeptics in his own party, he decided to risk a referendum on EU membership. His Liberal Democrat coalition partners committed political suicide by joining Labour's disastrous "Yeah to Europe" campaign.

                  Egged on by the pugnacious London tabloids, the public voted to leave by a margin of 59% to 41%, and then handed the Tories an absolute majority in the House of Commons. Freed from the red tape of Brussels, England is now the favored destination of Chinese foreign direct investment in Europe. And rich Chinese love their Chelsea apartments, not to mention their splendid Scottish shooting estates.

                  In some ways this federal Europe would gladden the hearts of the founding fathers of European integration. At its heart is the Franco-German partnership launched by Jean Monnet and Robert Schuman in the 1950s. But the U.S.E. of 2021 is a very different thing from the European Union that fell apart in 2011.

                  * * *
                  It was fitting that the disintegration of the EU should be centered on the two great cradles of Western civilization, Athens and Rome. But George Papandreou and Silvio Berlusconi were by no means the first European leaders to fall victim to what might be called the curse of the euro.

                  Since financial fear had started to spread through the euro zone in June 2010, no fewer than seven other governments had fallen: in the Netherlands, Slovakia, Belgium, Ireland, Finland, Portugal and Slovenia. The fact that nine governments fell in less than 18 months—with another soon to follow—was in itself remarkable.

                  But not only had the euro become a government-killing machine. It was also fostering a new generation of populist movements, like the Dutch Party for Freedom and the True Finns. Belgium was on the verge of splitting in two. The very structures of European politics were breaking down.

                  Who would be next? The answer was obvious. After the election of Nov. 20, 2011, the Spanish prime minister, José Luis Rodríguez Zapatero, stepped down. His defeat was such a foregone conclusion that he had decided the previous April not to bother seeking re-election.

                  And after him? The next leader in the crosshairs was the French president, Nicolas Sarkozy, who was up for re-election the following April.

                  The question on everyone's minds back in November 2011 was whether Europe's monetary union—so painstakingly created in the 1990s—was about to collapse. Many pundits thought so. Indeed, New York University's influential Nouriel Roubini argued that not only Greece but also Italy would have to leave—or be kicked out of—the euro zone.

                  But if that had happened, it is hard to see how the single currency could have survived. The speculators would immediately have turned their attention to the banks in the next weakest link (probably Spain). Meanwhile, the departing countries would have found themselves even worse off than before. Overnight all of their banks and half of their nonfinancial corporations would have been rendered insolvent, with euro-denominated liabilities but drachma or lira assets.

                  Restoring the old currencies also would have been ruinously expensive at a time of already chronic deficits. New borrowing would have been impossible to finance other than by printing money. These countries would quickly have found themselves in an inflationary tailspin that would have negated any benefits of devaluation.

                  For all these reasons, I never seriously expected the euro zone to break up. To my mind, it seemed much more likely that the currency would survive—but that the European Union would disintegrate. After all, there was no legal mechanism for a country like Greece to leave the monetary union. But under the Lisbon Treaty's special article 50, a member state could leave the EU. And that is precisely what the British did.

                  * * *
                  Britain got lucky. Accidentally, because of a personal feud between Tony Blair and Gordon Brown, the United Kingdom didn't join the euro zone after Labour came to power in 1997. As a result, the U.K. was spared what would have been an economic calamity when the financial crisis struck.

                  With a fiscal position little better than most of the Mediterranean countries' and a far larger banking system than in any other European economy, Britain with the euro would have been Ireland to the power of eight. Instead, the Bank of England was able to pursue an aggressively expansionary policy. Zero rates, quantitative easing and devaluation greatly mitigated the pain and allowed the "Iron Chancellor" George Osborne to get ahead of the bond markets with pre-emptive austerity. A better advertisement for the benefits of national autonomy would have been hard to devise.

                  At the beginning of David Cameron's premiership in 2010, there had been fears that the United Kingdom might break up. But the financial crisis put the Scots off independence; small countries had fared abysmally. And in 2013, in a historical twist only a few die-hard Ulster Unionists had dreamt possible, the Republic of Ireland's voters opted to exchange the austerity of the U.S.E. for the prosperity of the U.K. Postsectarian Irishmen celebrated their citizenship in a Reunited Kingdom of Great Britain and Ireland with the slogan: "Better Brits Than Brussels."

                  Another thing no one had anticipated in 2011 was developments in Scandinavia. Inspired by the True Finns in Helsinki, the Swedes and Danes—who had never joined the euro—refused to accept the German proposal for a "transfer union" to bail out Southern Europe. When the energy-rich Norwegians suggested a five-country Norse League, bringing in Iceland, too, the proposal struck a chord.

                  The new arrangements are not especially popular in Germany, admittedly. But unlike in other countries, from the Netherlands to Hungary, any kind of populist politics continues to be verboten in Germany. The attempt to launch a "True Germans" party (Die wahren Deutschen) fizzled out amid the usual charges of neo-Nazism.

                  The defeat of Angela Merkel's coalition in 2013 came as no surprise following the German banking crisis of the previous year. Taxpayers were up in arms about Ms. Merkel's decision to bail out Deutsche Bank, despite the fact that Deutsche's loans to the ill-fated European Financial Stability Fund had been made at her government's behest. The German public was simply fed up with bailing out bankers. "Occupy Frankfurt" won.

                  Yet the opposition Social Democrats essentially pursued the same policies as before, only with more pro-European conviction. It was the SPD that pushed through the treaty revision that created the European Finance Funding Office (fondly referred to in the British press as "EffOff"), effectively a European Treasury Department to be based in Vienna.

                  It was the SPD that positively welcomed the departure of the awkward Brits and Scandinavians, persuading the remaining 21 countries to join Germany in a new federal United States of Europe under the Treaty of Potsdam in 2014. With the accession of the six remaining former Yugoslav states—Bosnia, Croatia, Kosovo, Macedonia, Montenegro and Serbia—total membership in the U.S.E. rose to 28, one more than in the precrisis EU. With the separation of Flanders and Wallonia, the total rose to 29.

                  Crucially, too, it was the SPD that whitewashed the actions of Mario Draghi, the Italian banker who had become president of the European Central Bank in early November 2011. Mr. Draghi went far beyond his mandate in the massive indirect buying of Italian and Spanish bonds that so dramatically ended the bond-market crisis just weeks after he took office. In effect, he turned the ECB into a lender of last resort for governments.

                  But Mr. Draghi's brand of quantitative easing had the great merit of working. Expanding the ECB balance sheet put a floor under asset prices and restored confidence in the entire European financial system, much as had happened in the U.S. in 2009. As Mr. Draghi said in an interview in December 2011, "The euro could only be saved by printing it."

                  So the European monetary union did not fall apart, despite the dire predictions of the pundits in late 2011. On the contrary, in 2021 the euro is being used by more countries than before the crisis.

                  As accession talks begin with Ukraine, German officials talk excitedly about a future Treaty of Yalta, dividing Eastern Europe anew into Russian and European spheres of influence. One source close to Chancellor Gotha-Dämmerung joked last week: "We don't mind the Russians having the pipelines, so long as we get to keep the Black Sea beaches."

                  ***
                  On reflection, it was perhaps just as well that the euro was saved. A complete disintegration of the euro zone, with all the monetary chaos that it would have entailed, might have had some nasty unintended consequences. It was easy to forget, amid the febrile machinations that ousted Messrs. Papandreou and Berlusconi, that even more dramatic events were unfolding on the other side of the Mediterranean.

                  Back then, in 2011, there were still those who believed that North Africa and the Middle East were entering a bright new era of democracy. But from the vantage point of 2021, such optimism seems almost incomprehensible.

                  The events of 2012 shook not just Europe but the whole world. The Israeli attack on Iran's nuclear facilities threw a lit match into the powder keg of the "Arab Spring." Iran counterattacked through its allies in Gaza and Lebanon.

                  Having failed to veto the Israeli action, the U.S. once again sat in the back seat, offering minimal assistance and trying vainly to keep the Straits of Hormuz open without firing a shot in anger. (When the entire crew of an American battleship was captured and held hostage by Iran's Revolutionary Guards, President Obama's slim chance of re-election evaporated.)

                  Turkey seized the moment to take the Iranian side, while at the same time repudiating Atatürk's separation of the Turkish state from Islam. Emboldened by election victory, the Muslim Brotherhood seized the reins of power in Egypt, repudiating its country's peace treaty with Israel. The king of Jordan had little option but to follow suit. The Saudis seethed but could hardly be seen to back Israel, devoutly though they wished to avoid a nuclear Iran.

                  Israel was entirely isolated. The U.S. was otherwise engaged as President Mitt Romney focused on his Bain Capital-style "restructuring" of the federal government's balance sheet.

                  It was in the nick of time that the United States of Europe intervened to prevent the scenario that Germans in particular dreaded: a desperate Israeli resort to nuclear arms. Speaking from the U.S.E. Foreign Ministry's handsome new headquarters in the Ringstrasse, the European President Karl von Habsburg explained on Al Jazeera: "First, we were worried about the effect of another oil price hike on our beloved euro. But above all we were afraid of having radioactive fallout on our favorite resorts."

                  Looking back on the previous 10 years, Mr. von Habsburg—still known to close associates by his royal title of Archduke Karl of Austria—could justly feel proud. Not only had the euro survived. Somehow, just a century after his grandfather's deposition, the Habsburg Empire had reconstituted itself as the United States of Europe.

                  Small wonder the British and the Scandinavians preferred to call it the Wholly German Empire.

                  —Mr. Ferguson is a professor of history at Harvard University and the author of "Civilization: The West and the Rest," published this month by Penguin Press

                  Niall Ferguson on 2021: The New Europe - WSJ.com
                  The way we have seen trade size of emerging economies taking large shape during last 20 years and the way Chinese products are now more competent, cheap and more competitive, we may easily predict that China will have got a big share of export business of EU economies by 2021. we can see that high tech products and machineries being exported by China is also more competitive than their Western rivals due to their low cost of production. And this way overall of earning of EU’s economies are set to reduce by 2021. Its not just Greece, Italy, Britain, Spain, Portugal, Ireland like heavily indebted countries but by the passage of time, most of the EU’s economies would also fall in this list of heavy debt problems. They are earning less and spending less and there is no chance that they may achieve high growth rate like developing economies. There is a limit to borrow and pay for the expanses while debt to GDP ratio of most of these economies is now already over 100% and on the top of that they are borrowing more to avoid any sudden economic fall. Like how US recently broke down their debt to GDP ratio to avoid any sudden recession and now their debt level is over 100% to GDP. Even mandatory expanses of US are around over 80% of its Budget, having share of just social spending, welfare/ medical, around 43% of their budget?

                  There is a limit to borrow and pay for the expanses and US/EU economies may soon reach a level, say by 2021, when they will prefer to face recession than borrowing more. We are in the position to predict that US+EU may have faced a deep recession by 2021, like how Russia faced in 90s, and they don’t even have enough oil/ gas/ metal to support their economies also, like Russia? We would see many funny things in coming time…….

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                  • #99
                    I don't think it's too long now. Not sure what's going to happen, but whatever it is, it's not long now.

                    Debt crisis: live - Telegraph

                    in summary:

                    -Spanish and Italian debt levels still rising, in Spain's case only a few days after getting $100 million
                    -Europeans working on a federal economic union
                    -Greeks have an election in 5 days, the party likely to win SYRIZA had one of its senior members leave, saying "if they win, they'll destroy the country"
                    -things are so bad in Greece the authorities are taking money from frozen accounts just to keep the lights on
                    -still not read any solution for the Greek problem that makes sense other than leave the euro
                    -documented capital flight has been taking place in a few European countries
                    -posters of Merkel in a Nazi uniform in Italy (not new or all that incendiary at this point, but still perception)

                    Comment


                    • I think the next stage in Europe and Globally is a shift towards flexible countries.

                      Ergo countries with low base taxation that stems from lower property taxes, lower overall base tax rates like income etc...
                      Basically countries whom might have marginally high rates (Scandinavia) but those are rates on changing income and don't press in the livelihood of people like creeping property taxes and fees for business in beuracracy heavy countries. Ergo a country may have higher rates on paper but lower base rates in actually. Think someone having 50% tax rates but minimal fees and a country with 30% tax rates but the minimal fee is annualy grown and now exceeds 20%-30% of average annual business participant in the industry. [think 5000 fee for inspection and another 5000 for permits to annually operate in some trade or industry]

                      I am thinking this will favor countries like Netherlands, Scandinavia, Baltic states, Singapore, Thailand, etc.... The whole point of this shift will make global trade skewed through points of entry that are artificial much as what happens now but more so with added value manufacturing transferring to those countries due to increased uncertainties in high pop big countries. Ergo a business seeks stable tax rates that are predictable in a myriad of situations be it depression/growth instead of fluctuating rates upward in good times that strangle your business when SHTF. This is precisely what is coming as we see with fees and taxes introduced in Ireland (on behalf of bailout recipients ergo investment banks can be reversed by them simply defaulting and walking away though) with big countries the alignment inside is pillared support wise to continue the endure the interest burden the longest but long term their tax and burden focus is on extraction instead of expanding the productive base via their captive market. This dichotomy where a big market tries to extract the most from its participants is coming full circle and while it hasn't yet turned fully protectionist once it does access will still be open to direct neighbors, think Denmark, Netherlands, Canada, etc....

                      To a degree I see this as a repeat of something to the degree of devastation of 30 years war with small and nimble merchant republics benefiting the most once the ravaged and decimated countries try to tax themselves into rebuilding on the backs of lower flexibility as those that can move to better environments in order to participate in the recovery at a lower extraction rate than exists.

                      I can even see the Euro breaking down to such a degree that there is a preference in intra trade transactions to divirsify away from it via third party small stable countries with good economies. Netherlands, Scandinavia, Canada etc...

                      My thoughts revolve around market constraints and how they will be broken and washed away. We have these 'institutional' constraints and regulations that are inter-intra national on top of the regular bureaucracy in Europe especially which create black market incentives for participants to manipulate permissions to favor themselves. What happens is that there will be one market which simply balks at them and de-facto revokes enforcement ability of those institutions to regulate their market first de-facto and then de-jure. This will create something of an incentive for large scale industries to push for similar de-regulation since it will no longer be viable enforcement wise to keep smaller players out, thus the cost has to be removed for all of them, particularly in light of higher base rate creep. Competition will become far more viable in driving down prices and enforcing reality on stupidity that says that you cannot default on unplayable debts. Anyways my 3cents.
                      Originally from Sochi, Russia.

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                        • I like Nigel .

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