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European Union debt crisis is in danger of spreading, warns IMF

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posted on May, 13 2011 @ 04:38 AM
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European Union debt crisis is in danger of spreading, warns IMF



www.dailymail.co.uk

The European debt crisis could spread across the continent in a major blow to the single currency, leading economists warned last night.
Turmoil in Greece, Ireland and Portugal may engulf the wider eurozone despite the billions of pounds already spent in emergency aid, according to the International Monetary Fund.
It urged European leaders to fix the banking system and slash national deficits to restore confidence to the region.
In its latest report on Europe, it said economically weak countries could still drag their stronger neighbours down.


Read more: www.dailymail.co.uk...
(visit the link for the full news article)


edit on 13/5/11 by argentus because: change title to reflect that of source




posted on May, 13 2011 @ 04:38 AM
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'European Union debt crisis is in danger of spreading, warns IMF'


The report said: ‘Strong policy responses have successfully contained the sovereign debt and financial-sector troubles in the euro area periphery so far. But contagion to the core euro area and then onward to emerging Europe remains a tangible risk.’

Plea: Antonio Borges from the IMF said shaky banks need to strengthen
European finance ministers are set to approve a £68billion rescue plan for Portugal on Monday, including around £4billion from Britain. This follows the £96billion bailout of Greece and the £75billion bailout of Ireland last year.
But fears are mounting that Greece still cannot afford to pay back its debt of £285billion and may require more support to prevent default.
Jose Manuel Gonzalez-Paramo, of the European Central Bank, said: ‘A default would have extreme adverse consequences, many of an irreversible nature, for the Greek economy.’
The IMF warned ‘a shock to confidence could spread quickly throughout Europe’.
European director Antonio Borges promised to provide more aid to Greece if necessary, adding: ‘So far they have not approached us. The IMF stands ready.’


Read more: www.dailymail.co.uk...


I have other ongoing threads, one that discusses border control in the Eurozone, proposals and actual implementations, in which I assert my opinion that the tightening of border controls is to prevent future mass economic migration if TSHTF in the EU.

Another thread talks about the recent Diktat from the EU parliament that member states must track all EU citizens movements via flights and now we find this starkest of warnings from the IMF that seems to tie together some of these themes.

The current state of play is:

Ireland 75 billion GBP
Greece 96 billion GBP, current massive fears they are about to default on their current 285 billion total debt and will require a further bailout.
Portugal 68 billion GBP (being raitified in the EU parliament now)


Jose Manuel Gonzalez-Paramo, of the European Central Bank, said: ‘A default would have extreme adverse consequences, many of an irreversible nature, for the Greek economy.’
The IMF warned ‘a shock to confidence could spread quickly throughout Europe’.


Read more: www.dailymail.co.uk...


I think this is the precursor to a 'double dip' recession, the Greek economy would take a decade at least to recover from a second failure, the economies are totally stagnant in the EU. Inflation is being driven by massive increases in fuel prices, both transport and domestic fuels, food prices (partly because of the former) and massive unemployment is contributing to the problem.

In the UK it is forecast that we will have inflation running at around 5% at the year end which will force an interest rate increase which will in turn cause more economic pressure due to the increased number of people who will not be able to meet their mortgage commitments. The spector of negative equity levels not seen since the 1990's in the UK and for most of Europe not ever is very real.

From what I understand the US is suffering massively with this problem currently with some property having fallen as much as 69% since 2008 (Las Vegas and Florida - telegraph discusses recent US largest quarterly fall in house prices since Lehman Brothers fiasco (3%)

For starters, take the record 2.9m homeowners who had their properties repossessed by banks last year
)


So we see things are in a drastic situation on the other side of the ocean too, the US economy cannot and will not come to the rescue of the EURO when the bailout pressure increases.

For a very interesting examination of how Britain is involved in the bailouts please see Peter Osborne Blog

The real threat is not just limited to Greece's potential defaults, but if this problem spreads as is suspected to Spain I think we can safely say we will just have to forget the Euro. In fact I will be so bold as to say that the Euro will either consolidate down to several nations or be defunct within ten years. There is no way the debt defaults cannot affect the Euro as a useful currency.

I truly feel the other threads I have created help to pull the fears and suspicions of the governments of the EU into context here. The first move in any massive financial crisis would be to seal borders to stop mass economic migration into nations that are holding their own, by getting ahead of the game and using the 'Arab Spring' as the excuse the politicians must be fairly certain in my mind that the economic crisis is only going to worsen in the EU.





www.dailymail.co.uk
(visit the link for the full news article)
edit on 13-5-2011 by spacedonk because: (no reason given)



posted on May, 13 2011 @ 04:56 AM
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Excellent thread, Space, and great observations.

I can definitely see the writing on the wall for the Euro, and it's been there for a while now.

Ack... things just keep getting more and more "interesting", as the old Chinese curse would say.



posted on May, 13 2011 @ 05:13 AM
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Hey OP

I was reading a little of those articles earlier today when I was at work. Now they are saying....

The eurozone's economic growth accelerates


The economy of the 17 countries that use the euro grew by 0.8% in the first three months of 2011, up from 0.3% in the previous quarter.

Germany was largely responsible for the better-than-expected figure, reporting growth of 1.5% in the period.

There was a surprisingly strong 0.8% growth rate from debt-laden Greece.

France grew 1%, Italy and Spain grew 0.1% and 0.3% respectively and Portugal slid into recession after contracting for the second quarter in a row.

Growth there declined by 0.7%, following a 0.6% contraction in the final quarter of 2010.

"This is almost certainly as good as it gets for the eurozone and growth seems likely to moderate over the coming months in face of significant headwinds," said Howard Archer at IHS Global Insight.


www.bbc.co.uk...

Mixed results but growth overall, though as it states there, appears the growth probably won't be sustained.

I was watching BBC when they first broke this news earlier this evening (Australia) and the commentator mentioned that this makes it even more confusing, and hinted that these growth figures don't necessarily show promise.



posted on May, 13 2011 @ 05:14 AM
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ok, I have what maybe a rather simplistic question.

If every country is in debt, then who has all the money?
Does everyone owe money to everyone? Is that even possible?

And before you say "China has it all", according to this page on wikipedia, they also have an external debt of 406,600,000,000 USD.
Debt



posted on May, 13 2011 @ 05:21 AM
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reply to post by alfa1
 



A lot of the debt it is held in bonds. Owned by a variety of people, institutions, hedge funds, IMF other governments etc etc. Governments borrow money for a period of time at a fixed rate of interest, in a lot of cases this is how civic building projects like roads etc are funded, not paid for up front but staggered over ten years through government debt.



posted on May, 13 2011 @ 05:25 AM
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reply to post by alfa1
 


partly to each other..partly to banks...partly to insurance houses..pension funds...partly to private people (you can lend a government money if you want)

the thing is...if you lend the government money...its 'real' money...it exists...a bank however can buy government debt with non-existent money..

so obviously if a bank buys government debt with money that doesnt exist...that it never had...then..when the country defaults the banks claim they want 'stuff'...islands...buildings...motorways etc...that this is basically theft..and its ONLY possible when politicians and the media either dont understand whats going on or are corrupt.

edit on 13-5-2011 by alienesque because: (no reason given)



posted on May, 13 2011 @ 05:27 AM
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reply to post by surrealist
 


It is a really interesting point you raise. The difficulty with assessing growth is that it also bundles up things like fuel price increases and energy prices. In terms of say Tesco, the biggest retailer in the UK, they sell petrol and diesel when the price of these increase their revenue increases and is reflected as increased gross sales figures which reflects increased economic output, likewise Centrica is bundled into the figures who are the biggest sellers of gas and electricity in the UK.

As for Germany, it is not a topic I could comment on without researching fully, except to say they have historically had a phenomenally strong economy since WW2 and recently I read a story that talked about how their manufacturing output is till high. I will see if I can find it this afternoon.

Beyond that as you have mentioned these increases in output are so difficult to quantify as they cannot be defined as real increases in output and productivity or whether they are down to inflationary pressures and price increases in fuel.

The best handle to get on the economic situation is really in two areas money lent and unemployment, for the first we are seeing stagnant and decreasing numbers in lending to business, for home loans and for personal expenditure credit cards and loans, for the second area, it seems not to matter how much the figures are manipulated to suit politicians there is still massive increases across the EU.



posted on May, 13 2011 @ 05:28 AM
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Originally posted by spacedonk
reply to post by alfa1
 



A lot of the debt it is held in bonds. Owned by a variety of people, institutions, hedge funds, IMF other governments etc etc. Governments borrow money for a period of time at a fixed rate of interest, in a lot of cases this is how civic building projects like roads etc are funded, not paid for up front but staggered over ten years through government debt.


its also the only reason why we..the people..put up with so many wars...because we dont have to pay for todays wars...the next generation do..so we dont feel the 'pain'..the cost..

if a government had to go the current generation for money immediately every time they wanted to go to war..the people would say 'no way..im not giving you money to go to war'...

our financial system is completely and totally corrupt....it causes wars...countless deaths...and misery..



posted on May, 13 2011 @ 05:39 AM
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Monetary policy for countries like Greece and Portugal is virtually ineffective because of their fixed exchange rate. This is forcing the government to fork out more money from the banks to help stimulate growth. This is just a death spiral for Greece. It doesn't help that the Greek's are outside drinking coffee and retiring at the age of 53. Common currencies don't work. I'm surprised the Euro has lasted this long. If one country within the Euro doesn't perform well it drags everybody else down with them; while exporting inflation onto other countries. Of course, the European Central Bank will profit nicely from the debt which Greece is forced to pursue.

Countries like Germany who blow everybody out of the water in terms of productivity (except now China) suffer the most. This is also why I think there will never be a one world currency or an Amero. It simply doesn't work.



posted on May, 13 2011 @ 05:40 AM
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I personnaly glad for the failure of the Euro. it was bound to happen.
I am not happy about the actual failure, but because if it fails, then the Amero* is less likely to manifest.

*it is the planned name of the currency for when Canada, U.S., and Mexico combine into the north american union.

single currencies over extended areas only help banks and not countries.



posted on May, 13 2011 @ 06:11 AM
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reply to post by KingAtlas
 



Unless you have single government over that area with one set of policies, economic, foreign etc etc then a single currency can work.

In respect of the post above regarding wars and war funding - couldn't agree more! Can you imagine in light of the public service cuts we are all suffering if governments had been forced to hold a referendum on whether we wanted to spend xbillions on the incursion into Libya?!? I just think they might be told to p*** off!



posted on May, 13 2011 @ 06:29 AM
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Also a lot of Daily Mail sensationalism in this story (why am i suprised at that? :lol


Did you watch Newsnight last night? This was discussed in length by George Osbourne and one of the senior IMF ladies (very likely future head of IMF).

Basically, they were saying that it is blown out of proportion and the only real danger of default was Greece but even this may not be a bad thing - if they can hang on for another year (ish) terms of a default would be much more favourable and repercussions not so bad......

Also stated that Britain definately wouldn't be involved in a bail out for Greece but would be culpable for large assistance in Ireland........

Also discussed the possibility of a 2 tiered euro, northern and southern, and that this may actually not be a bad thing for economic development



posted on May, 13 2011 @ 06:41 AM
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Originally posted by alfa1
ok, I have what maybe a rather simplistic question.

If every country is in debt, then who has all the money?
Does everyone owe money to everyone? Is that even possible?


No, what has happened is that the heavy industrial nations, obviously Germany, France, have the biggest piece of the pie, this is the reason why Germany is dragging its feet on key and obvious methods that need to be done to re-establish the euro, for if it does so, then it stands to loose billions and as such, they wont move on such a decision as that would mean the loss of upcoming elections. The others who stand to loose billions are not nations but rather actual long standing firms the 1500's era and if you research it, then you begin to see the blood line follow right up to 2011 and current key figures who you read and view on the idiot box.



posted on May, 13 2011 @ 06:54 AM
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The problem is Britain is part of the bailout fund already in place. 750billion Europe wide. Which was signed up to by akastair darling on his last day as chancellor, if Greece require a further bailout we have already committed to help. If you read the telegraph link to peter osborns blog above you will see more than just daily mail sensationalism. It is untrue to say Britain would not be part of a future Greek bailout as we are signed sealed and committed already.

Unfortunately, in practice it matters very much indeed. This is because of the recklessly expensive error made by the outgoing chancellor Alistair Darling around this time last year. Darling’s disaster came on Monday May 10, 2010, when a meeting of European leaders took the momentous decision to launch a 750 billion euro fund, paid for by all European taxpayers, to rescue eurozone countries who met with financial difficulties. In an action that was entirely characteristic of New Labour’s free and easy way with British taxpayers’ money when it came to the European Union, Darling committed Britain to the bail-out. It was to be his final act as Chancellor. The following day, David Cameron and Nick Clegg reached their historic agreement, and the Coalition was formed.




The Irish commitment is based on bilateral agreements in respect of funding which has historic precedent:

The Irish bail-out has so far cost Britain some £7 billion (more, in fact, as we also loaned them money on a bilateral basis) while Portugal has cost a further £4.2 billion, though the final sum has yet to be agreed. It is highly unlikely that the British taxpayer will ever again see more than a small fraction of the money we have committed to these two bankrupt countries.


Below is Osbournes case:

The reason why the EU is set on this frankly lunatic course is terrifying. The sad truth is that most European banks, including the ECB, are now technically bankrupt. The only way they can stay afloat is by lying about the state of their accounts. So long as Greece, Portugal and Ireland are theoretically solvent, their debt can be marked at par on the banks’ balance sheets. The moment that they acknowledge reality by rescheduling their debt (going bankrupt, in ordinary discourse), the ECB and the rest will be forced into large write‑offs and provisions. The situation is so serious that one executive board member of the ECB, Jürgen Stark, has warned that Greek debt restructuring could cause a financial disaster that would put the devastation that followed the collapse of Lehman Brothers in 2008 “in the shade”. This is the hideous background to the meeting of European finance ministers that takes place on Monday and Tuesday in Brussels. As with Portugal and Ireland, Britain will once again be asked to throw good money after bad in order to maintain the blatant fiction that the Greek state – and the rest of the eurozone – is financially sound. This will give George Osborne an opportunity to remedy Alistair Darling’s mistake of 12 months ago. I understand that he will take it. The Chancellor will argue next week that Britain played no role in the first Greek bail-out, and so the rescue mechanism to which his predecessor mistakenly subscribed does not apply. This is only sensible. Osborne’s fundamental duty is not to ingratiate himself with European leaders – it is to guard the national finances. That means refusing to commit a penny more of British taxpayers’ money to the costly and doomed fight to save the euro.



Cant see his argument working though!





 
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edit on 13-5-2011 by spacedonk because: (no reason given)

edit on 13-5-2011 by spacedonk because: (no reason given)



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