Well boys and girls, Ireland is rolling over in the water, and Greece is venting steam as the water has now flooded its engines.
The Greek government assured the world they had a plan. And they did, just not the one they told us about. It was, as I argued months ago, the Argentina plan. Give whatever assurances the market wants to hear, lie through your teeth and in the mean time get your personal fortune and those of your friends off shore. It’s done.
The Greek government assured the world their deficit for 2010 was going to be 7.8%. Today we find its not – its 9.3%. And that is before the Greeks finally hand over the figures for the numerous swap agreements with the likes of Goldman Sachs. Those figures were supposed to be released last month and weren’t. They were withheld. The Eurostat press office says they have the figures but ‘neded time to go through them’. Sure.
9.3% wipes out the entire Greek recovery plan. It makes their austerity measures a sick joke. The only reason the markets haven’t gone wild is because no one is buying Greek debt anyway and besides they are far too busy having a melt down about Ireland.
The rate Ireland has to pay on its 10 year debt lept up today from 5.7% yesterday to 6.4% today That is a blow out. Ireland is stuffed. The head of the Irish Central bank admitted yesterday that the bank bail outs have FAILED to convince the markets. News flash for you mate – they failed to convince anyone at all!
Ireland has given away their future to banks and their bond holders, has bought from them their losses and heaped them upon the people of Ireland and IT HAS FAILED.
Ireland and Greece will both now have to restructure. This is no longer a political decision. It is no longer an Irish decision. It is being decided in Paris and Berlin and they are simply doing the numbers for what it will do to the EFSF. The fund is there, with its own AAA rating. The question is how much does the EFSF bail out the bond holders and how much does it make them pay. The EFSF itself has close ties to the bond holding community.
Portugal will be next to move from amber to red.
Germany already has in place the new rules it needs in order to force a resolution that includes costs falling on the bond holders. As soon as Germany started to push hard for the rule change everyone knew what it meant. Germany knew this bust was coming and took the steps it had to, to protect itself.
This is a done deal. Ireland and Greece are sinking. It just takes time for a large ship to keel over.
So what happens next? and how long will it take? Not that I expect you or anyone else to "know"; but anyone out there pontificating?
Yours truly, Unclear
Since I starting having a very rudimentary understanding of what was going on about three years ago I have been repeatedly amazed how long these macroeconomic issues take to play out.
There are a few crunch/tipping points which fool us in to believing that these things can play out on time scales we are accustomed to. However inevitable the retreat is these brief points are just the explosions – the shells flying through the air take months to arrive and the advance of the tanks years.
jms452
Apologies for my failure to do the research myself, but are you saying Merkel & friends have decided to make the bondholders take a bit of a haircut? This is very interesting indeed if true.
As for Ireland, it seems to me that they best hit rock bottom ASAP so the rebuilding can begin ASAP. First step should be leaving the Euro. Once the first country leaves, the dominoes will begin to fall one by one. I hope.
Morning DopeAddict,
yes, that's what Merkel has pushed for and seems to have got. Rattled the bond holders cage.
I'm interested to hear more of your thinking on the euro. If you don't mind telling.
Hi Golem think you'll appreciate this one, recommended by PrincessChipChops, a Guardian CiF and UT regular –
The Quiet Coup
" The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time. "
The Quiet Coup by Simon Johnson.
Golem — The Euro zone leaders talk about the possibility of Ireland or Greece leaving the Euro, but only in terms of how that will be a disaster for those countries, because they'd default on their loans (so what?,) no one will ever trust them again, loan to them again, etc.
I don't think that's true. It would be a disaster for the remaining Euro countries, as everyone would realize it's a house of cards, but for the countries that leave the Euro, they'd be free to start rebuilding their economies without the limiting restrictions on deficit spending, which is the only way for any country to begin climbing out of the hole they're in.
Countries like the US & UK, which control their own currencies, don't have to borrow to spend in their own countries (despite what they'd have you believe — they're creating money out of thin air for QE2.)
Right now the govt is the employer of last resort. If you control your own currency you can spend to create jobs, right now, to start rebuilding by creating a demand for goods & services. The only barriers are political.
Obama won't do it, because neo-liberals use unemployment to fight inflation, which is silly, but enables them to exert enormous amount of power over their own citizens, which is kind of the point. If you have the power you can do anything.
Euro zone countries can't spend now, because they have to borrow from someone to do so, and at usurious interest rates. But if Ireland leaves the Euro, it can spend to create jobs & begin recovery.
And if Ireland does so, and is seen to be making any progress at all, others will follow suit. Again, the barriers are political, and the decision to leave the Euro would be fought tooth & nail by the politicians who the banks control, but it can be done.
The political dimension you raise Dope Addict is centered on the politicians and what they are deciding to do but once the facts start to filter down to the people than a different political dimension will surely enter in. Kelly's article about possible mass mortgage defaults in Ireland indicate just one form a counter movement could begin.
So if Ireland did start to think that leaving the Euro could actually be beneficial, unthinkable a little while ago when Euro seemed all pluses, it would not be so hard to imagine a public demand developing for just such an outcome. Instead of looking like failure it might start to look like a sane form of resistance.
The info wars would start in earnest if leaving the Euro ever started to be seen as a viable policy option instead of a form of unspecified and somehow unimaginable disaster for the country cut adrift. The bogyman of default and leaving the Euro would quickly lose its power to frighten the population and then what would happen.?