Euro crisis: “So something is afoot.”

While a furious Irish taxpayer [on the Clontarf dart] discovers just how bad it’s going to be, RTÉ notes that EU finance ministers have formally approved the €85billion bail-out for Ireland.

While bond investors still appear unconvinced that the politicians have a clear strategy to restore the euro’s fortunes, there is growing political division over the best solution.

Belgium, which holds the EU presidency, and which has seen its own bond yields increase, wants the €750bn fund increased.

Luxembourg and Italy have thrown down the gauntlet calling for the creation of euro bonds and there appears to be tacit support from the European Commission.

But both ideas have been scotched by Germany, and at last night’s eurogroup news conference, Luxembourg’s Prime Minister appeared to accept that the focus should remain on countries reining in their deficits.

And, in the Irish Times, Arthur Beesley identifies “the epic muddle” the EU leaders are in

A multitude of interests are at play – within member states themselves, the banks they support and the EU institutions – and the very scale of the core problem grows larger as Belgium and Italy feel the heat of crisis.

The current vogue vests hope in markets placing their faith in the multipronged “systemic” response. However national austerity programmes and ad-hoc schemes to prop up banks and member states and a stricter economic rulebook have yet to do the deed.

Investors still fear defaults because they believe the weakened euro countries to be too indebted and they distrust wealthier countries to carry the can for them. On both these fronts, the political and financial implications are huge. As a result, Europe’s leaders are struggling to develop a coherent response.

Frau Bundeskanzerlin, history’s knocking…

Adds  From a BBC report

On Monday, the head of the International Monetary Fund, Dominique Strauss-Kahn, had called for an increase in the size of funds available for support.

And on Tuesday, he criticised Europe’s response to the eurozone debt crisis.

Speaking from Athens, where he was attending a meeting with the Greek prime minister, Mr Strauss-Kahn said: “The eurozone has to provide a comprehensive solution to this problem. The piecemeal approach is not a good one.”

Frau Bundeskanzerlin…

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  • Pete Baker

    Adds From a BBC report

    On Monday, the head of the International Monetary Fund, Dominique Strauss-Kahn, had called for an increase in the size of funds available for support.

    And on Tuesday, he criticised Europe’s response to the eurozone debt crisis.

    Speaking from Athens, where he was attending a meeting with the Greek prime minister, Mr Strauss-Kahn said: “The eurozone has to provide a comprehensive solution to this problem. The piecemeal approach is not a good one.”

    Frau Bundekanzerlin…

  • Mack

    George Friedman has an interesting take on history’s knock. He seems to think the EU might be less permanent than most in Europe. Germany might will reassert it’s own national interest and hook up with Russia to leverage their natural resources. While the current German political elite are Europhiles the German population doesn’t want to become Europe’s wallet..

    Max Keiser made similar comments recently too.

  • Pete Baker

    Mack

    That’s kind of covered by the Tim Garton Ash article the Frau Bundeskanzerlin line is from.

    If the eurozone falls apart, it will be because Germany did not do enough to save it. If the eurozone is saved, it will be thanks to Germany. This is the greatest challenge to German statecraft since the country was peacefully united 20 years ago. At the moment, the leaders of Europe’s central power are not rising to the challenge, but they still have a few weeks in which to show that they can. Thereafter, it may be too late.

  • sammymehaffey

    What price the Euro surviving in its present form ? Evens?

  • Greenflag

    George Friedman is off the wall . The Germans can’t afford to give up on the Euro . Any German return to the mark would be in today’s economic climate be accompanied by a huge revaluation of said mark thus putting Germany’s export led recovery into the waste bin .

    Although Putin is fluent in German and his children were educated at private institutions in Germany and although former German SDP Kanzler Schroeder is a director of Russia’s Energy Giant Gazprom I think we’re a long way from another Ribbentrop /Molotov pact .

    Anybody who wants to understand how German business (the Mittelstand) has been so successful in recent decades need look no further than Schumpeter’s article in the curent edition of the Economist .

    The Eurozone is not going to fall apart . It may however be redrawn into a two tier system with those in tier two given more time to catch up with the more developed centre countries .

  • John East Belfast

    The Germans wont want to leave the Euro because they have so many Euro denominated assets in the form of Loans to countries like the ROI.

    If they left the Euro then the value of the Euro would fall against the DM and they would take that haircut they are doing all they can to avoid.

  • Alias

    The US has an external debt of 13.5 trillion dollars but Germany has an external debt that is the per capita equivalent of over 100 trillion dollars as its debts are 7.5 times higher per capita than the US. It might well suit the Germans to exit the euro and offset any loss from a devaluation of assets in that bankrupt region against liabilities outside of it with a devalued German currency since they recognise that they have already plundered all the wealth from that region and that its consumers will now be repaying debts accumulated from the monetary regime aimed at benefiting the output of Germany and so won’t have any disposable income to consume more German goods. The only thing the IMF is concerned about is making sure that the EU bails-out the banks outside of it that Germany and ilk owe money to. Rats deserting a sinking ship after they have gnawed through its bow…

  • DC

    Mack – have you been following Max Keiser – did you buy any silver?

  • Alias

    The joke of europhiles used to be that the difference between Ireland and Iceland was one letter. Well, wouldn’t it now be wonderful to be Iceland? It was not a member of the EU and therefore was not forced to bail-out the eurosystem by converting private debt into sovereign debt and, as it had a sovereign currency, it could devalue its currency to get it out of trouble whereas Ireland surrendered sovereignty and has to make its citizens pay instead.

    Iceland is now officially out of its recession, and enjoyed growth of over 1% in its third quarter and its budget is now on course to return a surplus.

    http://www.telegraph.co.uk/finance/financetopics/financialcrisis/8187476/Iceland-offers-risky-temptation-for-Ireland-as-recession-ends.html

  • Greenflag

    ‘ wouldn’t it now be wonderful to be Iceland? ‘

    No. They have far too much snow and they are now back to fishing from disappearing cod stock . The cost of oil makes it ever more prohibitive to fish the nearly empty Newfoundland banks (fishing grounds not the relatively less evil Canadian financial institutions )

    . On the other hand Ireland could learn a bit from Iceland by enacting democratic legislation for economic treason for those who commit financial crimes of an order that would destroy people’s pensions and savings .

    As I write Mr Drumm former CEO of Anglo Irish is answering charges in a court to his ‘bankruptcy’ and residency status in the USA . While living in a 5 million dollar mansion he’s now driving a 1,000 dollar car while his wife lent him some 230,000 dollars for the new business which he runs .which he lent to her to help start a business he put that money into the new company which he runs.

    That ‘new ‘ company specialises in wait for it – debt restructuring. 🙂

    A word to our American friends – Beware the Greeks when bearing gifts and beware the Drumms -drumming to sort out your eh ‘financial debts’

    Meanwhile back in the real world Mr Noonan makes jokes in the Dail while the poorest people in Ireland get to carry the debt engendered by the crooked banks and their aiders and abetters in the Dail 🙁

  • Greenflag

    Jeb,

    ‘The Germans wont want to leave the Euro because they have so many Euro denominated assets in the form of Loans to countries like the ROI.’

    And that’s another reason . Although we are here mainly concerned with ROI you can add Portugal, Spain , Italy , Belgium and many others onto that list . Germany may be the EU’s biggest economy but they make up less than 20% of the total EU population . Germany will continue to have the problem which ALL Germanies have had since the 1870’s . In brief Germany is too big for Europe but too small for the world . Negotiating a sustainable economic and democratic existence between those two ‘limitations ‘ is possible only via the EU .

    Interesting to read former British PM Gordon Brown’s comments re his 1997 decision that the UK was not in a position to join the Euro .

    Weeks before the crisis struck, Mr Brown said he had decided the UK could not afford to wait for the international community to step in to stabilise the banking system.

    “The banking problems ran deep and were so systemic that Britain could not afford to wait for others to join us before taking root and branch action to save our banks,” he writes.

    If what I was about to do failed, I would have no choice but to resign”

    Gordon Brown on the 2008 bank bailout

    “By September I knew we were days away from a complete meltdown. I had set a course and was prepared to go it alone if necessary.”

    But Mr Brown said he was under no illusion about what would have happened if the £50bn bailout of three leading banks – and the £450bn in further credit guarantee and liquidity – had failed.

    “I was about to announce that we were offering to invest billions and take control of Britain’s two biggest banks – something no government in British history had ever done. If what I was about to do failed, I would have no choice but to resign.”

    Mr Brown suggested he had been “misled” about the financial strength of Royal Bank of Scotland in the run-up to the crisis and its problems were part of a wider breakdown in trust in the City, where excessive bonuses and risk-taking had become rife.

    “The motto of the old order in the City of London was ‘my word is my bond’ but the financial crisis revealed a culture quite alien to that heritage.

    the full story at

    http://www.bbc.co.uk/news/uk-politics-11947831

    “The stewards of people’s money were revealed to have been speculators with it.”

    Not just in the UK Mr Brown – Also in the USA , Ireland , Germany , France , Spain , Italy , Greece , Zimbabwe etc etc etc etc etc .

    Just anarchic financial capitalism at work on it’s pathological destructive path .

    But hey it’ll soon be increased ‘bonus ‘ time for all those poor sods in Goldman Sachs and other institutions in Wall St and the City of London ;(

  • The eurozone has to provide a comprehensive solution to this problem. The piecemeal approach is not a good one

    This is an understatement. Interestingly, there is a growing political consensus clustering around this viewpoint but what took me by surprise was the comments on the crisis by Labour’s former Chancellor of the Exchequer, Alastair Darling this speaking on Bloomberg this morning. He was very clear that action was needed to permanently stabilise the euro. Darling also made it very clear that whilst he understood German political difficulties at home, there was no alternative for the Euro but for Germany to be fully committed to it and to throw its weight completely behind it.

    Darling’s public positioning is a sign that senior Labour politicians are doubtful as to the euro’s survival and are positioning themselves for the possibility of it’s collapse.

  • Greenflag

    SM ,

    Ever since Lehman Bros collapse the actions of all the major economic powers have been ‘piecemeal’ of necessity for in truth the gurus of the world’s economic stratosphere are ‘winging ‘ it and that includes the Germans, Americans and our own woeful shower. And most of the politicians are too scared to do anything and the G-20 ran away from the problem a month or so back .

    Economically the world’s anarchic capitalist societies are in ‘mushroom ‘country and nothing less than a radical reform of the ‘rules’ of international finance will restore the confidence which is needed to sustain economic recovery .

    USA foreclosures will hit 3 million this year 2010 which is half a million more than last year . Unemployment is rising in the USA and Congress has decided that taking 44,000 dollars from somebody who makes a million dollar bonus is unfair whereas hanging 2 million people out to dry whose unemployment pay is scheduled to end at Christmas would be ethically fine 🙁