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Goal Of Unified Europe Falters Amid Downturn

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http://www.nytimes.com/2009/08/23/world/eu...tml?_r=1&hp

VIENNA — Herbert Stepic, an Austrian banker, and Laszlo Seres, a Hungarian entrepreneur, have never met, but they are tied together by 20 years of business, tens of millions of dollars of debt and the dream of borderless prosperity made possible by a united Europe.

Now they are struggling to nurse their businesses through the economic downturn. Europe, which appeared so tightly bound during the boom years, has left them to find solutions to the financial crisis on their own.

The drive toward European unity required big doses of both political and financial capital, with Western European banks showering cash on Eastern European entrepreneurs like Mr. Seres, who used the money to build hundreds of thousands of square feet of office space for a booming Budapest, Hungary’s capital.

Mr. Seres is just one of Mr. Stepic’s 15 million customers at the huge bank Raiffeisen International, served by some 3,200 branches across Eastern Europe.

This eastward Manifest Destiny seemed for years an inexorable and predictable process, with membership in the European Union followed by entry into the euro currency zone.

But as money from the West fueled a debt-laden binge in the East, that grand vision may have blinded investors to the risks of cross-border, cross-currency lending. As the financial crisis struck, Mr. Stepic’s bank, like many in Austria, found its loan portfolio deteriorating alarmingly. Meanwhile, Mr. Seres was forced into a mad scramble for cash to try to save his real estate empire. He pulled $400,000 from his own savings to keep his latest development from going bust.

“For more than a month I hardly slept,†Mr. Seres said of the period at the height of the financial crisis when he feared he might not be able to make his payments on time. “All the problems, all the commitments, accumulated at the same time.â€

Today, the aggressive lending for ambitious new projects has given way to a slow, painful unwinding. From Stockholm and Milan to Riga, Latvia and Sofia, businessmen on the front lines of integration had hoped that the European Union’s executive body in Brussels and the region’s central bank would put together a bold financial rescue and stimulus package to stabilize banks and cushion the severe slump in the East, especially in Hungary.

The World Bank’s president, Robert B. Zoellick, joined Austrian officials in calling for more assistance from Brussels to stabilize the region.

Instead, the leaders of the wealthier nations of Western Europe, who had welcomed their Eastern neighbors into institutions like NATO and the European Union, looked inward as the crisis worsened, rushing to protect their own companies and banks but resisting most pleas to save jobs or shore up banks elsewhere.

“We are not fighting against bad will. They are simply unable and not prepared to change the normal pattern,†Mr. Stepic, the banker, said of European leaders earlier this summer. “The main thing is that we don’t make geopolitical mistakes, that something that we all have been fighting for, for 50 years, to create a united Europe, is now forgotten suddenly.â€

The countries that use the euro chose instead to go into what Adam S. Posen, the deputy director of the Peterson Institute for International Economics in Washington, called a “defensive crouch†to protect the euro, which some worried would weaken if governments piled up debt to bail out troubled banks or other companies.

Mr. Posen called that a short-sighted approach that ignored the financial bonds between Europe’s constituent regions. “Failure to respond to the financial crisis in Eastern Europe is itself the greatest threat to the future growth and stability of the euro area,†Mr. Posen said.

More at the link.

I can remember warning about the Eurozone project 10 years ago that if the entry criteria where fudged this posed a huge risk to long term stability when a recession finally happened.

It looks like the whole EU project is going to be stressed tested in warns the idiots in Brussels never imagined.

Thank god the global recovery is here to ease the tensions and stresses in the region.

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http://www.nytimes.com/2009/08/23/world/eu...tml?_r=1&hp

More at the link.

I can remember warning about the Eurozone project 10 years ago that if the entry criteria where fudged this posed a huge risk to long term stability when a recession finally happened.

It looks like the whole EU project is going to be stressed tested in warns the idiots in Brussels never imagined.

Thank god the global recovery is here to ease the tensions and stresses in the region.

Wait and see what?

"Mr. Seres shored up his own capital position by selling 30 percent of one real estate venture. “Nobody knows what is the value on the market, because no transactions are on the market,†he said. “Nobody buys buildings now. We call it ‘sit out’ in Hungary. You sit and wait. Wait and see.â€"

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Wait and see what?

"Mr. Seres shored up his own capital position by selling 30 percent of one real estate venture. “Nobody knows what is the value on the market, because no transactions are on the market,†he said. “Nobody buys buildings now. We call it ‘sit’ in Hungary. You sit and wait. Wait and see.â€"

Sit out of luck more like. Waiting on a miracle that everybody looks the other way and pretends that what has happened, hasn't.

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If you're all using the same currency it becomes a race for each State to issue the most debt because the inflation hurts everyone equally. That's why they get so upset when one of the member States starts borrowing too heavily.

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The EU seems to be just another mechanism of control. It isn't needed for free trade and just neuters the ability for countries to make their own laws.

Even the UK state is too big - why the hell would we want to be part of an even bigger one!? It makes no sense to me... <_<

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The EU seems to be just another mechanism of control. It isn't needed for free trade and just neuters the ability for countries to make their own laws.

Even the UK state is too big - why the hell would we want to be part of an even bigger one!? It makes no sense to me... <_<

Yes but it gets to make some politicians feel all important and powerful, and on that level the EU is a rip roaring success. As ultimately that is what it's about.

If it was about free trade and jobs it would be a very different beast.

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I agree. Consolidation of power at every level is bad. Diffusion of power to the maximum extent practical maximizes freedom and productivity.

The EU seems to be just another mechanism of control. It isn't needed for free trade and just neuters the ability for countries to make their own laws.

Even the UK state is too big - why the hell would we want to be part of an even bigger one!? It makes no sense to me... <_<

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The EU seems to be just another mechanism of control. It isn't needed for free trade and just neuters the ability for countries to make their own laws.

Even the UK state is too big - why the hell would we want to be part of an even bigger one!? It makes no sense to me... <_<

Customs union. Before the rest of the world says **** off, you can tell them to **** off back - but with a bigger stick. Get your retaliation in first.

Customs is more important than free trade.

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Customs union. Before the rest of the world says **** off, you can tell them to **** off back - but with a bigger stick. Get your retaliation in first.

Customs is more important than free trade.

The rest of the world dont wont to tell us to f*ck off though. They just want to get on with life.

Its a fallacy invented by the pro EU'ers to make us come on board. So they can keep spongeing our tax money

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I agree. Consolidation of power at every level is bad. Diffusion of power to the maximum extent practical maximizes freedom and productivity.

As you spend more time on here Bill you'll find we polarise into two camps really, those wanting more or less government.

I agree, and would be inclined always to make my mistakes at the diffused end of the spectrum. Government is a decent concept except for the fact that anyone wanting to be in it must be insane to some extent.

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My take is a little confusing I guess. I think govt is basically good. It is certainly far from where it should be today, but the alternative is much worse. I can't speak to your situation, but in the States, the power of the federal govt is waaayyyyy out of control. States have the right to reign it in and they should start exercising that right by breaking off the money function. It's a novel approach that we are persuing. Decentralize the money power and the rest will follow.

As you spend more time on here Bill you'll find we polarise into two camps really, those wanting more or less government.

I agree, and would be inclined always to make my mistakes at the diffused end of the spectrum. Government is a decent concept except for the fact that anyone wanting to be in it must be insane to some extent.

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