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Euro Bound To Fail Say Top Bankers


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I have just met with a very senior Banker who I have known for many years and see a couple of times a year. I cannot name him or the Bank for obvious reasons, but you would know both if you ever listen to economic news.

Inside the bank there is not just concern over the Euro crisis but a simple belief that the Greek problem can barely be afforded on its own let alone other countries treading the same turf. And they are sure to fail, inside or outside the Euro. Full unabated default is only a matter of time. That leads to certain contagion. Italy, which could cut its POSSIBLY CONATAINABLE structural deficit has left it too late. They owe £1,600,000,000,000 and will not be able to service it. The market has turned and will not let it go now. Spain and Portugal will follow suit within months. Ireland has had their bail out, but they will leave the Euro too! THEY WANT TO DEFAULT, DO AWAY WITH THE DEBTS AND will blame contagion to engineer a default with less blame on themselves. They are growing, but it's known this will not last long for various reasons.

All this means the end of the European financial experiment I am told. Banks are getting ready if they have time, to try and prepare for survival. I will be getting a list of banks in order of safety soon. WE WILL SEE.

you're bxlondonman and I claim my £5 ;)

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Frankly, the UK press and pundits have been predicting the imminent failure of the EU and its predecessors for the past 6 decades. So far, they've always been wrong. If the EU/Euro can muddle through until the inevitable change of government in Germany (the main opposition party is strongly for more EU bailouts including issuing joint EU bonds etc. and it's not unlikely that the current coalition government fractures), the situation will likely just end up with a significantly accelerated integration of the eurozone states.

After all, as a whole, aggregate Eurozone debt/gdp is still significantly lower that that of either the US or UK. As a result, all it would need to resolve the Eurozone crisis more or less instantly is either an agreement to take joint liability for significant amounts of new debt or get the ecb to start printing in a similar order or magnitude as the BoE/Fed. Right now, Germany/France are pushing hard to avoid these outcomes, but eventually, after much haggling to entrench their control, they will agree, the alternative would be too damaging to them.

Couldn't agree more. So far the private sector banks are being pressured to write off a significant amount of the Greek debt. But in the end, the Euro will have to allowed to fall against other countries to reflect its value across all the participant countries, not what the French and Germans would like its value to be. Oh well, the ECB won't actually have to invest in any prinitng presses. At least the current quantitative easing method, of a few accounting entries and bob's your uncle, is relatively easy to achieve. Three or four trillion Euros, every three years or so, should just about do the trick. The banks will be miffed, once the ECB starts lending to Greece and Italy and the rest of the Southern European countries at half a percent. But eventually all good things - like their bonuses - come to an end.

I'd like the exchange rate to be around 3.2 euros to the pound. Then we'll all be able to afford to go there and shop, as opposed to just able to go there (thank you Ryanair!) at the moment.

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I'd like the exchange rate to be around 3.2 euros to the pound. Then we'll all be able to afford to go there and shop, as opposed to just able to go there (thank you Ryanair!) at the moment.

That's the big question: devaluing the Euro would help, but by how much? Still one size doesn't fit all.

Spiegel notes the imbalances that have developed in various economies.

According to the study, prices of goods produced in Greece went up by an average of 67 percent between 1995 and 2008, a record increase for the euro zone. The average price of domestically produced goods went up by 56 percent in Spain, 47 percent in Portugal and 41 percent in Italy. By contrast, prices went up in Germany by only 9 percent in the same period.

A Munich think tank suggests that Greece needs a currency depreciation of about 44% to be competitive again - particularly against its main tourist rival Turkey. But this would be absurd for other Eurozone countries.

There really is no way around this within the single currency.

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A Munich think tank suggests that Greece needs a currency depreciation of about 44% to be competitive again - particularly against its main tourist rival Turkey. But this would be absurd for other Eurozone countries.

There really is no way around this within the single currency.

It would make German exports cheap. It's got to be the eventual solution, surely?

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It would make German exports cheap. It's got to be the eventual solution, surely?

I too think that devaluation of the Euro would have to be the eventual solution. But it probably wouldn't make German exports much cheaper because the price of their raw materials, assuming them import them, would soar. So say a VW cost 16,000 Euro and say this works out to around £13,000. If they allow the market to devalue the Euro but need to keep the price at £13,000 equivalent just to be able to import the raw materials at current prices, then presumably the export price, at least, of their cars, if denominated in Euros, would rise substantially. And within the Eurozone the price of the cars would have to be raised, to allow for the fact that the Euro doesn't buy as much steel/chips/whatever else they need to import to build a car as it did before.

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It would make German exports cheap. It's got to be the eventual solution, surely?

Greece and German would not have the same currency at that point. I used to beleive the Euro would survive until quite recently, now I realise its fundamentally impossible to do so.

“The Germans want more fiscal unity and much tougher central observation – with the idea of a finance ministry,”

Mr O’Neill said in an interview with The Sunday Telegraph. “That will emerge for those that want to stay in this damn thing, or can stay in.

“With that caveat, it is tough to see all countries that joined wanting to live with that –including the one that is so troubled here [Greece]. If you wind the clock back, it was pretty obvious that economically probably only Germany, France and Benelux of the original joiners were the ones that were ideal for a monetary union.

“For [them] it is not a bad idea – these countries have always had some kind of tight fixing of exchange rates and are very intertwined. For all the rest that originally joined – Spain, Italy, Portugal, Ireland, Finland – it is actually questionable.”

Mr O’Neill said that because Finland and Ireland were adjacent to non-eurozone countries – the UK and Sweden – they might prefer to quit the euro. He said the single currency might be stronger as a result.

Turning to the Brussels bail-out deal, he said that, although some steps had been taken in the right direction, it did not “solve the issue” and that the European Central Bank needed “eagerly” to buy bonds.

http://www.telegraph.co.uk/finance/financialcrisis/8872380/Goldman-euro-could-split-apart.html

This pretty much indicates that only the core countries will survive a union, according to Goldman Sachs. France, Germany, and the Benelux countries.

Interestingly it could be that Germany agrees with the physical/economic links theory and intends to include Poland in future.

Germany's second-largest lender Commerzbank (which is 25 percent owned by the State) will refuse loans which don't help Germany or Poland,

http://in.reuters.com/article/2011/11/04/us-commerzbank-idINTRE7A310P20111104?feedType=RSS&feedName=everything&virtualBrandChannel=11709

A big chuck of Poland is so integrated with Germany that it WAS German until 1945 when 12million Germans were expelled. So a fiscal union makes economic sense.

As for countries like Ireland, they should have stuck with the GBP as so much of their gdp is with the rest of the UK. And whose idea was it to let basket cases like Italy in the Euro?

I too think that devaluation of the Euro would have to be the eventual solution.

You prove that its pointless, to do it they will need to print and cause inflation. The German people, never mind government will not stand for it. leaving the euro with the core members and suffering a higher Euro would be a better long term solution, leaving the others with their shitty Lire, pesetas etc

And its one I'm sure the Germans will choose.

Edited by Peter Hun
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Greece and German would not have the same currency at that point. I used to beleive the Euro would survive until quite recently, now I realise its fundamentally impossible to do so.

http://www.telegraph.co.uk/finance/financialcrisis/8872380/Goldman-euro-could-split-apart.html

This pretty much indicates that only the core countries will survive a union, according to Goldman Sachs. France, Germany, and the Benelux countries.

Interestingly it could be that Germany agrees with the physical/economic links theory and intends to include Poland in future.

http://in.reuters.com/article/2011/11/04/us-commerzbank-idINTRE7A310P20111104?feedType=RSS&feedName=everything&virtualBrandChannel=11709

A big chuck of Poland is so integrated with Germany that it WAS German until 1945 when 12million Germans were expelled. So a fiscal union makes economic sense.

As for countries like Ireland, they should have stuck with the GBP as so much of their gdp is with the rest of the UK. And whose idea was it to let basket cases like Italy in the Euro?

You prove that its pointless, to do it they will need to print and cause inflation. The German people, never mind government will not stand for it. leaving the euro with the core members and suffering a higher Euro would be a better long term solution, leaving the others with their shitty Lire, pesetas etc

And its one I'm sure the Germans will choose.

If you think benelux should be in you should check out the stats on Belguim.

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That's the big question: devaluing the Euro would help, but by how much? Still one size doesn't fit all.

Spiegel notes the imbalances that have developed in various economies.

A Munich think tank suggests that Greece needs a currency depreciation of about 44% to be competitive again - particularly against its main tourist rival Turkey. But this would be absurd for other Eurozone countries.

There really is no way around this within the single currency.

and what do they think about WEST v CHINA.....do WE need a 44% devaluation to compete...or is it all just tickateeboo?

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I too think that devaluation of the Euro would have to be the eventual solution. But it probably wouldn't make German exports much cheaper because the price of their raw materials, assuming them import them, would soar. So say a VW cost 16,000 Euro and say this works out to around £13,000. If they allow the market to devalue the Euro but need to keep the price at £13,000 equivalent just to be able to import the raw materials at current prices, then presumably the export price, at least, of their cars, if denominated in Euros, would rise substantially. And within the Eurozone the price of the cars would have to be raised, to allow for the fact that the Euro doesn't buy as much steel/chips/whatever else they need to import to build a car as it did before.

ah, inflation fixes all....NOT

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If you think benelux should be in you should check out the stats on Belguim.

I think you are correct. The mooted 'Super Euro' zone doesn't include Belgium, only the Netherlands. In fact, only the current AAA countries - including Austria.

Poland has absolutely no plans to join and wouldn't fit the accession rules anyway - higher interest rates, defecit, so on.

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The market has turned and will not let it go now. Spain and Portugal will follow suit within months. Ireland has had their bail out, but they will leave the Euro too! THEY WANT TO DEFAULT, DO AWAY WITH THE DEBTS AND will blame contagion to engineer a default with less blame on themselves. They are growing, but it's known this will not last long for various reasons.

All this means the end of the European financial experiment I am told. Banks are getting ready if they have time, to try and prepare for survival. I will be getting a list of banks in order of safety soon. WE WILL SEE.

Yes, all the PIIGS will leave the Euro

Yes, some financial institutions will fail

No, the sky is not falling and life in the UK 5 years from now will be much the same as today

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Yes, all the PIIGS will leave the Euro

Yes, some financial institutions will fail

No, the sky is not falling and life in the UK 5 years from now will be much the same as today

Not according to this BoE committee member:

Sky will fall in if Greece leaves EZ...

He says you're all mad to hanker after it. The consequences would be so awful that it won't be allowed to happen.

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Not according to this BoE committee member:

Sky will fall in if Greece leaves EZ...

He says you're all mad to hanker after it. The consequences would be so awful that it won't be allowed to happen.

Trading with and between Europe’s banks stops. Bank stocks crater and haven assets rise.

Hmm, what is a safe haven asset in this instant? UK property?

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But only property without debt. How much is the typical deposit?

Durch,

you underestimate just how much money has been looted in Europe. These countries arent going bankrupt because they have been prudent with the money they borrowed. Much of it was taken without any intention of repayment, the amounts are huge.

I bet Germany are going to have one heck of a crisis when they find that all their occupational pension schemes are empty having invested in these crooked government run schemes.

When the masses turn up in London, they will have enough gold for the deposit.

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Durch,

you underestimate just how much money has been looted in Europe. These countries arent going bankrupt because they have been prudent with the money they borrowed. Much of it was taken without any intention of repayment, the amounts are huge.

I bet Germany are going to have one heck of a crisis when they find that all their occupational pension schemes are empty having invested in these crooked government run schemes.

When the masses turn up in London, they will have enough gold for the deposit.

The Germans are going to be screwed when:

1. Vast numbers of people in Europe either cannot afford, or are unwilling to buy, Germans goods such as cars, electronics, engineering stuff.

There is bound to be a big anti-German backlash in Europe from the likes of, already, Greece but probably Italy and others.

Someone really needs to tell the prudent self-sanctimonious Germans that a huge reason why they are prosperous is that they have been selling their tat all across Europe. They benefited enormously from the EU zone and, arguably, they would not have been able to pay the massive costs of updating Eastern Germany if they had not free access to the EU market for their stuff.

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