The future of the Euro and EU.

[anthonyvop]

Whenever I hear politicians utter the phrase "to calm market fears" I do question who is running the world The answer is the markets...whoever they are.

Well Duh!

And it does a great job. It is only when a Politician gets involved that things get messed up.

[ArrowsFA1]

And it does a great job. It is only when a Politician gets involved that things get messed up.

So never mind democratic and accountable representation, let's just hand over power to "the markets"?

[ioan]

You didn't read my post very well did you? Perhaps if you go back and read it s l o w l y, moving your lips while you read, maybe you'll understand.

I did read it, I just don't agree with it, because even though Germans use Euro to buy things in the shop they don't export only in EURO currency, it is really a mix made up of USD, CHF, Yen, RNB, CNY ... and the list is long.
They also do not have only credits in EURO, so they will not need EURO to pay for all of them.

This issues is though mostly true for the US who do use the currency in which most of their debts are.
And the US is no way exporting more goods than Germany in order to balance their finances, yet funnily enough I don't see the US rating agency telling us day in and out how they will again lower it's rating.

If you take a look at the situation of the EURO countries you will see that there are only 2 of them who's debt percentage is higher than that of the US, one of them being Greece whom aren't playing in the big league anyway and whose demise could be easily attenuated.

Anyway I am curious to see how this unfolds and who exactly are those who stand to win from this whole orchestrated mess.

[ioan]

The problem is that France and Germany aren't just responsible for paying their own debts, they are providing the collateral as it were for those $100 billion to $ trillion bailouts. They're doing this both directly and by making it more attractive for private banks to lend money by subsidising them.

This is why the Greek and Italian bailouts are eroding confidence in France and Germany. Effectively North Europe is agreeing to be liable for South Europe's debt.

That doesn't mean that they can't possibly afford to do what they are doing. In fact they could easily afford it (especially Germany) if it weren't for others trying to drive up their credit rates.

No, there is no political game. Giving credit ratings is what credit ratings agencies do, they're just doing they're job and their arguments are justified.

I don't think that it's as simple as that, there are always someones interests involved in anything that happens out there.

Having said that, we should be taking their words with a pinch of salt. After all these are the same companies that failed to spot that subprime home loans were being mixed in with solid ones and gave those packages a AAA rating, the root cause for the entire credit crunch.

It' enough to read their justification for this weeks comments and you will wonder how is that anyone thinks they are credible.

I blame Germany for the current loss of confidence in the Euro, their inaction and failure to even say anything that reassures the markets is shocking.

I don't, they know that they will survive whatever happens, it's just a question of leveraging their position within the EURO zone, and maybe also over some other third parties.

[ioan]

Whenever I hear politicians utter the phrase "to calm market fears" I do question who is running the world The answer is the markets...whoever they are.

It's funny isn't it?
Instead of regulating them so that crap of this extent doesn't happen, we try to calm down with billions of gifted money that the working men have earned.

The system is rotten to the core and big changes are needed.

[Malbec]

That doesn't mean that they can't possibly afford to do what they are doing. In fact they could easily afford it (especially Germany) if it weren't for others trying to drive up their credit rates.

Sorry I think you didn't read my post properly.

They are underwriting bailouts that are in the 100s of billions of Euros. If Greece etc default then Germany and France are liable. In effect we're talking about Germany and France doubling/tripling their national debt at a stroke. Do you really expect their credit rating to remain the same?

I don't think that it's as simple as that, there are always someones interests involved in anything that happens out there.

Perhaps. However these are companies that make their money from rating financial products and institutions for their creditworthiness. Although they sometimes slip up if they are deliberately misleading then you might find that they will lose credibility and hence profitability. Why would these companies deliberately sabotage their own value?

I don't, they know that they will survive whatever happens, it's just a question of leveraging their position within the EURO zone, and maybe also over some other third parties.

The markets don't want to touch South European bonds because they don't trust those countries, at least Italy and Greece. Both countries have a history of lying and certainly Greece has previously understated its level of debt and directly sabotaged bailout attempts with that ridiculous attempt at a referendum.

They will only regain confidence in South European bonds when North European countries pledge that they will back them to the hilt. Sarkozy understands this. Merkel doesn't.

The markets wanted a trillion Euro bailout fund. Sarkozy pushed for it, Merkel blocked it. The markets wanted the ECB to be a lender of last resort to backup the bailouts. Sarkozy pushed for it, Merkel blocked it.

Merkel is still talking about the solution being fiscal responsibility. She's right if she wants to talk about preventing another Euro crisis in the future but she seems not to understand that the current problem is that the markets don't have faith in the bailouts and won't until there is concrete money behind it.

Its like a driving instructor watching the pupil cause an accident and instead of taking over control and preventing it keeps talking about how future accidents could be prevented by taking further lessons.

Added to this, the French have been commenting about how Merkel's advisors and aides have been behaving at meetings to resolve the Euro crisis, they've been seen laughing and drinking till the early hours while the French tear their hair out at the lack of action from the Germans.

What the Euro needs is a firm leader, unfortunately that is exactly what Merkel is not.

[ioan]

I thought I did mention above that Germany alone had already exported goods worth over 1 trillion Euros this year alone.
Why is that they couldn't pony up a few hundreds of millions needed to support PIGS?!
If you add the other countries which DO make a profit in Europe I am fairly sure that the 1 trillion is not a problem, and let's be honest no one say this money has to be put tomorrow in a safe deposit, they only need to say they do it, and it's job done.
So, based on what exactly can't the Euro countries support their debts?

I'm not sure why we are trying to base the discussion on how Merkel's advisers did eat and drink at meetings?
Should they hang themselves? Would they do a better work if their were all desperate, drinking one coffee after the other?
One needs to have a balanced approach to the issue if they are to solve it and tearing their hair out wouldn't help.
And I think I did already mention that Germany wants to get something in return of their support to the Euro, they want to be able to have a say in how others are using the currency that they are upholding, and I can't fault them for this.

Why would Merkel be the leader of the EU? I thought there are already other people who are taking care of that.

Anyway by Friday night we will know more about our future.

[anthonyvop]

So never mind democratic and accountable representation, let's just hand over power to "the markets"?

When it comes to the economy.....The Free market is 1000 times more democratic than any representative government can ever hope to be.

[anthonyvop]

This will get ioan's panties in a bunch

S&P JUST PUT THE EUROPEAN UNION ON CREDITWATCH NEGATIVE
Simone Foxman | Dec. 7, 2011, 2:47 PM | 2,117 | 18

Standard & Poor's ratings service just put the long-term rating of the European Union on "creditwatch negative."

With the eurozone accounting for 62% of the European Union's budgeted revenues in 2011, it would seem that the greater, 27-state European Union is also vulnerable to the crisis.

S&P is also putting BNP Paribas, Commerzbank, Societe Generale, Credit Agricole, Deutsche Bank, and many other European banks on "creditwatch negative."

Markets appear to be unfazed by the announcement. It is not wholly unexpected after S&P's announcement earlier this week that it had changed the credit outlook of 15 eurozone sovereign nations to negative.

Once again, S&P is late to the game and appears to be locking the barn door after the horse is gone. But the change certainly indicates just how precarious Europe's financial position has become.

Here's the press release on why S&P changed the EU's long-term outlook to negative:

---

On Dec. 5, 2011, Standard & Poor's placed the ratings on 15 of the 17 member states of the European Monetary and Economic Union (EMU or eurozone) governments on CreditWatch with negative implications. As a result, the ratings on 17 European Union (EU) member states are now on CreditWatch with negative implications.
We are therefore also placing the 'AAA' long-term rating on the EU on CreditWatch negative. At the same time, we are affirming the 'A-1+' short-term rating on the EU.
The CreditWatch placement on the eurozone member states was prompted by our concerns about the potential impact on these member states of what we view as deepening political, financial, and monetary problems within the eurozone.
Eurozone members directly contribute approximately 62% of the EU's total 2011 budgeted revenues. Our CreditWatch review will focus on the financial ability of eurozone member states to support the EU's debt service should the institution face a period of financial distress.
We expect to conclude our review as soon as possible after the European summit on Dec. 9, 2011. Depending on the outcome of our review of the ratings on eurozone member governments, we could lower the long-term rating on the EU by one notch, if any.

LONDON (Standard & Poor's) Dec. 7, 2011--Standard & Poor's Ratings Services
today placed its 'AAA' long-term issuer credit rating on the European Union
(EU) on CreditWatch with negative implications. At the same time, we affirmed
the 'A-1+' short-term issuer credit rating on the EU.

The CreditWatch placement is prompted by similar CreditWatch placements, which
we made on 15 eurozone sovereigns on Dec. 5, 2011. The CreditWatch on the EU
is an expression of our concerns about the potential impact on the future debt
service capacity of eurozone sovereigns, and therefore also the EU, in the
context of what we view as deepening political, financial, and monetary
problems within the eurozone. Eurozone members account for 62% of the EU's
total 2011 budgeted revenues. For 2011, budgeted revenues from Germany and
France were 32% of total EU revenues, at 16% and 14%, respectively. In total,
'AAA' rated member states account for just over 49% of the EU's 2011 budgeted
revenues, with only the U.K., Denmark, and Sweden retaining a stable outlook
(together they contribute 13% of the EU's 2011 budgeted revenues). Given the
EU's dependency on such revenues from national budgets, and our recent
CreditWatch placements on the 'AAA' ratings on Germany and France, among
others, we will concurrently review the 'AAA' long-term rating on the EU with
the ratings on the eurozone member states.

CREDITWATCH

We expect to resolve the CreditWatch placements on the eurozone member states
as soon as possible after the European summit on Dec. 8 and 9, 2011. Following
this, we then expect to resolve the CreditWatch on the EU. We typically
resolve CreditWatch actions within 90 days, although we will attempt to
resolve the CreditWatch placements on eurozone sovereigns and therefore the EU
sooner, if possible and appropriate.

We could lower the long-term issuer credit rating on the EU by one notch if we
were to lower the current 'AAA' ratings on one or more member states, with a
special focus on the largest contributors, France and Germany. Conversely, the
ratings could be affirmed at their current levels if we were to affirm the
member states' 'AAA' ratings following the respective sovereign CreditWatch
review.

Read more: S&P JUST PUT THE EUROPEAN UNION ON CREDITWATCH NEGATIVE

[BDunnell]

When it comes to the economy.....The Free market is 1000 times more democratic than any representative government can ever hope to be.

Explain. Be aware that 'Because it just is' does not constitute an answer.