[DaveO]

Re: Euro Crisis Revived With Yet Another EU Buggle : Wed Mar 27, 2013 3:47 pm  

<double post>

[DaveO]

Re: Euro Crisis Revived With Yet Another EU Buggle : Wed Mar 27, 2013 3:48 pm  

El Barbudo wrote: Do we know that it will be used as a template? That is what the Dutch finance minister said. Here is a link about the idea of it being a template: http://www.guardian.co.uk/world/2013/mar/25/cyprus-bailout-savings-raid-template That was yesterday but I just looked again and today its all change again... http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_27/03/2013_490097 Dijsselbloem seems a bit of an idiot and has effectively been rebuked. There is also this commentary: http://www.telegraph.co.uk/finance/debt-crisis-live/9956271/Cyprus-bailout-live.html Which states the obvious as to the consequences of the deal: If uninsured deposits in smallish banks in peripheral eurozone economies are at risk, you'd be mad to put your money there unless compensated by a very high interest rates. As a consequence, money is going to get sucked out of the peripheral economies into the safer, core economies where the too big to fail rule still holds true. The flight of capital from the periphery already seen because of fears of a eurozone break up will be further enhanced. No wonder the European Central Bank is so worried, for it is the the ECB which gets called on for funding when eurozone banks are facing deposit flight. Indeed, the absurdity of the German position on Cyprus, which is that creditor countries should not be expected to support periphery country banking systems, is that the ECB will have to support them instead, or as Machel Alexandrovich of Jefferies International puts it: "In saving €5.8bn in bail-out money, the other euro area countries will likely be on the hook for 4 to 5 times more in contingent Central Bank liabilities". Hey ho. (I presume he means "4 to 5 times more in contingent Central Bank liabilities" because of capital flight from other peripheral countries banks leaving them requiring support as well as the Cypriot banks). I am no economist but it seemed blindingly obvious to me when you raid deposits in banks of weaker countries whether the excuse is some hold loads of laundered cash or not you are bound to get people moving their cash elsewhere. Also according to the telegraph link above deposit controls will apply for 7 days to stop people withdrawing everything they have. Well WTF do they think is going to happen after 7 days???? It also seems to me if there is "flight of capital from the periphery" this just confirms something we already knew which is some countries should have never joined/been allowed to join the Euro in the first place. And all this because of a German desire not to be seen to be bailing out rich Russians of dubious background. Why on earth could they not see these consequences coming?

El Barbudo wrote: Do we know that it will be used as a template? That is what the Dutch finance minister said. Here is a link about the idea of it being a template: http://www.guardian.co.uk/world/2013/mar/25/cyprus-bailout-savings-raid-template That was yesterday but I just looked again and today its all change again... http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_27/03/2013_490097 Dijsselbloem seems a bit of an idiot and has effectively been rebuked. There is also this commentary: http://www.telegraph.co.uk/finance/debt-crisis-live/9956271/Cyprus-bailout-live.html Which states the obvious as to the consequences of the deal: If uninsured deposits in smallish banks in peripheral eurozone economies are at risk, you'd be mad to put your money there unless compensated by a very high interest rates. As a consequence, money is going to get sucked out of the peripheral economies into the safer, core economies where the too big to fail rule still holds true. The flight of capital from the periphery already seen because of fears of a eurozone break up will be further enhanced. No wonder the European Central Bank is so worried, for it is the the ECB which gets called on for funding when eurozone banks are facing deposit flight. Indeed, the absurdity of the German position on Cyprus, which is that creditor countries should not be expected to support periphery country banking systems, is that the ECB will have to support them instead, or as Machel Alexandrovich of Jefferies International puts it: "In saving €5.8bn in bail-out money, the other euro area countries will likely be on the hook for 4 to 5 times more in contingent Central Bank liabilities". Hey ho. (I presume he means "4 to 5 times more in contingent Central Bank liabilities" because of capital flight from other peripheral countries banks leaving them requiring support as well as the Cypriot banks). I am no economist but it seemed blindingly obvious to me when you raid deposits in banks of weaker countries whether the excuse is some hold loads of laundered cash or not you are bound to get people moving their cash elsewhere. Also according to the telegraph link above deposit controls will apply for 7 days to stop people withdrawing everything they have. Well WTF do they think is going to happen after 7 days???? It also seems to me if there is "flight of capital from the periphery" this just confirms something we already knew which is some countries should have never joined/been allowed to join the Euro in the first place. And all this because of a German desire not to be seen to be bailing out rich Russians of dubious background. Why on earth could they not see these consequences coming?

Re: Euro Crisis Revived With Yet Another EU Buggle : Wed Mar 27, 2013 4:10 pm  

For those of you you think that your money is safe in a mainstream bank, I would like to point out that since 2012 the law (EU Bank Resolution Directive) has provided the possibility of depositors taking a hit in return for shares in any failing bank. As I said before, if depositing funds in a mainstream fractional reserve bank (as opposed to a ring-fenced account like you would have had in the Trustee Savings Bank, or with a fully guaranteed account eg the old National Savings accounts) then legally speaking you are a loan creditor of the bank and so like bondholders should expect to take a hit in future (subject to the guarantee scheme - which I guess if ever called upon if, say, RBS went under again would either be reneged upon or prove worthless as £85,000 in such times would probably by worth about a penny in today's terms).

Re: Euro Crisis Revived With Yet Another EU Buggle : Wed Mar 27, 2013 7:23 pm  

There's an awful lot of Russian money going into Portugal at the moment according to the business contacts I have there, specifically The Algarve and the multi-million euro developments that were all the rage there ten years ago - the willing sellers are from the English and especially the Irish ex-pats, the ones who were multi-millionaires only for as long as the celtic tiger lived and breathed.

The Portuguese do not like the situation at all but are helpless to do anything about it - if they have another rough summer season then expect Portugal to be dragged into the bun fight too.

Re: Euro Crisis Revived With Yet Another EU Buggle : Wed Mar 27, 2013 9:50 pm  

JerryChicken wrote:

There's an awful lot of Russian money going into Portugal at the moment according to the business contacts I have there, specifically The Algarve and the multi-million euro developments that were all the rage there ten years ago - the willing sellers are from the English and especially the Irish ex-pats, the ones who were multi-millionaires only for as long as the celtic tiger lived and breathed.

The Portuguese do not like the situation at all but are helpless to do anything about it - if they have another rough summer season then expect Portugal to be dragged into the bun fight too.

Lot of Russian money has gone into London too!

[Kosh]

Re: Euro Crisis Revived With Yet Another EU Buggle : Thu Mar 28, 2013 10:07 am  

DaveO wrote:

I am no economist but it seemed blindingly obvious to me when you raid deposits in banks of weaker countries whether the excuse is some hold loads of laundered cash or not you are bound to get people moving their cash elsewhere.

Also according to the telegraph link above deposit controls will apply for 7 days to stop people withdrawing everything they have. Well WTF do they think is going to happen after 7 days????

I assume the idea is to raid the deposits before the 7 day period expires. After that it's a free for all.

DaveO wrote:

It also seems to me if there is "flight of capital from the periphery" this just confirms something we already knew which is some countries should have never joined/been allowed to join the Euro in the first place.

And all this because of a German desire not to be seen to be bailing out rich Russians of dubious background. Why on earth could they not see these consequences coming?

I think they saw the possibility and deliberately ignored it in the hope that it wouldn't happen. Or that they could somehow ride it out.

The whole thing has all the makings of an omnishambles. And the root of the problem, as you point out, was allowing countries into the Euro when they were in no way ready to join. Some of this might have been trickery (Greece) but a lot of it was deliberate policy to try and grow the Eurozone as fast as possible. Rules were bent or downright ignored and the pigeons are coming home to roost.

[DaveO]

Re: Euro Crisis Revived With Yet Another EU Buggle : Thu Mar 28, 2013 12:13 pm  

Kosh wrote:

The whole thing has all the makings of an omnishambles.

Watching Newsnight again the prospect of a cash fleeing other currently solvent banks to German banks (say) to the extent they became under threat or do actually go bust thus costing the Eurozone tax payer even more than simply bailing out the Cypriot banks was raised. It was more or less a "So what?" attitude from the Eruozone minister on the program.

He seemed to think that because shareholders and bondholders then large depositors would suffer (in that order) given the Cypriot template seems to now be in place then this meant it was clear banks would be allowed to fail which was in itself a good thing. What he didn't seem to get was peoples fear of losing their money might be the cause of any such bank failures as the Cypriot solution has undermined peoples confidence in all but what they perceive to be the safest banks.

The question of would the Cypriot solution work if a bank as big as RBS failed and what would the consequences be was also not really dealt with.

The Cypriot solution was criticised as being badly handled by one of the guests and a film also highlighted why its a mess in that a cheese farmer/producer had sent a payment for 1.2m Euros to a supplier and neither of them have any idea if 40% of it just vanished. Omnishambles is the right word!

Re: Euro Crisis Revived With Yet Another EU Buggle : Tue Apr 02, 2013 3:07 pm  

It is looking likely that the latest Euro crisis may lead to having effectively two Euros. The poor southern ones will have currency restrictions imposed and be forced to steal money from savers accounts which in Cyprus could be up to 60%. How long before the "southern Euro" will have a lower exchange value than the "northern euro"? It remains to be seen if these capital controls are even legal?

Next up in the great Euro shambles will be Slovenia where trouble is brewing and Malta and Luxembourg are coming up on the rails. What would finally sink the Euro would be if Spain or Italy were to come back with bigger begging bowls.

Re: Euro Crisis Revived With Yet Another EU Buggle : Tue Apr 02, 2013 5:12 pm  

Lord Elpers wrote:

. How long before the "southern Euro" will have a lower exchange value than the "northern euro"?

I've got a great idea. Why doesn't each Member State have it's own currency?

Re: Euro Crisis Revived With Yet Another EU Buggle : Tue Apr 02, 2013 5:53 pm  

The Euro experiment has well and truly failed. What a complete and utter shambles. I truly cannot wait for the day when the UK are given the long awaited opportunity to leave. A 'yes' vote will be like all my birthdays rolled into one, and watching the whole vile corrupt institution collapse like a pack of cards will be a joy to behold.