Sunday, 17 April 2011

Irish Junk, Spanish Unemployed, Greek Turmoil

No barbs on this. The EU is in trouble. The last time they had an unified currency things were run from Rome not Brussels and an Emperor had his face on Sestertii.

The Telegraph (UK not the Sydney toilet tissue) has articles here and here.

Greek, Irish, Spanish, and Portuguese 10-year government bond yields rose as markets continued to believe further debt restructurings will be needed eventually.

Fears that Greece will default rose to fresh highs yesterday after Wolfgang Schaeuble, the German Finance ministers, that a further restructuring of the company's debt may be needed, despite last year's €110bn (£97bn) bail-out.
George Papandreou, the Greek Prime Minister, did little to appease market jitters when he presented the outline of fresh fiscal plans but said the measures would only be spelled out in detail after Easter.


Moody's downgraded Ireland's debt rating to just above junk status, citing "weaker economic growth prospects" and "uncertainty" created by EU solvency tests.

It said the country's austerity plan is weakening government finances and it may suffer further as a results of interest rate increases by the European Central Bank.

That downgrading is a gimme, but,

Greek banks are big holders of sovereign debt; a haircut of a third to a half would immediately trigger another banking crisis in Greece and turn an already catastrophic flight of capital into a rout. The banking system would very quickly collapse. A restructuring would also collapse the country’s pensions system, as the asset of choice among Greek pension schemes is Greek sovereign debt. Pensions too would have to be cut severely.

You can see why the Greeks are so determined not to restructure. Default would also require big write offs among German and other eurozone banks, and therefore necessitate a further round of recapitalisations. The systemic consequences would be extreme, possibly worse than the Lehman’s collapse. Much the same observations can be made about Ireland and Portugal.

and, Spain? Spain's jobless could pass 5m says finance minister 5M unemployed is akin to 2.6m in Australia. Remember what brought Spain asunder (from the article).

Spain's booming construction industry drew millions of unskilled immigrant workers and generated high levels of economic growth in the decade to 2008.
But the collapse of the property bubble, compounded by the global financial crisis, left many people out of work, especially immigrants and youths.
The unemployment rate soared to 20.33pc at the end of 2010, the highest in the industrialised world.

And Britain? Britain will not join the EU bailout find. Probably because they'll need their own bailout. PIIGSUK.

So Europe on borrowed time, China about to pop (blog comment forthcoming) and an Australian housing implosion.  Everything is fine. Wayne said so.


  1. Spain is the kicker. If Spain falls things will get very difficult indeed. Every effort will be made to extend lifelines to Spain, because...well, like the banks, too big to fail.

  2. Agree 100%. Keep an eye on Spain. What will be interesting is if they get off with Austerity 'lite' ((UE approaching 20%). The rumblings from Portugal Ireland and Greece will be loud. Who does that leave? Italy and the UK. The PIIGSUK penalty box will be full.