Is the Euro well and truly buggered?

@georgeob1,

Yes, you're right, George, and the interesting part is, that we all will be there at the edge of the cliff and will see first hand how things progress.

The German papers write today that Merkel and Sarkozy are preparing themselves to a senario where Greece either withdraws or is expelled from the EU. The Greek government on the other hand has finally understood that a referendum would in all probability translate to a complete collapse without future bailout from the EU.

However, I think the deciding factor for the future of the EU will be Italy. The EU can survive the expulsion of Greece but not if Italy does not meet its obligations that were levied in Cannes - and with the disastrous Berlusconi government one never knows. The Italian crisis is very acute and will be the real threat to the EU in the upcoming weeks.

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@CalamityJane,

I agree. It is hard to follow the current fast-moving action both within Greece and among the principal European leaders. The crisis of conficence has indeed spread to Italy - at least as indicated in the bond market. There appear to be highly subjective and sometimes irrational forces at work in situations like these, and remedies that might otherwise be effective often are not in these conditions. Merkel & Sarkozy may be struggling with a whirlwind - let's hope they succeed.

Meanwhile, we remain politically deadlocked with our own problems.

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@CalamityJane,

Quote:

The German papers write today that Merkel and Sarkozy are preparing themselves to a senario where Greece either withdraws or is expelled from the EU

The latest bet I have seen is that is 80% likely by 2016.

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Other news reports refer repeatedly to suggestions from U.S.& UK leaders (including President Obama & PM Cameron) suggesting increased reserve funds and greater participoation in the effort by the ECB - either in ussuing Euro Bonds or loans to banks, and, as well, the persistent rejection of these actions by Germany and the ECB itself. I understand just enough about this to see the issues, but not enough to have a confident opinion about the optimal course of action. History provides examples of both success and catastrophe for both options. Indeed this, or something like it, is a central factor in the current political/economic debate in this country.

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@georgeob1,

Obama, in Cannes, suggested to Merkel to have the ECB print more money and she declined with the remark that most Germans would reject such an action (she's looking ahead of the German elections). Bonds don't have any takers as the investors are anxiety-riddled, and I agree, it would be the
cheapest solution whereas the demise of the Euro would be much more expensive, but it is what it is - history prevails over logic!

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@CalamityJane,

Merkel (and the Germans) may have a point in that the limitations in central government, inherent in the EU, don't allow sufficient supra national budgetary discipline to sustain the foundations of an ECB heavily involved in autonomously extending credit in the name of all the member countries. That indeed was the factor that led them all to abandon the stability pact that accompanied the creation of the Euro and the factor that enabled Greece (and other Eurozone countries) to run up such dangerous levels of debt.

I also think that the accelerating European demographic collapse - of all but the UK, France and the Scandanavian countries - is likely a core factor here in both creating the problem and fostering different perspectives on what must be done about it.

It's conundrum. The EU has made great strides over the past three decades chiefly by bypassing issues pertaining to EU-wide real governance, substituting for it various bureaucratic controls. They may have gone as far with that as is possible, and now find themselves in a head-on confrontation with competing national interests and priorities.

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@CalamityJane,

CalamityJane wrote:

Obama, in Cannes, suggested to Merkel to have the ECB print more money ....

The Greeks actually invented inflationary money-printing 25 centuries ago. This is the earliest recorded reference - and it sounds horribly familiar:

Quote:

......In 1929 the Harvard economist Charles Bullock published a magnificent essay on a monetary experiment conducted by Dionysius the Elder, ruler of the Greek city state of Syracuse from 407 BC until his death in 367. After running up vast debts to pay for his military campaigns, his lavish court and spectacles for the common people he found himself painfully short of ready cash. No one wanted to lend him any more money and taxes were drying up. So Dionysius came up with a great wheeze. On pain of death he forced his citizens to hand in all their cash. Once all the drachmas were collected he simply re-stamped each one drachma coin as two drachmas. Simple. Problem solved. Syracuse was rich again.

Except, of course, it wasn’t. Bullock used it as an early example of why just minting more money out of thin air was seldom a reliable way of creating more wealth......

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@georgeob1,

Interactive poll in Financial Times Deutschland on which country's debt poses the worst danger for the world economy: Greece, Italy, Japan, or US?
US wins by a wide margin: http://www.ftd.de/politik/europa/:einsatz-von-waehrungsreserven-bundesbank-wirft-ezb-komplott-vor/60125975.html

Quote:

Welcher Staat birgt mit seinen Schulden die größte Gefahr?

Antwort 1:
Griechenland
6%

Antwort 2:
Italien
32%

Antwort 3:
Japan
2%

Antwort 4:
USA
59%

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@High Seas,

Interesting, and as I said, Italy will have a far greater impact on the EU than
Greece.

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@CalamityJane,

http://www.avgi.gr/images/photoarchive/2011/11/7/anastasiou-071111_high.jpg?w=298

http://www.avgi.gr/DepartmentActionshow.action?departmentID=21

At last, payday for schooldays spent learning ancient Greek: this cartoon is from a leftwing / communist newspaper named "Dawn". Caption reads:

"Gentlemen, democracy in Greece is suspended".
"Let's put it to a vote!".
"No need, Mrs. Merkel has approved it".

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@High Seas,

Democracy is so overrated anyway Laughing

What is the real tragedy here is that Papandreou will step down shortly without as much as a slap on his wrist. He checks in his fellow countrymen at the poor house and lives happily thereafter in luxury. He certainly has no monetary problems.

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@CalamityJane,

The - presumed - interim Greek PM, Prof. Papademas of Harvard, was put on a plane headed for Greece. Situation there now known as Papandemonium. Over in Italy their own buffoon posted on his FB page a statement to the effect "rumors of my resignation are unfounded". You can't make that stuff up:

http://av.r.ftdata.co.uk/files/2011/11/Silvio_FB.png

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@High Seas,

Oh yeah, Berlusconi would never resign, he has to be thrown out of parliament, there is no question about it. Let the feminist do the deed!

I can't believe he's got his own FB account....I am looking him up now, hehe!

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@CalamityJane,

Though I don't know all the circumstances Papandreu III was the one who 'fessed up to all the financial shenanigans of his predecessors including father and grandfather. It may be that the situation had merely become critical and impossible to hide any longer.

It took Greece several decades to dig the deep hole they now find themselves in. The electorate and the government bureaucracy too are partly responsible for voting in and sustaining successive governments that indulged in the foolish spending and lax emforcement of tax laws that got them to this point. Unfortunately they now will have to pay the price.

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@georgeob1,

It appears to me that the Greek electorate are still living in La-la Land and don't believe they should be made to pay any price.

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@CalamityJane,

He made it through the vote! 308 in favor, zero against, 321 abstaining. Amazing.

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@Setanta,

There's a TV ad for a local beer shown on Greek TV, it shows 3 guys around a table eating and drinking massively, then a waiter bringing the check, then one of the diners telling the waiter: "...and send the bill to Angela!" (of course in Greek) whereupon the 3, later discreetly joined by waiter, laugh uproariously.

Can't remember the name of the beer; the 3 diners are apparently well-known comedians (I asked) but agree with you Greeks have only themselves to blame.

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@High Seas,

Amazing, isn't it! Nonetheless, his advisers urge him to resign. We'll see how big his ego is indeed.

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@CalamityJane,

CalamityJane wrote:

Amazing, isn't it! Nonetheless, his advisers urge him to resign. We'll see how big his ego is indeed.

The mood in Europe is reported to be it is when not if he resigns..

Italian Bond Yields:

http://s.wsj.net/public/resources/images/OB-QL850_italy1_K_20111108110040.jpg

http://blogs.wsj.com/marketbeat/2011/11/08/will-italian-bond-yields-trigger-higher-margin-requirements/

Quote:

If yields on the Italian 10-year benchmark top 7%, further downside for global equities may be in store. The 7% level is considered a psychological threshold because Greece, Ireland and Portugal all needed bailouts once yields on their own sovereign debt reached that level.

Italian yields are now trading around 6.74% and some rate strategists believe yields will top 7% before the end of the year, if not by the end of the week.

Italy passed a budget vote Tuesday but the country's Prime Minister, Silvio Berlusconi, lacks a majority in parliament. With Berlusconi facing pressure from opposition members to resign, the country could be in for further political maneuvering. Instability in the government may throw off the country's efforts to implement austerity measures as required by its eurozone neighbors.

Already the international community is losing faith in the country's ability to get its act together. If the political situation worsens, bond yields may have more room to rise.

"The Government's victory in the parliamentary vote today does nothing to alter the view that Silvio Berlusconi's days as Prime Minister are numbered," writes Ben May, European economist with Capital Economics. "The hope will be that Italy can quickly gain a new government with the stomach and the ability to implement major structural reforms.

http://www.thestreet.com/story/11304078/1/italian-bond-yields-offer-warning-signs.html

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@hawkeye10,

CNN is reporting that Berlusconi is in the process of resigning...

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Is the Euro well and truly buggered?

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