Wrong Then, Wrong Now

Wrong about the UK joining the Euro then and wrong about the UK not leaving the EU now.

Pub Quiz - Answer

The answer to yesterday's question: Which four European countries are not members of the EU but use the Euro as their currency is Andorra, Monaco, San Marino and Vatican City


C.G.P. Grey explains this and more here...

Pub Quiz time

Which four European countries are not in the EU but use the Euro as their currency?


Answer and rather good explanatory video tomorrow at noon...

Who's Next? Italy's Monte Paschi Admits To Billions In Deposit Outflows | Zero Hedge

'It appears, given news from Italy today, that European depositors are increasingly coming to therealization that deposits in their local bank are not 'safe' places to put their spare cash, but are in fact loans to extremely leveraged businesses. In a somewhat wishy-washy, 'hide-the-truth'-like statement on Monte dei Paschi's website, the CEO admits to, "the withdrawal of several billion in deposits." Of course, the reasons why these depositors withdrew their capital from the oldest bank in the world will never be known though of course he blames it on "reputational damage" from their derivative cheating scandal.

Apparently the fact that this happened to come about six week after said scandal and the bank's third bailout, and that the prior two bailouts did not result in such an outflow of unsecured liabilities (at least not to the public's knowledge), was lost on the senior management, as was lost that a far greater catalyst may have been the slightly more troubling events in Cyprus in the second half of March. Unsurprisingly, as Reuters notes, the CEO declined to give a forecast on the level of deposits at the end of the first quarter of 2013; no wonder given the bank just doubled its expectations for bad loans and the 'Cypriot Solution' dangling over uninsured depositor hordes.

Customers' deposits at Italian bank Monte dei Paschi fell by "a few billion euros" ... the bank said in a document posted on its web site on Saturday.'

First Cyprus, now Italy, next?
http://www.zerohedge.com/news/2013-03-30/whos-next-italys-monte-paschi-admits-billions-deposit-outflows

Now that there are different values of the euro, which ones should you avoid?

Cyprus is now in effect not in the core Euro zone, does that mean that Cyprus Euros are worth less than other Euros? For quite a while I have heard that many Germans have been demanding just German Euros. So how do you know what Euro is from where?

Euro coins have a national side indicating which country issued them but it's the notes that interest me more now. Euro notes do not have a national side but don't worry you can tell their origin from the first character of each note's serial number. The first character of the serial number is a letter and that letter uniquely identifies the country that issued the note. 

Here's the list that you need (thanks to Wikipedia)

So I'll obviously be avoiding Euro bank notes starting with a G, but I think that I'll also be avoiding M, S, T, V and Y.

In fact let's be frank, I'll be insisting upon X when I change my money for my next European holiday.

It seems that X does indeed mark the spot.


As a matter of interest the remaining 11 characters on Euro bank notes are numbers which, when their digital root is calculated, give a checksum also particular to their country of manufacture. Interestingly, because of the arithmetic of the checksum, consecutively issued banknotes are not numbered sequentially, but rather, 'consecutive' banknotes are 9 apart.

The one hundred and eighty second weekly "No shit Sherlock" award

Late in Europe #forex trading: For what it's worth, every trader I have spoken to says #ECB fighting inevitable #euro collapse @ForexLive -- Robin Shepherd (@RobinShepherd1)

Euro collapse is inevitable - No shit, Sherlock

"We cannot possibly let Greece go because if she leaves the Euro other countries will want to follow and that will be the end of our European project"

According to Nigel Farage the above were the words of Chancellor Angela Merkel, here's Nigel...

Plenty more in the speech about democracy in the EUSSR, David Cameron's broken promise and so on.

What's happening in Euroland?

UKIP's Nigel Farage making some very sensible faults on Russia's English language TV service about the reality of what is happening and will happen in the EuroZone.

The wisdom of Chris Huhne

No, not regarding the idiotic policies that he promotes regarding Climate Change but the Euro:

“The freedom to set interest rates merely according to domestic needs is a cruel mirage. Monetary union protects economies from the vagaries of speculative capital flows, enabling more stable growth and investment.”

From The Independent  in 2003.

"Monetary union protects economies from the vagaries of speculative capital flows, enabling more stable growth and investment" - Really Chris, really?

A Europhile sees the light

Per The Standard it seems that Danny Alexander has faced up to reality:

'“I think there is no doubt at all that the flexibilities we have, not being part of the euro, have been very helpful to the UK in dealing with the economic crisis we’ve had…”'

 Now what about Peter Mandelson, Ken Clarke and the rest of the Europhiles who wanted the UK in the Euro-Zone and pooh-poohed those of us who foresaw the obvious problems?

If you thought you were depressed about the UK economy; Liam Halligan makes me look cheerful about its prospects

'The only reason we are still able to roll over our sovereign liabilities is because, for the most part, the true extent of the fiscal risks we face hasn't yet been priced in to yields on global markets. What's happening on the eurozone's periphery, even if the current crisis is averted, is just the beginning.'

There's plenty more in Liam's Telegraph article  but I warn you it is not a cheerful read.

'In my view, a sudden and massive re-pricing of Western sovereign risk will happen much sooner than is widely expected. For now, global investors are in denial, assessing that default risks in many of the big emerging markets are much greater than in the West.

This is nonsense – particularly when you consider that the governments of the "advanced" countries are tacitly reliant on debasing and depreciating their currencies in order to lower their liabilities, so imposing on their creditors a form of "soft default".

At some point soon, and it brings me no pleasure to write this, private sector Western investors, together with our emerging market creditors, will drastically cut their exposure to Western sovereign debt. This will come as a rude awakening to the US and the big European sovereigns, who for years now have abused their "risk-free" status.'

Who is Liam Halligan. He is chief economist at Prosperity Capital Management. Greece, Ireland, now Italy the EuroZone is not in a good state and most people are in denial.What should we do, how do we survive the coming financial apocalypse? I don't think any but the super-rich can or will.

One cut that would not hurt a single pensioner or patient

On Tuesday morning a committee in Committee Room 14 at the Palace of Westminster will allow some ninety minutes consideration of the extra £9.5 billion payment to the IMF. A large amount of this money seems likely to be lent to Greece and maybe other troubled Euroland countries. As a comparison this Conservative lead Coalition government has 'viciously' cut Labour’s spending plans by £5.2 billion in 2010-11 and by £9 billion in 2011-12. Who in the UK would be hurt if this money was not provided? What guarantees do we have that this money will not be simply pissed up against a wall prior to the next bailout?

Actually there are some pensioners who may well be hurt by withdrawing the £9.5 billion: Peter Mandelson and the other EU pensioners whose support for the EU is apparently guaranteed by the promise of their EU pension.

Or have I got this wrong? Alex thinks I have and I respect his knowledge of matters financial:

'Alex said...
Sorry you have this (mostly) wrong, probably been reading to much Carswell. Just because he is an MP doesn't mean he isn't a loony dingbat.

1. This is a credit limit not an expense. We aren't paying in any cash, just agreeing to extend facilities.

2. It puts the IMF capitalisation back to the same proportion of world GDP as it was last time it was recapitalised in 1989./ I don't remember anybody making a fuss at the time.

3. While the capital is nearly doubled, the burden is shifted proportionately to wards the BRICs and away from the first world.

4. The IMF always gets its money back. It is the lender of last resort and goes in with heavy boots.

5. The deal was agreed by the last government and was signed by most countries in the world from Afghanistan to Zimbabwe.

4 July 2011 19:52'

Although:
1. Yes it is just a facilty but how likely do you think it is that it won't be called upon?
2. Quite possibly but major EU countries (and others) were not facing a sovereign debt crisis in 1989, they are now
3. Proportionately you may be right but it is still money that the UK should not have to provide
4. In the past maybe but going forward are you 100% sure the IMF will always get its money back?
5. That the last Labour government agreed to this does not surprise me in the least!

Now why would the Chinese want to ensure the survival of the EU?

The Telegraph report that:

'The Chinese premier, Wen Jiabao, has thrown the eurozone a vital lifeline and pledged to buy billions of euros of European debt to keep the single currency project alive. '

So why are the Chinese so keen to ensure the survival of The Euro and thus the European Union? Why are they announcing support for The Euro at almost the same moment that they announce that they will stop buying US debt? Do the Chinese see the EU project as the sort of nascent superpower that they would prefer to do business with than with the USA? A non-democratic (maybe even anti-democratic) superstate, run by a small elite and administered by apparatchiks whose first loyalty is to the EU not their own country; hard to see why the EU appeals to the Chinese isn't it?

EU extravagance

The EU 'need' a larger headquarters and back in 2004 they ordered one. Now the plans have been made public and at a time when national governments and more importantly ordinary people across the EU are having to tighten belts, our EU masters have no such plans.

The design was presented to David Cameron and the other EU leaders at a summit in a brochure rumoured to have cost £100,000 itself. The building is budgeted to cost £280 Million; I bet it costs more.

What a waste? Of course. But whilst the Euro collapses alongside Greece, the EU-philes are still out there, indeed Tony Blair has lifted his snout just long enough to talk up the EU on this morning's Politics Show. The oh so pro EU BBC are already reporting what he said thus:

'Former prime minister Tony Blair has said there might still be a case for the UK joining the euro in the future.

He told the BBC he did not agree with people who argued joining would be a disaster, but there had to be a compelling economic case for doing so.

He said he believed the euro would eventually resolve its problems and the case for Britain joining may become "compelling ... at a certain point".

David Cameron said it would be a "dreadful idea" for Britain to join.

The prime minister, in Brussels for an EU summit where Greece's debt crisis is among items on the agenda, said: "Britain is out of the euro - I think we will stay out of the euro and certainly as long as I am doing this job there is no prospect of Britain even contemplating joining the euro."

...

Mr Blair told BBC One's Politics Show, in an interview to be broadcast on Sunday, he had backed the idea of Britain joining the euro when he came to power - but had accepted that the conditions had to be right.

...

"Now I don't actually take the view that some people take, that Britain joining the euro, in the past or now, will be a disaster. However I always said, unless you can make a compelling case for it economically you were never going to win a referendum on it.

"And the case for Britain joining isn't compelling. Now it may become that at a certain point."

...

Mr Blair said the problems with the eurozone were "fundamental" and there had to be changes - to align fiscal and monetary policy across the single currency area, and to make changes in those countries with problems.

"If people are retiring in their 50s on large salaries in the public sector, in circumstances where, in the end, you know, life has changed, demography has changed, people are living longer and so on - at some point you've got to reform."

But he said he did not think the euro would collapse, adding that the logistics of recreating individual currencies were "immense".

"For Europe, no I don't think they're going to give up the single currency. Now that's not to say there aren't huge issues to do with how you get through the next months." '

I presume that The Politics Show will not question Tony Blair too hard about his enthusiasm for the Euro. Questions like 'would the UK be better off now if it had joined the euro?' will not be asked. Questions like 'does monetary and fiscal union mean that political union is inevitable?' will also not be asked.

The BBC is pro-Labour and pro-EU, so Tony Blair will have got an easy ride this morning and this anti-Labour and anti-EU NotaSheep will not raise my blood pressure by watching the interview...

How close to Sovereign Debt default is Greece?

Andrew Colquhoun, head of Asia-Pacific sovereign ratings for Fitch, told a conference in Singapore early on Tuesday that the Fitch Ratings Agency would regard a debt exchange or voluntary debt rollover of Greek debt as "a default event and would lead to the assignment of a default rating to Greece."

Standard & Poor have reaffirmed that a voluntary debt restructuring for Greece would probably be deemed a default.

Only Moody’s Investors Service has held back, in so far as they give a Caa1 rating to Greece’s sovereign debt.

All the above is interesting as the technical ways of avoiding default are investigated and explored. I note that the International Swaps and Derivatives Association has said that a debt exchange that extended maturities, rather than writing off debt, would not be considered a default because that would not trigger payment on contracts to insure against default (Credit Default Swaps).

In my view Greece will not avoid default and at that point the Euro currency experiment will fail; maybe the EU with it.

Now what I am about to say may surprise people. I am no fan of the Euro or the EU; I would have voted against the European Constitution/Lisbon Treaty had I been given the chance in the promised referendum, indeed I would have voted to leave the EU if I had been asked. However the collapse of the Euro and maybe the EU will cause misery to many millions of people and Pyrrhic victories are usually not worth it.

Monday morning catchup

The usual story, too many tabs and too little time:

1) Edmund Conway in The Telegraph argues that it would be best if Germany left the Euro rather than Greece. It's a point of view. What I wish is that the EU-fanatics who connived to let Greece enter the Euro, despite knowing that it's economic figures were fiddled to meet the convergence criteria, are  made to apologise for their stupidity.


2) Wake Up America has a story of education in the USA.


3) The Algemeiner has news of Yale, anti-Semitism and Jewish donors.


4) The New York Sun compares

'Two pulchritudinous ones... Michele Bachmann and Sarah Palin.


5) HotAir discusses the coming ice-age, for more look here.


6) Guido Fawkes in The Guardian explains what he thinks happened at PMQs last week. For my take, read this.


7) Andrew Lilico at Conservative Home explains the 'Twenty things Westminster needs to know about Greece and its debts'; it's not a cheerful read.


8) Elder of Zion has some pictures that show the true state of Gaza; warning not for the faint-hearted.


9) Andrew Grice in The Independent thinks that Ed Miliband and Ed 'second choice' Balls are divided over apologising for over-spending. You will not be surprised to learn that Ed Balls does not want to apologise for anything.


10) Finally World Net Daily has a story of an odd twist on the Obama birth-certificate story.

Game over for Greece and the EU?

I hear that Standard & Poor have cut Greece's credit rating to CCC, the lowest in the rated world. To give you an idea of how Greece's likelihood of repaying debt is viewed, that rating places Greece below Pakistan (a country in a state of near civil war) and Jamaica. Standard & Poor says that it believes there is a higher likelihood that Greece will see one or more defaults over the next 12 months than not.

The Greek government is trying to push through austerity measures whilst Greek 'workers' complain in the streets; apparently they don't see why they should have to work beyond their mid 50s like workers in the rest of the EU. It also seems that the Germans are getting fed-up with throwing money at the feckless Southern EU countries (and Ireland) whose massive increase in living standards have come largely as a result of EU transfers of money from Germany, the UK and some other mostly North and West European countries.

Meanwhile the whole EU, the eurozone countries and the IMF are in discussions over a second bailout for Greece; this time one expected to total up to €120bn. The talks have hit a problem as the German government has decided that it will not keep footing the bill and is insisting on the involvement of private investors. Somehow I doubt that private investors will chip-in.

So if Greece is more than likely to default on its debt within 12 months, where does that leave the EU and the UK in particular? The EU project of ever-closer union needed monetary union as a precursor to full union. The Sovereign debt crisis affecting chiefly Greece at present but also Ireland, Portugal and Spain may cause the splitting of the Eurozone into two strands of countries; in effect the solvent and the insolvent. In a sensible world this should mean the end of the EU's ever closer union but the leaders of the EU project do not live by sensible rules and they are more likely to say that the debt problems require closer union.

One thing that I have not heard is an acceptance that those of us who argued that the Eurozone project with its single currency would not succeed because of the impossibility of running a single currency to suit the needs of such disparate countries were correct and the Euro-enthusiasts were wrong, very wrong. I have heard not even a whiff of an apology from Tony Blair, the multitude of Lib Dems who supported it or especially the BBC who gloried in portraying us EU-realists as 'Little Englanders' at best and raving xenophobes at worst. Come on BBC apologise, you got it wrong and in any case you should not have taken sides. I suppose the EU money you receive may have helped sway your coverage though...

Where are the Euro-enthusiasts now?

'Lord Mandelson, Nick Clegg, Lord Heseltine, Paddy Ashdown and Ken Clarke have all gone incredibly quiet on the subject of the single currency.'

However people of that ilk don't apologise for being so, so, so wrong in the past, they just move on to the next way of achieving their ends.

Iain Martin in The Mail explains...

'Surely, it was one of the greatest escapes in Britain’s history.

If we had been foolish enough to go into the European single currency we would be in an even more dire economic situation than we are now.

The euro’s lower interest rates would have made money even cheaper and easier to borrow during the boom, making the recession deeper when the bubble burst and more difficult to get out of.

You won’t hear any of this from those in the political establishment who cravenly backed Tony Blair when he was madly trying to abolish the pound.'

Read the whole article for an explanation as to how EU rules have been bent to allow the bailouts but above all remember this:

'We are on the hook in other ways, too, unfortunately. The most disgraceful last act of the Labour government was to sign us up to take part in the financial rescues for Ireland and Portugal.'

Yes as with so much that is wrong with this country, it is the last Labour government's fault and they should be both blamed and held to account.

As for the people named at the top of this piece, shouldn't they be asked about their previous (and for all we know current) Euro enthusiasm and whether they admit they were wrong? And whilst we are the on the subject, shouldn't just one interviewer ask Peter Mandelson where his loyalties lie bearing in mind that EU pensions are, I believe, paid on the understanding that the EU can remove this pension, if in the view of the Commission or the Luxembourg Court, they "fail to uphold the interests of the European Communities".

Is Greece about to fall out of the Euro?

From der Spiegel:

'The debt crisis in Greece has taken on a dramatic new twist. Sources with information about the government's actions have informed SPIEGEL ONLINE that Athens is considering withdrawing from the euro zone. The common currency area's finance ministers and representatives of the European Commission are holding a secret crisis meeting in Luxembourg on Friday night.

Greece's economic problems are massive, with protests against the government being held almost daily. Now Prime Minister George Papandreou apparently feels he has no other option: SPIEGEL ONLINE has obtained information from German government sources knowledgeable of the situation in Athens indicating that Papandreou's government is considering abandoning the euro and reintroducing its own currency.

Alarmed by Athens' intentions, the European Commission has called a crisis meeting in Luxembourg on Friday night. The meeting is taking place at Château de Senningen, a site used by the Luxembourg government for official meetings. In addition to Greece's possible exit from the currency union, a speedy restructuring of the country's debt also features on the agenda. One year after the Greek crisis broke out, the development represents a potentially existential turning point for the European monetary union -- regardless which variant is ultimately decided upon for dealing with Greece's massive troubles.'

And whilst this is going on, we send money to bailout Portugal.

'"It would lead to a considerable devaluation of the new (Greek) domestic currency against the euro," the paper states. According to German Finance Ministry estimates, the currency could lose as much as 50 percent of its value, leading to a drastic increase in Greek national debt. Schäuble's staff have calculated that Greece's national deficit would rise to 200 percent of gross domestic product after such a devaluation. "A debt restructuring would be inevitable," his experts warn in the paper. In other words: Greece would go bankrupt. '

Greece this week; how long before Portugal? Spain? Italy? Who next?

'Europe's Banks Are in Far Greater Danger Than People Realize'

As gold makes new highs and oil supplies look ever more threatened maybe this Der Spiegel article is somewhat timely, it's in the form of an interview with US economist Barry Eichengreen:

'SPIEGEL: A look at the banks' books, though, is enough to realize that it won't be easy. They are still full of bonds from high-risk countries that have yet to be written off. And the equity base of European banks in particular remains weak.
   
Eichengreen: Europe's banks are in far greater danger than people realize. Most people now understand that last year's stress tests didn't tell us much. The tests were a token gesture and lacked realistic scenarios. They completely ignored the liquidity risks that banks could face. Regulators will not be allowed to get away with that this time. However, what would put my mind at rest more would be if the responsibility for carrying out the stress tests went to the European Commission. National regulators are too susceptible to pressure from the regulated.
 
SPIEGEL: How much money do the banks need to crisis-proof their balance sheets?
 
Eichengreen: As a rough estimate, I'd put the costs for recapitalizing the German and French banks at 3 percent of Franco-German gross domestic product.
 
SPIEGEL: So about €180 billion.
 
Eichengreen: There are no cheap solutions. My main concern is that Europe will choose a middle path again, for example by making the interest and terms on loans to Greece and Ireland more tolerable. Europe's leaders wouldn't be wrong in doing that, but it would fall far short of what is needed to save the euro. The result would be more wasted months for Europe.'