EU Ponies Up Trillion Dollar Rescue

Discussion in 'Politics' started by sargon20, May 10, 2010.

  1. sargon20

    Gold Member

    Joined:
    Mar 14, 2006
    Messages:
    11,370
    Likes Received:
    2,102
    Gender:
    Male
    Location:
    Atlantis
    And just when all the pundents were saying that Brussels couldn't do it.

    E.U. Details $957 Billion Rescue Package


    BRUSSELS — European leaders, pressured by sliding markets and doubts over their ability to act decisively, agreed on Monday to provide a huge rescue package of nearly $1 trillion in a sweeping effort to combat the debt crisis that has engulfed Europe and threatened markets around the world.

    Officials are hoping the size of the program — a total of $957 billion — will signal a “shock and awe” commitment that will be viewed in the same vein as the $700 billion package the United States government provided to help its own ailing financial institutions in 2008. The package represented an audacious step for a bloc that had been criticized for acting tentatively, and without unity, in the face of a mounting crisis.
     
  2. maxcok

    Gold Member

    Joined:
    Nov 17, 2009
    Messages:
    7,392
    Likes Received:
    12
    Gender:
    Male
    Location:
    Elsewhere
    Lord knows, I am no expert on Euro Politics, but my understanding was if Britain is not on board it could scuttle the whole deal. Which is by no means assured. Anyone over there want to enlighten us ignorant merichuns?
     
  3. DexterMorgan

    Verified Gold Member

    Joined:
    Mar 28, 2010
    Messages:
    441
    Albums:
    6
    Likes Received:
    780
    Gender:
    Male
    Location:
    Coming to a theater near you
    Verified:
    Photo
    It's a good first step....but, there are still many variables. Such as whether or not the affected countries (Greece, Portugal, Italy, Ireland, and Spain) will have the political strength to enact and enforce budget austerity. The biggest weakness of the EU is that even though they are unified economically, they are not unified politically. I believe I heard Angela Merkel's Christian Democrats lost pretty big over the weekend. How long will the economically secure Northern European countries be willing to subsidize the economically weaker Southern European countries. I believe we will find many countries will find it more politically palpable to exit the EU....rather than endure severe financial austerity for the good of the European Union.
     
  4. sargon20

    Gold Member

    Joined:
    Mar 14, 2006
    Messages:
    11,370
    Likes Received:
    2,102
    Gender:
    Male
    Location:
    Atlantis
    Britain has alwats wanted to go it alone.

    Did you see they rolled out Helmut Kohl, a key proponent for a united Europe, last week? He pleaded for the public not to abandon unification. But you are right, they are united in name only. The rescue package is deeply unpopular just as it was in the US.
     
    #4 sargon20, May 10, 2010
    Last edited: May 10, 2010
  5. DexterMorgan

    Verified Gold Member

    Joined:
    Mar 28, 2010
    Messages:
    441
    Albums:
    6
    Likes Received:
    780
    Gender:
    Male
    Location:
    Coming to a theater near you
    Verified:
    Photo
    The UK really isn't a key player in this...they retained the British Pound. As Margaret Thatcher said...(paraphrasing).."When you give up your currency, you give up your sovereignty". Plus, and I'm really generalizing here...most people in the UK view themselves as "Atlanticist" (aligned with the US)...then aligned with continental Europe (Eurosceptics).

    Plus, the UK has their hands full with their own budget crisis, and now a hung parliment
     
  6. DexterMorgan

    Verified Gold Member

    Joined:
    Mar 28, 2010
    Messages:
    441
    Albums:
    6
    Likes Received:
    780
    Gender:
    Male
    Location:
    Coming to a theater near you
    Verified:
    Photo
    A lot of Germans have a point. They went through severe economic hardship reuniting Eastern and Western Germany. It was a severe economic strain, but they buckled down and got it down. Now they wonder..."why should we subsidize public employees retiring at 50 (in Greece) when nobody else can do that here". I think many Germans would love to return to the Mark...just as many Greeks would like to return to the Drachma. That way, I think both sides would be happy. One could devalue their currency (although the Greeks don't have a strong export market, so not so much benefit)...and the Germans could enjoy ultra-low borrowing rates and the strength of being a reserve currency.
     
  7. sargon20

    Gold Member

    Joined:
    Mar 14, 2006
    Messages:
    11,370
    Likes Received:
    2,102
    Gender:
    Male
    Location:
    Atlantis
    Yes the Germans loved the strong mark. It seems the euro was born in Brussels and not in the hearts and minds of Europeans. And now the public(northern) has to pay for it. I think Britain long ago recognized the danger of succeeding so much control to Brussels and said 'no thanks' to all of it. You have vastly different countries and cultures united by a currency. How can that last?

    Euro Will Collapse Like Tower of Babel: Economist
     
  8. dandelion

    Verified Gold Member

    Joined:
    Sep 25, 2009
    Messages:
    7,879
    Albums:
    2
    Likes Received:
    598
    Gender:
    Male
    Location:
    UK
    Verified:
    Photo
    I think the eurosceptics are much more 'little englanders' and hate all non-english equally.


    Someone observed the reason the Germans are interested in bailing out Greece is all those German banks holding potentially deafaulting Greek debt.The euro authorities will now kindly take it off their hands if needs be.
     
  9. D_Tim McGnaw

    D_Tim McGnaw Account Disabled

    Joined:
    Aug 30, 2009
    Messages:
    7,317
    Likes Received:
    8

    Exactly, the European central bank will be buying up huge amounts of sovereign debt, meaning that it will be responsible for paying it. Hence the huge rally in world markets and a big rise in the value of the Euro. The underlying message being that so long as the European Union, or at least the entire Euro zone becomes the guarantor of these debts there is plenty of confidence that they wont be defaulted on. This means that confidence in the overall EU economy is also high.
     
    #9 D_Tim McGnaw, May 10, 2010
    Last edited: May 10, 2010
  10. D_Andreas Sukov

    D_Andreas Sukov Account Disabled

    Joined:
    Oct 6, 2008
    Messages:
    2,933
    Likes Received:
    3
    I believe he meant Europhile.
     
  11. TomCat84

    Gold Member

    Joined:
    Nov 23, 2009
    Messages:
    3,497
    Albums:
    1
    Likes Received:
    32
    Gender:
    Male
    Location:
    San Diego, CA
    I think an earlier poster's point was that although these countries are essntially united economically, they are not even close to being united politically, at least in terms of electorates. When push comes to shove, will the German/French, etc electorates tolerate a continued subsidy of poorer nations, ie Greece? Perhaps they will begin to vote for parties that promise to withdraw from the EU.
     
  12. D_Tully Tunnelrat

    D_Tully Tunnelrat New Member

    Joined:
    Jun 25, 2004
    Messages:
    1,168
    Likes Received:
    1
    It's a grand gesture to the markets, but won't solve all the remaining structural issues. Unless it is accompanied by a real political union, and a more accommodative monetary policy, you will continue to see heavy deflation in parts of Europe that prior to the euro were known as high inflation economies: Italy, Greece, etc. or a re-combing of who is in the EU/Euro. I see this as a East-West deflation-inflation push-pull, so far the East is ahead, but eventually the West will no longer be able to combat their deflation with more debt. Do I hear the sound of printing presses in the distance...
     
  13. sargon20

    Gold Member

    Joined:
    Mar 14, 2006
    Messages:
    11,370
    Likes Received:
    2,102
    Gender:
    Male
    Location:
    Atlantis
    The Germans would leave the euro before that happens.
     
  14. Joll

    Gold Member

    Joined:
    Jan 28, 2009
    Messages:
    14,509
    Albums:
    1
    Likes Received:
    722
    Gender:
    Male
    Location:
    Wales (GB)
    LOL! That's a bit of a generalisation, Dandy! A lot of them go over the top - but many (I think) just resent the power to govern their country residing elsewhere.

    I guess Euro-realists are more balanced though, than out-and-out sceptics.
     
  15. Jason

    Gold Member

    Joined:
    Aug 26, 2004
    Messages:
    9,924
    Likes Received:
    639
    Gender:
    Male
    Location:
    London (GB)
    Yet again the EU has come up with too little, and there are doubts about the ability to deliver.

    Greece is a tiny part of the Eurozone economy. Yet we have found that a E110bn rescue is needed (and that just a first stage). The markets need to be reassured that there are guarantees in place for other Eurozone economies that might go pear shaped. The list certainly includes Portugal, Spain, Italy and Ireland and may include Belgium and Austria. Spain and Italy are big economies. A back of an envelope calculation suggests that the sum needed is E5trillion.

    There are also political issues. The sovereign debt is issued by individual countries, not the Eurozone. Paying guarantees could be done by individual countries stumping up real money. This needs agreement - it isn't quick or automatic. Or it could be done by the ECB buying it, which in effect is printing money. At the moment there isn't a legal framework for this. Again it needs agreement.

    The deal is an expression of support by Eurozone countries. But in the end it is just words. The markets have responded well today. I don't think it will last.
     
  16. Jason

    Gold Member

    Joined:
    Aug 26, 2004
    Messages:
    9,924
    Likes Received:
    639
    Gender:
    Male
    Location:
    London (GB)
    This is just not right.
     
  17. D_Tim McGnaw

    D_Tim McGnaw Account Disabled

    Joined:
    Aug 30, 2009
    Messages:
    7,317
    Likes Received:
    8

    Yes very back of an envelope Jason.


    But in any case, the ECB will be buying up sovereign debt, that's part of the deal agreed. There is a legal framework for it, it's been agreed and will be happening.

    This is the largest bailout in history, it's hardly an expression of support. The markets don't respond to empty gestures Jason, surely even you know that.
     
  18. Jason

    Gold Member

    Joined:
    Aug 26, 2004
    Messages:
    9,924
    Likes Received:
    639
    Gender:
    Male
    Location:
    London (GB)
    I thought in the UK/EU threads of the politics board we were showing that on our side of the Atlantic we know how to be polite and respectful of others in our comments.
     
  19. D_Tully Tunnelrat

    D_Tully Tunnelrat New Member

    Joined:
    Jun 25, 2004
    Messages:
    1,168
    Likes Received:
    1
    Even under the IMF program, the Greek debt will reach 150% of GDP in three years, and you will need GDP growth of 7-8% for forever just to pay the increased debt. Even with both of these conditional programs, Greece is effectively insolvent. Better to restructure the debt now. A haircut of 50% would be about right.

    Given that the Angela Merkel effectively lost control of one house of the German Parliament/Bundestag because she supported the much smaller bailout of Greece. What will the reaction of the Westphalians be when they are asked to pay even more to bail out Greece? This new bailout package may never be ratified, even if Greece meets all the conditions required to meet each next bailout payment, as it still needs to clear 14 parliaments in order to be law.

    Did you seen the strain on Sarkozy, and Merkel's faces? They looked almost as exhausted as Clegg and Cameron post their election campaign.

    Oh, and by the way, 53% of the IMF's contribution which has been calculated at $230B-320B will be paid by the US. So the US helping to save the EU.
     
  20. D_Tim McGnaw

    D_Tim McGnaw Account Disabled

    Joined:
    Aug 30, 2009
    Messages:
    7,317
    Likes Received:
    8

    I wasn't being impolite, merely pointing out that even someone as doctrinaire about their opposition to the EU as you are has to admit that the markets do what's in the best interests of making money and that they don't operate on the basis of a wing and prayer. But you can act as though I was being disrespectful of you if you want. I mean that would be much easier than dealing with an alternative opinion to your own I'm sure, not that I'm accusing you of trying to smear what I've said or anything, perish the thought. You would never be so impolite or disrespectful, would you?
     
    #20 D_Tim McGnaw, May 11, 2010
    Last edited: May 11, 2010
Draft saved Draft deleted