Eurozone watch

[Dismal Science]

There is also this of course: Euro Approaches Two-Year Low on Spanish Banks Concern

[campbell]

http://mobile.bloomberg.com/news/201...t?category=%2F

Ireland has this banking advice for Spain: imagine the worst and double it.
Like Ireland, Spain sought a bank bailout after being felled by a real-estate crash. Now, just as the Irish did, the Spanish are awaiting the results of outside stress tests gauging the size of the hole in the banking system.
“Think of the worst possible scenario on banking losses: then double it,” said Eoin Fahy, an economist at Kleinwort Benson Investors in Dublin. “Adopt the most conservative assumptions.”
Nine hundred miles northwest of Madrid, Irish analysts wring three lessons from its own banking crisis, among the worst in history. First, quickly present an accurate estimate of the bad loans. Second, force banks to face up to losses, possibly through the creation of a so-called bad bank. Third, share as much of the loss as possible with bank bondholders.
“Spain should face the economic reality, even if they have to value property loans at discounts of 40, 60 or even 80 percent,” said Alan Ahearne, former economic adviser to Brian Lenihan, the finance minister who presided over Ireland’s response to the near-collapse of its financial system. “If the real losses aren’t faced up to, who’s that going to fool?”

[campbell]

http://www.businessinsider.com/moody...e-watch-2012-7

Moody's just changed the outlook on three of Europe's strongest AAA countries—Germany, the Netherlands, and Luxembourg—to negative.
It affirmed Finland's stable outlook.
The ratings agency sees the likelihood of a Greek default and euro exit and/or the costs associated with trying to keep the country in the euro as mounting risks for Europe's strongest economies.

[campbell]

it may be vacation time in Euroland, but stuff keeps rolling on

http://www.spiegel.de/international/...-a-849747.html

Banks are particularly worried. "Banks and companies are starting to finance their operations locally," says Thomas Mayer who until recently was the chief economist at Deutsche Bank, which, along with other financial institutions, has been reducing its risks in crisis-ridden countries for months now. The flow of money across borders has dried up because the banks are afraid of suffering losses.

According to the ECB, cross-border lending among euro-zone banks is steadily declining, especially since the summer of 2011. In June, these interbank transactions reached their lowest level since the outbreak of the financial crisis in 2007.

In addition to scaling back their loans to companies and financial institutions in other European countries, banks are even severing connections to their own subsidiaries abroad. Germany's Commerzbank and Deutsche Bank apparently prefer to see their branches in Spain and Italy tap into ECB funds, rather than finance them themselves. At the same time, these banks are parking excess capital reserves at the central bank. They are preparing themselves for the eventuality that southern European countries will reintroduce their national currencies and drastically devalue them.

"Even the watchdogs don't like to see banks take cross-border risks, although in an absurd way this runs contrary to the concept of the monetary union," says Mayer.

....
Particularly large amounts of money have recently flowed into German sovereign bonds, although with short maturity periods they now generate no interest whatsoever. "The low interest rates for German government bonds reflect the fear that the euro will break apart," says interest-rate expert Burkert. Investors are searching for a safe haven. "At the same time, they are speculating that these bonds would gain value if the euro were actually to break apart."

The most radical option to protect oneself against a collapse of the euro is to completely withdraw from the monetary zone. The current trend doesn't yet amount to a large-scale capital flight from the euro zone. In May, (the ECB does not publish more current figures) more direct investments and securities investments actually flowed into Europe than out again. Nonetheless, this fell far short of balancing out the capital outflows during the troubled winter quarters, which amounted to over €140 billion.

....
One of these warriors is John Paulson. The hedge fund manager once made billions by betting on a collapse of the American real estate market. Not surprisingly, the financial world sat up and took notice when Paulson, who is now widely despised in America as a crisis profiteer, announced in the spring that he would bet on a collapse of the euro.

[Johnny Deformed]

Greece will leave soon. As will Spain and Portugal. If they can manage those well enough Italy will do so as well. I will then take a cheap vacation.

[Brad Gile]

Originally Posted by campbell

it may be vacation time in Euroland, but stuff keeps rolling on

http://www.spiegel.de/international/...-a-849747.html

I read Der Spiegel every day, so I read this article today also. Germany's economy is slowing and it seems that a lot of Germans are questioning continuation of holding up the euro. In fact, I seem to recall that the German Supreme Court is studying the constitutionality of Germany bailing out other countries.

Looks to me that the Euro is going the way of the dodo.

[Johnny Deformed]

Back door socialism failed. I'm very surprised by this.

[campbell]

Originally Posted by Brad Gile

In fact, I seem to recall that the German Supreme Court is studying the constitutionality of Germany bailing out other countries.

Yeah, that's in the article. I didn't quote that bit

[echo]

Originally Posted by Brad Gile

I read Der Spiegel every day, so I read this article today also. Germany's economy is slowing and it seems that a lot of Germans are questioning continuation of holding up the euro. In fact, I seem to recall that the German Supreme Court is studying the constitutionality of Germany bailing out other countries.

Looks to me that the Euro is going the way of the dodo.

http://www.economist.com/node/21560269

The economist estimates the cost of a Grexit at 320 billion euros, 110 would be German (4% of German GDP). Plan B (exit PIGS + Cyprus) is estimated to cost 1.15 trillion euros, 500 would be German (20% of German GDP). A plan to save Europe is estimated to cost 300-400 billion euros, ~1/3 would be German.

They advocate saving the Euro, but point out that a real fix needs to be implemented soon.

[campbell]

Originally Posted by echo

They advocate saving the Euro, but point out that a real fix needs to be implemented soon.

I have been hearing that line for... what.... three years now?