Archive

Posts Tagged ‘European Union’

Portugal is the new Greece

July 6, 2011 Leave a comment

The proverbial dike is buckling:

Moody’s Investors Service on Tuesday became the first rating agency to cut Portugal below investment grade, causing the 10-year Portuguese government bond yield to leap more than 1 percentage point to euro-era highs.

The agency cited worries that administrative problems and slow economic growth might prevent the Portuguese government from hitting ambitious targets to shrink its budget deficit over the next three years under a 78 billion euro international bailout.

But Moody’s also said efforts by the European Union to have private investors bear part of the burden of supporting Greece, through a “voluntary” rollover of maturing Greek debt, threatened investor confidence in Portugal as well.

If investors believe the EU may follow the Greek model and pressure them into bearing part of the cost of future aid to Portugal, they may become less willing to lend to Lisbon, reducing the chance that it can resume borrowing from markets in 2013 as planned, Moody’s said.

Saner heads in Europe are sounding the alarm:

 

Government bureaucrats in centralized Euro-capitals, picking winners and losers in a so-called free market never works.

Greek savers rushing to buy gold

June 22, 2011 Leave a comment

Worthless paper:

Greek citizens are emptying savings accounts and buying gold as they brace themselves for the possibility of a sovereign default and a run on the banks.

Pledges by socialist prime minister George Papandreou that his government would “save the country” have been widely discounted by the public. However, parliament gave him a vote of confidence late on Tuesday night. The socialists have a six-seat majority in the 300-member house.

Sales of gold coins have soared as savers seek a safer and fungible source of value.

“When the global financial crisis started, our sales of coins to investors overtook bullion for the first time,” said Harry Krinakis, at Sepheriades, a Greek precious metals trader. “Now the sales ratio has reached five to one.”

Tomas, a computer technician, has exchanged his euro savings for gold coins: “I keep them at home just like my grandmother did in the second world war.”

Andreas, a supermarket manager, transferred the family savings to Munich earlier this year: “The Swiss banks aren’t interested unless you’ve got several hundred thousand euros.”

“We can’t trust the politicians to get us out of this mess [and] have to protect our families,” Sakis, a garage owner, said at an anti-austerity protest in Athens’ Syntagma square. “A bank collapse has got to be on the cards.” He added he had withdrawn his savings and placed them in a bank safe deposit box “for security. Who cares about interest right now?”

Somehow the Greeks are not so thrilled with their government’s insistence that everything will be peachy.

Spain is the next Greece

May 19, 2011 Leave a comment

There seems to be a trend going on in European countries with nanny-state socialist tendencies recently:

Thousands of people last night filled Puerta del Sol, where demonstrators have used Twitter to attract supporters to a makeshift camp in the central Madrid plaza, mirroring the use of social media that fueled the recent protests in Tunisia andEgypt. They’ve plastered buildings with posters and slogans and are holding political discussions throughout the day.

Spain’s Socialist government, which faces regional and local elections on May 22, turned against its traditional base to push through the deepest budget cuts in at least three decades and overhaul labor and pension laws. The collapse of Spain’s debt-fueled property boom left the country with an unemployment rate of 21 percent, and 45 percent of young people out of work.

“The rich are getting richer and the poor are getting poorer,” Pepa Garcia, a 34 year-old unemployed actress, said in an interview yesterday at the Puerta del Sol. “People should be indignant; some banks are getting rescued with our money while we’re almost drowning.”

[…]

Spain’s bank-rescue fund has committed around 11 billion euros ($16 billion) to lenders suffering from the collapse of the real estate market. Savings banks need another 14 billion euros to meet new capital requirements, the Bank of Spain estimates. The government is pushing lenders to raise those funds from private investors, with the national rescue facility known as FROB acting as a backstop.

[…]

The Socialists are set to suffer a setback in most of the regional elections, polls show. The party will be beaten in the region of Castilla-La Mancha, which it has controlled for three decades, and may lose the city of Barcelona for the first time since Spain’s return to democracy in 1975, according to a poll by the state-run Center for Sociological Research on May 5.

[Spanish Prime Minister Jose Luis] Zapatero has angered traditional supporters by slashing public wages, freezing pensions and seeking to change wage- bargaining rules as part of his efforts to cut the euro-region’s third-largest budget deficit and shield the Spanish economy from the sovereign debt crisis.

There are lessons to be learned here in the United States, as more and more people become dependent on a government check for support.    The government should always be considered temporary help to your situation, because as fast as the government gives, so can it take away.

EU’s Greek bailout not turning out so good

It’s the firm belief of bureaucracies with control of the citizenry’s treasure that the allotment of said treasure is to the benefit of societies, and the healer of all of a nation’s ills. 

In Greece, not so much:

The eurozone’s first ever bailout of a debt-laden member country is failing and will need to be renegotiated exactly a year after the €110bn (£96bn) rescue package was agreed for Greece.

Following secret talks in Luxembourg on Friday between Athens and some of the key EU players, it emerged that Greece will not be able to meet the terms of last year’s rescue and is hoping to ask the eurozone for more funds.

As Britain made clear it did not want to offer any more support for Greece as part of an EU package or a bilateral loan, investors remain unconvinced of the ability of Athens to sustain its €340bn debt load.

Signalling that his government will struggle to finance itself on the bond markets by next year – which was part of the deal struck with the eurozone and the IMF – the Greek finance minister, George Papaconstantinou, said: “We will either go out to markets or use the recent decision by the EU that allows the European fund to buy Greek bonds. The markets continue to disbelieve in our country.”

Greece is known for government-subsidized, 50-year old retirees and citizens dependent on government money.  Turns out that’s not such a good thing.

We need some Nigel Farage

March 15, 2011 Leave a comment

When the European Union and the United States collapse under the weight of its debt and political impudence, we can’t say we weren’t warned:

 

American politics could use a few Nigel Farages, or at least the Republican party could anyway.  The Democrats are beyond saving.

Financail Crisis Redux 2.0

May 25, 2010 Leave a comment

All of this talk of liquidity in the markets and confidence between banks sounds vaguely familiar:

Dollar Libor rates gauging stress within the interbank lending market have jumped to a 10-month high of 0.5363pc, with credit contagion spreading to every area. The iTraxx Senior financials index – banks’ “fear gauge” – rose 20 basis points on Tuesday to 184. “It turns out we weren’t seeing the light at the end of the tunnel after all, but a train with a big light on it coming towards us of double-dip,” said Dr Suki Mann, at Societe Generale.

While the Libor rate is still far below peaks reached during the Lehman crisis, the pattern has ominous echoes of credit market strains before the two big “pulses” of the credit crisis in August 2007 and September 2008. In each case a breakdown of trust in the interbank market was a harbinger of violent moves in equities and the real economy weeks later.

RBS’s credit team said Libor strains were worse than they looked since most banks in Europe were paying much higher spreads, especially in Spain. The “implied” forward spreads were nearer 1.1pc.

To me, there seems to be a lot of complacency here in the United States.  The subprime mortgage crisis came around less than two years ago and destroyed much of Wall Street in its path, and took back hundreds of billions of dollars in equity from everyday Americans.  And nobody seems to worry about a second wave of failing banks and the tenuousness of our economy and financial markets.

When the dominoes start falling in Europe, only a fool will think that the American market will be immune to the mess.  We’re a global marketplace now, and the idiocy of our central bank, the Treausry and our political leaders will not change that fact.

NYT: The reckoning is coming to Europe

May 23, 2010 Leave a comment

Hey, guess what?  LIBERALISM. DOES. NOT. WORK. 

Across Western Europe, the “lifestyle superpower,” the assumptions and gains of a lifetime are suddenly in doubt. The deficit crisis that threatens the euro has also undermined the sustainability of the European standard of social welfare, built by left-leaning governments since the end of World War II.

Europeans have boasted about their social model, with its generous vacations and early retirements, its national health care systems and extensive welfare benefits, contrasting it with the comparative harshness of American capitalism.

Europeans have benefited from low military spending, protected by NATO and the American nuclear umbrella. They have also translated higher taxes into a cradle-to-grave safety net. “The Europe that protects” is a slogan of the European Union.

But all over Europe governments with big budgets, falling tax revenues and aging populations are experiencing rising deficits, with more bad news ahead.

With low growth, low birthrates and longer life expectancies, Europe can no longer afford its comfortable lifestyle, at least not without a period of austerity and significant changes. The countries are trying to reassure investors by cutting salaries, raising legal retirement ages, increasing work hours and reducing health benefits and pensions.

[…]

In Rome, Aldo Cimaglia is 52 and teaches photography, and he is deeply pessimistic about his pension. “It’s going to go belly-up because no one will be around to fill the pension coffers,” he said. “It’s not just me; this country has no future.”

Changes have now become urgent. Europe’s population is aging quickly as birthrates decline. Unemployment has risen as traditional industries have shifted to Asia. And the region lacks competitiveness in world markets.

According to the European Commission, by 2050 the percentage of Europeans older than 65 will nearly double. In the 1950s there were seven workers for every retiree in advanced economies. By 2050, the ratio in the European Union will drop to 1.3 to 1.

[…]

In Athens, Mr. Iordanidis, the graduate who makes 800 euros a month in a bookstore, said he saw one possible upside. “It could be a chance to overhaul the whole rancid system,” he said, “and create a state that actually works.”

At the end of the day, two plus two always equals four, no matter which country you live in.

Europe is only beginning to realize the big steaming pile of crap it’s gotten itself into.  Meanwhile, here in the United States our elected overlords would rather not get into the lifeboats, but are content to climb back onto the Titanic.

During the healthcare debate, the favorite mantra of the pro-reformers was that the United States was “the only Western nation” that didn’t “provide” healthcare to its citizens.  This is emblematic of the entire progressive doctrine–that government not only can provide for the cradle-to-grave well-being of its citizens, but it’s imperative that it must do so.  All of it of course, paid for by taxing the productive class and/or public debt.

This is a recipe for a Euro-style disaster.

Waiting for rainbows and unicorns in Europe

May 14, 2010 Leave a comment

Portugal has its share of economic problems, along the lines of Greece and the other Euro-socialist nations who are suddenly realizing that their social utopias are not…(ahem)… realistic.   Jose Socrates is the socialist Prime Minister and has led the country for five years:

The center-left government of Mr. Sócrates, which has had to run the country with the tacit support of the opposition since losing its outright parliamentary majority last September, appears ill-placed to scrap Socialism-inspired rules that have strained the housing market but also help the elderly survive in Western Europe’s poorest country.

After Britain, Portugal also has the region’s most unequal income distribution, with a minimum monthly salary of just €475, compared with €633 next door in Spain.

Income inequality?!  Under a left-of-center government in Europe?  How did that happen?  Isn’t a virtuous leftitst economic system supposed to look out for its lower class?

Since the inauguration of President Obama, I’ve seen so much crap from the left side of the blogosphere with regards to how great things will be once we begin to drag the country towards statism follow the enlightened path of our European brethren, and take a politically liberal approach towards governance.   You know, the whole “well the rest of the industrialized world does (insert leftist entitlement/regulatory program here), why don’t we?

The economic crisis in Europe is highlighting the folly and idiocy of such arguments, and the disastrous results of their debunked economic policies are laid out for the whole world to see.

Markets soar on $900 billion bailout for EU, or Wither the Euro?

May 10, 2010 Leave a comment

That’s a lot of short-covering.

Stocks reached levels they haven’t seen since…last week.

The markets saw some serious volatility towards the end of last week and that continued as the market surged today.  But plugging the holes via a massive liquidity intervention is not exactly a sure thing:

Just hours after leaders agreed to provide nearly $1 trillion as part of a huge rescue package, central banks began buying euro zone government bonds directly on Monday — an unprecedented move to inject cash into the financial system.

[…]

In response, the euro has rallied against the dollar, markets surged and the risk premium on Greek and other government bonds plunged. But analysts pointed out that the package did little to reduce overall debt, and that the uncertainty that has plagued the markets could return if European nations did not take bold steps to reduce their borrowing.

“If the will for fiscal discipline in the E.U. is plainly evident, long-term confidence in the euro will be restored,” Michael Heise, chief economist of the German insurer Allianz, said in a note to investors.

The Euro seemed to hit bottom last week at $1.25, and surged to $1.31 early this morning on the bailout news.  But that didn’t last long as the Euro was last trading at $1.277 vs the US dollar.

So much for confidence in the Euro.

Angela Merkel doesn’t like the banks

The German leader unloads with some arrogant and ominous rhetoric:

“First the banks failed, forcing states to carry out rescue operations. They plunged the global economy over the precipice and we had to initiate recovery packages. Because of these packages, we have become indebted and now, they are speculating against these debts — that is really very treacherous,” she said.

“Governments must regain their supremacy over the markets, which they no longer have, and for that we need much stricter global rules,” she added, at a debate on Europe organised by a public broadcaster.

States must “regain their supremacy over the markets”?  I understand this is Europe, where most people have it ingrained in them that government is the ultimate and most virtuous solution to their problems, but this is some harsh rhetoric in light of recent events.  Especially when considering that three bankers were killed during the Greek riots this week.  Not to mention the upheaval in the markets.

You would think that these arrogant buffoons would try to bring some confidence into the markets instead of using the bully pulpit to agitate.  It’s unfortunate because we’re seeing the same idiocy coming from our benevolent elected politicians here in the United States.