The Big Bailout of the Eurozone (Another crisis coming? - Seriously)

[seafoid]

As someone who knows really nothing about all of this, could anyone with a grasp of what is happening explain to me what would happen if the whole Eurozone basically went bang?  Would all countiries using the Euro have to revert back to their own currencies?

I see some theroists say that the Eurozone was just one big experiment from the start and that it wasnt sustainable.
Also, there was a rumour going around that the Irish Government where printing Punts a while back just in case 

It depends on whether the Euro drops a few countries or it disappears.

Say Ireland leaves the Euro but the Euro endures. Ireland will owe all the euros it owed within the euro to foreigners. Within Ireland all eurodebt would be transferred into new punts. The new punt would fall in value because nobody would want to buy it and all euro debts would increase in value compared to new punts. So it would be hard . But with a cheaper currency it would be easier to export stuff. The euro meanwhile would rise in value against the dollar because it had less of the poor economies in it. That would hurt German exports since they would cost more. 

If the Euro disappears then a load of banks will go bust. All the countries would have new currencies.    Everyone would want German marks and the price would go through the roof. German exports would suffer.

[muppet]

As someone who knows really nothing about all of this, could anyone with a grasp of what is happening explain to me what would happen if the whole Eurozone basically went bang?  Would all countiries using the Euro have to revert back to their own currencies?

I see some theroists say that the Eurozone was just one big experiment from the start and that it wasnt sustainable.
Also, there was a rumour going around that the Irish Government where printing Punts a while back just in case 

It depends on whether the Euro drops a few countries or it disappears.

Say Ireland leaves the Euro but the Euro endures. Ireland will owe all the euros it owed within the euro to foreigners. Within Ireland all eurodebt would be transferred into new punts. The new punt would fall in value because nobody would want to buy it and all euro debts would increase in value compared to new punts. So it would be hard . But with a cheaper currency it would be easier to export stuff. The euro meanwhile would rise in value against the dollar because it had less of the poor economies in it. That would hurt German exports since they would cost more. 

If the Euro disappears then a load of banks will go bust. All the countries would have new currencies.    Everyone would want German marks and the price would go through the roof. German exports would suffer.

If we left the Euro we would have to default on our debt. That might not be the worst thing for us but our banks would almost certainly collapse as their doors are only open because of emergency lending by the ECB.

As for Punts, I think it would be irresponsible for the Government not to have printed them as a back-up. No one knows where the Euro will be at Christmas and our destiny is certainly out of our hands.

[seafoid]

As someone who knows really nothing about all of this, could anyone with a grasp of what is happening explain to me what would happen if the whole Eurozone basically went bang?  Would all countiries using the Euro have to revert back to their own currencies?

I see some theroists say that the Eurozone was just one big experiment from the start and that it wasnt sustainable.
Also, there was a rumour going around that the Irish Government where printing Punts a while back just in case 

It depends on whether the Euro drops a few countries or it disappears.

Say Ireland leaves the Euro but the Euro endures. Ireland will owe all the euros it owed within the euro to foreigners. Within Ireland all eurodebt would be transferred into new punts. The new punt would fall in value because nobody would want to buy it and all euro debts would increase in value compared to new punts. So it would be hard . But with a cheaper currency it would be easier to export stuff. The euro meanwhile would rise in value against the dollar because it had less of the poor economies in it. That would hurt German exports since they would cost more. 

If the Euro disappears then a load of banks will go bust. All the countries would have new currencies.    Everyone would want German marks and the price would go through the roof. German exports would suffer.

If we left the Euro we would have to default on our debt. That might not be the worst thing for us but our banks would almost certainly collapse as their doors are only open because of emergency lending by the ECB.

As for Punts, I think it would be irresponsible for the Government not to have printed them as a back-up. No one knows where the Euro will be at Christmas and our destiny is certainly out of our hands.

I imagine the budget deficit would have to be slashed to zero as well .

What would you do with the banks, Muppet?

[muppet]

I imagine the budget deficit would have to be slashed to zero as well .

What would you do with the banks, Muppet?

Budget deficit would have to be slashed to zero unless we intended to borrow. Could you imagine relying on the markets after such a calamity?

Firstly what to do with euro mortgages held by foreign banks. Imagine if you took a €300,000 mortgage with BOSI. Then if we leave the Euro and devalue by 50% (just to demonstrate). Would your mortgage now be £600,000 owed to BOSI or £300,000 leaving them nursing a 50% loss instantly? If it was the former, holders of those mortgages would be destroyed, if the latter the non-Irish banks will suffer huge losses on top of their previous losses.

As for 'our' banks. They will have to announce a savage tax on assets held abroad giving a few weeks/months grace be implementation. Any such assets would have to be repatriated into Irish banks pronto while begging the ECB for lee-way. After taking stock of how much money actually returned we would know where we were with the emergency lending. I would then be telling bondholders to start naming their preferred haircut. As you hinted at though, if that was happening we would definitely have to slash the budget defect to zero instantly.

Edit: Thinking more about it any tax wouldn't be quick enough. They would have to take the private pensions and freeze assets in the banks, including the ECBs money. The banks problem would be secondary to the deficit one and they would have to take our money deposits too most likely.

[muppet]

Amazingly we still have higher growth than the Eurozone  average. We would be in reasonably good shape were it not for the banks (and the twits that cheerlead them, especially the FF/PDs and the media).

Growth is the way out for Europe and it isn't happening, but because we actually have some growth, tiny as it is, we might survive any initial shrinking of the euro.

[Fear ón Srath Bán]

We've export led growth, but indigenous contraction, which is only going to get worse with the swingeing cuts in capital expenditure. Hard to say where that particular paradox will ultimately lead.

[muppet]

We've export led growth, but indigenous contraction, which is only going to get worse with the swingeing cuts in capital expenditure. Hard to say where that particular paradox will ultimately lead.

The reality is completely irrelevant. The decision-makers need sound-bites, not facts.

'The fundamentals are sound...........'

[Fear ón Srath Bán]

If Irish growth outstrips the Eurozone (or EU) on a sustained basis it won't matter, true.

Well, it won't matter for anyone except the poor sods on the Sod without a pot to piss in (and no prospect of buying a pot).

[muppet]

If Irish growth outstrips the Eurozone (or EU) on a sustained basis it won't matter, true.

Well, it won't matter for anyone except the poor sods on the Sod without a pot to piss in (and no prospect of buying a pot).

Is this lowering of the growth forecast not going to continue this vicious cycle of lower growth, leading to bigger cuts leading to lower growth?

Or lower growth forecasts leading to credit rating cuts leading to higher interest and then bigger deficits leading to lower growth?

[Tubberman]

Looks like the govt are finally getting some control over at least one of the banks WE OWN:

http://www.rte.ie/news/2011/1110/banks.html

In a major U-turn this evening, State-owned bank AIB has decided to pass on an ECB interest rate cut to standard variable customers despite refusing to do so yesterday.

In a statement the bank said: "Following the meeting between AIB, members of the Government and the Economic Management Council, the Board of AIB has decided to implement a 0.25% interest rate cut to its variable rate mortgages."

The European Central Bank last week cut its key interest rate by 25 basis points to 1.25%.

Yesterday AIB's executive chairman David Hodgkinson met Taoiseach Enda Kenny and Tánaiste Eamon Gilmore.

Despite a demand for AIB pass on the rate cut Mr Hodgkinson said yesterday its customers already benefited because the bank had not increased rates when they were raised by the ECB on two occasions this year.

However, this evening's statement reverses that position.

Earlier Tánaiste Eamon Gilmore had called on banks to reconsider their position on mortgage interest rate reductions.

Mr Gilmore said if they do not reconsider, the Government would take 'action as appropriate'.

EBS, Permanent TSB, KBC and former Irish Nationwide have already announced that their customers will benefit from the ECB's decision.

However both Ulster Bank and Bank of Ireland have not passed the rate cut on to customers.

[seafoid]

We've export led growth, but indigenous contraction, which is only going to get worse with the swingeing cuts in capital expenditure. Hard to say where that particular paradox will ultimately lead.

Plus because the banking system is paralysed there is virtually no lending to the SME sector so where are the jobs going to come from ?
Every person unemployed costs the state more than Euro 10K per annum in Soc Welfare. 

[muppet]

We've export led growth, but indigenous contraction, which is only going to get worse with the swingeing cuts in capital expenditure. Hard to say where that particular paradox will ultimately lead.

Plus because the banking system is paralysed there is virtually no lending to the SME sector so where are the jobs going to come from ?
Every person unemployed costs the state more than Euro 10K per annum in Soc Welfare.

What would you do with the banks?

[armaghniac]

If Irish growth outstrips the Eurozone (or EU) on a sustained basis it won't matter, true.

Irish growth is expected to be almost double the Eurozone average in 2012, albeit twice very little is not much.
The local economy is subdued, but that partly reflects people paying down debt. Contrast Ireland's growing trade surplus with the UK which now has a record trade deficit.

[seafoid]

We've export led growth, but indigenous contraction, which is only going to get worse with the swingeing cuts in capital expenditure. Hard to say where that particular paradox will ultimately lead.

Plus because the banking system is paralysed there is virtually no lending to the SME sector so where are the jobs going to come from ?
Every person unemployed costs the state more than Euro 10K per annum in Soc Welfare.

What would you do with the banks?

I think I would resolve them. Break them up and give the bondholders and the ECB whatever is left after the depositors are paid off.
Throw out anyone earning over say  100K and start off again from scratch.

"We gotta retain the talent. what are you f**king talking about motherf**ker. That's the same talent that f**ked the whole place up"

http://www.youtube.com/watch?v=zOZnRUZKf48
at 2:45

In 2008 Wolfgang Munchau said "But a recession is not the worst possible outcome.The worst is for this crisis to go on and on, for Minsky's moment to become an eternity". 

http://www.ft.com/intl/cms/s/0/8362b1d0-4b59-11dd-a490-000077b07658,s01=1.html#axzz1dLG4cpdp

[Fear ón Srath Bán]

If Irish growth outstrips the Eurozone (or EU) on a sustained basis it won't matter, true.

Well, it won't matter for anyone except the poor sods on the Sod without a pot to piss in (and no prospect of buying a pot).

Is this lowering of the growth forecast not going to continue this vicious cycle of lower growth, leading to bigger cuts leading to lower growth?

Or lower growth forecasts leading to credit rating cuts leading to higher interest and then bigger deficits leading to lower growth?

Or we could all just talk it up, pollyanna-like, endlessly. Wait a minute... hasn't that been tried recently, with houses or something!