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ECB Rate Hikes could Kill Greece, Ireland, Portugal, and even Spain!
On Sunday, new analysis of the recent actions by the ECB was
published in the Observer (Guardian). The British media outlet hired
consultancy firm Fathom to evaluate the bailouts of different European
member states and the possible outcome.
The study concluded that the bailouts are not the biggest threat for
Europe. The renewed hawkish stance by the ECB, which led to the recent
interest rate hike, is far more dangerous!
Via the Observer:
Analysis by City consultancy Fathom, obtained exclusively by the Observer,
shows that because the interest rates on the bailouts provided to
Greece and Ireland track the European Central Bank’s lending rate, a
series of increases could push these countries – and Portugal – into
default.
“If the ECB continues to tighten policy, the impact is clear:
default is more or less inevitable,” says Fathom director Danny Gabay.
“Greece is clearly on an unsustainable path.”
Fathom also warns that Spain remains vulnerable, despite Madrid
insisting last week that its economy is much healthier than Portugal’s
and its debts are much more manageable. Spanish banks must roll over
debts worth more than 5% of GDP this year, and more than 9% in 2012, in
addition to the government’s financing needs. A two-point increase in
the interest Madrid pays in the bond markets – much of which could come
from the ECB, even without a further loss of confidence from bond
investors – would, on Fathom’s calculations, force Spain into a fiscal
crisis.
A string of defaults could shatter the markets’ confidence, Gabay
argues, resulting in a devaluation of up to 30%, with significant
knock-on effects: “What could make the markets lose confidence is
watching these countries implode.”
While the experts are discussing the future of the EU, the euro is on
a tear versus the dollar, choking European exporters. This could lead
to even more damage to tax income, i.e. state budgets.
There’s
no question about it: the tensions are building rapidly in Europe. At
the current pace, Code Red could be installed fairly quickly for the
European financial system.
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"smart money Europe"(?) You disappoint me just a trifle.
.. do you think British analyses of the EU are objective ? They want to draw attention away from their own desperate fiscal situation at all costs. Just like in April/May 2010 when they were predicting the collapse of the EUR and got royally shafted through several orifices. As for the EUR/USD now:
http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/4/11_Fa...
If there is a fault in the logic set out in that link I would like to hear it. And if you want some real analysis of EUR zone economics I would recommend the GEAB newsletter. The PIIGS will be disciplined until they either toe the line or leave the EUR. In addition, all the ECB has to do is stay behind Benocide on the money printing circuit.
I thought they were already dead, well Greece and Spain. They now walk the world as undead living off the flesh of their EU neighbors. Portugal will rise undead with the next full moon, and Spain has been bitten twice. One more and it becomes the vampire that will suck the last bit of life out of Europe.
slaughter of PIGS
for the benefit of pork haters
The "Cartel" hungers. Id say next stop is Belgium.
I don't think a quarter point here or a quarter point there matters to borrowers paying 7+% interest already. The patient is on life support now. The end is near. It is just a matter of time. If artificially low interest rates are needed to keep one alive, all one can do is make preparations for the inevitable.
http://www.TheAngryGrapes.Com
but a quarter of a point rate hike on the national debt will equal the entire savings of the past weeks defecit reduction deal.
whoosh..... gone!
http://www.bloomberg.com/news/2011-04-10/stiglitz-calls-for-new-global-r...
A string of defaults could shatter the markets’ confidence, Gabay argues, resulting in a devaluation of up to 30%, with significant knock-on effects
Liquidity seeks an equilibrium, the only markets both large and open enough to absorb global liquidity are $, €, & ¥. Until another option is created, I believe the the primary determinant of flows will be the relative unattractiveness of each of the three options.
I think that´s the goal - to kill Greece, Portugal, Ireland and perhaps also Spain. I believe Germany has a secret plan, namely to push these mismanaged economies out of eurozone. These southern countries should have never been allowed to join in the first place, so now is the chance to kick them out. It cannot be done directly so it will be done indirectly by inflicting pain on them and forcing them to withdraw voluntarily.
Actually ,your title is wrong !
Rate hike did not kill all PIGS, It's just Fuse !
The bailout is the real killer !
This is what Bailout really is !!!
Essentially ,
Bailout a country and a country who accepts a bailout means no different with "Colonizer and Colonized during Colony time" !
Whichever country accepts bailout means:
The whole country and all their citizen will work as a slave,Sacrifice their real economy,real lifetime hard work ,probably for generation for the so called bailout burden !!!
Hitler and Binladen are really just kids compared with all CB AUTHORITY In terms of human & real economy destruction for every country !
Who would have Fathomed it.
ECB are braindead...They'll keep printing into the insolvent EZ banking system. One thing is for sure they hike rates, they (ECB) will suffer unrealised losses in the billions, oil will go up further (USD sold EUR bought), and we edge all so closer to the major economic reset... heading there anyway, they'll just speed it up
Europe as a continent is tied to the ME. 'Nuff said.
i think the theme "little guy take it on chin" remains in place. i'm sticking with Belgium (of course) and Italy as "their next loving man."
It seems to me that whatever happens somebody is going to get torched. So just let it happen, and let's get on with the economy resetting itself.
Kondratieff and the Old Testament recognized the same cycle that bankers seek to deny. Jubilee!
Interesting, in "old-Jewish" tradition, all debt was extinguished (forgiven) every 7 years.
These were the days before you could hop a jet to tel-aviv/shanghai/basel/et al., to avoid the pogrom.
That was the minor relief,with major relief at 50 years, or after 7 cycles.
I wonder how long the drug lords will need to fill their bins with the new fiat, whenever it gets printed.
Some commenters here think the Trichet and the european elites have this thing under control. Europe the political entity is utterly screwed in point of fact, and they have no idea what to do. Tiny Iceland is leading the way on "what to do" by democratically lifting their collective middle finger at creditors. There must be haircuts, so there will be haircuts, and this will kill the balance sheets of big core country private banks, requiring each national government to take care of national economic survival. The ECB will not be able to juggle the wildly different motivations across its wildly different members.
If so called bail out does more harm and damage than default to all pigs country and all their people ,
Why not default????
If ECB & Tricet has abandoned all PIGS nation and all their citizen for their own interest,
Actually,not just abandoning, start killing ,
Why not leave and abandon them??
let crisis maker take their responsibility instead of let all innocent PIGS nation and all their people suffering??
the welfare folks will collect welfare, the rich & poweful will pontificate, and the middle classes will bear the load as always.
Less we forget, Greece has been in default or restructuring about 50% of the time since the early 1800's. Going as long as they have without a major sovereign crisis is sorta like a record. It's really about time to revisit their historical tradition I suppose.
sunny
only goes to show how long some lies can last.
Rate hikes never killed anybody. In fact, the Paul Volker experience in the U.S. suggests that rate hikes may be exactly what these countries need right now.
Volcker cemented the externalisation of the dollar out of the US economy - by keeping a artificially strong dollar via high interest rates.
This continued to give American consumers buying power but made American capital investments uneconomic - this consumer demand was then filled by continued industrialisation of the Asian continent.
The ECB may have a similar policey towards the EU periphery - even when capital was flowing it chiefly went to consumption demand and not industrialisation.
Now they seem to want to re wild the second world countries of the EU by engaging core trade with the Asian landmass.
All of this malinvestment is facilitated by overvalued debt currency - it will work until it will not - these bastards will stretch their power to the very limit.
Our only hope is that the rope they hang us with will break.
Volker's rate hike killed American exporting and manufacturing; Detroit is the way it is now because of Volker; read up on the "volker shock".
the Chevy Cruze recall didnt help much either, or the decades of managerial financial rape of their bank accounts.
and there was me thinking it was because they made crap cars and had agreed unaffordable healthcare and pension plans with the unions...
The rate hike is symbolic. All that matters is the liquidty provided by the ECB itself, the Fed, the BOJ and the IMF.
Did Paul Krugman participate in the evaluation?
Funny how it is never spelled out that you would need to refrain from rate increases for somewhere between 20 and 50 years to let Greece earn it's way out of their debts...
Quite frankly, I'd like to see REAL info and tips instead of speculative garbage. The EU will not let those countries default inside itself, therefore this article is worthless
+1
The EU has done everything, including reneging on its constitutional engagements to avoid a PIIGS default. Suggesting that Trichet is not aware of the consequence of rate hikes and would let the PIIGS hit the wall without further reaction is frankly nonsense.
So they'll just give Greece and others interest-free loans?
BTW Dilma of Brazil has openly said : "Brazil is prepared to buy Portugal's debt as the "good functionning of a Portuguese speaking country + the health of a big commercial partner for Brazil (EU) is too strategic to world trade equilibrium for Brazil to stay silent. It is prepared to act."
I would ponder on the implications of this statement from a global player of big league dimensions. As the Rest of the World plans how to step out of the USD's demise vice as its world reserve currency.
In the end, it might very well happen.
This would be totally absurd and unjust, of course, but politicians know what "systemic risk" means, and they don't want it to unravel during their mandate.
My German relatives are a tough bunch; they will carry the EU torch for as long as it takes.Or perhaps they should make plans to join me in South America.
how are you going to get there after the exits are all closed?
These global idiots thought they could solve things with infinite money printing to 'stop from going broke'..
and we the people see the reality and suffer
what makes you think this wasnt the plan or part of it, to begin with?
what makes you think this wasnt the plan to begin with?
And the same idiots also thought they had all the "tools" they needed to extract liquidity from the system when the "time came".
Yes, sure -- they have the tools. But the capacity to use them is a whole different story. And they, like all other fools in similar positions of power before them, find themselves equally helpless to use them now that the time is here.
History will be cruel to Ben Bernanke and his counterparts at the ECB. They will be seen as a pompous academic asses without backbones. Men who kneeled before the banking cartel, but didn't even know they were kneeling -- smug in their own obviously flawed belief that they were in control. Men who betrayed their own people in some of the most traitorous acts in modern history. Men who sold out to a small group of banking oligarchs, to whom they themselves were pawns.
Monetary collapse is in full swing. The increasing, exponential velocity of that collapse is going to surprise even the goldbugs. The momentum is already lethal for the value of the dollar, and there is absolutely no possible way (no. possible. way.) that Bernanke can stop on the brakes now.
The fact that they are doomed is not amazing.
The fact that they are only dimly aware of it, is truly astrounding.
you are assuming that that he and the others arent regarded as heroes and the fathers of some new society yet to come.
In full swing and irreversible.
But, Popo, who and how was so much power invested in this one individual (Fed Chairman) and the Federal Reserve generally? In a 'democracy' how could this be allowed to happen and, worse, continue for nearly 100 years? I agree with your summation - but where did America go wrong with the democratic experiment?
US is not a democracy. And that's where it went wrong, in teaching its people.
Enkidu --
1) The ability for private capital (both foreign and domestic) to directly affect the outcome of elections and creation of new legislation has completely short-circuited the democratic process.
2) And the ability for politicians to create debt by budgeting more than is available currently has completely destroyed fiscal and monetary stability.
3) The ability for private individuals (in both of the above cases) to operate in a manner that is both self-interested and in stark opposition to the best interests of their country and countrymen -- without any fear of personal legal repercussions -- has created an environment where those who can objectively be called "traitors" and "criminals' are instead rewarded with power, prestige and wealth.
Where did we go wrong? We created the means to not only circumvent democracy, but to circumvent fiscal responsibility and the very law itself. This was permitted at a thousand levels of society out of personal greed and facilitated by a justice system that is deeply incapable and inept at prosecuting white-collar criminals -- or even recognizing them as such.
We, as a nation, are fond of laughing at China's practice of capital punishments for failed/traitorous civil servants. This is absolutely *not* something to laugh at. When a civil servant sells out his country and his people there is a word for that person: He is a traitor. Historically speaking, the penalty for traitors is uniform. They are executed. But today, when those who are entrusted with safeguarding our system silently sell out to private interests, they receive massive personal financial rewards -- and the idea of even prosecuting them is dismissed as 'a bit harsh'.
I'm going to put it flatly on the table: These people need to be put in jail for life. That's not harsh. That's completely and utterly necessary for the survival of our nation. You cannot have a viable government, nation or society filled with hundreds of thousands of independent power mongers whose interests lie in opposition to the interests of your nation -- and continue to reward those individuals by a factor of 10 or 100 to one. The concept is nothing short of insane. If one were intentionally trying to incentivize individuals to destroy their nation -- one could conceive of creating a system similar to the one that currently exists. We continue to richly reward those who are actively destroying us, and wonder where we are going wrong.
We need penalties.
Jail. For life.
And we need to shatter the absurd wall of private ownership for those who have betrayed their country.
Paid yourself $100 million while violating laws and at the expense of your nation? We'll be taking that back, asshole -- on your way to jail. Yes, that includes your house and all the money you stashed off shore.
Life behind bars for those who abuse their positions of responsibility, break laws and betray their people out of personal interest. (ie: Traitors)
I disagree, putting people (who are proven traitors) in jail for life is stupid. You're essentially giving them free accomodation, free food, free clothes and free medical all courtesy of taxpayers. They need to be removed from the system and there's only one way.
Tight post, Popo. :-)
There's a reason treason is a capital crime.