Originally Posted by McDave
Spain gets 'bailout'. Pays lower interest rate. 'Bailout' fund gets substantial interest on repayments. Everyone's a winner. Except the markets of course. Unless Spain defaults on the 'bailout'. Which it won't.
The latest figures on Spain bailout are that 300billion would be needed.they are about to get 100 billion but are in deficit of 9 billion in order to meet the requirements needed to get it...thats just for Spain and the money is not there..this is partly if it does get a bailout it would like us need to exit the markets for some time.If Spain is bailed out Italy will need to be too....and that will cost about somewhere in the same ball park if not more ...some have put a figure of 300billion to 500 billion on it
And of course we are assuming that we would see reform....in both these countries...however i am doubtful
France will be unable to help even if it itself does not need funding ( i am assuming for the moment it does not i am unsure)
Germany does not have this kind of money. The Whole EU does not have this kind of money.Germany (Bundesbank actually) again rejected any notions of eurobonds dept pooling or even buying more govt bonds.The ECB can't make them.
If we can't afford Greece what makes people think we can afford Spain and Italy?The answer always seems to be well we can't afford to lose them. That does not mean the money is there to keep them.
I think there are three options. Debt default or allowing Spain and Italy to burn or write off some debt. And a partial bailout. This option i don't think will work in the long term though.As Spain has a Conservative Govt at the moment and they have NOT made reform. Now this is even in terms reforms needed to meet requiremets in order to get the current funding promised that they are waiting for. Spain is 9billsion short of meeting the requirements needed to qualify for the cash funding promised. This is turning into another Greece scenario.
Merkel and Spain also have another hurdle to surmount. Although plans had called for the ESM to succeed the EFSF on July 1, this has been blocked by a temporary injunction imposed by the German Federal Constitutional Court. The court is hearing a case brought by plaintiffs who argue the ESM and fiscal pact will force Germany to give up too much sovereignty and undermine the power of its democratically elected parliament to determine what happens with taxpayers money.
The second Scenario i see as a possibility is that Germany breaks away from the Euro ...and polls have shown recently that the majority of Germans favour a break up of the Euro rather than providing more money.
But polls are polls ..the Question is which would be cheapest ....a Break up or providing more money to the Eurozone....so far we have thought funds woud be cheaper than a break up however this is only true if reforms and targets are met......and they are not being met by key countries.
The majority feel in the far left in Germany and many accross Europe that it is pointless to save the Euro. That it just cannot be done ...it cannot be saved.I think they are right. It cannot be saved the reform is not there the institutins are not there and the money is not there to keep funding Eu countries.
What is interesting was a speech recently by Mario Draghi stating besides his comitment to save the Euro (well why woud he not he loses his job if it goes) that one of the problems with saving the Euro zone was that money and investment seemed to stay in national borders even with regulation reform.
People looking at the figures forget ..money is linked if not lead by politics and nationhood...
Greece cannot be saved not just because of figures but really because of leadership lack of reform and society ..it is the same with Spain..they have a sense of entitlement that is not met with responsibility..if you want socialized healthcare...that is great...BUT YOU HAVE TO PAY FOR IT COLLECTIVELY....and commit to that and accept the economy that comes with those socialized structures and the working hours and employment structures and taxation that goes with it.
The EU has to realize it is not just about numbers it is about completely reversing attitudes and societal norms....
If Spain and Greece have no future then neither has Italy and then the EU and the euro as we know it is over.I imagine the Germans will go back to their beloved DM if the left socialistd get in and defeat Merkel. Lord knows what will happen in France.People have suggested until now that the cascade effect is enough to motivate Germany to cough up ...however what we have seen is that investors and money is staying in their own economies.
Ireland is doing better despite the partial EU meltdown..Germany has falling unemployment and it's econoomy is doing ok....money is staying national not international despite deregulation and the myth of Global friendly integration. People are staring to question whether we are integraed enough for it to destroy Germany and others if there was a break up or if it would cost more than funding. Germany has rejected the idea of buying Spannish Debt. They ar not afraid enough of EU or Euro break up to fund anymore or share debt it seems .Economies have stayed national more than we think. That is why the Euro problems seem so unequal and individual differing from country to country. The problems are different from country to country.
It is either federalization and direct sovereign and financial control or break up in the next few years and i don't think it will be all EU countries if it is a federal Europe maybe Germany and scandies and MAYBE France ...
But not Spain or Italy or us piigs....we have nothing really to offer and we darg it all down...and that in turn damages us more than being separate..