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Noob question, perhaps: What has Germany to gain from a breakdown of the EMU? Don't the German banks have huge outstanding debts that will be affected in the worst case scenario and the EMU folds like a wet paper bag?
by Nomad on Sun Apr 10th, 2011 at 02:39:32 PM EST
They are about to find out. After such a rupture they will no longer be able to be certain about the value of payments they receive from trading partners in much of Europe and the Deutchmark will be very strong and thus an impediment to German exports. But defending the euro requires political vision and courage, both of which seem to be lacking.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Apr 10th, 2011 at 03:15:12 PM EST
[ Parent ]
So in other words, the German industrial establishment (which is major here) is going to be pitted against the banking establishment.

This is going to be (if you'll excuse the term) rich.

Or: Angela Who?

The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman

by dvx (dvx.clt št gmail dotcom) on Sun Apr 10th, 2011 at 04:18:53 PM EST
[ Parent ]
by afew (afew(a in a circle)eurotrib_dot_com) on Sun Apr 10th, 2011 at 04:27:21 PM EST
[ Parent ]
by Jerome a Paris (etg@eurotrib.com) on Sun Apr 10th, 2011 at 04:32:56 PM EST
[ Parent ]
... it'd seem to leverage the bet to have an pro industrial-capitalist shock policy that the industrialists know about and can ram through when the shit hits the fan.

The financial-capitalists are quite possibly not looking out for a shock policy that looks after the common interests of industrialist-capitalists with other stakeholder and tosses the financial-capitalists under the bus.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Wed Apr 13th, 2011 at 02:15:13 PM EST
[ Parent ]
Are the industrialists sufficiently united and organized to "ram through" a "pro-industrialist" shock policy? How many are compromised by being beholden to the financial capitalists?

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Apr 13th, 2011 at 09:58:20 PM EST
[ Parent ]
I wonder whether being beholden to finance capitalists is a motivation to do it.

In the US, certainly not. In Germany ... I don't know. Its a lot more plausible, in any event.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Wed Apr 13th, 2011 at 10:32:42 PM EST
[ Parent ]
I am reminded of the old maxim: "If you strike at a King you must kill him."

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Apr 13th, 2011 at 10:39:42 PM EST
[ Parent ]
Hence why in US probably not.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Wed Apr 13th, 2011 at 10:58:22 PM EST
[ Parent ]
I guess the industrialists were happy to let the bankers make most of the contributions and get most of the press until....

Fortunately for Germany, it still HAS a manufacturing sector. In better run economies, such as the USA and UK manufacturing is SO 20th century. My question is: why have the industrialists let things get to this point? Or does it take the earth opening up beneath them to arouse them from their stupor?

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Apr 10th, 2011 at 04:38:27 PM EST
[ Parent ]
Fachidioten.

Isn't there a french word for it?

Their understanding of everything outside their area of competence is somewhat limited.

by IM on Sun Apr 10th, 2011 at 04:40:43 PM EST
[ Parent ]
In English a specialized idiot or idiot-savant? Suffers from tunnel vision?

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Apr 10th, 2011 at 05:23:38 PM EST
[ Parent ]
Yes. That is the word.
by IM on Sun Apr 10th, 2011 at 05:47:11 PM EST
[ Parent ]
Narrow-gauge specialist?

The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman
by dvx (dvx.clt št gmail dotcom) on Mon Apr 11th, 2011 at 05:55:16 AM EST
[ Parent ]
That... would be a railfan :-)

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Mon Apr 11th, 2011 at 08:10:51 AM EST
[ Parent ]
... I'm a standard gauge specialist ...

OTOH maybe I'm not a true railfan.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Wed Apr 13th, 2011 at 02:16:33 PM EST
[ Parent ]
I meant, a narrow-gauge specialist is one special sub-type of railfans :-)

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Wed Apr 13th, 2011 at 05:28:46 PM EST
[ Parent ]
... someone who sees a reaction to someone being described as a narrow-gauge specialist as being a railfan, and whose first reaction is to think of the pro's and con's of having rails 2ft apart ...

... risks being a narrow gauge specialist in the broader sense, even if he comes down in favor of 4ft 8.5in.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Wed Apr 13th, 2011 at 06:59:02 PM EST
[ Parent ]
What do you mean, Germany? Our government is thinking in weeks and days.

Do you really think e. g. Phillip Rösler thinks about the Eurozone? He is thinking about his party conference in may, about who will be deputy party leader, about whow he can economy minister instead of the economy minister (calif instead of the calif). Rösler is at least a bit thinking about his party too - the aforesaid eoconomy minister is fighting for his very short term political survival.

Merkel is.. I don't know. Does she know?

And the Bundesbank is as usual in a spiritual realm of their own, worrying about inflation, about rising wages (in Germany!), the public finances (in Germany!). And of course since the upheaval there, they are occupied with their own personal quarrels.

Drift, nothing more.
The result could still be the same.

by IM on Sun Apr 10th, 2011 at 04:35:15 PM EST
[ Parent ]
... are betting that by the time the periphery gets around to defaulting or devaluing, they will have shifted all the periphery's debt to the German government.

Which is why defaulting sooner is better than defaulting later.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Apr 10th, 2011 at 05:25:29 PM EST
[ Parent ]
Defaulting sooner is better than defaulting later...for the people, not the banks.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Apr 10th, 2011 at 07:38:20 PM EST
[ Parent ]
The bet here is that the political commitment to the EU and the combination of neoliberal and Austrian economics in the establishment will ensure that the EU doesn't break up and doesn't allow a default, preferring to go the IMF-style austerity route instead.

I wonder where the "no bondholder bail-ins before 2013" comes from. Is it that 2008-13 is a five-year period that they think a priori will allow banks to make their balance sheets whole to the point where they can take a default without blowing up?

Is it that by 2013 the banks will have offloaded all their debt onto the governments? Note that the EFSF is basically a way to replace unpayable maturing debt owed to "the market" with new debt owed to the EU Member States' treasuries. "The market" refuses to roll over the debt, so the EFSF does it for them.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Mon Apr 11th, 2011 at 09:13:44 AM EST
[ Parent ]
I wonder where the "no bondholder bail-ins before 2013" comes from. Is it that 2008-13 is a five-year period that they think a priori will allow banks to make their balance sheets whole to the point where they can take a default without blowing up?

That is the only thing that makes sense of the provision. And it is confirmed by the howls from Germany over StressTest 2.0. And, per Basel II definitions many of the Landsbanks will have to be capitalized, not re-capitalized. Has their capitalization to date consisted of "the full faith and credit" of their state governments?

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Apr 11th, 2011 at 11:28:06 AM EST
[ Parent ]
Silent Capital

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Apr 11th, 2011 at 12:02:18 PM EST
[ Parent ]
per Basel III definitions

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Apr 11th, 2011 at 12:03:44 PM EST
[ Parent ]
UPDATE 1-Germany acknowledges Greece may need to restructure deb

BERLIN, April 13 (Reuters) - Germany acknowledged for the first time on Wednesday that Greece may need to restructure its debt but said such a step could only be pursued before 2013 if it were done on a voluntary basis. In an interview with Die Welt newspaper, German Finance Minister Wolfgang Schaeuble said on Wednesday "additional steps" would have to be taken to deal with Greece's huge debt burden if an analysis from the European Central Bank and European Commission in June showed it is unsustainable.

His comments were the first by a senior euro zone official acknowledging that some form of restructuring of Greek debt may be needed. The ECB and the European Commission have both ruled out such a step, fearful that asking investors to accept changes such as smaller or later repayments could intensify the bloc's debt crisis, possibly sucking in other vulnerable economies. When asked by the daily how Greece, or other countries like Portugal, would ever be able to eliminate their "mountains of debt", Schaeuble said:

"In June we will get a progress report. I'm expecting a detailed analysis on the debt sustainability of Greece, that will be done in consultation with the Commission and the ECB. If this report concludes that there are doubts about the debt sustainability of Greece, something must be done about it."

Asked what should be done, Schaeuble said: "Then further steps will have to be taken."

Schaeuble made clear, however, that any restructuring would have to happen on a voluntary basis if done before 2013, when new rules go into effect that envision private creditors shouldering losses in the event debt relief is provided to stricken euro zone states. "Until then a restructuring could only take place on a voluntary basis," Schaeuble said.


This strikes me as about as reasonable as specifying that Grandpa can't die before 2013 because that would be awkward for the heirs. What ever the color scale is for unreality, this requires the deepest shade.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Apr 13th, 2011 at 09:50:11 PM EST
[ Parent ]
Take another sip, Angela.



As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Apr 13th, 2011 at 09:52:59 PM EST
[ Parent ]
ARGeezer:
Germany acknowledged for the first time on Wednesday that Greece may need to restructure its debt but said such a step could only be pursued before 2013 if it were done on a voluntary basis.
What is it with the magic 2013 date?

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Thu Apr 14th, 2011 at 04:00:29 AM EST
[ Parent ]
Next German Federal elections?
by gk (gk) on Thu Apr 14th, 2011 at 04:06:01 AM EST
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Surely they'd be better off doing it all now? Voters will have forgotten by 2013?

I suspect it's  the complex of regional and federal elections from now to 2013: lose too many of the smaller ones and Merkel will be gone.

by Colman (colman at eurotrib.com) on Thu Apr 14th, 2011 at 05:01:27 AM EST
[ Parent ]
Do voters care much? She may be postponing the problem so that her successor has to deal with it. If she gets reelected, then they can start talking about 2017 being the key date....
by gk (gk) on Thu Apr 14th, 2011 at 08:16:19 AM EST
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The date for the next fiveyear plan?

A vote for PES is a vote for EPP! A vote for EPP is a vote for PES! Support the coalition, vote EPP-PES!
by A swedish kind of death on Thu Apr 14th, 2011 at 08:00:04 AM EST
[ Parent ]
Finland may block Portugal aid
Greek debt restructuring to involve 40 to 50% haircuts

The German weekly Die Zeit quotes EU sources as estimating the size of a potential haircut for Greece of 40 to 50% to ensure debt sustainability. The paper reports that various options were under consideration now, including a simple maturity transformation. Moritz Kraemer of S&P is quoted in the article as suggesting a size of the necessary haircut of 50-70%, adding that a simple rescheduling would not provide sufficient debt relief. He said a restructuring is only worth doing if the debt is reduced to a sustainable level - considering the price a country has to pay for a restructuring of debt is very high in terms of lost market access.

 

Talking to Die Welt Wolfgang Schäuble said that he expected a detailed debt sustainability study for Greece to be prepared by the Commission and the ECB. "We will have to do something should this report conclude that the debt sustainability is in doubt", the finance minister said referring to "further measures" that would have to be undertaken.  However Schäuble also stressed that up until 2013 private creditors could only be subjected to voluntary debt restructuring. After 2013 private creditors would have to expect to automatically part of restructuring.

Why wasn't a debt sustainability study done a year ago? Anyway, better late than never.

And what is it about 2013?

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Thu Apr 14th, 2011 at 04:06:38 AM EST
[ Parent ]
... enough time to quietly shift their liabilities onto the public balance sheet, so a public publicised bailout can be avoided.

The fact that the collateral damage from such a PR exercise includes several Mediterranean economies does not seem to overly concern Die Seriöse Leute.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Apr 14th, 2011 at 05:22:33 AM EST
[ Parent ]
Exactly.
by kjr63 on Fri Apr 15th, 2011 at 03:32:58 PM EST
[ Parent ]
First year after the end of the world, so a safe place to punt to.
by afew (afew(a in a circle)eurotrib_dot_com) on Thu Apr 14th, 2011 at 05:36:03 AM EST
[ Parent ]

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