The stark choice: Increase German debt or save the Euro

[doodab]

How? All countries miraculously paid off their debts?

The only way it'll blow over (whilst keeping the Euro) is if the Germans/French cough up.

If you work in EUroland, bend over and take your shafting.

They will get the money back with their new financial transaction tax.

It'll be time to touch your toes soon

[sasguru]

They will get the money back with their new financial transaction tax.

UK has veto on that. Ain't going to happen.

[BlasterBates]

How? All countries miraculously paid off their debts?

The only way it'll blow over (whilst keeping the Euro) is if the Germans/French cough up.

If you work in EUroland, bend over and take your shafting.

There are two scenarios

1) Disorderly default and possible break up of the Euro

2) Orderly default with recapitalisation of banks affected

Scenario 1) is the burning building, it aint going to happen. Scenario 2 will affect banks within and outside the Eurozone.

Spain and Italy do not really have a big problem, it is quite manageable unless there is a disorderly default.

When the orderly default comes watch Osborne reach nervously for his wallet.

[sasguru]

There are two scenarios

1) Disorderly default and possible break up of the Euro

2) Orderly default with recapitalisation of banks affected

Scenario 1) is the burning building, it aint going to happen. Scenario 2 will affect banks within and outside the Eurozone.

Spain and Italy do not really have a big problem, it is quite manageable unless there is a disorderly default.

And who pays for the banks recap?

[BlasterBates]

The French government will fund their recap.

The German government will fund their recap.

The UK government will fund their recap. You don't seriously believe the banks in Europe's financial centre won't be affected and here's the hint who owns most Irish bonds?

bend over...

even the US may have to shore up a financial institute, credit default swaps spring to mind

[doodab]

even the US may have to shore up a financial institute, credit default swaps spring to mind

Hence the pressure to avoid a default that would trigger CDS contracts. One analysis I read had the US approx as exposed as France when the insurance of PIIGS sovereign debt and bonds issued by Eurozone banks was taken into account.

Of course in theory the total amount of tulip doesn't get any bigger because of the CDS, it just changes who will end up stinking of it.

[sasguru]

The French government will fund their recap.

The German government will fund their recap.

The UK government will fund their recap. You don't seriously believe the banks in Europe's financial centre won't be affected and here's the hint who owns most Irish bonds?

bend over...

even the US may have to shore up a financial institute, credit default swaps spring to mind

Don't make me laugh.
France can't afford it, Germany can't and neither can Britain.
Of course the ECB could always "print money".
Sayonara the whole of Europe for a generation.

[doodab]

And who pays for the banks recap?

Recap Schmecap. The last bank standing will buy all of the others. At that point it will own the whole world and everybody in it so things like capital ratios will be largely irrelevant.

[Doggy Styles]

In a year ir two it will have blown over.

I admire your optimism for the eurozone in the face of all history of debt crises!

I wouldn't have as much confidence in an organisation that (a) didn't foresee the inevitable (i.e. what is happening now) when they created the euro and (b) didn't spot anything strange happening in the PIIGS economies from the moment they joined it.

But the best one of the lot was the sanction for a country whose deficit did exeed the limit - a big fine that made them borrow even more to pay!

[centurian]

The problem with the UK deficit is that because the banking sector has imploded, it now has a structural deficit.

And it's interesting how that has been spun to declare this a banker's deficit.

The bankers didn't cause the structural deficit - merely they are no longer making enough money for the tax revenues to be able to cover it.

Yet it is being spun that money is being taken from "hard working families" and "given" to bankers.