Yesterday, only two days after the final $17 billion of the first Greek bailout was approved for release, S&P announced that it would declare Greece in default if the French and German national banks carried through on their plan to roll over maturing Greek bonds by using the proceeds from those maturing bonds to purchase new 30-year Greek bonds. That deal was to be carefully structured, including tightly restricted trading of those bonds to prevent them from immediately losing all of their nominal value, which of course in a free market would occur immediately after they were issued.
The simple fact is that Greece is bankrupt. Everyone knows that, but the EU is striving mightily to conceal it because when the Greek domino topples the rest of the Euro economy quickly follows. French and particularly German taxpayers have had enough, watching their wealth being pillaged to subsidize Greece. Everyone knows that once Greece collapses it will soon be followed by Portugal, Ireland, Italy, and Spain, with Belgium and then France itself not far behind.
So the EU pretends desperately that none of this is happening. Hiding their heads in the sand is obviously not an effective solution. Unfortunately, there is no effective solution.
If Germany and the UK have any sense, they’ll withdraw from the EU and return to their national currencies.
I think that the UK is still using the Pound, even thought they are part of the European Union.
Yes, the Pound Sterling is still the official currency of the UK, which is a member of the EU but not of the Eurozone. But I understand that the Euro is widely accepted in Britain as an alternative currency, both at the retail level and, more significantly, for large-scale business transactions.
Nope in the UK you cannot spend euro. In London some shops might take it but they will charge you an extortionate exchange rate. They also take US dollars and Japanese Yen, but also rip you off in the exchange.
Its also not a big business currency. According to the latest government figures approximately 40% of UK business is with the euro zone, which is a large figure but it show how much business is outside the zone.
I’ve obviously been misinformed. Perhaps I got that idea watching British TV programs.
I was in town only 30mins ago, and so I asked if the large shop (Argos, sells everything) took Euro – the (young) person behind the counter looked at me strangely and said “no, I use them on holiday!”.
My friends run small businesses and they can’t accept euro without opening a special (and expensive) bank account. I work for a large corporate, and all our invoices are in pounds sterling, but we work in US $ internally as we’re a US owned company.
I wonder what TV shows you’re watching, and from what date ? 🙂
Not sure, or it may be that I misinterpreted comments by some of our British friends who visit periodically.
I think there was a bunch of talk as IF the UK was going to use the Euro back in 2001. I did trip across an article from that year stating that: Safeway; Sainsbury; Selfridges; Virgin; Marks and Sparks; and the Body Shop as some of the “big name” stores all accepting the Euro, but that may have fallen by the wayside since that time. Some places like Woolworths announced that they would accept the Euro only in North Ireland and the Channel Islands.
My M-I-L gets a British Pension paid in GBP, and I get to hear about the exchange rate each and every month!
For years, Canadian businesses accepted US dollars and paid whatever the exchange rate was. More recently, more shops are posting signs saying no American money accepted. Probably because since the US enforced passports between our countries, American tourism into Canada just up and died.
You have been predicting the demise of the Euro practically before it ever appeared. First of all, the whole Greek debacle, is only about 3% of the Euroland economy, and could be bailed out with pocket change from the other countries.
Secondly, the strong nations are benefiting greatly from the economic union. They will not be going back to their old currencies. Much of the strong growth in Euroland has been due to removal of exchange and transaction fees between currencies. Business and politicians are well aware of this–and even the man in the street likes being able to pay on vacations with their own currency.
If anybody drops out, it is going to be Greece. And THAT is what the big countries secretly want: Greece returns to its own currency and defaults, and Euroland is rid of its biggest thorn in its foot. IMF and World Bank do not want to see that, though–and they will probably prevail.
According to Obamer and Geithner, the US is going to default on 8 August. Who is in worse trouble–Euroland or the US?
Pocket change? You need a reality check.
What strong nations? The strongest of the group by far is Germany, and it’s very weak in absolute terms. Strong growth? Again, surely you jest.
Greece dropping out? Again, dream on. The Eurozone would like nothing better than to expel Greece, but there’s no provision for doing so. Greece could leave voluntarily, but they’d be insane to do so. Why would they give up the only card they hold? And even if Greece somehow disappeared, the Eurozone is still left with Ireland, Italy, Portugal, and Spain, all of which are in horrible shape.
Who is in worse trouble? That’s not even close. The US has the world’s strongest economy by far. Europe is moribund. We’re in bad shape relative to what we should be, but comparatively we (and Canada) are in far better shape than anyone else.
Well, apparently we won’t be able to count on the Germans to wake up and smell the coffee. Moody’s downgraded Portugal to Junk Status today, and Chancellor Merkel is denying the new ratings and wants the IMF, European Central Bank and the European Commission to reassess the new ratings, as she trusts “above all the judgment of those three institutions”.
Not that I think Moody’s and S&P have much credence after they sat back and let the housing crash happen.
Three percent IS pocket change–to Germany alone. Spain and Portugal are less of a problem because they WILL pay back any loans they get–eventually. Everybody knows that Greece will not. So the only dilemma here is how to shake that damned burr Greece off the leg.
In case you have not been paying attention, the EU is now China’s largest trading partner, having passed up the US a few years ago. China has been systematically withdrawing its funds from US Treasuries, until their current investment is minimal compared to just a few years ago. China is far more interested in the EU now, than it is in the US. The head of their economic planning agency said recently that this is because the EU has businesses that are of a more manageable size than the super-conglomerates of the US.
Oh. And the EU is also the largest economy in the world. Taken as a whole, the US did only slightly better than the EU in per-capita GDP growth last year.
Take a look at
http://en.wikipedia.org/wiki/Economy_of_the_European_Union#Economic_growth
and note that GDP growth for Spain was down only -0.1% last year. Portugal was actually up 1.3%. Ireland is actually worse off than either of those two, but nobody is talking about them.
Fact is–Greece is far better off than California. So, maybe the US will default first, after all. Unless you don’t believe our President and Secretary of the Treasury.
QUOTE Bloomberg News
“Aug. 2 is a ‘hard deadline’ for when the U.S. will no longer to meet [sic] all its debt obligations,” Obama said at a White House news conference.
/QUOTE
(Sorry, I previously noted 8 Aug, but it is 2 Aug.)
Barring the north of Ireland, Euros are not accepted as currency in the UK. In the north, they’ll happily take as many euros as shoppers from the south will give them, and with the rip off republic prices charged down south, they get a lot of euros.
Regarding Ireland, whats keeping us afloat is twofold – aggressive and painful tax increases and a buoyant export sector, mainly composed of US multinationals. Now, if we could defeat the public sector unions we’d be out of this mess in relatively short order.
I love statistics, Chuck. And they need to be comparable to be useful.
Let’s look at the EU economies from the Wiki article you posted: $16.282 trillion GDP produced by a labor force of 239.3 million people. That’s $68,040.12 per person. A similar article about the US economy on Wikipedia shows $14.772 trillion GDP, so certainly the EU is the larger economy, but the US produced that with only 65% of the labor force (154.5 million) for a total of $95,611.65 per person. Imagine the economy with a population the same as the EU, if they could maintain the high production rate, the US GDP could be as high as $22.879 trillion.
Of course China is more interested in the EU now. They’ve hooked the US on cheap Chinese crap and have totally saturated the market. The EU has 35% more people to sell crap to. The Chinese must be rubbing their hands in glee. After the lure of cheap goods finishes the EU economy, China will emerge as the dominant economy of the planet.
Unless we could borrow a page from Mack Reynolds and get the Chinese hooked on religion. Or is that what the Falun Gong is up to? 😉
“Unless we could borrow a page from Mack Reynolds and get the Chinese hooked on religion. Or is that what the Falun Gong is up to? ”
I’ve always wondered why the Chinese object so strenuously to Falun Gong. Persecuting religions, if that’s what FG actually is, just makes them stronger.