I don’t think this is likely, but if it collapses, it might start like this. Germany has guaranteed bank deposits at German banks. That puts lots of pressure on other EMU members to guarantee bank deposits at their own banks or Germany has just caused a run on, say, Irish banks. But of course each country has their own financial situation and banks are healthier in some countries than others. That means that Germany has essentially forced gov’ts to choose between potentially taxing hand-to-mouth citizenry to pay savers or having runs on their banks. Ouch. A run on a bank is an immediate problem and insuring banks probably isn’t so most countries will probably follow suit. But imagine if bank insolvencies pick up in, say, Greece to the point where the gov’t needs to increase taxes enormously to recoup losses of people with savings. The gov’t might decide that it would be in its long-term best interests to be able to make decisions about its own gov’t relationship with Greek banks rather than have the Germans decide it. That would mean resurrecting the Drachma. Then the Irish might follow suit. And then the French who never trusted the Germans anyway (with good reason, I might add).
They are taxing hand-to-mouth citizenry with the insidious inflation tax.
But insidious taxation doesn’t cause revolt like in-your-face-and-mailbox tax bills.
i saw in the WSJ that the UK and Ireland increased guarantees on bank deposits as well. and some other countries “propped up” banks… Belgium, Luxemburg, Netherlands, Italy.
Exactly… most people don’t even notice inflation.
Italy, Spain and France have the strongest banking sector…based on old school banking operations. In Italy and Spain bank started to learn about derivative three or four years ago…the amount of asset write down in these banks is marginal. Look at Santander or BNP Paribas…
I think they used to be old school, but times-they-are-a-changin. My hubby is from Italia. When we first met, he said you needed nearly 50% down to buy a house there. He was appalled by how lax our credit standards were. Then his mom called him the other day (maybe it was a few weeks ago, my days have all started to mesh together) and said that they now have lines of credit at her local grocery store. “Hey… I’ll take a kilo of prosciutto. And put it on my tab.”
nolabird032 Wrote: ------------------------------------------------------- > I think they used to be old school, but > times-they-are-a-changin. My hubby is from Italia. > When we first met, he said you needed nearly 50% > down to buy a house there. He was appalled by how > lax our credit standards were. Then his mom called > him the other day (maybe it was a few weeks ago, > my days have all started to mesh together) and > said that they now have lines of credit at her > local grocery store. > “Hey… I’ll take a kilo of prosciutto. And put it > on my tab.” Well…nothing changed…just thing in this way…with mortgage rates at 8% or 9%…it is very appealing for a bank to give a loan now… however things are still pretty strict compared to the USA or UK. Nothing compared to Rescap in USA… " no prosciutto…only bread on the tab"