Will The Euro Go Down In Flames?

[pandora's box]

Even a £635bn safety fund has failed to silence alarm bells over currency crisis spreading to Britain - so can anyone stop the euro going down in flames?

Riots on the streets of Greece and political turmoil in Dublin may be troubling - but they also seem remote.

Even Britain's controversial £7bn contribution to the Irish bailout appears modest compared with our own banking rescues and public debts.

But this weekend the euro firestorm is approaching the City. On Friday the Bank of England warned of the threat to Britain's banks of a continued euro crisis and, as if on cue, Lloyds Banking Group shocked the stock market by announcing a sharp rise in its likely losses in Ireland.

Lloyds, which is 41% owned by the taxpayer, has already taken a £1.6bn knock to profits in the first half of 2010 because of its £27bn portfolio of loans to Irish businesses and households. On Friday afternoon it warned that it would take a further £2.7bn hit, bringing its total charge on bad Irish loans to £4.3bn this year.

Read more: http://www.thisismoney.co.uk/news/article.html?in_article_id=520137&in_page_id=2#ixzz18mqrPatW

[bogbrush]

IMO, no. I'm afraid instead we'll get closer political union as the national government pay the price for German refinancing.

The fourth Reich approaches!

[WageslaveX14]

And right on cue the only member of the government who understands why banks' interests are directly opposed to those of the rest of the economy gets nobbled by the Telegraph, just in time for the fourth bailout (1. Nov 08, 2. March 09, 3. Ireland) to be perpetrated with nothing in return from the bankers, and no restrictions on bonus looting.

[pandora's box]

And right on cue the only member of the government who understands why banks' interests are directly opposed to those of the rest of the economy gets nobbled by the Telegraph, just in time for the fourth bailout (1. Nov 08, 2. March 09, 3. Ireland) to be perpetrated with nothing in return from the bankers, and no restrictions on bonus looting.

It does seem rather coincidental, I must admit.

[no accountant]

Riots on the streets of Greece and political turmoil in Dublin

..

Lloyds, which is 41% owned by the taxpayer,

Maybe we should sell Lloyds while we're still up.

And the euro? Conspiracy theories aside, the sooner Germany leave the better. The remaining euro countries can devalue and become competitive again and get everyone back to work.

[Keep Walking]

It does seem rather coincidental, I must admit.

It makes no difference if he is a good guy or otherwise, kindly or stupidly, he has facilitated the unfairness.

[aa3]

At the end of the day Germany will crack and bail out everyone. I think the big question is the terms for each bailout. Greece seems to have gotten one cracking deal. Basically a blank cheque. Meanwhile Ireland got hit with terrible burdens.

Its like a huge game of chicken when each nation needs a bailout. If a nation is willing ot 'go all the way' and default on the loans and pull out of the Euro, I guarantee Germany and friends will bail them out no questions asked. But for ones like Ireland where so many rich Irish were not willing to default and have their banks blow up, the Germans basically take over their country.

[EvilEdna]

At the end of the day Germany will crack and bail out everyone. I think the big question is the terms for each bailout. Greece seems to have gotten one cracking deal. Basically a blank cheque. Meanwhile Ireland got hit with terrible burdens.

Its like a huge game of chicken when each nation needs a bailout. If a nation is willing ot 'go all the way' and default on the loans and pull out of the Euro, I guarantee Germany and friends will bail them out no questions asked. But for ones like Ireland where so many rich Irish were not willing to default and have their banks blow up, the Germans basically take over their country.

I'm not sure about that. As I remember it the Germans were begging the Irish to accept help and the Irish were happy to stick it out.

[Wuluf]

From the OP's link

"27. Get the world out of the Red and bring back Brown.

For all his misgivings I genuinely believe he is capabable of stabilising the whole mess .... on a world basis.

People were too quick to get the boot into him ... ok some of it may be warranted .... but the loonies we have at the helm along with the euro muppets showing as much vision and solidarity as a student protest coupled Chinese protectionisim and the USA terrified and holding their breath could bring down the whole card house.

Cameron needs to ask Brown to come in and provide a clear plan for all countries to follow. Once the ship is steady then he can go back to whatever he is doing now. But for the sake of this generation get that man back in ASAP."

[aa3]

I'm not sure about that. As I remember it the Germans were begging the Irish to accept help and the Irish were happy to stick it out.

Maybe the Irish did hold out and get a better deal than I was thinking. At the peak of the Irish crisis a couple weeks ago if a Euro bailout hadn't been agreed over the weekend, the Irish banks would not have opened on the Monday. They were out of cash, and needed that line from the ECB.

Meanwhile Germany and friends have hundreds of billions of Euros already at stake in countries like Ireland.

[Arbitrage]

At the end of the day Germany will crack and bail out everyone. I think the big question is the terms for each bailout. Greece seems to have gotten one cracking deal. Basically a blank cheque. Meanwhile Ireland got hit with terrible burdens.

Its like a huge game of chicken when each nation needs a bailout. If a nation is willing ot 'go all the way' and default on the loans and pull out of the Euro, I guarantee Germany and friends will bail them out no questions asked. But for ones like Ireland where so many rich Irish were not willing to default and have their banks blow up, the Germans basically take over their country.

You missed something: Germany is a democracy!

[Bloo Loo]

so the Euro crumbles?

so what?

it wasnt here 30 years ago.

Europe and its people were, are and will be in the next 30.

concentrating on the "Money" is a diversion.

[Dorkins]

At the end of the day Germany will crack and bail out everyone. I think the big question is the terms for each bailout. Greece seems to have gotten one cracking deal. Basically a blank cheque. Meanwhile Ireland got hit with terrible burdens.

Its like a huge game of chicken when each nation needs a bailout. If a nation is willing ot 'go all the way' and default on the loans and pull out of the Euro, I guarantee Germany and friends will bail them out no questions asked. But for ones like Ireland where so many rich Irish were not willing to default and have their banks blow up, the Germans basically take over their country.

Germany has a population of 80m, or only 60m if you don't count the (still heavily subsidised) east. The PIIGS alone have a combined population of 125m. Then of course there's France and Belgium, and Austria is highly exposed to foreign exchange lending in Eastern Europe. Can 60m people bail out 200m? And that is of course assuming that Germany has no problems of its own...

Germany won't be bailing anybody out. Either the PIIGS (+BF) will default or the ECB will try to print their way out of trouble.

[interestrateripoff]

The next couple of years will be very interesting for the Euro. It's hard to see how the project can continue in it's current guise.

[aa3]

Germany has a population of 80m, or only 60m if you don't count the (still heavily subsidised) east. The PIIGS alone have a combined population of 125m. Then of course there's France and Belgium, and Austria is highly exposed to foreign exchange lending in Eastern Europe. Can 60m people bail out 200m? And that is of course assuming that Germany has no problems of its own...

Germany won't be bailing anybody out. Either the PIIGS (+BF) will default or the ECB will try to print their way out of trouble.

Good point. After this 700 billion Euro credit line is blown through they will have to print to cover it. I will change my statement to finally Germany will crack and give power to the ECB to print. It is already defacto doing some, but I mean outright the power to be a real central bank.

[aa3]

You missed something: Germany is a democracy!

Just like Ireland and Greece, where their people democratically supported the austerity deals.

[Bloo Loo]

Good point. After this 700 billion Euro credit line is blown through they will have to print to cover it. I will change my statement to finally Germany will crack and give power to the ECB to print. It is already defacto doing some, but I mean outright the power to be a real central bank.

printing is a bailout? please explain how this cures the problem of excess expenditure over income.

[bogbrush]

Just like Ireland and Greece, where their people democratically supported the austerity deals.

There is no vote about living within your means. It's like saying nobody voted for gravity to kill them when they fell off a cliff.

[non frog]

printing is a bailout? please explain how this cures the problem of excess expenditure over income.

It doesn't; but it is a temporary fix that allows people to continue to live beyond their means and pretend there is no problem. That has been the prefered political solution to every economic problem since the war. I think its a reasonable guess therefore that it may be the eventual outcome.

[Bloo Loo]

It doesn't; but it is a temporary fix that allows people to continue to live beyond their means and pretend there is no problem. That has been the prefered political solution to every economic problem since the war. I think its a reasonable guess therefore that it may be the eventual outcome.

I agree, but its a bit like pumping the airgun to get a bigger bang when it does fire.

[indirectapproach]

Since printing is the only alternative to collapse, my bet is on printing and sooner rather than later.

Ok, the Jermans don't want monkey money but since the great anglo saxon invention of the credit card, it's not as if they are gonna have to wheel it about in barrows.

[Hyperduck Quack Quack]

I think the Euro is highly unlikely to go down in flames. It's too big to fail. What would replace it?

I think it's more likely that we'll end up joining the Euro than that it will fail, although both seem pretty unlikely to me at the moment.

Yes, there is a crisis in the Eurozone, because of debt in what they call the 'peripheral' nations. But many of the states in the USA have huge debts but we don't stories about the dollar being about to collapse.

[Realistbear]

Before all the proverbial hit the fan I was saying that the Euro would not be able to withstand its first real test due to lack of political consensus.

If it survives, it will be a different beast to what it is today and based on very dfferent critera. Possibly a super-DM if Germany take over political control.

IMO there will be years of confusion and doubt ahead and all the ingredients that have made Europe one of the most unstable regions in the world throughout human history. It has taken political-economic Empires to hold it togeher in the past and it was really only the Romans who pulled it off for any length of time. Napoleon, the Kaiser and Hitler were flashes in the pan in comparison to PAX Romana under the Emperors.

Euro up strongly vs. $ and £ today.

Edited December 22, 2010 by Realistbear

[Realistbear]

Looks like the Chinese have taken some sort of action to shore up Portugal and thus prevent the Euro collapsing today:

http://uk.finance.yahoo.com/news/Banks-lift-FTSE-China-eases-reuters_molt-2843436051.html?x=0

Banks lift FTSE as China eases euro debt worries

David Brett, 12:13, Wednesday 22 December 2010

LONDON (

Reuters

) - Banks (SBK.NX - news) boosted the top share index by midday on Wednesday, helped by reports China is ready to buy Portuguese bonds which eased European debt concerns.

I wonder if they might buy the rest of the PIIGSB too?

Edited December 22, 2010 by Realistbear

[indirectapproach]

This recent Chinese entry on the european scene is an interesting one.

If the Chinese wanted to kick the crutch from under the Americans propping up europe might be one way to do it but if they did that, all the money they've loaned the US would not get paid back.

It looks to me like they know as well as everyone how important it is to keep the plates spinning and are happy to lend a hand.

It's probably a good idea to prevail upon the Chinese to hitch their interest to yours.