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Gene Ellis

The Eurocrisis Can Easily Flare Up Again - Seeking Alpha - 0 views

seekingalpha.com/...isis-can-easily-flare-up-again

shared by Gene Ellis on 03 Dec 12 - No Cached
  • It is clear for all that they will also have to swallow cuts, but for this to take place, politicians have to break promises, the ECB has to break the law, and the IMF has to do something rather unprecedented. None of this is easy, to put it mildly.
  • Recently, there was a new EU/IMF/ECB 'agreement' that won't fare any better.
  • Basically, we're lending Greece more in order for it to keep the appearance that it is servicing and paying of the debt.
  • ...8 more annotations...
  • The International Monetary Fund will not disburse Greece's next bailout tranche until the country completes a voluntary buy back of its debt, an IMF spokesman said
  • Who will actually sell the debt at a 70% discount?
  • Most private Greek debt holders just want to hold to maturity, they've already been subjected to two haircuts.
  • Two thirds of the private holders of Greek debt are Greek banks (22 billion euro). These are certainly not going to sell because doing so forces them to realize losses on the debt,
  • There is a simple and obvious solution, which will then force itself. The official creditors should take really substantial losses on Greek debt.
  • The simple truth is that as long as Greece's economy is moribund and its debt/GDP trajectory spiraling out of control, nobody is going to invest in Greece, capital and educated people will leave in a vicious cycle, and Greece's capacity for paying back its debt shrinks by the day. Something has to give.
  • The only real alternative is Greece leaving the euro
  • This situation is basically a slow asphyxiation.
  • Gene Ellis on 03 Dec 12
     
    Exc. piece...  Eurocrisis as of Dec. 3, 2012
Gene Ellis

Europe to Germany: your eurocrisis 'answers' don't work for us - CSMonitor.com - 0 views

www.csmonitor.com/...3

GDP

shared by Gene Ellis on 01 May 12 - No Cached
  • Gene Ellis on 01 May 12
     
    Global
Gene Ellis

Eurocrisis: on towards total catastrophe - Mail Online - M E Synon's blog - 0 views

synonblog.dailymail.co.uk/...towards-total-catastrophe.html

shared by Gene Ellis on 04 Sep 12 - No Cached
  • Gene Ellis on 04 Sep 12
     
    "catastrophe This is an edited version of my column in Monday's Irish Daily Mail -- "
Gene Ellis

The Limits to ECB Policy - The Euro Crisis - WSJ - 0 views

blogs.wsj.com/...the-limits-to-ecb-policy-2

shared by Gene Ellis on 08 Mar 13 - No Cached
  • Although it has yet to be implemented or even clearly delineated, the mere threat of an ECB bond-buying program, which is what the OMT boils down to, has been enough to drive down yields and reopen the fixed-income markets to the single currency’s struggling sovereigns.
  • Those in employment don’t want their salaries to adjust downwards and insist on maintaining regulations that protect them from competition from the unemployed. Impossible to justify regulatory barriers to entry remain in many employment sectors (such as French rules that make becoming a ski guide almost as onerous as it is to get a pilot’s license).
  • ultimately, politicians will have to make the decisions on whether the euro zone can be saved by choosing to accept either inflation or massive, and unlimited, cross-border transfers or painful unwinding of past excesses through internal devaluation and restructuring.
Gene Ellis

Op-ed: The End of the Euro: A Survivor's Guide - 0 views

www.iie.com/...oped.cfm

EUROCRISIS

shared by Gene Ellis on 16 Jun 12 - No Cached
  • Ms. Lagarde's empathy is wearing thin and this is unfortunate—particularly as the Greek failure mostly demonstrates how wrong a single currency is for Europe.
  • The Greek backlash reflects the enormous pain and difficulty that comes with trying to arrange "internal devaluations" (a euphemism for big wage and spending cuts) in order to restore competitiveness and repay an excessive debt level.
  • During the next stage of the crisis, Europe's electorate will be rudely awakened to the large financial risks which have been foisted upon them in failed attempts to keep the single currency alive. When Greece quits the euro, its government will default on approximately 121 billion euros of debt to official creditors and about 27 billion euros owed to the IMF.
  • ...7 more annotations...
  • More importantly and less known to German taxpayers, Greece will also default on 155 billion euros directly owed to the euro system (comprised of the ECB and the 17 national central banks in the euro area). This includes 110 billion euros provided automatically to Greece through the Target2 payments system—which handles settlements between central banks for countries using the euro. As depositors and lenders flee Greek banks, someone needs to finance that capital flight, otherwise Greek banks would fail. This role is taken on by other euro area central banks, which have quietly lent large funds, with the balances reported in the Target2 account. The vast bulk of this lending is, in practice, done by the Bundesbank since capital flight mostly goes to Germany, although all members of the euro system share the losses if there are defaults.
  • But between Target2 and direct bond purchases alone, the euro system claims on troubled periphery countries are now approximately 1.1 trillion euros (this is our estimate based on available official data). This amounts to over 200 percent of the (broadly defined) capital of the euro system.
  • No responsible bank would claim these sums are minor risks to its capital or to taxpayers. These claims also amount to 43 percent of German Gross Domestic Product,
  • Jacek Rostowski, the Polish Finance Minister, recently warned that the calamity of a Greek default is likely to result in a flight from banks and sovereign debt across the periphery, and that—to avoid a greater calamity—all remaining member nations need to be provided with unlimited funding for at least 18 months. Mr. Rostowski expresses concern, however, that the ECB is not prepared to provide such a firewall, and no other entity has the capacity, legitimacy, or will to do so.
  • The most likely scenario is that the ECB will reluctantly and haltingly provide funds to other nations—an on-again, off-again pattern of support—and that simply won't be enough to stabilize the situation.
  • he automatic mechanics of Europe's payment system will mean the capital flight from Spain and Italy to German banks is transformed into larger and larger de facto loans by the Bundesbank to Banca d'Italia and Banco de Espana—essentially to the Italian and Spanish states. German taxpayers will begin to see through this scheme and become afraid of further losses.
  • there will be recognition that the ECB has lost control of monetary policy, is being forced to create credits to finance capital flight and prop up troubled sovereigns—and that those credits may not get repaid in full. The world will no longer think of the euro as a safe currency; rather investors will shun bonds from the whole region, and even Germany may have trouble issuing debt at reasonable interest rates.
Gene Ellis

We still need to learn the real lessons of the crisis - FT.com - 0 views

www.ft.com/...3a-11e3-a5f9-00144feabdc0.html

EUROCRISIS

shared by Gene Ellis on 09 Jan 14 - No Cached
  • We still need to learn the real lessons of the crisis
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