You are not logged in. Please register or login.
- Topics: Active | Unanswered
Re: Europe further up shit creek than United States
It took a weekend to shatter the complacency of German finance minister Peer Steinbrück. Last Thursday he told us that the financial crisis was an "American problem", the fruit of Anglo-Saxon greed and inept regulation that would cost the United States its "superpower status". Pleas from US Treasury Secretary Hank Paulson for a joint US-European rescue plan to halt the downward spiral were rebuffed as unnecessary.
By Monday, Mr Steinbrück was having to orchestrate Germany's biggest bank bail-out, putting together a €35 billion loan package to save Hypo Real Estate. By then Europe was "staring into the abyss," he admitted. Belgium faced worse. It had to nationalise Fortis (with Dutch help), a 300-year-old bastion of Flemish finance, followed a day later by a bail-out for Dexia (with French help).
Within hours they were all trumped by Dublin. The Irish government issued a blanket guarantee of the deposits and debts of its six largest lenders in the most radical bank bail-out since the Scandinavian rescues in the early 1990s. Then France upped the ante with a €300 billion pan-European lifeboat for the banks. The drama has exposed Europe's dark secret for all to see. EU banks took on even more debt leverage than their US counterparts, despite the tirades against ''le capitalisme sauvage'' of the Anglo-Saxons.
We now know that it was French finance minister Christine Lagarde who begged Mr Paulson to save the US insurer AIG last week. AIG had written $300 billion in credit protection for European banks, admitting that it was for "regulatory capital relief rather than risk mitigation". In other words, it was underpinning a disguised extension of credit leverage. Its collapse would have set off a lending crunch across Europe as banking capital sank below water level.
It turns out that European regulators have allowed even greater use of "off-books" chicanery than the Americans. Mr Paulson may have saved Europe.
Most eyes are still on Washington, but the core danger is shifting across the Atlantic. Germany and Italy have been contracting since the spring, with France close behind. They are sliding into a deeper downturn than the US.
The interest spreads on Italian 10-year bonds have jumped to 92 points above German Bunds, a post-EMU high. These spreads are the most closely watched stress barometer for Europe's monetary union. Traders are starting to "price in" an appreciable risk that EMU will break apart.
The European Commission's top economists warned the politicians in the 1990s that the euro might not survive a crisis, at least in its current form. There is no EU treasury or debt union to back it up. The one-size-fits-all regime of interest rates caters badly to the different needs of Club Med and the German bloc.
The euro fathers did not dispute this. But they saw EMU as an instrument to force the pace of political union. They welcomed the idea of a "beneficial crisis". As ex-Commission chief Romano Prodi remarked, it would allow Brussels to break taboos and accelerate the move to a full-fledged EU economic government.
As events now unfold with vertiginous speed, we may find that it destroys the European Union instead. Spain is on the cusp of depression (I use the word to mean a systemic rupture). Unemployment has risen from 8.3 to 11.3 per cent in a year as the property market implodes. Yet the cost of borrowing (Euribor) is going up. You can imagine how the Spanish felt when German-led hawks pushed the European Central Bank into raising interest rates in July.
This may go down as the greatest monetary error of the post-war era. The ECB responded to the external shock of an oil and food spike with anti-inflation overkill, compounding the onset of an accelerating debt deflation that poses a greater danger. Has it committed the classic mistake of central banks, fighting the last war (1970s) instead of the last war but one (1930s)?
After years of acquiescence, the markets have started to ask whether the euro zone has the machinery to launch a Paulson-style rescue in a fast-moving crisis. Who has the authority to take charge? The ECB is not allowed to bail out countries under EU treaty law. The Stability Pact bans the sort of fiscal blitz that has kept America afloat. Yes, treaties can be ignored. But as we are learning, a banking system can implode in less time than it would take for EU ministers to congregate from the far corners of euroland.
France's Christine Lagarde called yesterday for an EU emergency fund. "What happens if a smaller EU country faces the threat of a bank going bankrupt? Perhaps the country doesn't have the means to save the institution. The question of a European safety net arises," she said.
The storyline is evolving much as eurosceptics predicted, yet the final chapter could end either way as the recriminations fly. Germany has already shot down the French idea. The nationalists are digging in their heels in Berlin and Madrid. We are fast approaching the moment when events decide whether Europe will bind together to save monetary union, or fracture into angry camps. Will the Teutons bail out Club Med? If not, check those serial numbers on your euro notes for the country of issue. It may start to matter.
- Randall Flagg
- Rep: 139
Re: Europe further up shit creek than United States
Indeed. I call dibbs on England and Germany helping us fight Russia, China and Iran. I can't forget our pals the Aussies ( Ilove you guys over here) to help out too.
Disband the European Union and only agree to alliances that benefit you, rather than rebuilding old Sovier Bloc countries.
Re: Europe further up shit creek than United States
You wish.
France's Christine Lagarde called yesterday for an EU emergency fund. "What happens if a smaller EU country faces the threat of a bank going bankrupt? Perhaps the country doesn't have the means to save the institution. The question of a European safety net arises," she said.
This is what's really going to happen. A strengthened, more centralized Union.
No shit we're worse off than you. We invented this bullshit.
Re: Europe further up shit creek than United States
France's Christine Lagarde called yesterday for an EU emergency fund. "What happens if a smaller EU country faces the threat of a bank going bankrupt? Perhaps the country doesn't have the means to save the institution. The question of a European safety net arises," she said.
This is what's really going to happen. A strengthened, more centralized Union.
i really doubt we'll get a more centralized eu. i don't see germany and france jumping in to help a small country just because. but that's the negative me speaking, let's hope you're right and i'm wrong.
Re: Europe further up shit creek than United States
This is what's really going to happen. A strengthened, more centralized Union.
I disagree. Your goose is cooked. The union is gonna get weaker. The partnership was always uneven to begin with. It was a paper tiger that depended on the US to protect it. Now that the US is falling, we're now getting glimpses of the real EU.
Also, Russia could destroy it without even firing a shot. All they have to do is turn off the oil spigots. The union would also collapse if its currency took a nosedive. Only country that will come out of that disaster smelling somewhat like a rose is the UK.
I'm starting to wonder if the US would even protect you in the event of a Russian invasion. We simply do not have the money, troops, resources, and equipment to move those troops around at a high speed. Its one reason I think its time to dissolve NATO.
As long as Russia wasn't killing American troops on the EU battlefield, I have a feeling the US would only do symbolic "pinprick" strikes on the Russians.
The ONLY way the US would involve itself is if it wanted the war to go nuclear.
Flagg, you're Evo's military expert. What are your thoughts on the Russian bear walking into the EU while the US is weaker than its used to being?
You European guys might want to start memorizing the Soviet National Anthem.
Re: Europe further up shit creek than United States
polluxlm wrote:This is what's really going to happen. A strengthened, more centralized Union.
Also, Russia could destroy it without even firing a shot. All they have to do is turn off the oil spigots. The union would also collapse if its currency took a nosedive. Only country that will come out of that disaster smelling somewhat like a rose is the UK.
i will take your 'turning off the oil spigots' and raise you a 'turning off the gas pipes too' 
and i think that the scandinavian countries might survive this too.
You European guys might want to start memorizing the Soviet National Anthem.
we don't need to. at least the eastern countries, we have our old communist anthems from 20 years ago. we just need to take the old books out from the archives. 
chinese democracy, out in 2009.
european democracy - to be announced 
- Randall Flagg
- Rep: 139
Re: Europe further up shit creek than United States
Any attack on European soil will garner an American response. I personally believe a full out response. Europe is our closest ally and the American people would support the defense of their nation, especially against Russia.
You have to look at the bigger picture. If Russia attacked the EU, it would essentially be forming an alliance (maybe not written out, but at least spoken) with the middle east. It would be WWIII. There's no way America is going to sit around and watch Europe disolve. We have troops in almost every European ocuntry and are intsalling missle shields there as well. There's no way we'd let those assetts be taken.
From a logistical standpoint, it could certainly be done. We have Brigades back here on breaks and plenty of National Guard and reservists. People wouldn't get time off, but with the sense of importance that would coincide with such an attack, recruiting numbers would jump and the American people would rally behind it. It's highly likely the draft would need to be brought back. The excessive amount of casualties that would occur against the Russians would require more troop support. - This is what would make or break the US. Right or wrong, 99% of Americans feel no obligation to serve in the military anymore. Forcing a substantial portion into the military would have major repercussions. From a military perspective, the draft is always a bad thing in terms of quality of troops. There is never enough time to train and adapt them to military life and often they have lousy attitudes; which lowers morale and causes confusion which leads to deaths.
Militarily, I have no doubts the US would win any war; assuming we used everything we had. This opinion is further strengthed if we had the support of Europe. The question is what cost are we willing to pay for a decisive victory?
