EMU debt crisis edges ever closer to the core
>>>The parallel is often made between Greece and Germany under the EU and California and ... say Wyoming (probably a rare solvent US state). Will the PIIGS cause the break-up of the union?? Answer: When not if - and when might be this week. Just remember the great oily bookends of '08: Crude $140 - Lehman Implosion - Crude $35. Nothing but wallpaper, chewing gum, and bailing wire has been applied to the Euro and US states since the cracks began to show in '07. Mr. Bernanke's press has propped up the equities - and maybe commodities. Beware. Oh. The Irish government did not bail out the Irish banks for the sake of Ireland. If the Irish banks failed, then the big Euro banks - Credit Suisse, etc - would fail, and then the big US banks would fail. The Irish were thrown under the bus for Goldman Sachs and the other US TBTFs. Don't ever think that a Lehman type event can't/won't happen in the near future.<<<
By Ambrose Evans-Pritchard 10:14PM GMT 10 Jan 2011
The eurozone's debt crisis is once again in danger of spiralling out of control after yields on Portuguese debt spiked to a post-EMU high and contagion hit Spain and Belgium.
Logo's unveiled by the European Union head office for retailers across the EU that tells customers as of next year they can pay their bills in euros if they wish. EMU debt crisis edges ever closer to the core
The European Central Bank (ECB) intervened heavily in the markets, buying Greek, Irish and Portuguese bonds to drive down yields again, but has yet to broaden its emergency purchases to a fresh set of countries. Germany's Bundesbank is vehemently opposed to policy "creep" that involves the ECB in fiscal rescues by the backdoor.
The bank's refusal to be drawn further has left Belgium fending for itself as an escalating constitutional crisis pushes yields on its 10-year bonds to a post-euro record of 4.27pc. The country has not had a government since Flemish separatists emerged as the biggest party in elections seven months ago.
Stephen Jen, chief economist at Blue Gold Capital and a former IMF official, said Greece, Ireland and Portugal are already "insolvent". Refusal to face up to reality draws out agony, with a "cancerous" effect on the whole eurozone.
Mr Jen said the bail-outs themselves - done in the in the name of "saving the euro" - are causing the crisis to spread ever wider by contaminating stronger states instead of separating the balance sheets of good from bad, as would be normal in a debt clean-up operation.
The danger is that this will infect Europe's core, threatening the AAA ratings of France, Germany and others. If the EU's bail-out fund is enlarged by a further €250bn (£208bn) to €700bn, "one or more" of the AAA states may be downgraded, "most likely" France. "We see a further escalation of the debt crisis. There is no silver bullet because the underlying problems are 'knotted'," he said.
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telegraph.co.uk |
