Done you all a favour - here is the salient part of the article I put the link to. Bear in mind when you read this that the EU is asking the Greek people to solve this issue for them. Hence the impasse we are at. Exciting times… Greece Is Only a Symptom of the Real Problem The problem is European banks, the European Central Bank and a flawed single currency concept — the euro. In May 2010, we got a clear message from Europe on just how desperate the situation was there. That’s when the powers of Europe gathered to determine a game-plan for dealing with Greece. The European Union, the IMF and the ECB could have backed away and let the country pull-out of the monetary union and go on with its business of mending itself through currency and debt devaluation. But they didn’t do that! Instead, in perhaps the most shocking development in the entire global financial crisis, they vowed to rip up the rulebook that the European monetary union was built upon, by using taxpayer money of the stronger countries to support the fiscally irresponsible weaker countries … to the tune of 750 billion euros worth of promised aid. Moreover, the European Central Bank, built upon the idea of fierce independence, tossed its rulebook out and vowed to be the buyer of last resort of the toxic sovereign debt of the failing euro-zone peripheral countries. AND they continued accepting the toxic collateral from these countries in exchange for short-term liquidity. They didn’t go to such extreme measures because they really cared about saving the likes of Greece, Portugal and Ireland (and even Spain). They did so because they had to! When the global financial crisis was at peak severity, much of the world focus was on U.S. bailouts. Meanwhile Europe and the ECB were naively admired as the example of conservatism and rationale. But throughout the financial crisis, the ECB was offering unlimited funds to its European banks for a paltry 1 percent interest. The stated purpose was to keep credit flowing in its economy. However, the banks weren’t lending to consumers and businesses; they were lending to the PIGS (Portugal, Ireland, Greece and Spain) to keep them alive. The struggling countries were happy. They were able to borrow at reasonable rates, even though they were maintaining massive budget deficits and burgeoning debt loads … The banks were happy. They were borrowing at 1 percent and lending at juicy yields … The ECB was happy to handout euros left and right, but now its strategy has backfired. And the ECB was happy, because it was aiding the struggling countries through the “back-door” … maintaining adherence to its guiding principles and keeping its appearance as staunchly independent. But finally, market participants took notice and went on attack, selling the government bonds of the weak euro members. Consequently sending borrowing rates for these countries soaring, exposing their spiraling deficits and the flaws of the greater European monetary union. So when the decision had to be made by European officials and the IMF, back in May 2010, to let Greece go or go “all-in” … the choice was obvious. They had to go all-in, because the European banks were loaded with Greek debt. If Greece had fallen, the other weak countries would have fallen, putting $2 trillion worth of European bank exposure to the PIGS countries on course for massive write downs — and triggering another financial crisis. But now, more than a year later, the PIGS remain on the path of default, European banks are still highly exposed, and all of these desperate actions to stave off the ultimate impact day has left the … ECB Loaded with Toxic Assets! As I warned in my Money and Markets May 14 column, the sovereign debt crisis in Europe could make the Lehman Brothers failure pale in comparison. It’s not just European banks, but the European Central Bank is at risk of failing. A European think-tank, Open Europe, says the ECB has taken on nearly 400 billion euros of exposure to the four most troubled European countries — selling off its good assets to take on bad assets. And they estimate the ECB is 23 to 24 times leveraged. When Lehman failed it was 30 times leveraged. They estimate that Greece would have to restructure half of its debt to bring it down to sustainable levels. With that scenario, it would “effectively leave the ECB insolvent.” If that happens expect another wave of global financial crisis, bigger than the first, where markets trade in two tiers: Risky and safe.
Watching live coverage on BBC. A choice quote: 1351: Deutsche Bank chief Josef Ackermann says the financial industry would offer European politicians a solution on Greece because a Greek default would be even more dramatic than the Lehman crisis. “I guarantee we will offer the politicians a solution, but this must prevent a meltdown,” he told politicians and bankers in Berlin. Vested interests anyone?
Michael Lewis had a good article about Greece and its curious financial culture in an article in Vanity Fair last year: http://www.vanityfair.com/business/features/2010/10/greeks-bearing-bonds-201010
is anyone watching CNBC? this reporter is out there on a roof without a gas mack sucking in all those fumes. its like sex panther - it stings the nostrils…
Breaking News: The vote in favour of the austerity measures has passed the 151 votes needed for them to be passed
Dude_CFA Wrote: ------------------------------------------------------- > Breaking News: The vote in favour of the austerity > measures has passed the 151 votes needed for them > to be passed The show MUST go on!!