Is Italy the Latest Failed Euro State?

[RandBlade]

That is one way of looking at it. The other is that governments that have proven incapable of reforming are pushed in front of the bus by a very effective campaign of not helping those who don't help themselves.

So far the crisis is costing the paymasters of the EMU very little and the prolafigate member states a lot.

Ah, very clever. Our ingenious solution is to do nothing, make the situation far worse, then ...

It is not eurosceptics now saying that the eurozone itself is in an existential crisis here. It takes a very generous mind to credit inaction, awkwardness, the inability to make serious deals and tough choices as a "very effective campaign". The G20 and all the other practically weekly crisis meetings now have been part of that effective campaign I suppose?

[Hazir]

Ah, very clever. Our ingenious solution is to do nothing, make the situation far worse, then ...

It is not eurosceptics now saying that the eurozone itself is in an existential crisis here. It takes a very generous mind to credit inaction, awkwardness, the inability to make serious deals and tough choices as a "very effective campaign". The G20 and all the other practically weekly crisis meetings now have been part of that effective campaign I suppose?

You should understand that I am not 100% certain at what is being played out right now. What I see is that there are minute babysteps towards the 'Fed-ization' of the ECB, but what I also see is that those steps being minute is replacing peer presure with the cold hard hands of the markets. And then you start to see a pattern of shoving Club Med into a Rheinland model.

Is it economic inaptitude or very refined byzantine politics? I for one don't know. What I do know is that if it is politics it makes very good use of the crisis by threathening armageddon while knowing armageddon can be stopped in its track by using the monetizing of debt option.

[RandBlade]

Be careful what you wish for, 3 months ago you said that the armageddon could be avoided by that but because it was possible it wouldn't be necessary. Now its looking more and more plausible that in the end that will be the only option that will end this - and ultimately that option means a large-scale fiscal transfer between nations. The big losers then would be the "paymasters of EMU", so why they would have deliberately made that happen is beyond me.

[Hazir]

Be careful what you wish for, 3 months ago you said that the armageddon could be avoided by that but because it was possible it wouldn't be necessary. Now its looking more and more plausible that in the end that will be the only option that will end this - and ultimately that option means a large-scale fiscal transfer between nations. The big losers then would be the "paymasters of EMU", so why they would have deliberately made that happen is beyond me.

Who said is that this is what I wish for? I just mentioned that it can be used if things really go bad, and by keeping it out of reach right now things go bad where pressure is needed. Is it a smart policy? From one angle it looks inept and unsatisfying, from the other it looks like sheer genius.

[RandBlade]

Insane, Machiavellean and cynical would be appropriate adjectives to put before the word genius too were it deliberate.

I think more this is a case of an unmovable object (German/ECB resistance) meeting an irresistable force (market realities/pressures).

[Nessus]

I think more this is a case of an unmovable object (German/ECB resistance) meeting an irresistable force (market realities/pressures).

This is the way the euro ends.

This is the way the euro ends.

Not with a bang but with bunga-bunga.

Seriously, with Italian 10-years now well above 7 percent, we’re now in territory where all the vicious circles get into gear — and European leaders seem like deer caught in the headlights. And as Martin Wolf says today, the unthinkable — a euro breakup — has become all too thinkable:

A eurozone built on one-sided deflationary adjustment will fail. That seems certain. If the leaders of the eurozone insist on that policy, they will have to accept the result.

Every even halfway plausible route to euro salvation now depends on a radical change in policy by the European Central Bank. Yet as John Quiggin says in today’s Times, the ECB has instead been part of the problem.

I believe that the ECB rate hike earlier this year will go down in history as a classic example of policy idiocy. We would probably still be in this mess even if the ECB hadn’t raised rates, but the sheer stupidity of obsessing over inflation when the euro was obviously at risk boggles the mind.

I still find it hard to believe that the euro will fail; but it seems equally hard to believe that Europe will do what’s needed to avoid that failure. Irresistible force, meet immovable object — and watch the explosion.

[Hazir]

Insane, Machiavellean and cynical would be appropriate adjectives to put before the word genius too were it deliberate.

I think more this is a case of an unmovable object (German/ECB resistance) meeting an irresistable force (market realities/pressures).

Why would the Germans be unmovable? They benefit enormously from the euro, and relatively cheap as things stand. A lot of the talk that comes out of Germany shows that people that matter know what is necessary and welcome it. They just want it on their conditions, and that would mean more than anything that the ECB is not going to be used for future excessive state spending.

[Loki]

Krugman needs to stop making grandiose statements about things he's only moderately informed about. The euro might or might not collapse, but it's hardly at the edge of the line right now. I really wish someone kept track of all the BS predictions he makes that never come true.

[Nessus]

Given how loathed he is, there's bound to be a web site

I think he shadow boxes against a few, in fact

[Steely Glint]

I really wish someone kept track of all the BS predictions he makes that never come true.

Unrelatedly, people who make BS predictions safe in the knowledge that by the time they're supposed to come to pass people will have forgotten all about them, and then use them to present some mysterious air of worldliness or hint at sources of information unavailable to the listener, or to try use it to some kind of point are a major pet hate of mine.

[RandBlade]

Why would the Germans be unmovable? They benefit enormously from the euro, and relatively cheap as things stand. A lot of the talk that comes out of Germany shows that people that matter know what is necessary and welcome it. They just want it on their conditions, and that would mean more than anything that the ECB is not going to be used for future excessive state spending.

Yes, the Germans have gained, just as much as the Italians gained. At first. The problem is that they currently want to have their cake and eat it too, as you say "on their conditions". The excessive spending that the Mediterranean nations were spending was in no small part on Germanic exports, just as it was unsustainable for the Greeks and Italians, the situation they'd created was unsustainable for the Germans too. Now the same currency that allowed them to over-sell to them is also what is poisoning the atmosphere.

It is time to pay the piper, on the markets conditions.

[Loki]

Krugman is a pet hate of mine.

I do have to say that one of the things I like about academia is that someone like Krugman would be considered a clown after the second prediction.

[RandBlade]

Hence why he is a Nobel-prize winning academic and must vaunted in academic circles?

The funny thing is that Krugman to me represents the frustrating part of academia.

[Loki]

Hence why he is a Nobel-prize winning academic and must vaunted in academic circles?

The funny thing is that Krugman to me represents the frustrating part of academia.

Vaunted in academic circles? Certainly not. He's a joke now. Even people who agree with him don't take him seriously anymore.

[Dreadnaught]

I'm beginning to find the discussion of whether this crisis is a failure of the Euro to be something of a distraction. If anything, it seems the Euro simply hastened what was an inevitable crisis of overgenerous entitlement states backed by onerous tax policies.

In many ways, this is the fiscal reckoning some of us have been talking about.

Separately, I'm a fucking idiot for scheduling an investment in an internationally-weighted mutual fund with 50% exposure to Europe that was triggered today.

[RandBlade]

Fears that Europe's sovereign debt crisis was spiralling out of control have intensified as political chaos in Athens and Rome, and looming recession, created panic on world markets.

Reports emerging from Brussels said that Germany and France had begun preliminary talks on a break-up of the eurozone, amid fears that Italy will be too big to rescue.

Yeah right, I'll believe it when I see it. But still, if the Eurozone was to break up, Germany giving up and exiting/creating a Euro2 is more likely probably than a new Lira being created by choice.

[CitizenCain]

Hence why he is a Nobel-prize winning academic and must vaunted in academic circles?

The funny thing is that Krugman to me represents the frustrating part of academia.

He's not an academic and he's not even an economist. Granted, ~30 years ago he did some Nobel-prize winning work in economics, but... since then, he just bitches about how America isn't communist enough. About 3 decades ago, Krugman changed from an economist and an academic into a political pundit (and a bad one, at that).

[Hazir]

Yes, the Germans have gained, just as much as the Italians gained. At first. The problem is that they currently want to have their cake and eat it too, as you say "on their conditions". The excessive spending that the Mediterranean nations were spending was in no small part on Germanic exports, just as it was unsustainable for the Greeks and Italians, the situation they'd created was unsustainable for the Germans too. Now the same currency that allowed them to over-sell to them is also what is poisoning the atmosphere.

It is time to pay the piper, on the markets conditions.

Talking about paying; you really there will not be a price to pay for the UK for keeping Italy afloat? It is unlikely we will let you get away with much more talk from the sidelines for free. Either you will fork out money or be told to shove any reservations you have about treaty changes.

[GGT]

I'm beginning to find the discussion of whether this crisis is a failure of the Euro to be something of a distraction. If anything, it seems the Euro simply hastened what was an inevitable crisis of overgenerous entitlement states backed by onerous tax policies.

In many ways, this is the fiscal reckoning some of us have been talking about.

IMO it's a political failure, not a fiscal or monetary one. They're not the United Nations of Europe, like the United States of America. A single currency could never unite all those nations, with different histories and languages, and national identities.

Separately, I'm a fucking idiot for scheduling an investment in an internationally-weighted mutual fund with 50% exposure to Europe that was triggered today.

Why did you do that?

[Hazir]

I'm beginning to find the discussion of whether this crisis is a failure of the Euro to be something of a distraction. If anything, it seems the Euro simply hastened what was an inevitable crisis of overgenerous entitlement states backed by onerous tax policies.

In many ways, this is the fiscal reckoning some of us have been talking about.

Separately, I'm a fucking idiot for scheduling an investment in an internationally-weighted mutual fund with 50% exposure to Europe that was triggered today.

It is not a bit of a distraction, it is a major distraction. The only reason people talk about this crisis is because that's the way the media and certain talking heads talk about it. There is however not a single reason why a default of even all EMU countries should necessarily lead to the disappearance of the euro. There are scenarios that make a breakup plausible, but all of those scenarios rest on the ridiculous presumption that it is useful for a non-competitive economy that doesn't print a reserve currency to devalue its currency rather than to undertake steps to improve its competativity.

It's like telling Greece that it shouldn't even try to be like Germany and that it has no other way to go than that of Zimbabwe.

[Hazir]

IMO it's a political failure, not a fiscal or monetary one. They're not the United Nations of Europe, like the United States of America. A single currency could never unite all those nations, with different histories and languages, and national identities.



Why did you do that?

If it were just a political failure then it's not a failure as far as I know; the euro still exists.

And to be honest, I guess it will be around for a long long time.

[GGT]

The euro as a currency, or the eurozone as a unified economic group of nations?

The ECB or the IMF?

Political differences are inherent....what's the plan for that? Or will it be another plan, for a future plan?

[RandBlade]

Talking about paying; you really there will not be a price to pay for the UK for keeping Italy afloat? It is unlikely we will let you get away with much more talk from the sidelines for free. Either you will fork out money or be told to shove any reservations you have about treaty changes.

Ah it always comes back to the UK with you, right.

Be interesting to see how the Irish react in their referendum etc if there's a new treaty. Not that I think a new treaty is necessary, the regulations required were set forth in Maastricht anyway - let alone Nice or Lisbon, they just weren't enforced. While the EFSF has already been set up despite the treaty. To be pratting around arguing over a Treaty which then has to be ratified by 27 nations unanimously, many by referendum (including possibly the UK but not just us) is to pick a rather apt saying "fiddling while Rome burns". Is there nothing better or more serious to do?

[GGT]

You guys are confusing. All this time, such worry and fret about tiny Greece....while larger nations and more important economies like Italy or Spain are much more worrisome, and harder to "save".

Is there a plan for that?

[RandBlade]

You guys are confusing. All this time, such worry and fret about tiny Greece....while larger nations and more important economies like Italy or Spain are much more worrisome, and harder to "save".

Is there a plan for that?

Italy has always been more worrisome but less immediate, they day of reckoning is fast approaching (if not now here) for Italy though.

The problem is that when a decade ago I and others were concerned about these problems we were "(Chicken) Little (Englanders)" and not sensible and ignored.

When the crisis hit its been a case of why do today what can be put off until tomorrow.

Greece has been dealt with, salami slice style only as and when it'll mean utter collapse if its not. Its still after years now and multiple bailouts not resolved.
Ireland and Portugal were only bailed out on the days it became necessary.
Italy has been put off, obfuscated, denied it would be necessary and only now getting dealt with when its too late.
Spain is being ignored.
France is being totally ignored.

Yes it'd be sensible to have dealt with this sooner. Perhaps but you'll never here anyone say it, it'd be in hindsight sensible not to have gotten into this mess in the first place. Oh well, hindsight is 20-20. We've been using the acronym of PIIGS for quite a while now, but only dealt with them piecemeal. It may be attempted to be explained as masterly inactivity, but you're right GGT - there is no plan.

tl;dr - The countries of Europe are still individual nations and no individual nation wants to be stuck with the bill.

[GGT]

Well, the real problem is.....no nation wants to be "stuck with the bill", but every nation is heavily in debt. Not just eurozone or euro currency nations, but also the US. (And we help fund the IMF.) And all our debt is global, linked via financial institutions that created "synthetic investment vehicles", including bets on sovereign default and credit defaults in the swaps markets, and hedging currency values. All of which trace back to either gov't fiscal policy (politics) or central banks (monetary policy).

The whole thing is crazy. Debt as profit, buying debt as profit, leveraging debt as profit (arbitrage). The basic facts are pretty stark, though. Made quite grim by the Great Global Recession. Or the Great Transition, the Great Reset, or whatever you want to call it: everyone has been living on IOUs and debts, with carry trades and fuzzy accounting for decades. Everyone.

[Hazir]

Ah it always comes back to the UK with you, right.

Be interesting to see how the Irish react in their referendum etc if there's a new treaty. Not that I think a new treaty is necessary, the regulations required were set forth in Maastricht anyway - let alone Nice or Lisbon, they just weren't enforced. While the EFSF has already been set up despite the treaty. To be pratting around arguing over a Treaty which then has to be ratified by 27 nations unanimously, many by referendum (including possibly the UK but not just us) is to pick a rather apt saying "fiddling while Rome burns". Is there nothing better or more serious to do?

Well, you seem to be missing the whole political situation again. There is not going to be a treaty in the old school way. The treaty Merkel is talking about is going to force EU to make in-out decisions, there will not be any chance for any country to veto the deal for all others.

The Irish voting no will simply mean that the Irish vote themselves out of whatever deal is made to save their economy.

And why I keep bringing up the UK over and over again is that your government is telling your public that in this financial crisis it's a good idea to act as if your interest in getting a solution for the crisis is so little that there is no reason for you to pony up money just like the rest of us.

[Hazir]

Well, the real problem is.....no nation wants to be "stuck with the bill", but every nation is heavily in debt. Not just eurozone or euro currency nations, but also the US. (And we help fund the IMF.) And all our debt is global, linked via financial institutions that created "synthetic investment vehicles", including bets on sovereign default and credit defaults in the swaps markets, and hedging currency values. All of which trace back to either gov't fiscal policy (politics) or central banks (monetary policy).

The whole thing is crazy. Debt as profit, buying debt as profit, leveraging debt as profit (arbitrage). The basic facts are pretty stark, though. Made quite grim by the Great Global Recession. Or the Great Transition, the Great Reset, or whatever you want to call it: everyone has been living on IOUs and debts, with carry trades and fuzzy accounting for decades. Everyone.

Would you mind keeping that crap out of this discussion? The EU is not in the same financial state as the US, the problems are entirely different. There is interconnection but not because the problems are the same.

[RandBlade]

To distract attention from the eurozone for a moment, I was pointing out a few months ago the UK gilts and being mocked by Hazir for saying there were "safe haven" status currently. Well the UK gilts today hit a record - 10 year gilts are at 2.106%, the lowest since 1896.

Was amused reading this elsewhere, just to put into context 1896, this is who was ruling Europe back in 1896 when the UK's gilts were last viewed as this safe.

Austria-Hungary - Franz Joseph I, Emperor of Austria and King of Hungary (1848–1916)

Belgium Léopold II, King of the Belgians (1865–1909)

Bulgaria Ferdinand of Bulgaria, King of Bulgaria (1886–1918)

Denmark
Monarch - Christian IX, King of Denmark (1863–1906)

France -
President - Félix Fauré, President of France (1895–1899)

German Empire -
Monarch - Wilhelm II, German Emperor (1888–1918)

Greece
Monarch - George I, King of the Hellenes (1863–1913)

Italy
Monarch - Umberto I, King of Italy (1878–1900)

Luxembourg

Monarch - Adolphe, Grand Duke of Luxembourg (1890–1905)

Netherlands

Monarch - Wilhelmina, Queen of the Netherlands (1890–1948)

Ottoman (Turkish) Empire - Abdülhamit II, Sultan (1876–1909)

Portugal - Carlos, King of Portugal (1889–1908)

Russia - Nicholas II, Tsar of Russia (1894–1917)

Serbia -Monarch - Aleksandar Obrenović V, King of Serbia (1889–1903)
Spain -
Monarch - Alfonso XIII, King of Spain (1886–1931), under the regency of his mother Queen Maria Christina (1885–1902)

Sweden - United Kingdoms of Sweden and Norway -
Monarch - Oscar II, King of Sweden (1872–1907)

United Kingdom -
Monarch - Victoria, Queen of the United Kingdom (1837–1901)
Prime Minister - Robert Arthur Talbot Gascoyne-Cecil, 3rd Marquess of Salisbury, Prime Minister of the United Kingdom (1885–1886, 1886–1892, 1895–1902)

1896!!! Interesting reading though, a change of the times. Some very famous names, but didn't realise that France was the only Republic back then.

We now resume back with the normal programming. Total Eurozone growth predictions slashed today

[GGT]

Would you mind keeping that crap out of this discussion? The EU is not in the same financial state as the US, the problems are entirely different. There is interconnection but not because the problems are the same.

Nope, sorry, my "crap" is just as important in this discussion as anyone else's. Debt is debt and politics are politics. The interconnection is a great part of the problem, even if you think the specifics are "entirely different". The worries are about contagion, tumbling dominoes, and who picks up the pieces. Every day the eurozone nations wobble, the US stock market tanks. Every day the euro currency falters, other currency markets react.