Time To Panic About Europe Again

Forums: Europe, European Central Bank, Global-Politics, International-Politics, World-Politics
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Europanic is back in style. After a monthslong reprieve initiated by the European Central Bank’s decision to offer the continent’s banks nearly unlimited quantities of low-interest medium-term loans, the sovereign debt crisis has returned. This time ground zero is Spain rather than Italy, but the pattern is familiar. Interest rates on Spain’s debt went up a little, putting further strain on Spain’s budget. That called its solvency into question and pushed up rates further still. And as interest rates rise, Spanish banks’ viability comes into doubt, squeezing credit to the domestic economy and further weakening the budget. Depending on how you look at it, it’s a sovereign debt crisis, a banking crisis, or a simple growth crisis, but in any case, there is a risk of national default, total bank meltdown, and perhaps the collapse of the single currency or even the larger European project.
The key symptoms include a Spanish bond auction on Wednesday that drew little demand from investors, and a flight back into U.S. Treasury bonds and away from European debt. And of course while Spain is a big deal on its own terms, lurking behind it is the reality that if Spain goes down, the larger economies of Italy and even France will be pulled into the muck.
Fundamentally, the crisis recurred because the last “solution” to the crisis solved nothing. It was a half-genius, half-mad suture to narrowly address the banking crisis. Given enough free money from the ECB, any bank has the ability to stay solvent. That calmed nerves, and the newly solvent banks were quietly encouraged to load up on European government debt, which helped bring interest rate spreads down. At the time, critics assailed this as little more than an effort to kick the can down the road, and they were right. But oftentimes in a panic situation, down the road is exactly where you want the can to go. If resolving the underlying problems with Europe’s economic framework were easy, it would have been done already. Solving hard problems takes time, so stopgap time-buying measures are welcome. The trouble is that months later, not only are the fundamental issues still with us, it’s difficult to say that any progress at all has been made.

http://www.slate.com/articles/business/moneybox/2012/04/eurozone_debt_crisis_it_s_time_to_panic_about_it_again_.html

This is the same conclusion that I reported about 6 weeks ago on Greece, that the EU leaders all know that Greece will default and almost certainly will leave the Euro, but they are stalling on admitting it because they are trying to get ready for a Greece default. Except they are not getting the work done, so all that is really happening is that everyone only delaying and praying.

I dont know how anyone can at this point escape the conclusion that Europe lacks the political leadership required to deal with the debt problem, which means that Europe is headed for an inevitable cluster-****.

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@hawkeye10,

hawkeye10 wrote:

Time To Panic About Europe Again

So, after careful study and analysis of the situation, you have reasoned that the best course of action is to panic?

2 Replies

@rosborne979,

runs contrary to everything i've read in the Hitchhikers Guide to the Galaxy

1 Reply

@djjd62,

Spock once concluded that there are logical times for emotional outbursts, so maybe he's got some backing on this. Smile

0 Replies

The sky is falling, the sky is falling ! ! !

1 Reply

@rosborne979,

rosborne979 wrote:

hawkeye10 wrote:
Time To Panic About Europe Again

So, after careful study and analysis of the situation, you have reasoned that the best course of action is to panic?

Had you followed the link you would have noticed that I stold the headline from Slate.....I am not the author.

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Did anyone catch the piece 60 Minutes (Steve Kroft) did on the debt crisis in Greece this past Sunday? Not really much new revealed, but the footage on the average, ordinary Greek worker and the suffering they're enduring was heartbreaking. Bleak future.

2 Replies

@Irishk,

Irishk wrote:

Did anyone catch the piece 60 Minutes (Steve Kroft) did on the debt crisis in Greece this past Sunday? Not really much new revealed, but the footage on the average, ordinary Greek worker and the suffering they're enduring was heartbreaking. Bleak future.

Which gets back to what I said at the very beginning....at some point the Greeks are going to decide "**** the EU......we are DONE!"

1 Reply

@Setanta,

Setanta wrote:

The sky is falling, the sky is falling ! ! !

Chicken Little says it again!!!

1 Reply

@hawkeye10,

hawkeye10 wrote:

Irishk wrote:

Did anyone catch the piece 60 Minutes (Steve Kroft) did on the debt crisis in Greece this past Sunday? Not really much new revealed, but the footage on the average, ordinary Greek worker and the suffering they're enduring was heartbreaking. Bleak future.

Which gets back to what I said at the very beginning....at some point the Greeks are going to decide "**** the EU......we are DONE!"

If the only way capitalism can survive is with government help, and the only way anyone or any government can survive is with credit then the whole thing is up in the air with no more foundation than a house of cards...Capitalist governments beat the Commies with funny money... Let's see if they can beat themselves...

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@Irishk,

Irishk wrote:

60 Minutes (Steve Kroft)

i prefer Sid & Marty Krofft

http://i2.listal.com/image/715021/600full-h.r.-pufnstuf-photo.jpg

1 Reply

@Fido,

Idiot.

1 Reply

@djjd62,

Well, duh lol...who wouldn't? Steve Kroft should move to Lidsville...if he could get a green card.

0 Replies

@Setanta,

Setanta wrote:

Idiot.

fowl!!!

0 Replies

Europe’s Economic Suicide

PAUL KRUGMAN

Quote:

Consider the state of affairs in Spain, which is now the epicenter of the crisis. Never mind talk of recession; Spain is in full-on depression, with the overall unemployment rate at 23.6 percent, comparable to America at the depths of the Great Depression, and the youth unemployment rate over 50 percent. This can’t go on — and the realization that it can’t go on is what is sending Spanish borrowing costs ever higher.

In a way, it doesn’t really matter how Spain got to this point — but for what it’s worth, the Spanish story bears no resemblance to the morality tales so popular among European officials, especially in Germany. Spain wasn’t fiscally profligate — on the eve of the crisis it had low debt and a budget surplus. Unfortunately, it also had an enormous housing bubble, a bubble made possible in large part by huge loans from German banks to their Spanish counterparts. When the bubble burst, the Spanish economy was left high and dry; Spain’s fiscal problems are a consequence of its depression, not its cause.

Nonetheless, the prescription coming from Berlin and Frankfurt is, you guessed it, even more fiscal austerity.

This is, not to mince words, just insane
.
.
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So it’s hard to avoid a sense of despair. Rather than admit that they’ve been wrong, European leaders seem determined to drive their economy — and their society — off a cliff. And the whole world will pay the price

http://www.nytimes.com/2012/04/16/opinion/krugman-europes-economic-suicide.html?_r=1&hp

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@hawkeye10,

You know; that it may well have been a choice of sorts by political leaders to put their nations on the hook to international bankers; but the absolute best thing for the whole world is to tell these bankers to go to hell and deliver them if necessary...What has happened here, and everywhere as far as I can tell, is that in order to survive and ensure large profits that people, individuals and countries and businesses of every size were forced to use credit, and offered credit far beyond their ability to repay...And considering that every country can only produce so much value with its labor, and that nature produces some, but that much can only be realized by trade, again made possible with credit, and that people must still consume much of what they produce in order to continue to produce; that, the need to pay interest is draining the wealth from the whole world into the banks of the wealthy... It is not that this country or that should default... We all should default, every citizen of every country and every country should default...People can exist paying as they go... We cannot exist paying a part of every transaction to the rich who never really give any of it back to society except by way of fresh loans draining more blood from every life...

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Time To Panic About Europe Again

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