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Could The Financial Crisis Erupting In Ireland, Portugal, Greece And Spain Lead To The End Of The Euro And The Break Up Of The European Union?
Could The Financial Crisis Erupting In Ireland, Portugal, Greece And Spain Lead To The End Of The Euro And The Break Up Of The European Union?
Courtesy of Michael Snyder at Economic Collapse
The Irish banking system is melting down right in front of our eyes. Ireland, Portugal, Greece and Spain are all drowning in debt. It is becoming extremely expensive for all of those nations to issue new debt. Officials all over Europe are begging Ireland to accept a bailout. Portugal has already indicated that they will probably be next in line. Most economists are now acknowledging that without a new round of bailouts the dominoes could start to fall and we could see a wave of debt defaults by European governments. All of this is pushing the monetary union in Europe to its limits. In fact, some of Europe's top politicians are now publicly warning that this crisis may not only mean the end of the euro, but also the end of the European Union itself.
Yes, things really are that serious in Europe right now. In order for the euro and the European Union to hold together, two things have got to happen. Number one, Germany and the other European nations that are in good financial condition have got to agree to keep bailing out nations such as Ireland, Portugal and Greece that are complete economic basket cases. Number two, the European nations receiving these bailouts have got to convince their citizens to comply with the very harsh austerity measures being imposed upon them by the EU and the IMF.
Those two things should not be taken for granted. In Germany, many taxpayers are already sick and tired of pouring hundreds of billions of euros into a black hole. The truth is that the Germans are not going to accept carrying weak sisters like Greece and Portugal on their backs indefinitely.
In addition, we have already seen the kinds of riots that have erupted in Greece over the austerity measures being implemented there. If there is an overwhelming backlash against austerity in some parts of Europe will some nations actually attempt to leave the EU?
Right now the focus is on Ireland. The Irish banking system is a basket case at the moment and the Irish government is drowning in red ink. European Union officials are urging Ireland to request a bailout, but so far Irish Prime Minister Brian Cowen is not taking the bait. The Irish government does not seem too keen on having even more austerity measures imposed upon it by the EU and the IMF.
According to Nadeem Walayat, the harsh austerity measures that Ireland has endured during this past year have only made Ireland's financial problems even worse....
The people of Ireland having endured over a year of austerity on the promise that it was all necessary to suffer pain today by cutting public spending so as to reduce the annual budget deficit to sustainable level for economic gains tomorrow. Instead the exact opposite is taking place as the Irish economy contracts due to economic austerity whilst its bankrupt banks are sending the countries debt and liabilities soaring, thus resulting in a far worse budgetary position than where Ireland was before the austerity measures were implemented as the bond markets are waking up to evitable debt default which is sending interest rates demanded to hold Irish debt soaring to new credit crisis highs.
But the big Irish banks are bleeding cash fast. For example, the Bank of Ireland recently reported "a 10 billion euro outflow of deposits from early August until the end of September." Irish banks and the Irish government need help whether they are willing to admit it or not.
But Ireland is not the only one in trouble. Portugal became the latest European nation to push the panic button when Portuguese Finance Minister Fernando Teixeira dos Santos announced that his country was in such bad financial shape that it might have to seek a bailout package.
Things are so bleak in Portugal right now that Foreign Affairs Minister Luis Amado says that his nation "faces a scenario of exit from the euro zone" if a solution is not found for this financial mess.
On top of all this, word is coming out that Greece is in even worse financial condition than initially believed. The statistics agency for the EU, Eurostat, revealed on Tuesday that Greece's deficit for 2009 was actually 15.4% of GDP rather than 13.6% of GDP as originally thought.
The Greek national debt is now well over 120 percent of GDP. It seems inevitable at this point that Greece will need more bailouts if they are to remain part of the EU.
Spain is also starting to feel the heat. Spain's short-term debt financing costs jumped sharply on Tuesday, and officials in Spain are begging the Irish government to accept the bailout they are being offered so that the "contagion" does not spread.
But could a few mid-size countries in Europe really cause the next great global financial crisis?
Yes.
In the UK, veteran Conservative MP Peter Tapsell is warning that a total collapse in Ireland "could pose as great a threat to the world economy as did Lehman Brothers, AIG and Goldman Sachs in September 2008".
Already we are seeing world financial markets getting rattled by all this news.
Fears regarding what is happening in Ireland, Greece, Spain and Portugal helped push the Dow Jones industrial average down nearly 200 points on Tuesday.
But the real story is that this financial crisis in Europe could potentially cause the break up of the euro and of the European Union.
The truth is that the euro and the European Union are inseparably linked at this point. In fact, EU President Herman Van Rompuy is warning that if some of the weaker countries in Europe are forced to abandon the euro it will likely cause the total destruction of the European Union....
"We’re in a survival crisis. We all have to work together in order to survive with the euro zone, because if we don’t survive with the euro zone we will not survive with the European Union."
German Chancellor Angela Merkel is also warning that a failure of the euro could bring down the entire European Union....
"If the euro fails, then Europe fails."
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But officials in Europe are not going to let the dream of a united Europe slip away easily. Right now they are working really hard to keep Europe together, and that means some "tough love" has to be imposed on the "weak sisters". As these weaker European economies collapse, they are being forced to accept harsh EU mandates in exchange for bailouts. As Ambrose Evans Pritchard recently pointed out, "forced austerity" is quite similar to serfdom....
Greece is now under an EU protectorate, or the “Memorandum” as they call it. This has prompted pin-prick terrorist attacks against anybody associated with EU rule. Ireland and Portugal are further behind on this road to serfdom, but they are already facing policy dictates from Brussels, but will soon be under formal protectorates as well in any case. Spain has more or less been forced to cut public wages by 5pc to comply with EU demands made in May. All are having to knuckle down to Europe’s agenda of austerity, without the offsetting relief of devaluation and looser monetary policy.
In the end, Europe is going to move in one of two directions. Either this financial crisis will finally be the thing that breaks up the euro and the European Union, or it will result in a Europe that is ruled even more strongly by EU bureaucrats.
As this crisis unfolds over the next couple of years, the EU is going to try to grab more power and more control. They are going to ask national governments to give up substantial amounts of power and sovereignty in exchange for bailouts. So far it is working.
But at some point will one nation say that enough is enough?
Perhaps that one nation could be Ireland. The citizens of Ireland actually voted "no" on the EU Constitution, but then the EU forced them to vote a second time so that they could "get it right".
Wouldn't it be ironic if it is Ireland that ends up lighting the fuse that breaks up the euro and the European Union? The Irish are a fiercely independent people, and they have a history of resisting tyranny.
In any event, this is going to be an extremely interesting winter across the EU. If things go badly, the entire global financial system could be plunged into mayhem. Let us hope that does not happen.
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Second photo courtesy of William Banzai7 (at Zero Hedge)
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Italy and Spain are the next countries who could follow Ireland and Portugal with Greece into the abyss. Either the policymakers figure out that pain cannot lift anyone up, or Europe will descend into another recession, and probably take the world with it.
http://www.prime-targeting.com/european-banks-in-trouble/
While Irish banks are fast losing their depositor base and there is a real question mark over solvency of the Irish government, there really is a simple "daisy chain" solution which is for the Irish government to have the ECB loan money to the Irish banks to buy Irish government bonds - after all there is a blanket guarantee on offer from the Irish government.
List of tax haven countries.
http://www.financemetrics.com/save-the-banks-from-themselves/
My proposal is as follows: once you are in the EU, you can apply to join the EMU (i.e., use the Euro as your currency). If your economy is not good enough, you continue using your old currency. England and Switzerland have decided to stay out of the EMU for reasons of sovereignty. Greece should never have been let in.
If you are in the EMU. and things start going sour the solution is to reconvert to your old currency. One day all bank accounts are converted from euros to the new currency at par. Even bonds would convert 1 to 1. The government would then allow the new currency to float on the FX exchanges, and issue new bonds denominated in the new currency. Any base money they need to print is in the new currency, which is their privilege.
As the currency depreciates, bond holders and equity stakes take a slow manageable (and hedgeable) haircut. They also collect their coupons in the new currency, the equivalent of a lower interest rate.
Once the problems of too much debt had been worked through, the country, which is still in the EU, could choose to reapply for entry to the EMU again. In theory this could happen multiple times without putting the whole EU or EMU into jeopardy. Presumably over some long period like 50 years the less responsible countries would evolve a culture of fiscal responsibility. And this would stop happening.
Every time there is a crisis in the EU, yank and brit dogs start barking "It is the end of Euro and EU!". At least Europeans discuss their problems and try to find solutions, unlike Americans who just print more money or sell more muni or state bonds, pretending everything will be ok some day. California is a big clusterfuck, so is Florida and many many other States. Plus the drastically dumbed down and gridlocked Congress and Senate.
Countries rarely detach from a stronger currency and create their own weaker one. It is the other way around. Countries issue new currencies when the old one starts having too many zeros in the notes. That is because in the other situation salaries would be paid in the weaker currency but the debts would be still in the old stronger one, most likely going up faster and faster. Just like it is in Eastern Europe, they would like to join the Euro because their own currencies are going down but many debts are in Euros.
Ireland issuing new currency would have to devalue it instantly, euro nominated debts would go to the roof. It would create even bigger mess than currently. Nothing is more damaging then currency going down the toilet fast and debts in another currency or gold. Weimar Germany was much worse than Great Depression. It wiped clean the middle class in two years.
the euro was doomed from the start and was always financially unsound. same for the eu. I will be happy to see it collapse, although, I am surprised for it to happen so soon. I reied to warn the bankers and they refused to listen and rudely tried to force me to accept their trash. the euro was difficult to avoid. it was a currency made by a scam. the people of europe didn't like it even.
http://covert2.wordpress.com
bailing out ireland and then all the other pigs ensures the EU will not break up. the periphery will be unable to leave due to being indentured to outrageous debt.
as an irishman it looks to me that they are blocking the exits by forcing us to accept that we dont need. another gift to th banks courtesy of the debt pions. the queen wants to visit next year i cant help but feel like a teenager whos thrashed the family gaff while the parents are away.
Michael is an idiot:
"The truth is that the Germans are not going to accept carrying weak sisters like Greece and Portugal on their backs indefinitely."
Merkel is just as strong as she has ever been. Complete nonsense.
"In addition, we have already seen the kinds of riots that have erupted in Greece over the austerity measures being implemented there."
These accomplished absolutely nothing.
The truth is that, just as in the U.S., as long as the clerks are employed, looting will continue unabated. When BLS unemployment for Bachelors level workers gets to 20%, wake me up.
Guess what it is now?
4.7%
We should pay attention to what happens and how they deal with it over there since we're going to face the same problems here with many of our states.
Does everyone here want to pitch in to bail out California?
Shut Down the Euro ... Each country needs its own currency .
This also will stop the NWO in its tracks...
We don't want a one world government...
We all need guns in our houses... and some Ammo...
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Just like Alabama and Lousiana? USA is even more vulnerable because you guys are producing nothing, just a bunch of paper pushers.
December 7th fast approaching. Make sure to withdraw most or all of your money and/or close your bank account on this day. Global coordination.
There may not be riots in Europe. All you need is a pro-citizen government elected. The Banksters are quaking in their boots regarding that happening. Don't think they don't know they are walking a tight rope with regard to some political party coming coming along that says "Fuck the Bankers". And should such a party get elected somewhere in the PIIGS its game over. Watch how countries are treated with regards to their up coming election schedule more than anything.
I would like to see that. What kind of government say "fuck the bankers"? Third world countries that live insulated from the rest of the world?
I doubt this is an option on the European table as they maintain an expansionist policy, can not do otherwise. Therefore bankers will be welcome as bankers and imperialists form a dynamic duo based on a love hate relationship.
hm
sorry for being rude but
fuck this ue aka ussr 2...
Do not believe the euro/beauro/elite's big lie that without the euro the EU is finished. That is obviously not true. the EU is large and quite successful internal free trade area. It's existence is not dependent upon a majority of the members having a common currency.
What IS true, however, is that the ruling elite of self apponted beaurocrats in Brussels who are subject to no sort of democratic control at all, WILL be finished if this occurs. The scare stories are nothing more than scares to try to frighten the children.
European history since the fall of Pax Romana has been a series of wars against each nation state. It's in the European's blood.
The Euro was a nice little experiment, but I don't expect it to last.
USA was a nice little experiment, soon to be as dead as USSR.
"The Irish are a fiercely independent people, and they have a history of resisting tyranny."
Herein lies the problem - couple it with their luck and the Irish might have already lighten the fuse without even knowing it...hopefully, there is a long one but there is no telling...
So true. Little story, I met an Irish who was grand on Irish pride and maintained that if the second vote for the Treaty was a yes, the Irish streets would turn into flames. I bet against this guy that the Irish were simply interesting in getting the most of the EU deal, protecting some vital interests to them. Never saw my money though.
This time, it is no different: the Irish are simply pushing their position to the maximum, they know they are in a strong position to get the most out of their deal. European countries have too much bad blood on their history to allow pay back situation. They need to strengthen their position and therefore the merge into a european entity is mandatory. No other option. The Irish government knows that and they are in a position to thwart the transnational merge. Ireland might go down but so will the rest of Europe. Very strong position for the Irish. I bet the Portuguese, the Spanish wish they were into that position first.
http://www.youtube.com/watch?v=Yjr7NtntWeQ
Well.. seems to cost about $2T/Year to keep it going.
This post has nothing in it that I have not previously read on ZH. The point of the Irish bailout is that it's not bailing out Ireland. It's bailing out Ireland's banks so that Irish debt-holders don't take the loss from the collapse of the property bubble. Does that sound familiar? Acceptance of the EU/IMF bailout transmutes private losses into sovereign losses. It's holding Irish citizens hostage for money they will never see, money used to make investors in Irish bonds good. I hope the Irish tell the EU to bugger off and let the banks die, but I expect they will get saddled with the costs of other's bad investments.
Hopefully breakup rather than debt enslavement of an entire continent.Hyperinflation or default these are the future,the system is bankrupt and bailouts only buy time.The official line is the time is brought until things return to normal,things won,t return to normal for decades or probably ever.Lets be honest though the official line will be held whether its working or not,those in authority are on the payroll so the sooner the death spiral happens for Europe the better.Anything is better than killing time getting poorer,reality will occur sooner rather than later.Financial bankruptcy is one thing but working and middle class austerity will be the death knell for the Political class and the Elites,can,t happen soon enough.Same shit different day,month,year, the financial system is dead don,t even bother with the funeral,move on.
There is austerity coming to a lot of European countries one way or the other.
First, there is the sanctioned way of the bailout. Sure things may look normal for a while, when liquidity is sorta restored. But the IMF will impose austerity. And their vassals in the local goverment will impose those while talking about the need to impose financial discipline and the need to pay for past mistakes, while in fact this will be the debt noose tightening around the citizens' neck for generations to come.
The other way is strategically default and hand out large big cups of the well-known chinese drink of phuck-yu to many a creditor. The austerity here will come from the liquidity crunch. It will probably be more severe than in the first case, but it will also mean that people are not forced into servitude to the international moneylenders. And any rebound will have to be based only on smarts and local resources, making it much more valuable and natural.
Unfortunately this is unpalatable to the whores that are officially elected to govern the country and the local feodals residing in the CB of said country. The only thing left to count on is the stupidity and ineptness of the reigning clique - their awkward meddling just brings the endspiel much closer.
You can make any story seem sensational by starting with the word "could" and ending with a question mark.
"Could Obama Be a Kenyan Anti-colonialist?"
He's definitely sounds like a Keynesian, but Dinesh D'Sousa makes a strong argument for the anti-colonialist (but not Kenyan) thesis. Think of him as an anti-westernist internationalist bent on reducing the power and influence of the west in favor of third world entities. In France they talk about "tier-mondistes"...third worldists. They have a lot of those types in academia and running around loose too, believing the west exploits the third world and causes the misery there.
well "right now i'm feeling exploited." how about the Greeks? Or France itself? Does Portugal now need a rescue from Brazil? Does the United States from China? Why not simply start all discussion with "I really don't know what the heck is going on" then proceed....
it's funny but almost 20 years ago i wrote an entire "mini book" stating "why the European Union is no different from General Motors." Needless to say "I was laughed out of the Academy." I was told "it had no bearing on international affairs" and "was ridiculous." Governments can cover a lot of lies although "nothing compares to the Academy" shall we say. The "interest groups" of course in the European Union make GM "look like paddy-cake" shall we say. To "treat debt markets like some static entity" as though "countries never spend and only save" is just like saying "General Motors will never have to return to its Federal momma." It's of course "an act of faith" and a very expensive one at that! will it "not succeed"? hahahahaha. no one on the planet can even define the term! the question of course is "will it fail while we're trying to rescue it"? well..."did we destroy the town in the act of trying of save it"? at some point "the simple observable fact obliterates the language associated with it."
I notice the news is reporting that Ireland will take a bailout by using statements of entral Bank of Ireland Governor, but not the Government. Sounds to me like the bank trying to pressure the Govt. Meaning that it is not a certainty yet.
No. Not yet.
No! They bailed out Ireland...NEXT!!!
the Chicago boys economic theories keep getting crushed, every country that does what academics say they should, take on debt to price up assets and then austerity, not default, to pay debt...Lithuania, Latvia, Ireland, it backfires and economy crashes, once again real world expirement in austerity proves it does not work...but still no one will acknoweldge economies don't work that way...if debt servitude, poor farm economies produced wealth for economy as a whole we still all be serfs, Ireland, as many others have shown, common wealth is not served by spending all you money on saving banks and cutting on your spending on saving people:
"...The people of Ireland having endured over a year of austerity on the promise that it was all necessary to suffer pain today by cutting public spending so as to reduce the annual budget deficit to sustainable level for economic gains tomorrow. Instead the exact opposite is taking place as the Irish economy contracts due to economic austerity whilst its bankrupt banks are sending the countries debt and liabilities soaring, thus resulting in a far worse budgetary position than where Ireland was before the austerity measures were implemented as the bond markets are waking up to evitable debt default which is sending interest rates demanded to hold Irish debt soaring to new credit crisis highs."
eg
Spanish economy grinds to a halt in Q3
http://www.channelnewsasia.com/stories/afp_world_business/view/1094113/1...
And the US isn't the only one that falsifies employment data..
Spain Economy Watchhttp://spaineconomy.blogspot.com/
Wonder how far and fast markets will fall today if Ireland comes out and says..'accepting a bailout is by no means certain'.
That is why it is fucking stupid this bounce back today, a simple comment like that can shoot them dead again.
Ireland may be the last straw for the German people. Anything beyond that will have them rioting enmass and make it politically impossible for Germany to continue the game.
It is the austerity measures when shared by a number of countries that is going create huge amount of resentment to the EU and there will end up being a strong movement to exit or destroy it from within. People will come to despise the Euro, either rightly or wrongly it wont matter to them.
It is game over now. If they do Ireland now how can they swallow Spain? Spain will be too much.
Also peoples will be eager to grab hold of things to hate and attack and the main one will banksters, and to be sure to be sure, there will be those around provoking building and directing this hatred. Banksters better have their private armies as they sit at the top of the tree as being the root cause of this global crisis.
Get a clue. Germany is bailing out the totally insolvent German banks and in turn bailing out German shareholders, bondholders and pensions. Sooner or later, the German people will see through this reality and will stop trashing the lazy Greeks and the drunk Irish. No one, I repeat no one will be rioting ANYWHERE.
Where did you get that ?
We are in 2010, W.Münchäu
declared this summer that
the German banking system
was 'technically' insolvent
The Germans are said to have
138 billion $ of Irish bonds on their
books, total exposure of the
European banks is USD 650 billions.
In relation total cost of German stimulus
, including bank bailouts, amounted to
450 billion euros. So it not so much
about Germany-where they are already rioting-
than about the compouned collapse
of the European banking system, the EU and the
ECB, also 'technically' bankrupt at this very moment
So let me get this straight, the Germans are not bailing out their "technically insolvent" banking system but they are bailing out the European "technically insolvent" banking system and the ECB which is "technically insolvent". Nice.......
Where are these riots in Germany you speak of? Or are they stopping another train full of nuclear waste again and I didn't get the memo?
You're absolutely right. The little tiffs we've seen in the streets of Greece, France and England so far are just children's games compared to what would result from truly serious hardships imposed by governments.
It's much more than a financial numbers game to the populations of these yet sovereign nations. And they most definitely are not going to stand for it.
Let it collapse - the EU. mired in debilitating "political correctness", "multi-culti", and a host of other social pathologies too numerous to mention, needs to go.
Nationalism, particularly nationalism built around monocultural folkish states and peoples, is the unalterable wave of the future.
Even the strong states - Germany and France especially - would benefit from a return to distinctive national currencies, the better to best chart their own futures for their own distinct peoples.
In the unlikely event that political (and monetary union) were to become the norm in an unstable and debilitated Europe, it would be best done under the leadership of a Vaterstaat with the economic strength and political will to make it happen.
That nation is Germany - Continental Europe's natural master and guide.
Forget Brussels - Berlin is the natural capital of a Europe that stretches from the Arctic to the Mediterranean, from the Dnieper river to the Brittany coast.
Perhaps under the leadership of,say, a Reichskanzler Thilo Sarrazin, Europe can shed its problems (beginning with the judefetzen Euro), and begin anew.
Remember, eighty years ago, a certain corporal from Austria almost made it happen.
Where is he now when we need him?
what you say is contradictory. How can such "unique identities" remain in the greatest totaltarian monstrosity of our so called "modern" age?
Man, people like to see stuff one way street.
So once again, this will end in a deeper EU bondage; the political union dimension will keep increasing.
Strangely enough, while it is easy to find articles all predicting the disintegration of the EU, it is harder to find articles on how this situation is going to be exploited to further the integration.
Not only that, but it is possible to make money out of predictions on EU end but certainly less on how the EU is going to be strengthened. Maybe because coercion is the main component in the recipe and admitting that is not a best seller?
As to Ireland, they just make sure they get the best deal throughout their change in an artful way. There is no austerity program going on in Ireland. For austerity program, you need to go in SE Asia or any other third world country that went through them for extremely lower level of debts.
Just duplicity at its best, and in the incoming change, minorities in Europe are going to have it hard, extremelly hard. The EU want social engineering the US way, and it means extreme dureness on minorities.
watch for back door China UST dumping vis a vi euro, greek, irish, etc Chinese bond purchases....china will support the eurozone
Statists will never let a good crisis go to waste. They'll try to do what they believe in: Extend and strengthen the (death)grip of centralized state power.
This isn't exactly right. Power doesn't care about states, it cares about power. If that's in American slob consumers, then go with that. If it's in Mellonesque liquidation through the state, then go with that.
But it's always about power, never about any particular enforcement mechanism. When sovereign states have no more power, they will simply be abandoned, they will be good for nothing. Democracy won't be able to revive them, dictatorship won't be able to revive them.
Think, for the first time, of the state as good for nothing under all circumstances. Difficult!!
I wish this was the first sentence in your post, it would have saved me the 30 seconds I spent reading the rest of the drivel you posted.
Notice I mirrored the socalled austerity program in Ireland with austerity programs as they were applied in SE Asia or other regions in the world, third world countries and stuff.
The austerity program in Ireland is like that person who eats 5 rich meals per day and is asked to go on a diet and then reduces the number to 4 rich meals per day.
Will still put on fat, but slowlier.
Or that gambling player who is up to the ears in debt because he plays night and day and start to ease off on Mondays because they are the slow day.
What is asked from Ireland? To slow down on the speed they can go into debt? Feel free to call it austerity. It looks to me more like a soft rehab program, you know, the ones you get buy your doses from the janitor and nurses or others. Not the program where you are isolated in a cell with nobody to speak to and either you survive the privation or you die scenario.
Just out of curiosity, how do you call the other programs, those that were applied on other countries? What is your word for that?
I have no idea what the word for that is in your language.