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According To AXA, There Is "No Chance" European Bail Out Package Will Succeed
Some late night words of caution from one of the UK's best journalists. In a report obtained by Ambrose Evans-Pritchard, French financial firm AXA is quoted as essentially saying that the chance of the Eurozone's survival is nil. Why a European bank would issue it own suicide note is unclear, although the firm's logic is sound: "The markets are very nervous because they can see that there is a fatal
flaw in the system and no clear way out. We are in a very major crisis that has even broader implications than
the credit crisis two years ago. The politicians have not yet twigged to
this." Ms Zemek said the rescue had bought a "maximum" of 18 months respite
before deeper structural damage hits home, with a "probable"
default by Greece setting off a chain reaction across Southern Europe. "It
would be the end of the euro as we know it. The long-term implications are
at best a split in the eurozone, at worst the destruction of the euro. It is
not going to end happily however you slice it."
And some more doom and gloom:
Axa said there was "no chance" that the EU's €750bn "shock and awe" shield will succeed since it treats Club Med's debt trap as a short-term liquidity crisis.
In the case of Greece the joint IMF-EU policy will increase Greek public debt from 120pc to 150pc of GDP by 2014, arguably making matters worse.
A number of ex-IMF officials have said the policy is doomed to failure since there is no devaluation or debt relief to offset the ferocious fiscal squeeze, and may endanger the credibility of the Fund itself. The IMF had floated the idea of a debt restructuring but this was blocked by the Brussels.
Contagion from a Greek default would be harder to control than fallout from the Lehman collapse. "This has huge implications for banks. These bonds didn't just disappear; they went somewhere, allegedly into French money markets and insurance companies, or on to French balance sheets," she said.
The ECB has lent Greek banks €85bn, mostly in exchange for collateral in the form of Greek government bonds.
This has kept Greek lenders alive as they suffer a slow bank run, losing 7pc of their deposit base since last June as wealthy Greeks shift their funds abroad. The ECB support is equal to 20pc of their non-equity funding, according to Lombard Street Research.
All this is occurring as Merkel and Sarkozy's denial that all is good is getting progressively more transparent for the mere propaganda, and total lack of long-term planning that it is. With a near record number of EURUSD short contracts outstanding, traders should be wary of massive short covering episodes, although the fate of the EUR, just like that of the US market at this point, are both guaranteed. We will present tomorrow's ECB deposit facility usage as it becomes available. Following today's all time record of €384 billion, at this point the death of European interbank liquidity is a certainty, and unlike the US, as Bank of America points out (and as we will touch upon tomorrow), there is no simple, and US-comparable "print money" solution. Europe is on now its own.
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One by one they go down in flames. Own Gold or be owned.
The only word of caution here is that AEP has been spewing about the "imminent" extinction of the euro for about 12 years now.
LOL! OK, fine, so he was 'right but early.'
(Yeah I know, in the trading world this is aka 'wrong'.) :-)
I'm not sure about your argument. Are you saying because he hasn't been right - so far - we should ignore him?
Probably not. More like the story of the broken clock twice right in a day.
Pritchard has unvariantly announced the end of Euro since its inception.
Pritchards has made a business out of this trend, building up a lucrative controversy on this dogmatic stance. He is worshipped by people who wish to see the Euro fail and mocked by other people for his oversimplistic point of view.
The guy is not interested in knowing what is what. He is interesting in stirring up controversy to cash on it.
At any point of the day, he might happen to be right. But it will only happen coincidentally. Not as a result of his analysis.
Sports are an excellent field for this kind of business model. Pick up a young sportsperson with a kind of potential and start to announce a defeat. Market your obsession. In the end, the latter the young sportsman is defeated the better it is as the defeat will bring an end to the marketing value of your obsessive rant.
I agree, any EUR-related story published by the Torygraph should be taken with a pinch of salt, because of the anti-European agendas of both the Telegraph and the UK Tory party to which the newspaper is strongly connected.
Notwithstanding the complete disintegration of the Eurozone, but yeah...whatever.
I am Chumbawamba.
I agree, any EUR-related story published by the Torygraph should be taken with a pinch of salt, because of the anti-European agendas of both the Telegraph and the UK Tory party to which the newspaper is strongly connected.
Wow, that is really one hell of a statement, the floodgates are opening.
The pair might be right according to their agenda.
Their disagreement pointed at the following:
-Mr. Sarkozy wanted a fiscal integration on the scale of the Eurozone.
-Mrs. Merkel wanted a fiscal integration on the scale of the EMU.
Seems to me that both have in common a fiscal integration.
The plan seems to go well.
No, I think Mr Sarkozy wanted to protect the French banks loans to Greece, and get some, if not all of that money back, while Ms Merkel wanted to protect the German taxpayer public, especially those that were supposed to vote in a regional election, which is now behind us.
In the end, Ms Merkel probably realized German banks had also loaned a lot of money to Greece and she relented, and German and French taxpayers ended up throwing more money in a bottomless pit: the banks coffers.
Politically, this is going to end very badly for both of them, as French and Germans voters and taxpayers are getting fed up with this little game of "let's spend money we don't have", with all its assorted nastiness (meaning: drastic budget cuts).
Top political jobs, like POTUS, are temp assignments wherein the occupants march into office with list of promises to the people that got them elected and know they will never keep. They give 4-8 years lip service to the folk, all the while spending their time making certain they and their contributors walk away with as much treasure, connections and power as they can haul away.
This works out very well for everyone but the people who, as usual, are left worse off than before.
Agreed, but what can we serfs do to stop the endless shift of wealth from the people to the plunderers? Why must the fraudulent banking system be kept afloat endlessly only to need more bailout down the road? Structural change is needed. How will it happen?
How will it happen?
When you cut up your credit cards, stop paying income taxes, and close your bank accounts and buy gold and silver.
That's when.
I am Chumbawamba.
I see what you mean but it does not fit.
All points out that the position was determined beforehand and the gymkhana between Sarkozy and Merkel was only a political show.
Because, in the end, Mrs.Merkel chose the most expensive to the tax payers solution. She could have cut in for the cheapest solution, which was to confine to Eurozone.
A comedy of a duo playing low balling to me. The finale is the most adverted solution to the tax payer. None of the actors finishes with a responbility in the deal as each of them only responded to the low ball offer of the other.
Will you please point me in the direction of the fiscal integration plan? I only recall a budgetary supervision plan.
Mark to DM! (Uber Alles)
1) Europe
2) UK
3) Japan
4) USA
5) New currency regime...first unveiled by a) China? b) Middle East? c) Russia? d) All of the above?
Roll on the Depression and the 'interesting times'. I want to get THROUGH this, and over to the other side.
Gonna go ahead and try shorting EURUSD and AUDUSD if (when?) EUR gets past the bids clustered here, sinks down past .2150.
Wonder if the Swiss are gonna have to ride up again on their white intervention horse this week?
e. none of the above!!
we are in uncharted, but well lubricated, waters here...
Hey, if it's lubricated, then I'm counting my blessings. ;-)
The Euro Crisis- a look at Spain's great depression
Picture of AEP should be in the dictionary under "Europhobe".
I know he is still pissed that he cant not, as his daddy did, study "savage tribes" [or as he would call them "continental Europeans"], but he should really tone it the fuck down.
Going from an Empire to a laughing stock must be hard, but he should hide his disgust towards Francs, Goths, Slavs and Iberians a bit better if he wishes to have any credibility.
Credibility generally means you are believed but you don't make any money.
Whereas the lying, cheating, thieving scoundrels of the world seem to wind up with all the booty and babes.
Chaos reigns triumphant.
AEP has a booty? Is it worth a look?
Amen.
Ambrose Evans-Pitchard as a best UK journalist? No, he´s famous for something else - chronic europhobia.
+∞
I´m sure that when Amrose writes about continental Europe, he froths from his mouth. He´s just insane, let´s leave him with his little pleasures, it´s his only joy. ;p
I beg to differ.
I think Ambrose Evans-Pritchard is a very professional media worker. Him being led by hate is unclear.
He managed to build a nice controversy and controversy brings cash.
He has now his followers who follow to get reinforcement on the so much expected euro downfall day and detractors who follow to mock the articles simplistic line, giving them plenty of cheap shots at no sweat.
Meanwhile, Pritchards laughs his way to the banks (he probably has several) as appealing to both sides in a controversy is the best way to bring cash.
I dont know if he loathes the Euro. What is sure is that the Euro is what earns his money. Without the Euro, the man could be compelled to provide analysis for which he would be out of his depth.
On his tombstone, one could engrave: Lived by blaming what he earned his money from.
"I dont know if he loathes the Euro."
Heh, that was a good one. Thank you. I just got my daily amount of required laugh.
His relationship to the Euro might not be related to a feeling like hatred/love.
This man, as the very professional media worker he is, has built a successful controversy over the Euro. Media is all about that: building controversies. Controversies are the best as they appeal to both sides.
See for example the excellent book by former wrestling franchise owner Eric Bishop. Best wrestlers are controversial figures as they sell seats both to their cheerers and their booers.
Pritchard is a controversial figure on the Euro. He sells paper both sides.
Does Pritchard need to hate the Euro to do that? I dont think so. Have you any evidence he does hate the Euro?
This guy has manufactured a line of speech that allows him to exist in terms on the media stage.
Claiming that Pritchards hates the Euro because he's made a business out of unvariantly negative reports on the Euro is like claiming a priest believes in his god because he's made a business out of reporting on his god. Or that a heel in wrestling is as despicable in real life as he appears on the ring.
"...very professional media worker..."
Please, dont continue in this, because I will fall off my chair laughing.
His "dislike" towards euro and continental Europe is not purely professional, it´s emotional. He keeps using emotional words, negative emotional words, expressing his (negative) views of euro or continental Europe. Example. He´s Keynesian and also a big fun of printing money. He thinks the way out of this recession are big stimulus packages and printing money. When eurozone decided for austerity measures he described this as a "demented policy". I think we both agree that saying "demented" is not exactly a professional, but rather emotional word. And he´s doing this very often, using negative emotional words in describing continental Europe. Not to talk that he only writes about eurozone when there´s some negative news, never drops a positive word. That´s not quite professional(unbiased) either. He simply hates euro and the Continent till his bones and if you cant see it, you´re either blind or of a same view as he is. Have no more to add.
isn't being in Media all about creating a hyper-emotional environment ... where people yell and scream and talk over eachother like Hardball and all that BS ? ... that's what media is ... because people love to see everybody torn apart by their adversaries ... makes for good viewing/reading..
I think we should do more of it ... let's all rip eachother to shreds night and day...let just do it!
Sure, anyone can use whatever emotions he/she wants while writing articles. No problem with that. And I´m then free to make conclusions about impartiality and credibility of such articles.
Anyway, I would rather prefer facts than emotions in financial articles, but then again, who I am to ask for that? ;P
Where have you been? This is the reason most people visit ZH: to read people ripping each other apart in the comments. It's our modern day bloodsport, just (unfortunately) without the blood.
I am Chumbawamba.
But if use of "negative emotional words" is likely to increase the controversialism of his writing (which seems likely to me) and thus, per the hypothesis you are disputing increase his readership, surely such use of emotive language could be adequately explained by cynical, rational self-interest on his part, without any explanatory recourse to genuine emotion.
As it happens, I don't think this is entirely the case. Like most people who are skeptical of the benefits of further European integration (myself included), I imagine he is genuinely concerned about the immense democratic deficit inherent in the EU's government, and very much aware that monetary unification without fiscal (and hence political) unification is a fundamentally unstable state of affairs. It is inconsistent not to oppose the existence of the Euro if you are not a Euro-federalist. And if you are a Euro-federalist, it seems to me that you ought to acknowledge that the vast majority of European citizens are of the opposing point of view, making any attempt to force through a federalist agenda fundamentally anti-democratic. It's not hard to see how this leads to the belief that the single currency was doomed from the start - and it's entirely consistent to claim that it was doomed from the start and that AEP was simply badly wrong (though not as wrong as those who expected it to be a permanent and expanding institution) about the timescale of its collapse. Some form of currency union (most likely consisting only of the northern nations for whom a hard currency is feasible) may continue to exist in a few years time. The Eurozone as presently construed, with one currency and interest rate for Germany and for Club Med, almost certainly will not. I don't pretend to know what the trigger event for break-up will be, or whether it will happen next week or in 2014. I'm pretty damn confident it's going to happen.
As for his views on economic theory, I believe he is a monetarist, rather than a Keynesian: his policy prescription for the Euro-zone, as I understand it, is fiscal austerity (not stimulus) coupled with extreme monetary loosesness - ZIRP and large scale outright (unsterilised) money printing in order to force devaluation, preferably by individual countries in their own refloated currencies, but if not by the ECB on behalf of all. I hasten to add that I do not agree with him on this.
The problem with many eurosceptics is that their beliefs are based on fiction, not reality. You write: "...I imagine he is genuinely concerned about the immense democratic deficit inherent in the EU's government...". Excuse me. What EU government? There´s none. There´s EU Commission with Commissioners being bureaucarts with very limited powers. Do you want to elect bureaucrats? I dont know of any country where bureaucrats are directly elected in elections. Do you? Most powers still lies within national governments and I doubt that will change anytime soon. And of course, all national government are directly elected by citizens. Again, what´s undemocratic in that? Will you explain?
As for eurozone. Eurosceptics keep talking about Greece and Spain on one hand and Germany on other. And what about the rest? Eurozone has 16 members and it works well for 11 of them even without any political union. Ireland and Italy are fixable so you essentially have 3 problematic countries: Spain, Greece, Portugal. I agree that they are a problem. The way out? Well, either they reform their economies (more flexible labour market, tax reform ...) or they´ll be forced out of eurozone (sooner or later). In either case eurozone can go on without political union. Either as a slimer one or a reformed one. I see no reason for eurozone disbanding because of 3 problematic countries.
I´m personally for european cooperation and integration, not necessarily federation. And let me guess, you are from UK, right?
That is the point. That is where his professionalism shines through. He is a true professional media worker. His goal is to expand his readership base.
He managed wonderfully.
As to a huge democratic deficit concern, well, the guy, as a british, can handle a certain kind of huge democratic deficit and cant handle another kind. A simple matter of taste.
I agree, any EUR-related story published by the Torygraph should be taken with a pinch of salt, because of the anti-European agendas of both the Telegraph and the UK Tory party to which the newspaper is strongly connected.
Excuse me gents, but AEP did not say this. Theodora Zemek, head of global fixed income at AXA Investment Managers did.
"The markets are very nervous because they can see that there is a fatal flaw in the system and no clear way out," said Theodora Zemek, head of global fixed income at AXA Investment Managers.
"We are in a very major crisis that has even broader implications than the credit crisis two years ago. The politicians have not yet twigged to this."
Ms Zemek said the rescue had bought a "maximum" of 18 months respite before deeper structural damage hits home, with a "probable" default by Greece setting off a chain reaction across Southern Europe. "It would be the end of the euro as we know it. The long-term implications are at best a split in the eurozone, at worst the destruction of the euro. It is not going to end happily however you slice it," she said.
He has been saying since, oh, 1999 that the EUR will implode in the next 6 months [just to say the same thing when nothing happened in those 6 months].
He got his gig just because he is the son of a well known father [who I actually admire due to his Philosophy of Anthropology and negation of quantitative values in Anthropology. He also gave birth to one of the most taboo topics in the later 20th century; the question of primacy of rationality. But thats a whole other set of topics.].
Cheeky - I loved this - the primacy of rationality in an un-rational world.
Why people don't panic at all ? Euro rate is 1.22 now, up again. Only a few guys are smart while the majority are fool ?
I like those odds!
On minor correction: AXA is an insurance company, not just a "financial firm".
Democrats and Republics speaking the same language can't agree (or compromise) on a single issue. Why anyone ever thought the EURO would work with multiple languages, cultures and political constructs is beyond (to use Cheeky's words) the primacy of rationality.
I remember the controversy well when the EUR was born. The idea was deeply unpopular in most affected countries (actually I think in all, but could be misremembering). The British treated it as a victory, successfully keeping out of it at the time.
I have trouble believing that even the pollies who pushed it *really* thought it was ever going to work. It was your classic Dumb Idea - at least that's how it looked to me across the pond...BUT, also very obviously, of great benefit to big banks who could now increase their power.
I am still not too clear on why anyone outside of piggy banksters would want to prop it up, but it may have something to do with, now that this is their currency, dismantling it may cost Europeans dearly in terms of prices, wages, pensions, investments, political stability, etc - none of the alternatives for them are attractive. Default brings great pain for the population. Austerity brings them pain. Trying to revalue in an orderly fashion brings pain. Dismantling a currency system that has been in place for more than a decade, and that was forced in and has since been flogged as some sort of hands-across-the-border ideal, must be a psychological block to say the least. (Remember the whole, 'Are You A European?' identity question?) And I get the impression that the European pollies, with some kind of reputation (?) or idealisation to preserve, are going to find it even less palatable than their populations. They will have to admit in front of the whole world that they failed. Pollies will do nearly anything to avoid this.
I do get from comments on various blogs, that some Europeans are a bit at a loss as to why everyone keeps harping about Euro bad debts, fraud, and default options, and DOESN'T for the US. It seems some are feeling a bit scapegoated for this reason. Why is the USD given a pass, and even called 'safe haven' or 'flight to quality', for being about as bad a fiat as the euro?
I've certainly noticed when the AUD and other smaller currencies - NZD, CAN - get beat down just b/c they don't have the 'friends in high places' of the major pairs. So they're easy targets even if the fiat is *at least* as good quality as the EUR or USD.
Well, just my thoughts and impressions from the outside looking in. Meantime, enjoying the short squeeze currently in progress...couldn't get my sell in, had to settle for a buy today instead! Que sera, sera.
"The idea was deeply unpopular in most affected countries ..."
Pure nonsense.
You're right that (outside Britain and one or two others) the single currency was not unpopular (though it was far from uncontroversial). However, the two possible medium term outcomes were both massively unpopular in more than enough countries to make it unworkable: the Germans (without whose consent nothing in Europe can in practice be achieved) could never accept the level of subsidisation by them of southern Europe that would be necessary to avoid the kind of austerity measures which the Club Med populations will absolutely not be willing to stomach. Germany and Spain can't sustainably be part of a currency union while retaining democratic government, because one or other of their populations will reject the sacrifices involved. It's that simple. That the Euro wasn't unpopular at the start was only the result of most people not understanding its implications.
OK, how about 'it was deeply unpopular with those few lacking common stupidity?' (since 'common sense' has become an oxymoron)
I like that.
From now on I will use the phrase "common stupidity" in place of "common sense" since the latter is not very common any more and the former is all too so.
I am Chumbawamba.
How about bailing out my breakfast cereal?
What the hell is happening to Oats?
http://www.finviz.com/futures_charts.ashx?t=ZO
Should have traded this when I called it 5 days [or so] ago.
http://www.marketwatch.com/story/bp-credit-rating-slashed-six-notches-by-fitch-2010-06-15?reflink=MW_news_stmp
The incredible exponential growth in debt is affecting all major currencies. IMHO, this is the plan. Since banks can game inflation better than the general populace, they can squeeze every available piece of wealth possible before all currencies become so worthless and debt so overwhelming that a complete reset must be established. Voila! A one world currency with all traffic through the BIS in return for the debt relief.
I don't see the difference in the value of the euro, dollar or yen. All worthless, all incapable of funding their bond obligations without global transfers of QE. All the CB's are playing race the check.
As suggested earlier, the EURUSD daily chart is giving bullish signals.
http://stockmarket618.wordpress.com
http://www.zerohedge.com/forum/latest-market-outlook-1
The bond market is like a drooling, sightless, AIDS-infected idiot monster with a colossal cock.
The politicians are so addicted to the cock that they don't mind dying.
Disgusting isn't it?
Zemek (AXA) was talking about Greek default in April:
http://www.ft.com/cms/s/0/3969bb02-52e9-11df-813e-00144feab49a.html
Investors braced for Greek defaultBy David Oakley and Anousha Sakoui
Published: April 28 2010 18:47 | Last updated: April 28 2010 18:47
...
Theodora Zemek, global head of fixed income at Axa Investment Managers, says: “The stakes are very high. Jean-Claude Trichet [European Central Bank governor] may say Greece won’t default, but the market is very worried about this.
“Regardless of a big assistance package from the International Monetary Fund and the EU, Greece may not be able to turn its economy round and we could see a default if not this year then the next.”
from same article:
Ms Zemek adds: “If the Greek crisis worsens, default or no default, then the big question turns to the future of the eurozone and whether it can survive.”
So she's been negative on the whole Eurozone question for a while. Interesting CV:
http://www.axa-im.com/index.cfm?pagepath=aboutaxaim/whoweare/corporatego...
yay. I may live to see the end of Keynsianism and indiscriminate Utilitarianism.