Sunday, January 13, 2008

Goodbye ClubMed…….It’s been emotional

Spain and Italy threaten EMU stability

A top French bank has warned that mounting strains within the eurozone will set off a sharp jump in spreads on Italian, Spanish, Greek, and Portuguese sovereign bonds this year, forcing major changes in government policy across the region. BNP Paribas said a decade of lagging performance across southern Europe has left the region unable to compete with the eurozone's northern tier. A property boom fuelled by low real interest rates has disguised the slippage until now, but only at the cost of storing up greater trouble.

The end of the Euro?

Posted by lvmreader @ 05:39 PM (971 views)
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9 thoughts on “Goodbye ClubMed…….It’s been emotional

  • japanese uncle says:

    A development after another that proves and endorses my argument. As I have said time and again, euro is a foregone failure as forcefully imposed by the stupid yet arrogant bankers. When things go wrong, all the underlying problems spurt out at a stroke. Now even the dumbest will learn a painful lesson. Forceful unification of currency and tax/interest rates regardless of regional cultural diversity will never work. Eurozone is basically nil without the main engine the Germans who however hate euro, and ernestly wishing to see DM back in their wallet. Italians and Spanish and French share this feeling Everyone detest euro like Microsoft, but is forced to use it.

    Now they must seriously discuss about scrapping euro at the cost of tens of billions that will have to be borne personally by those idiot bankers and their puppet politicians who promoted and implemented it.

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  • @Japanese Uncle,

    I agree with you. You cannot expect disparate countries to suddenly change their cultures and march in economic lockstep. It was always going to be a disaster.

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  • Flashback: http://www.housepricecrash.co.uk/newsblog/2007/11/blog-europe-beginning-to-crack-8288.php

    Dear Tangara,

    France has been more broke than even the UK for longer. EADS is a sham, but the French tourism industry is wonderful and so are the railways. If France instituted Free Market reforms and stopped treating non-white people like animals, they would attract tsunamis of investment.

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  • So relatively speaking do we expect the pound to gain against the euro?

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  • @inbreda,

    Structurally, the Euro is a sham, but in the short term (3-6months), we may see the GBP weaken considerably before the Euro gives up the ghost, especially as France, Spain, Italy, Greece and Portugal are forced back to the 1970s.

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  • The weaker economies hanging onto the coat tails of Germany was always asking for trouble. Hopefully the weaker economies have sorted out their structural problems in the economies (high inflation, balooning public sector deficits, etc). Maybe some of them will leave the Euro, and do a massive devaluation.

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  • lvmreader : I agree, in the short term the pound has further to fall yet.

    On the Euro’s long-term future, people keep saying it’s impossible to have one interest rate for the whole continent because of different needs in different countries. However even within Britain we have the same problem – the southeast needs higher rates while the old industrial midlands and north need lower rates. However the pound survives because politicians can use other tools to encourage investment in troubled regions while moderating the boom elsewhere. That option isn’t available to the ECB, so there are only two possibilities: either the Euro breaks up into its constituent currencies, or the European government is given more powers over the economy. I wouldn’t be surprised if we see more of the latter.

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  • Bloomberg ran an article, yesterday from some EC oficials who said they were finding it harder to maintain the unity of the Euro. They were “speaking under cover” of course.

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  • @alan,

    Interesting article – can you provide the link?

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