The euro crisis

As time runs out furthermore, it eats away at something which is critically important in recovering from a crisis - confidence. With enough fear involved, markets are not self correcting.

Fiscal and debts data on a balance sheet are just a snapshot of a point in time. Investors and credit rating agencies, they love to abruptly react to snapshots and headline news. They should have something to foretell market players, and try to avoid such abrupt reactions. They are the first who wreck havocs by bringing panics into financial markets.

It seems a new and correct fiscal and monetary model is required to make sure that there is a self-adjusting system. The ECB must play the real role of the EU's central bank, because aggregate supply and demand of the euro is crucial and must be regularly. A ministry of finance should be set up to carry out the EU's fiscal policy, set up and balance the EU’s budget, raise funds, etc. A rescue fund is nonsense, because a water bucket can’t fight a large flaring fire.

The fiscal and monetary pocicy must be linked closely to make sure that the self-adjusting system works de facto, for example, a budget deficit, if exists, must be filled immediately by raising aggregate supply of the euro, etc.

The problem is do all members of the EU desire to erect such a system, even it’s correct? It seems, some members dislike it for fear of losing power, sovereignty and wealths, especially such strong members as Germany and France.

As has been pointed out in the article Europe, thanks largely to the Euro project, is now officially a sinking ship.

I found an excellent blog today (not written by me, I hasten to add) which argues that Britain should turn towards the Commonwealth of Nations now, rather than the EU. I hope the Economist will leave the link up because I think it's really worth a look:

http://goo.gl/90r0J

It doesn't quite make sense to me that they are trying to break the EU apart when they are in huge danger. If countries are dropped and then left to having to deal with all of this on their own, nothing will get better and Greece is an example of that. Greece is already struggling to progress and receive the next tranche, if it is dropped won't it struggle even more? The same goes for Italy, if they are going to have to deal with their problems on their own. I don't believe dropping countries is the correct solution. However, I am not an expert at any of this so maybe dropping the countries now and dealing with it now instead of later will help get the ball rolling. But personally I still go back to the EU needing to stick together and find some other way to turn all of this around. Decisions need to be made thoroughly but quickly which is tough

The European Union should drop Greece indefinitely. Obviously Greece is making no progressive steps in coming to terms with this possibility or even fixing the issue, for they just barely find a way to get by each tranche. The question is whether or not this will solve the problem and ultimately save the euro. My guess is more will have to be done in order to reverse this economic drought but it can only seem to be a step in the right direction for the EU. A complete restructuring of the boundaries of the EU could take place. One unified form of currency around the world will probably not happen anytime soon, and I think most powerful countries will do whatever they can to help save the Euro

Time is running out for the Euro to survive and dropping Greece from the system not only will make the Euro nonexistent, but it will go from a currency issue, the whole economic state of Europe will be in jeopardy. But I believe that the EU should help those countries in jeopardy instead of just dropping them from the whole system. That will only harm them even more. With the way things are going, the EU may be heading towards a dead end, and it will become a reality if they can’t find an answer to their economic instability.

If the Eruo Zone is in danger, why are people trying to break it apart? A German official says, " Italy will have to deal with its problems on it own." This is no way to strengthen the Euro Zone, its only a way to weaken it. Groups are more powerful then single countries and need to stick together to help each other out. Is Greece departures, it will painful for both Greece and the rest of the Euro zone. Then why even think of doing such a thing? German's talk of giving up Greece is not a good talk. More talk should be made on sticking together and cutting spending and raising revenues. After all power is in numbers. The problem is now, not tomorrow. So plans to mend the Euro Zone must be made as soon as possible to prevent things from getting even worse

Everybody makes a mistake but Euro Politicians germany and france can not accepted that they made a horrible mistake leting in Greece.
If these politicians eccept the mistake they need to resign & they won't do that.
Simple maths is that Greece has no real economy,no natural resources and even if anyone buys the small Irelands in Greece local Greeks they will not let you have a piecefull life there.Some English man bought a house In Creete you go ask him,he can not even sleep there.They will force him to live,thats the Greek nationalsm for you.
Greece has to be out of Europe let them have they own economy Olive oil industry,travelling tourism,producing some tabacco and entertaining the foreign Tourist with Drahma based economy.And everybody will live happy.
How can possible Greece can pay the Loans with this economy?
Greece will be out not if but when,that is the question.

I completely agree with the statement that the problem with this issue is now, not later. What Europe can do to fix things now will directly affect how much and how bad things become in the long run. Giving up on Greece will indeed be painful for both parties, but may need to be done to get things rolling in the right direction. The euro-zone goal should be to not panic and complete agreements that aren't thorough, but to get the right agreements done to help the economy in the long and short terms.

Even the most European nations are gathered as EU together under same purpose, each European nations have had its tradition for a long time. Also traditions of European nations are quite different from each other. It makes nations hard to unite and cooperate to make EU better. Also in the article, as the economy of Greece is ruined, German politicians openly talked to cut off Greece's lifeline and letting it fall out of euro. Rather than helping nations under hard situation, members of EU try to kick those nations out of EU. Actaully EU still does not have strong economic system. In my opinion, as they gathered as EU, European nations should work just like one huge nations named EU. If they don't, there will be no hope for EU.

I don't understand why the EU is still trying to cover Greece's financial problems. In order for the EU to succeed as a political body it needs to become more unified. That won't happen until the countries who cannot pull their economic weight are kicked out of the EU. Have to think long-term not short-term.

Shout out to plaid avenger

I'm not sure that the Euro was the best move for Europe, though it's hard to tell. Provided the same world financial situation existed without the switch to the Euro how do you think countries such as Greece and Germany would fair? Would Greece's situation have as much an impact on the Mediterranean?

I believe the answer to the euro zone crisis, as well as currency valuations over time is to think of all the worlds currencies as checking accounts.
What both the euro zone and the rest of the world need is a savings account. And that would come in the form of a single worldwide mutual fund/ unit trust. Center it in the Cayman Islands or some such neutral place. Give it the mandate to invest in government securities, currencies, perhaps gold and silver and world wide equity holdings. This would only really work if there was only one.
Such an entity, if structured right and holding an international portfolio would have been, from the start, a way to correct, hedge or relieve pressure on Greek, Spanish, Italian and all the other debt crisis.
The second mandate on bonds is to hold them to maturity. Trading of one tranch for a replacement trance at a different maturity date or interest rate would be the only reason, for the most part, that the bonds would ever be traded. As a hedge
Another key point to the mandate of the fund is that customers could trade not only cash, but the actual government bonds and equities to the fund in exchange for unit shares.
There would be no second by second change in price. At a predetermined time the end NAV of the portfolio would be priced at the end of each "business day". All trades for the next business day would be done at that new price.
Let it be owned by a foundation that gives the profits to say the United Nations. The fund paying taxes in each country on dividend income would be continued. The fund paying a dividend would hopefully be tax free in most countries.
All the nations of the world need a backup to the dollar, euro, yen and such. Unit shares in the fund could be just that.
Sovereign nations could park billions in the fund as a hedge against the other currencies. And this is all the currencies of all the nations of the world. Banks in any country in the world would be allowed to trade their currency, bond and stock holdings for unit shares.
Financial institutions and individuals could trade a portion of all equity holdings in their portfolios for unit shares as well. There would also be a major advantage to large financial institutions of being able to execute very large block transactions for an agreed on single day long set price with ease.
The fund could have a group of perhaps 6 or so regional trading centers to handle those trades within its region of expertise.
With some good size and economics of scale and simplicity of dealing each day with a single all day price would make accounting easier. The chore of pricing the NAV at the end of the day would perhaps be the hardest requirement. Allowing all 6 or so regional centers to each do their own total for the entire world and then comparing that all 6 match should help avoid errors.
And it is with this hoped for economics of scale for fund management costs that the profits of the fund would be quite substantial and could be put to good use by a foundation run by the UN or some other global foundation. At full potential, this amount of money could run into the tens of billions of dollars a year.
It is my sincere hope that the fund would NOT be run by the World Bank, the IMF or any single or group of private or publicly owned financial institutions or G20 or G8 institution.
The fund would, however, be driven to make a profit and to not make purchases at prices not determined exclusively by them. This is the reason for the hope of non political participation in the ownership/management of the fund.
It also allows for the hedging among all the nations of the world on the massive amount of US currency and government securities that find themselves being a major part of almost all international countries and financial institutions.
The fund could be a true international basket of financial instruments. The daily end of day NAV quotation could become a benchmark number followed worldwide.
But as to the theme of the article, the fund could have already been soaking up old bonds, exchanging certain current debt for new debt of longer maturity or interest rate adjustment. At the same time the fund could also have stepped in and purchased part of any recapitalization plan for some of the banks. Also by owning equity shares, for an example, in Greek publicly traded companies, they would hopefully reap the benefits of there return to climbing valuations.
The euro and the euro zone, with Greece and all the rest still in it, can be saved. But the current discussions of the pooling of individual national bonds for Euro bonds is but one step. For truly
maximum financial potential to bring to bare on such crisis worldwide, a much broader, yet in many ways extremely simple solution is at hand.
http://greenrivergroup.blogspot.com

enriquecost: 'The former Prime Minister of Japan tried for U.S. troops in Okinawa to leave Japanese territory and was fired. So much for our "Sovereignty".'

Your memory fails. Japan's PM was attempting, for the convenience of Okinawa's citizens, to cause to be repositioned the US troops in and around Okinawa. About that time Korea fired a missile over Japan's main island and that was the last we heard of the Okinawa discussion.

As for Europe's 'occupation' by the US you proclaim: That bromide is an old excuse for European failure to fund adequate military forces or agree on a unified defense plan. Indeed doesn't Europe possess nuclear arms? To suppose that the US could 'occupy' Europe, against Europe's will, even it it wanted to, is asinine.

If Europeans want the US out, why not vote a party in that sees it that way? Or isn't that how Europe works anymore now that the EU is in charge? And if it were true, why are Poland, Estonia and Hungary (among others) so eager for US bases on their soil? tut-tut

Quit sulking! You are feeding every stereotype of the mean-spirited, self-centered ignorant little-eropeon that there ever was.

Why people demean themselves by spouting patently dishonest revisionist versions of history is beyond me.

BTW, NATO is a unique conjunction in history, a blessing to Europe and the US and the world. The monkey tinkerers in Brussels may foul it, but when that happens, look out. Europe is a collection of economic competitors jockeying for advantage, to the disadvantage of the rest, not a nation or a superstate yet. Yet.

The third Greek Intifada is NOT the fault of Germany. No, PASOK - The Ruling Party - The Greek Government will organize this Intifada to protest the Phoney Austerity Legislation of ( them ) - The Greek Government. So why do the Greek Government organizes IHESE INTIFADA'S AGAINST THE GREEK GOVERNMENT ? IT IS NOT THE ABSURD THAT IT LOOKS. THESE DEMONSTRATIONS ARE MEANT TO BE BROADCASTED TO THE HARD-SOULED NORTHERN EUROPEANS.
It is a "Squeez Operation". Greece will have received two Aid Packages without anything in return. The organizers of the first and second Intifada's in Greece were brilliant. They seized the German Culture completely ! The investment was minimal some cars and shps were torched - and the returns on these investments - Intifada's - were far over 250 Billion Euro's that disappeared into thin air. Remember, Greece does not have any credible budgets, since years. Where is this money going to ? So why is Germany paying ? Is it the typical oscilliation between 'Agression' and 'Guilt' ? Maybe. But it seems that Germany will pay, and pay, and pay,... Germany is not paying because of "Greece". No Germany is paying because of the Guilt Paradigm in Germany. President Sarkozy is using it. Greece is using it.

@LoveIsrael

What will happen in Greece is not a German problem.
Germany is not responsible for Greek politics.
Greece is an independent and sovereign country and has to handle its own problems by themselves.
If there is an Intifada we have to accept it as well as we have to accept the riots in London and elsewhere.
But this should never be any kind of a reason for Germany being alarmed.

Germany tries to solve its own problems- other countries may solve their problems.:)

Germanambassador,

You are right.

Even if Germany represents 19% of the ECB´s capital with 82 million people, and even including other "Germanic" nations like the Netherlands and Austria, it is in a minority.

The Franco-Italian Axis representes 26% of the ECB´s capital with 125 million people. That explains Mario Draghi as next President instead of Axel Weber.

Of course, if Germany had more "allies" than France, it would be the Core of the ECB but at present the states in the side of Germany are: Netherlands, Austria, Finland and Luxemburg (total: 122 million people)

Anyway, the presence of Timothy Geithner, U.S. Secretary of the Treasure in the "Ecofin" (European Ministers of Economy and Finance) reveals who really gives orders in the European Protectorate: the U.S.

Europe is not Sovereign but a Protectorate similar to India under the British Raj. Until the Iraq War U.S. Domination was more or less hidden under a "democratic" flavor. Yes, people can go to the polls and vote. But on the mos important issue, Defense, there is no Sovereignty.

After WWII the U.S. recovered thanks to Jean Monnet the idea that Walther Funk, Minister of Economy of the III Reich had started to implement: the European Union with a Europesn System of Central Banks (ESCB), but this time under U.S. control. Germany is still under military occupation as we all know, and Germans (or the Japanese) don´t have any chance to tell U.S. troops to leave German territory. They just will not do it. The former Prime Minister of Japan tried for U.S. troops in Okinawa to leave Japanese territory and was fired. So much for our "Sovereignty". When Chirac tried to build autonomous European Defense Headquarters he also was fired and the puppet Sarkozy suddenly took France to the NATO structure, with the French Generals under the command of SACEUR, Supreme Allied Commander of NATO Europe (just another name for a DICTATOR) whose name is James Stravidis.

And now Tim Geithner in the ECOFIN giving orders, the same way as Obama telling both Merkel and Zapatero what they had to do. They just have to follow orders. In 2007 Spain had a 2% budget surplus, but for Obama a budget deficit of impressive proportions was essential to save the World from a systemic collapse. Zapatero then took the coutry from a 2% budget surplus to a -10% budget deficit (similar to the US and the UK) 12 points, while in the US and the UK (which were already on deficit) the difference was 6 points....

The EU needs - and will - issue a Eurobond with a Joint & Several Liability. THAT will calm the markets for good: the rally of the (lost) decade. It will unleash (massive) inflation but if that is the price to avoid civil war and/or WWIII, then it is still very cheap.

This morning I read a proposal by George Soros to get the Euro going again on Reuters. It sounds good, but there are a few obvious problems:
1. The Euro in any new form (if voters in Northern Europe agree at all) would need an organisation to oversee the market, to verify data and to apply sanctions when the rules are violated.
2. These rules need to be embodied in treaties, which usually take years of negotiation.
3. At present, Greece and Portugal are in fact bankrupt with no solution in sight.
4. At present, the Spanish, French and German banking systems are in fact bankrupt, with no solution in sight.
5. At present, Italy, Spain and Ireland are finacially too fragile to act without the help of the ECB, with no solution in sight.

I don't want to sound too hopeless, but I will need more convincing than Mr. Barroso's quixotic chirping about Eurobonds. He has been out of the loop since the beginning of the credit crunch, and is now creating a mythical world for the European Parliament, an overpaid and powerless body of no consequence.

The EU is not consisting only of Germany.
Germany is the least important member of a union of 27 different countries.
And there are quite more important super-powers members of the EU so that the influence of Germany since ever has been marginal.
Against 26 other countries Germany can do nothing at all.

The EU administration at Brussels is completely French and British and the ECB is a mere French institution.

So Germany is the wrong address for any complaints against the EU.
The leaders of the EU sit in Paris and London.

Berlin is only a small and inferior branch without any importance.