How Did Europe Get In This Economic Situation And How Do They Get Out

[onlooker]

In the fall of 2008, there was the Iceland debt crisis.  Then in the winter of 2009, there was the Greece debt crisis. 

Now, there are more cracks in the Euro zone surfacing.  So, I thought it is about time to open up this forum on all about Europe where people can post their comments here for future reference.   

[onlooker]

Saint-Etienne Swaps Explode as Derivatives Ambush Europe

See:  http://www.youtube.com/watch?v=C7gY7kMocY4&feature=youtube_gdata

[onlooker]

See this long read:

Saint-Etienne Swaps Explode as Financial Weapons Ambush Europe

By Alan Katz   April 15, 2010

Use of swaps in Europe soared in the late 1990s and early 2000s because banks pitched them as the easiest way to reduce costs on fixed-rate loans, according to Patrice Chatard, general manager of Finance Active, which helps more than 1,000 localities across Western Europe manage their debt.

The financial institutions that sold the derivatives were many of the same ones that received government bailouts to weather the worst global credit crisis since the 1930s.

http://www.bloombrg.com/apps/news?pid=20601109&sid=a30KHZKX1WJo&pos=10

[onlooker]

On IMF involvement (er ... American taxpayers) with Europe:

See: Rep. Ron Paul Grills Bernanke On The Massive Expansion To The IMF’s New Arrangement To Borrow    Posted on Apr 15, 2010

http://www.infiniteunknown.net/2010/04/15/rep-ron-paul-grills-bernanke-on-the-massive-expansion-to-the-imfs-new-arrangement-to-borrow/

[sidewinder]

Seems like it was a good idea to NOT dump the pound for Euros eh

[onlooker]

Sidewinder:

Seems like it was a good idea to NOT dump the pound for Euros eh

Swan song -- a reference to an ancient belief that the Mute Swan is completely silent during its lifetime until the moment just before it dies, when it sings one beautiful song.

~   ~   ~

I quite agree.  It’s not over, they say, until the fat lady sings.  Relating this to the British pound sterling, the third-largest reserve currency – It’s not over for the pound, until the rest of Europe sings. 

After the rest of Europe is stripped of all her secrets and at the dark and gloomy German cabaret Kit Kat Klub, a former Chancellor of Germany sings the melancholy swan song "Is That All There Is?" in the haunting style of Peggy Lee; then it will be over for the euro, and not the pound.   

[onlooker]

FYI, here’s an article on the connection between Germany and the Euro as according to this writer:

ABOUT GERMAN MONEY
 
By Richard Thomas, Contributing Writer

Modern Germany is a key member of the Eurozone, and as such it uses the euro as its currency. However, the monetary policies behind this pan-European currency are very German in origin and are based on the success of the last independent currency of Germany, the Deutsche Mark. The euro is almost as German as the Deutsche Mark was, and thoroughly German when it comes to the specifically German euro coins minted by the Bundesbank.

Replacement by the Euro

Germany was one of the founding members of the European Community (EC), and then the European Union (EU). It was only fitting that the country spearheaded the creation of Europe's  common currency, the Euro. Germany adopted the euro from the day of its introduction: January 1, 1999. However, Deutsche Marks continued as legal tender in Germany until February 28, 2002, and can still be exchanged into euros at any time at the fixed rate of 1.95 DM to 1 euro.

German Influence on the Euro

German monetary thinking was strongly influential on the terms of the Maastricht Treaty, which created the euro, its governing European Central Bank (ECB) and the Eurozone (the group of countries using the euro). The Bundesbank and the German government were firmly committed to policies that kept inflation low, and those policies live on in the euro. Eurozone members were committed to keeping their government budget deficits below 3 percent of GDP, for example. Overall, the ECB has kept inflation lower than that of other Western countries, and interest rates a little higher. This has created, just as was the case with the Deutsche Mark, a strong and stable currency. In many ways, the euro is the direct heir of the old Deutsche Mark.

http://www.ehow.com/about_5147879_german-money.html

[onlooker]

On Europe and derivatives

See: 

NEXT BUBBLE: $600 TRILLION?

Cities, states, universities could sink from monster derivatives meltdown

By Jerome R. Corsi   April 19, 2010

As interest rates begin to rise worldwide, losses in derivatives may end up bankrupting a wide range of institutions, including municipalities, state governments, major insurance companies, top investment houses, commercial banks and universities.

Defaults now beginning to occur in a number of European cities prefigure what may end up being the largest financial bubble ever to burst – a bubble that today amounts to more than $600 trillion.

The Bank of International Settlements in Basel, Switzerland, now estimates derivatives – the complex bets financial institutions and sophisticated institutional investors make with one another on everything from commodities options to credit swaps – topped $604 trillion worldwide at the end of June 2009.

To comprehend the relative magnitude of derivative contracts globally, the CIA Factbook estimates the 2009 Gross Domestic Product, or GDP, of the world was just under $60 trillion.

Derivative contracts, therefore, have now reach a level 10 times world GDP, meaning even a 10 percent default in derivatives would equal world GDP.

The small 800-year-old town of Saint-Etienne in France has just defaulted on a $1.6 million contract owed to Deutsche Bank. The city entered into a complex currency swap arrangement to reduce the cost of borrowing some $30 million.
To cancel all 10 derivative contracts Saint-Etienne currently holds would cost the town approximately $135 million, more than six times the amount initially borrowed, largely because no bank or institutional investor would want to purchase contracts that are now on the losing side of the bet.

Saint-Etienne is only one of thousands of EU municipalities that bought into derivative contracts as a way to cut the costs of municipal borrowing.

http://www.wnd.com/index.php?fa=PAGE.view&pageId=143057

[MetalMeister]

They got tempted by good returns on those derivatives and got caught with their pants down LOL.

Idiots!

Hasn't anybody other than Canada figured out that you can't spend your way out of debt?

 

Saint-Etienne Swaps Explode as Derivatives Ambush Europe

See:  http://www.youtube.com/watch?v=C7gY7kMocY4&feature=youtube_gdata

[MetalMeister]

Interesting.

Seems everyone is TOO BIG TO FAIL now.

If a country has problems because they (Greece) defrauded the European Union, then everyone around the world makes loans through the IMF to prevent something catastrophic from happening, while all the bankers get richer.

Nice to be owned by Goldman Sucks and JP Morbid...

 

On IMF involvement (er ... American taxpayers) with Europe:

See: Rep. Ron Paul Grills Bernanke On The Massive Expansion To The IMF’s New Arrangement To Borrow    Posted on Apr 15, 2010

http://www.infiniteunknown.net/2010/04/15/rep-ron-paul-grills-bernanke-on-the-massive-expansion-to-the-imfs-new-arrangement-to-borrow/

[sunseeker]

German Windfall Profits From Exiting The Euro:

http://news.goldseek.com/GoldSeek/1271693749.php

Both Germany and France realise that first one to act would reap the biggest benefit. Which in itself makes it a possibility. Britain committed itself to the ERM but had to leave. Needs must sometimes.

In a bit of disarray at the moment. Plans for the break in Spain on hold. Mrs SS thought it would be a good idea to get some work we where planning to do later on the house started now. Now we have workmen in the house until Wednesday next (I think we all know the problems/disruption associated).

Good postings everyone.


ATB 

[onlooker]

Sunseeker:

Here’s an article about another possible winning scenario for Germany.
 
There's safety in numbers.  Germany along with other more “compatible” European countries like Austria, Finland, the Netherlands could form a new common currency. 
 

Euro Trashed
By Joachim Starbatty       March 28, 2010    Tübingen, Germany

THE European Monetary Union, the basis of the euro, began with a grand illusion. On one side were countries — Austria, Finland, Germany and the Netherlands — whose currencies had persistently appreciated, both within Europe and worldwide; the countries on the other side — Belgium, France, Greece, Italy, Portugal and Spain — had persistently depreciating currencies. Yet the union was devised as a one-size-fits-all structure. As a result, some countries had to use creative accounting to satisfy the fiscal criteria for entry — Greece, it’s long been known, went so far as to falsify its debt and deficit numbers.

~    ~    ~

If Germany were to take that opportunity and pull out of the euro, it wouldn’t be alone. The same calculus would probably lure Austria, Finland and the Netherlands — and perhaps France — to leave behind the high-debt states and join Germany in a new, stable bloc, perhaps even with a new common currency. This would be less painful than it might seem: the euro zone is already divided between these two groups, and the illusion that they are unified has caused untold economic complications.

~   ~   ~

In short, the euro is headed toward collapse.

http://www.nytimes.com/2010/03/29/opinion/29Starbatty.html

[onlooker]

Portugal, next country on the chopping block; and / or a diversion from the US economic crisis.

See: 

US Stocks Tumble After S&P Cuts Greece, Portugal; DJIA Off 128        April 27, 2010

http://www.marketwatch.com/story/us-stocks-tumble-after-sp-cuts-greece-portugal-djia-off-128-2010-04-27

And see: 

The Next Global Problem: Portugal
By Peter Boone and Simon Johnson          April 15, 2010
 
http://baselinescenario.com/2010/04/15/the-next-global-problem-portugal/

[sunseeker]

Sunseeker:

Here’s an article about another possible winning scenario for Germany.
 
There's safety in numbers.  Germany along with other more “compatible” European countries like Austria, Finland, the Netherlands could form a new common currency. 
 

Euro Trashed
By Joachim Starbatty       March 28, 2010    Tübingen, Germany

THE European Monetary Union, the basis of the euro, began with a grand illusion. On one side were countries — Austria, Finland, Germany and the Netherlands — whose currencies had persistently appreciated, both within Europe and worldwide; the countries on the other side — Belgium, France, Greece, Italy, Portugal and Spain — had persistently depreciating currencies. Yet the union was devised as a one-size-fits-all structure. As a result, some countries had to use creative accounting to satisfy the fiscal criteria for entry — Greece, it’s long been known, went so far as to falsify its debt and deficit numbers.

~    ~    ~

If Germany were to take that opportunity and pull out of the euro, it wouldn’t be alone. The same calculus would probably lure Austria, Finland and the Netherlands — and perhaps France — to leave behind the high-debt states and join Germany in a new, stable bloc, perhaps even with a new common currency. This would be less painful than it might seem: the euro zone is already divided between these two groups, and the illusion that they are unified has caused untold economic complications.

~   ~   ~

In short, the euro is headed toward collapse.

http://www.nytimes.com/2010/03/29/opinion/29Starbatty.html

Hi Onlooker

Designed as an alternative to the USD, but fatally flawed.
Different languages. Different cultures. Economies biased around different sectors.
They created a “Common Currency” for countries with little or no common ground.
The EURO could have been designed for failure.
Another Goldman Sachs innovation??? LOL

When the UK had a referendum to decide if we should pull out of the EU in 1975 we where assured by ALL political parties that membership of the EU was only to cement trading relationships. The doomsayers where telling us that it would erode our sovereignty/create a United States of Europe with a common currency/laws/parliament.
 THE UK VOTER WAS ASSURED THAT IT WOULDN’T HAPPEN.

We where also told that if we didn’t join the EU then the USA would turn it’s back on the UK in favour of forging ties with the member countries and that would be disastrous for us.
I for one voted for the UK to exit the EU. Before the UK joined the EU we already had established good trading links throughout the world, not least through the Commonwealth Countries and through EFTA. The UK had found oil in the North Sea (as had Norway who was one of our trading partners in EFTA). Britain pays €9.97 billion per annum into the EU coffers and gets €6.22 billion out of the EU. Talk about shooting yourself in the foot.

Printing money will be the same story.

The masses only ever wake up to reality when it’s too late.

 ATB 

[onlooker]

OL quote:

Portugal, next country on the chopping block; and / or a diversion from the US economic crisis.

After Portugal, Spain is the latest European country to be in the hot seat.  This writer says Spain’s economy is four times the size of Greece and is considered too big to rescue.
   

SPAIN DOWNGRADED AS EUROPE DEBT CRISIS WIDENS
By Juergen Baetz and Pan Pylas          Apr 28

BERLIN – Europe's debt crisis spread its contagion to another country Wednesday when a major agency downgraded Spain's credit rating, even as Germany grudgingly moved closer to bailing out Greece from imminent collapse.
Greece and Portugal — up to now the focus of alarm — are relative economic minnows. But Spain's economy, at four times the size of Greece, is considered by many too big to rescue.

http://news.yahoo.com/s/ap/20100428/ap_on_bi_ge/eu_europe_financial_crisis