Post Tagged with: "Ireland"
Understanding Greek CDS in a restructuring
I expect a soft restructuring sometime in 2011 followed by a certain degree of dithering and a hard restructuring down the line. But, of course, the tail risk is there
Stuffing bondholders in Greece and Ireland
If E.U. leaders are smart, they will understand that the turmoil they fear from a Greek restructuring will be much worse if that default is a unilateral one forced by a population that has taken to the streets
Destroying the Periphery in Order to Save the Core’s Banks
William Black writes that the non-payment of debt – including bank debt – by the nations on the periphery would lead to severe banking crises and a return to recession in the core of eurozone. This is what is behind the stance of the ECB, EU, and the IMF. He argues that this is destructive and that it is essential that the nations of the EU periphery reclaim their sovereignty as sovereign nations have a range of policy options to recover from recessions. Unemployment is a pure deadweight loss. In a serious recession in a nation such as the U.S., the losses are measured in the trillions of dollars. Speeding the recovery from recession, ending unemployment, and avoiding hyper-inflation should be a sovereign nation’s transcendent economic goals at this time
The Euro system contains a serious design flaw
The primary difference for Euroland to sovereign issuers is that the Euro can only be created by the ECB – it is the issuer of the currency. The governments of Ireland, Greece, Spain, Germany, etc. are the USERS of the currency. The implications of this distinction cannot be overstated. Members of the Eurozone are like individual states in the US. Like California, Ireland must go out and ‘get’ the currency – either by taxing or borrowing – before it can spend. It must pay whatever financial markets demand, and it can be priced out of the market. It can become insolvent, and it can be forced to default on its debt
To repeat, the ECB is not conducting a stealth bailout
Karl Whelan finds that a recent analysis by Hans-Werner Sinn on an alleged ECB bailout is incorrect. Willem Buiter is now out with a commentary on the same issue corroborating Whelan’s view. Below are the bullet points he highlights in his analysis for Citigroup followed by the full article. This is seriously technical stuff, but still very important. I have underlined the key bits because his argument ties in with something I have been banging on about for some time, namely that banks are not reserve constrained in a convertible floating exchange rate credit system
What has led Ireland to the brink of collapse?
A comprehensive outline of the Irish situation and with a retrospective on the steps leading us to the brink
The ECB is not conducting a stealth bailout
In a recent column at VoxEU , Hans Werner Sinn of the prestigious Institute for Economic Research claims that the German Bundesbank is effectively propping up banks across the Eurozone’s periphery. He adds that doing this risks a major crisis. Here, Karl Whelan of University College Dublin argues that Professor Sinn’s analysis is incorrect and that his policy prescriptions are extremely unhelpful and even dangerous
Europe Needs Shock and Awe, but…
Various news wires are reporting leaks of the IMF/EU/ECB review of Greece. Apparently they are concluding that the implementation of the conditions for last year’s aid package have ground to a halt. They are also concluding that the Greece economy is weaker than they had previously thought
Will Greece Allow Central Bankers To Destroy Sovereignty?
ECB intransigence leaves little alternative to breakup. Europe’s payments-surplus nations are waging financial war against the deficit countries. Without a common union based on mutual support within a mixed economy – one capable of checking financial aggression – the European Central Bank replaced the military high command. Its bold gamble is whether the Greeks will be as stupid as the Irish, not as smart as the Icelanders
Breakup of the euro?
The creditors know that the game is up. All they can do is take as much as they can, as long as they can, pay themselves bonuses that are “free” from recapture by public prosecutors, and run to their offshore banking centers
Kicking the Can to the End of the Road
Each new version of the European debt crisis will spook the bond markets yet again. When you look at the economies of the euro-peripheral countries, it is hard to see how they can dig themselves out without a great deal of pain and serious spending cuts, which of course means slower economies and even more pain. But that is the only way through, short of the Eurozone basically guaranteeing all debt for a long time, which means you are asking Finnish and German and Dutch and French voters to agree to take on more taxes to pay that debt. Or it means a real loss of sovereignty and control for debtor nations
Here’s How Much German Banks Are on the Hook To The Periphery For
It bears remembering that the German banks are very exposed to the periphery as we contemplate the Spiegel article on Greece’s alleged desire to defect from the euro zone