Eurozone will collapse...

[Ignitionnet]

Originally Posted by Osem

http://www.bbc.co.uk/news/business-29681331

It'll be interesting to see how keen the Germans are to share in the European austerity, unemployment etc. they've managed to avoid for so long. I can't see anything in Europe changing very much until the Germans start feeling the pain.

Germany imposed austerity on itself for the past decade, driving wages down in an attempt to maintain a huge competitiveness gap with other members of the Eurozone. Part of the reason for pain in Germany now is the extreme reluctance to invest in pretty much anything.

They need to spend more at home, invest in infrastructure and rely less on the Eurozone keeping their exports cheap and emerging economies continuing to buy their stuff.

In short they have largely the opposite problem to us. Their own dogma is coming home to roost.

[Osem]

I think the 'austerity' imposed on itself is rather different from that it has effectively 'imposed' on others. Anyway whatever the reason(s) for it, an unhappy German electorate isn't going to do much to cement unity in the EU.

I found this interesting, reminds me of UKIP.

http://www.ft.com/cms/s/0/aa6dc99c-4...#axzz3GcUbUAvJ

[Osem]

Chancellor Angela Merkel would rather see the UK exit from the European Union than compromise over the principle of free movement of workers, according to the German magazine Der Spiegel.

http://www.bbc.co.uk/news/uk-29874392

Call my bluff...

[Ignitionnet]

So here we are. Having exhausted every other option the ECB really only have full QE left, and Germany along with various other northern European states don't want it to happen.

http://www.telegraph.co.uk/finance/c...rlin-Wall.html

The governors of all northern and central EMU states - except Finland and Belgium - lean towards the Bundesbank view, foolishly in my view but that is irrelevant. The North-South split is out in the open, and it reflects the raw conflict of interest between the two halves.

The North is competitive. The South is 20pc overvalued, caught in a debt-deflation vice. Data from the IMF show that Germany’s net foreign credit position (NIIP) has risen from 34pc to 48pc of GDP since 2009, Holland's from 17pc to 46pc. The net debtors are sinking into deeper trouble, France from -9pc to -17pc, Italy from -27pc to -30pc and Spain from -94pc to -98pc. Claims that Spain is safely out of the woods ignore this festering problem.

France demanded EMU as a condition of supporting German reunification. Seems to have bitten them in the backside as Germany are obsessed with inflation while France and others want it to erode their debt.

---------- Post added at 09:03 ---------- Previous post was at 09:01 ----------

Also this is what happens when you give up control of your currency. Without control of currency a government loses much of its sovereignty.

http://www.irishtimes.com/news/irela...lout-1.1989869

Humiliating and if the reports I've read are accurate the whole Ireland emergency funding and bailout is also actually illegal under the treaties. Of course the treaties are irrelevant if they threaten the EU dream of ever-closer union.

[Osem]

Ah well it's all in a day's work for a Eurocrat...

[Osem]

Originally Posted by Ignitionnet

So here we are. Having exhausted every other option the ECB really only have full QE left, and Germany along with various other northern European states don't want it to happen.
...

It seems Mario might agree:

http://www.bbc.co.uk/news/business-30654641

The value of the euro has fallen to its lowest level since the middle of 2010, following comments from Mario Draghi, the president of the European Central Bank (ECB).

In a newspaper interview, he hinted again that the bank might soon start a policy of quantitative easing to try to stimulate the eurozone economies.

The aim would be to stop the continued fall in the general level of prices.

The euro fell 0.4% to $1.2034 after Mr Draghi's comments were made public.

Recently, the official eurozone inflation rate has fallen to just 0.3%.

[Ignitionnet]

Yes, well, QE is great for bailing out banks and inflating asset prices but has done perilously little to stimulate the real economy.

All well and good if trying to recapitalise banks on the sly but for actually combating deflation or promoting productive investment it appears to have been virtually worthless in Japan, the USA and here.

[Osem]

Originally Posted by Ignitionnet

Yes, well, QE is great for bailing out banks and inflating asset prices but has done perilously little to stimulate the real economy.

All well and good if trying to recapitalise banks on the sly but for actually combating deflation or promoting productive investment it appears to have been virtually worthless in Japan, the USA and here.

Adopting a flawed strategy. How very unlike the EU...

[Osem]

Germany has an "urgent responsibility" to invest more in the eurozone, France's economy minister has said.

Emmanuel Macron told the Les Echos newspaper that Europe's largest economy needed to take a "proactive" role in reviving growth in the area, by doing more to boost consumer demand.

http://www.bbc.co.uk/news/business-30704993

Wonder what their answer will be...

[Ignitionnet]

They're having a laugh. Germany doesn't like investing in itself let alone the rest of the Eurozone.

German politics has become defined by its leaders' attitude to debt and investment, just as British politics has become defined by its leaders' attitude to the NHS.

The German commitment to prudence and the British commitment to universal healthcare, free at point of delivery, are both laudable, but have become politically untouchable, even when change is manifestly necessary.

[Stop It]

Originally Posted by Chris

German politics has become defined by its leaders' attitude to debt and investment, just as British politics has become defined by its leaders' attitude to the NHS.

The German commitment to prudence and the British commitment to universal healthcare, free at point of delivery, are both laudable, but have become politically untouchable, even when change is manifestly necessary.

Well, the former is completely, demonstrably nonsense.

This German commitment only started in 2009 with their amended Basic Law that says they cannot have a deficit of more than 0.35% of GDP. That doesn't even apply until 2016!

Until then, they have ran a budget deficit in 14 of the last 18 years and 6 years ran more than 3%, which is the EU limit. (Data here: http://www.tradingeconomics.com/germ...ernment-budget)

Germany could easily invest their way out of deflation, they don't want to. It's a political decision and is a policy of the CDU, not an untouchable policy like the commitment to the NHS here.

[Osem]

It did not take long. The game is very much in play. Greek voters are being bombarded with warnings about what is at stake when they go to the polls on 25 January.

There is little that is coded in these messages. When a country has been bailed out to the tune of €240bn (£187bn; $286bn) there is no such thing as non-interference in Greece's internal politics.

Most of the European political establishment does not want Greece to elect the radical left party Syriza led by Alexis Tsipras. The party is currently narrowly ahead in the polls. Mr Tsipras is looking for debt relief and hinting that his election could spark wider change in Europe. He frames his message as "ending austerity politics".

http://www.bbc.co.uk/news/world-europe-30679182

So German politicians are sending out their new year messages. Unlike in 2012, a Greek exit from the euro would now be considered "manageable". The eurozone has built up much greater protection against shocks. The German Vice Chancellor, Sigmar Gabriel, said "that's why we cannot be blackmailed". He wants Greece to stay in the eurozone, he said, but it had to abide by the agreements it had made.

This could be very interesting.

[Ignitionnet]

Incoming QE announcement next week, apart from Greece whose bonds won't be bought as they don't meet quality requirements.

http://www.expatica.com/de/news/coun...FT_446105.html
http://www.euronews.com/business-new...runch-meeting/
http://www.bloomberg.com/news/2015-0...l-says-1-.html
http://www.ekathimerini.com/4dcgi/_w...01/2015_546283

Greece is also due to run out of cash in 6 months and banks are on emergency funding from the ECB:

http://www.nytimes.com/2015/01/17/bu...-aid.html?_r=0
http://www.marketwatch.com/story/maj...ash-2015-01-16
http://www.bloomberg.com/news/2015-0...ch-syriza.html

Complete with a bank run gathering steam.

http://www.standartnews.com/english/...news-7085.html

[Sirius]

Originally Posted by Ignitionnet

Incoming QE announcement next week, apart from Greece whose bonds won't be bought as they don't meet quality requirements.

http://www.expatica.com/de/news/coun...FT_446105.html
http://www.euronews.com/business-new...runch-meeting/
http://www.bloomberg.com/news/2015-0...l-says-1-.html
http://www.ekathimerini.com/4dcgi/_w...01/2015_546283

Greece is also due to run out of cash in 6 months and banks are on emergency funding from the ECB:

http://www.nytimes.com/2015/01/17/bu...-aid.html?_r=0
http://www.marketwatch.com/story/maj...ash-2015-01-16
http://www.bloomberg.com/news/2015-0...ch-syriza.html

Complete with a bank run gathering steam.

http://www.standartnews.com/english/...news-7085.html

You can bet even thou we have nothing to do with the Euro, the EU will expect us to help fund it.