Is The Euro Going To Collapse? The EU?

[Kathianne]

In the past week to 10 days, I've seen more and more financial reports that it may actually happen. This one I just ran across from, The Economist, probably sums the situation up best:

http://www.economist.com/node/21540255


The euro zone Is this really the end? Unless Germany and the ECB move quickly, the single currency’s collapse is looming Nov 26th 2011 | from the print edition

EVEN as the euro zone hurtles towards a crash, most people are assuming that, in the end, European leaders will do whatever it takes to save the single currency. That is because the consequences of the euro’s destruction are so catastrophic that no sensible policymaker could stand by and let it happen.
A euro break-up would cause a global bust worse even than the one in 2008-09. The world’s most financially integrated region would be ripped apart by defaults, bank failures and the imposition of capital controls (see article (http://www.economist.com/node/21540259)). The euro zone could shatter into different pieces, or a large block in the north and a fragmented south. Amid the recriminations and broken treaties after the failure of the European Union’s biggest economic project, wild currency swings between those in the core and those in the periphery would almost certainly bring the single market to a shuddering halt. The survival of the EU itself would be in doubt.

Yet the threat of a disaster does not always stop it from happening. The chances of the euro zone being smashed apart have risen alarmingly, thanks to financial panic, a rapidly weakening economic outlook and pigheaded brinkmanship. The odds of a safe landing are dwindling fast...

[Kathianne]

and another, directly addressing Britain's position in the scheme of things should the worst happen?

http://www.telegraph.co.uk/news/worldnews/europe/eu/8917945/Can-Britain-cope-if-the-eurozone-collapses.html


By Iain Martin (http://www.telegraph.co.uk/comment/columnists/iainmartin/)
7:00PM GMT 26 Nov 2011



What happens if the eurozone breaks up?

It would make the collapse of Lehman Brothers look like a mere rehearsal. The risk is that if a eurozone government – say Greece or Italy – defaults on its debts, it will send such a shock through the European banking system that there would be a cascade of bank failures and the seizing-up of basic transactions.

In such conditions, it is hard to see how the eurozone could be calmly picked apart by policy-makers: its break-up would be rapid and disorderly, with some countries leaving the euro and a chaotic slump in trade, consumer confidence and demand for goods and services.

Is a collapse looking likely?

Until recently, the idea that the eurozone could break into pieces seemed outlandish. But increasingly, it appears to be the most likely outcome. Last week, the markets even turned on Germany, which is usually seen as the ultimate safe bet. On Wednesday, more than 30 per cent of the 10-year bonds that it was trying to sell went unbought...


What can the Government do?
Behind the scenes, Whitehall’s first priority is contingency planning. The Government is now operating on the basis of an expectation that the single currency will come apart, but is hoping it doesn’t happen soon: “The eurozone was a mad idea,” says a senior minister. “It will break up. But so terrible would be the impact that we think it’s worth them having a go at keeping it together.” In the meantime, the Foreign Office is focusing on trying to prepare the machinery to help Britons who might be stranded abroad if banking systems and cash machines go down.
There is also the potential for social unrest: embassies and consulates have been told to prepare for a flood of inquiries and requests for help if the euro stops working in some countries and other currencies have to be introduced (there are a million Britons in Spain alone). Fortunately, the government can keep liquidity flowing at home in an emergency, thanks to the UK retaining its own currency.
Is there any good news?
Not a lot in the short term, but there is some further down the road. Even if the euro as we know it comes apart, it is unlikely to splinter into 17 new currencies. Austria, Holland and others are so closely integrated with the German economy that a northern currency bloc would quickly be born. That bloc – let’s call it “Greater Germany” – is extremely prosperous and would want to be open for business as soon as possible.
Economic crises also present opportunities. Britain has a long history of trading well beyond Europe’s borders, and the Government is keen to encourage better links with rising countries such as India. It will take time, but a post-eurozone Britain could end up less fixated on Europe, and more engaged with the increasingly prosperous outside world.
Iain Martin is a leading political commentator

[Noir]

The Euro *is* dead, its been dead for months, and i've known people who kept a tight eye on all things EU who have been saying the Euro was coming into major trouble *before* the recession hit.

The only think that is keeping the Euro alive is the fear of what would happen without it, because of that no one is willing to make the first move. But i suspect its coming closer, and germany will likey be the 'first mover'. I dread to think what the world economies will look like when that day comes.

[Kathianne]

The Euro *is* dead, its been dead for months, and i've known people who kept a tight eye on all things EU who have been saying the Euro was coming into major trouble *before* the recession hit.

The only think that is keeping the Euro alive is the fear of what would happen without it, because of that no one is willing to make the first move. But i suspect its coming closer, and germany will likey be the 'first mover'. I dread to think what the world economies will look like when that day comes.

I fear that you are right, the onslaught of links tend to back that up. I hope you and they are wrong, but wouldn't put money on it.

[jon_forward]

I to believe the euro is soon to be worthless and nothing more than trinkets. We shall soon see how deep the abiss truly is.the fall will be very fast and hard.

[fj1200]

The Euro won't be worthless and the EU isn't going anywhere but the grand monetary experiment will be over.

[darin]

Who will the population hold accountable for the bad ideas that lead to the collapse? Will the population FINALLY get it - socialism like they had it is TERRIBLE for nations?

[fj1200]

Who will the population hold accountable for the bad ideas that lead to the collapse? Will the population FINALLY get it - socialism like they had it is TERRIBLE for nations?

The bad idea wasn't their brand of socialism, it was an unsustainable central banking regime because they don't have the fortitude to let Greece, et al, suffer their fate.

[Noir]

I to believe the euro is soon to be worthless and nothing more than trinkets. We shall soon see how deep the abiss truly is.the fall will be very fast and hard.

and watch the Dollar and Pound crash with it...

[Kathianne]

and watch the Dollar and Pound crash with it...

I would have yepped this a few weeks ago, now not so sure. They'll take a hit, but not I think would have been predicted.

[Kathianne]

Hmmm,

http://www.guardian.co.uk/politics/wintour-and-watt/2011/nov/29/georgeosborne-autumn-statement-20111


George Osborne prepares for run on banks in troubled eurozone countries Tories warn of collapse of eurozone and danger of a depression as Germany is criticised for slow response


George Osborne (http://www.guardian.co.uk/politics/georgeosborne) said in his autumn statement (http://www.hm-treasury.gov.uk/press_136_11.htm) on Tuesday that the Treasury is "undertaking extensive contingency planning" in response to the eurozone crisis (http://www.guardian.co.uk/business/debt-crisis).
The chancellor gave little detail of this planning. This was in line with the decision of the Office for Budget Responsibility (http://www.guardian.co.uk/business/office-for-budget-responsibility) (OBR) not to assess the impact on Britain's economic growth of a "disorderly outcome" to the eurozone crisis.
Behind the scenes Treasury officials are hard at work. They are losing sleep over fears of a run on the banks in Italy (http://www.guardian.co.uk/world/italy) and some of the other troubled eurozone members. This is what one Treasury source told me:

The five to midnight scenario will be a run on the banks in Greece (http://www.guardian.co.uk/world/greece), Italy and Portugal (http://www.guardian.co.uk/world/portugal). Spain (http://www.guardian.co.uk/world/spain) is fine. There is already a drawdown from banks. But we haven't got to a run on the banks yet.

Sir Mervyn King (http://www.guardian.co.uk/business/mervyn-king), the governor of the Bank of England (http://www.guardian.co.uk/business/bankofenglandgovernor), highlighted concerns about banks in the eurozone in his evidence to the Commons Treasury select committee on Monday. But there are growing fears among members of Osborne's circle that the eurozone could break up...

...

There is at least some cause for comfort. Gideon Rachman argued in the FT on Tuesday (http://www.ft.com/cms/s/0/79656ee4-19b3-11e1-ba5d-00144feabdc0.html#axzz1f7bPXmar) that a "grave economic crisis in Europe" would not lead to a repeat of the instability of the 1930s:


For all the parallels, I still cannot bring myself to believe that we are heading back to the 1930s.




I fail to see comfort in the inability to 'bring myself to believe...'

[Noir]

I would have yepped this a few weeks ago, now not so sure. They'll take a hit, but not I think would have been predicted.

The pound is all but totally interlaced with the euro. Not to mention for such a small country we have a huge banking sector. Groups like Loyds and HSBC, huge multinational banks would drop like stones. Not to mention the Spanish Bank Santander, who own a couple of banks in the UK. A euro collapse would be disastrous to the pound.

[jimnyc]

The pound is all but totally interlaced with the euro. Not to mention for such a small country we have a huge banking sector. Groups like Loyds and HSBC, huge multinational banks would drop like stones. Not to mention the Spanish Bank Santander, who own a couple of banks in the UK. A euro collapse would be disastrous to the pound.

That the same HSBC as here in the States, where all of my money is currently located? I have some CD's there too... If they dropped/failed, would I lose everything? Can I move a CD from one bank to another if it's not time yet? Fuckers better not fail and take my $$$ with them!

[Noir]

That the same HSBC as here in the States, where all of my money is currently located? I have some CD's there too... If they dropped/failed, would I lose everything? Can I move a CD from one bank to another if it's not time yet? Fuckers better not fail and take my $$$ with them!

Yeah it's all part of the one bank -

"HSBC Holdings plc is a global banking and financial services company headquartered in Canary Wharf, London, United Kingdom.[3] As of 2011 it is the world's second-largest banking and financial services group and second-largest public company[6] according to a composite measure by Forbes magazine.[7][8] It has around 7,500 offices in 87 countries and territories across Africa, Asia, Europe, North America and South America and around 100*million customers.[4][9] As of 30 June 2010, it had total assets of $2.418*trillion, of which roughly half were in Europe, a quarter in the Americas and a quarter in Asia.[5]"

And trust me, basically every house in the UK with a mortgage will have it with Loyds, HSBC or Santander. So idk what the heck would happen if one/all failed.

[fj1200]

That the same HSBC as here in the States, where all of my money is currently located? I have some CD's there too... If they dropped/failed, would I lose everything? Can I move a CD from one bank to another if it's not time yet? Fuckers better not fail and take my $$$ with them!

No, they're all still FDIC insured and I'm pretty sure that any US subsidiary is going to have to meet US rules on reserves, etc.

[fj1200]

And trust me, basically every house in the UK with a mortgage will have it with Loyds, HSBC or Santander. So idk what the heck would happen if one/all failed.

So? That will have no impact on the mortgages.

[Noir]

So? That will have no impact on the mortgages.

How will it not when an entire currency breaks down?

[fj1200]

^The banks still hold the mortgages and are entitled to be repaid. The pound is not going to break down.

[logroller]

No, they're all still FDIC insured and I'm pretty sure that any US subsidiary is going to have to meet US rules on reserves, etc.

----translation----

the US govt will make sure they remain too big to fail... I mean solvent.:laugh:


Breaking news-wise-- central banks eased lending today-- even China lowered reserve ratios.
http://news.businessweek.com/article.asp?documentKey=1376-LVGNVD0D9L3501-6GNUPRVDSPRHP42JACNRKSJ3V1

[Noir]

^The banks still hold the mortgages and are entitled to be repaid. The pound is not going to break down.

But how much can you owe to a bank that's just crashed? To take the most clear cut example, A&L was bought by Santander, should the Euro collapse, with most of santanders assets in Eruos, how does it trade and operate?

[fj1200]

----translation----

the US govt will make sure they remain too big to fail... I mean solvent.:laugh:

;) That boat done sailed about 80 years ago anyway.


Breaking news-wise-- central banks eased lending today-- even China lowered reserve ratios.
http://news.businessweek.com/article.asp?documentKey=1376-LVGNVD0D9L3501-6GNUPRVDSPRHP42JACNRKSJ3V1

Let's float our troubles away.

[fj1200]

But how much can you owe to a bank that's just crashed? To take the most clear cut example, A&L was bought by Santander, should the Euro collapse, with most of santanders assets in Eruos, how does it trade and operate?

You owe the bank whatever your mortgage says you owe the bank; the bank as entity still has claims on your house flat. I'm guessing Santander UK, formerly A&L, is still a pound based entity and will remain as such even though owned by Banco Santander regardless of what happens to its Euro-based parent. If the Euro and pound are heavily devalued then congratulations, owners of real estate will be able to pay their debt with highly inflated Euros/pounds.

[logroller]

You owe the bank whatever your mortgage says you owe the bank; the bank as entity still has claims on your house flat. I'm guessing Santander UK, formerly A&L, is still a pound based entity and will remain as such even though owned by Banco Santander regardless of what happens to its Euro-based parent. If the Euro and pound are heavily devalued then congratulations, owners of real estate will be able to pay their debt with highly inflated Euros/pounds.

and refinance their loans at inflated values(euro/pound) :coffee:

[Noir]

You owe the bank whatever your mortgage says you owe the bank; the bank as entity still has claims on your house flat. I'm guessing Santander UK, formerly A&L, is still a pound based entity and will remain as such even though owned by Banco Santander regardless of what happens to its Euro-based parent. If the Euro and pound are heavily devalued then congratulations, owners of real estate will be able to pay their debt with highly inflated Euros/pounds.

I'm with you until this point "if the euro ans pound are heavily devalued then congratulations, owners of real estate will be able to pay their debt with highly inflated Euros/pounds." that makes no rational sense to my brain. Surly the persona debt will be proportional to the inflation/deflation of the currency.

[fj1200]

I'm with you until this point "if the euro ans pound are heavily devalued then congratulations, owners of real estate will be able to pay their debt with highly inflated Euros/pounds." that makes no rational sense to my brain. Surly the persona debt will be proportional to the inflation/deflation of the currency.

Try this then; the "inflated pounds" are now worth less than when you originally borrowed to buy your house and you can pay your debt with the now devalued/inflated currency. There is no adjustment to the original value of the mortgage, any inflationary scenario is going to lower the real value of the mortgage over time. That inflation expectation is built in to the interest cost that you pay but if inflation goes up after you borrow the money the holder of the real estate will reap the gain. Conversely the holder of the note will suffer a real loss on that mortgage.

Does that make the mud any clearer? :laugh:

[Kathianne]

Scary analysis:

http://www.theatlantic.com/business/archive/2011/11/will-the-eurozone-last-the-year/249202/


Will the Eurozone Last the Year? By Steve Clemons
Ten days ago, Sean Kay (http://www.huffingtonpost.com/sean-kay), a political science professor at Ohio Wesleyan University and author of Celtic Revival? The Rise, Fall, and Renewal of Global Ireland (http://www.amazon.com/Celtic-Revival-Renewal-Global-Ireland/dp/1442211091), sent me the note below outlining Germany's options now after having failed to take the steps that might have put it in front of Europe's growing economic crisis:

One thing that is crucial to keep in mind is that the peripherals -- Ireland, Portugal and Greece -- may likely not even be worth in terms of assets the actual value that Germany and the rest of Europe and the IMF is bailing them out at, particularly if deepening recession stunts any prospects of economic growth.

Crucially, the argument for the Irish bailout (and Portugal and the first Greek tranche) was containment to stop contagion. But that was the "theory" behind it. Aggressively get Ireland early into that fold to stop the bleeding, especially to shore up German and other major bank exposure at the time.

Here's the key: that approach has clearly failed. Key to the Germans, It was not in to help those peripherals - but it instead wanted to use them to send the strongest possible messages to Italy (and Spain) about budget reform and austerity - and in both cases that has clearly failed as we are seeing the contagion nightmare unfold. What is amazing to me is that scenarios just a few week ago unthinkable now seem very possible....