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Portugal: the danger is not over

Gavin Hewitt | 18:32 UK time, Friday, 8 April 2011

LISBON The threat of a bail-out had been hanging over Portugal for months. It perhaps explains why the initial reaction to the request for help was so muted. But talking to people in the warm sunshine you discover a different story. It is easy to find resignation, easy to find those who have bought the line that "there is no alternative".

There are, however, layers of anxiety - the young woman worried because her job is dependent on public funding, another who wants to start a family but sees a bleak future. There's the politician who says this is one of the worst moments in Portugal's history and an older woman, on a tram, who told us it was a humiliation. And then the by now familiar European story - a younger generation desperate for work and planning their getaways.

The prime minister had said he would not resort to the begging bowl. The Portuguese banks, when they ceased buying up the country's debt, ensured defeat. What is left now is to negotiate the terms of surrender.

What we learnt today is that the bail-out will be around £70bn ($114bn; 79bn euros). It will come with strict conditions - deeper cuts to the budget, privatisations and reforms to the labour market. We should get the details by mid-May.

Until early June, Portugal is in limbo, without a government. The election will turn on the question of who brought Portugal to the verge of bankruptcy?

Almost certainly only a newly elected government can finally sign off on the terms of the bail-out. Because of the political uncertainty, the EU has insisted that all the major parties agree to the terms of the bail-out.

Soon the men and women in suits - technical mandarins who will pore over the accounts - will descend on Lisbon. Only then will some of the key details emerge - what will the interest rate be? What will be the repayment period? And, perhaps most crucially of all, what further spending cuts and tax increases will be demanded? How extensive will be the structural changes required in order - hopefully - to re-engineer a chronically uncompetitive economy?

Public sector workers have grown increasingly restless, increasingly opposed to the raft of spending cuts and tax increases. VAT has gone up. There have been new taxes on some pensions. Wages have been trimmed. Money for local councils and health and education has been pruned.

More is surely to follow. The federation of public sector unions has already called a strike for early May.


A woman wheels a trolley past a design of a screaming woman in Lisbon, Portugal


There is, so far, little of the Greek anger here. Even so, a significant part of the population will challenge austerity on the streets.

Across Europe, the mood is turning against austerity. The central question remains unanswered - is the medicine working? In Greece, tax revenues are actually falling. Ireland has been forced to pump another 24bn euros into its banks. The European Central Bank has ruled out burning investors so Irish taxpayers shoulder the burden and lean years stretch ahead.

Portugal is in the midst of a double-dip recession. And therein lies the conundrum. How will these economies grow to the moment they can escape their debt trap?

That is why many economists believe that, sooner or later, debt restructuring will follow. Across the EU, opposition parties are likely to say the years of austerity are a very high price to pay to defend the euro. For it is the European institutions who insist that investors should not take a hit because they fear the ripples that would flow through the banking system.

Spain's Finance Minister Elena Salgado, who has negotiated her country's path with some skill, declared yesterday that Spain would be the last euro-zone country to need a bail-out. You wouldn't want to put your money on it. Growth in Spain is barely spluttering and unemployment is actually increasing. There are doubts too over Italy's finances.

Meanwhile, the European Central Bank has edged up interest rates. As it was in the beginning so it continues. At the birth of the euro-zone the rate was right for some countries but not others. The chief economist at MKM partners said: "The ultimate effect is that [the interest rate rise] will restrain inflation in Germany and France but will cause deflation in the periphery which will cause austerity programmes to fail."

That is the doubt that informs the main political debate.

Could the treatment the EU has chosen to defend the euro - namely austerity in exchange for loans - fail? And, if it does, what then? There is increasing tension - as I have written in other posts - between the bankrollers (voters in Germany, Finland and Holland) and the bailed-out (voters in Greece, Ireland and Portugal) who increasingly resent the EU and their loss of independence.

In Britain, too, the public seems overwhelmingly against offering loan guarantees to Portugal. The UK potentially will have to contribute about £4bn but the chancellor says many hurdles would have to be jumped before he would be signing any cheques.

The government insists its hands were tied by commitments made by the former chancellor in the dying days of the Labour government. Alistair Darling says he consulted incoming ministers. The chancellor also made it clear today that he would not challenge the use of the EU's emergency fund to bail-out Portugal. He sent a clear signal to some of his back-benchers that he was not about to open up a major row with Europe.

So far this bail-out has been calmer than the others but the road ahead is littered with risks and dangers.

Comments

Page 1 of 2

  • Comment number 1.

    Yesterday Osbourne said the UK must pay down the national ‘credit card’. But during the transition between Labour and Coalition governments he made a ruinous mistake in giving EU finance ministers permission to use the UK ‘national credit card’ to fund the EFSM to bail out the eurozone periphery. That mistake on his first day in the job looks likely to result in £6 billion being put on the UK credit card.

    The UK should take the EU decision to establish a temporary EU-wide bailout fund (the EFSM) to the ECJ as a clear violation of Article 123 (the no bailout clause) of the Lisbon Treaty. The UK would likely win in the long-term, but the short-term effect would be that the EFSM could not be used and the eurozone-only EFSF fund would be tapped instead to bailout Portugal at least. If the court case would last until the permanent eurozone bailout fund is up and running in 2013 it would serve the purpose of protecting UK taxpayers from the catastrophic blunder that Osbourne made in his post-election stupor. If Cameron will not take what should be an open and shut case to the ECJ then he is wantonly throwing away £6bn while cutting UK public services, defence and the police budget by 20% for lack of any backbone to confront the EU for violating its own treaty.

  • Comment number 2.

    Spain - no matter what their politicians say - is definitely the next in line.

    (I've happily put my money where my 'mouse' is! As with Greece, Ireland and now Portugal, betting against these stupid liars is like taking candy from a babe).

    As Eurozone interest rates rise, more and more Spaniards with negative-equity properties will default on their mortgages placing immense pressure on Spanish banks.

    The Spanish economy, like the Eurozone itself, is unsustainable.

  • Comment number 3.

    This is more interesting.

    http://www.bbc.co.uk/news/business-13013659

    ---and for once a chance to lead --- instead of only wanting to !

  • Comment number 4.

    #2 MaxSceptic

    ---Please tell your secret investment strategy --I´m all mouse ears !

  • Comment number 5.

    It's amazing the type of pics you always pick when you talk about Portugal and its problems in the British press. so now you choose to depict Portugal as a country of gypsies and graffitti? I don't see the point . The country is already in enough trouble to having it being badmouthed on a constant basis in the British press. Especially the Portuguese which have always treated the British kindly and with respect. I seriously doubt any serious Portuguese newspaper would take pictures of a Brit council estate and mention it as being "Britain". It's already also sad enough that you refer to us as PIIGS. ANd it's not like the UK isn't in trouble itself. I think it's time to stop with this discrimination.

  • Comment number 6.

    #5. At 00:21m. 9th apr 2011, pedrolx

    --✄-- so now you choose to depict Portugal as a country of gypsies and graffitti? I don't see the point --✄--

    British Subliminal stimuli propaganda (commonly known as BBC special effects) ... enjoy ...

  • Comment number 7.

    And in the meantime, in the real world, not the 'Gavin's BBC world', the Euro has risen to a 2 year high.... 1.45 to a USD...

  • Comment number 8.

    The fundamental problem facing Portugal is one which journalists, local politicians local talking heads and Euro-politicians constantly avoid.

    This is the nature of the country's 1976 constitution, which written in the wake of the 1974 revolution by Socialists and Communists, essentially entrenches socialist philosophy and "social inclusion" within Portuguese society. It is for this reason that the minute any government proposes far reaching changes in any sector, that sector goes out on strike.

    On reason I believe that Portugal has arrived at its current point is that, deep down, senior national leaders know fundamental economic restructuring is necessary, but fear for severe social and political consequences à la the period between 1910 and the entry into power of Salazar, when there was a new government every few months.

    These politicians would much rather hide behind the camouflage of blaming changes on the "IMF" and "Brussels", than honestly admit that the country has and is living beyond its means and that to fund the deficit, productivity must be increased through dismantling restrictive labour legislation, state bureacracy and other key pillars of the statist socialist society.

    It is unlikely this latter policy will work owing to likely social unrest and I fear for the long term future of Portugal, which will have to consistently go through repeated "bail-outs" to fund deficits created by increasingly large social security and pension requirements and an inability to generate real and substantial economic growth in the long term.

  • Comment number 9.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 10.

    #8. At 08:46am 9th Apr 2011, barlaventoexpert,

    A very astute analysis and you rightly point the finger for these troubles at the dominance of Socialism that is entrenched in the constitution. It is amazing that so many pro-EU'ites here consider the EU to be not explicitly Socialist claiming the EPP in the EP to be conservative. The EU is rampant Socialism gone wrong, the spend, spend culture is typical Socialism, the redistribution of wealth (bail-out) is a Socialist dream, the 'if it moves regulate it' response to everything in the EU is again a typical Socialist reaction, and when it all goes bottom up as now they just wring their hands and blame anything else than themselves.

    Of course Ellinas in #6 will always blame the Brits, just as many on the mainland have been spoon fed by their media's to believe it is all the UK's fault, as the UK as an Island has always been an easy scapegoat for the incompetence and corruption of the mainland political parties. The mainland politicians (Socialists all) assert that if only the UK was truly European and in the Euro all would be well, totally ignoring that the presence/absence of the UK changes nothing, the EU/Euro project is fatally flawed and a Socialist pipe dream where as always, the citizens suffer for their Socialist disasters.

  • Comment number 11.

    No doubt before the main event is decided we will be treated to some familiar light-entertainment; Sarkozy impersonating John Major in the last days of ERM in demanding ever larger sums of good money be thrown after bad. Merkel impersonating King Canute in insisting upon the primacy of politics over economics. The EU institutions impersonating themselves in proclaiming it a beneficial crisis best tackled with an increase to their own power and budget.

    But the comedy acts cannot distract from the momentous main event at hand. The preliminary bouts involving Greece, Ireland and Portugal have been completed, the bailout funds depleted, and the realisation dawns that the next dominoes to fall - Spain and Italy - are too big too bailout. The headline event is at hand and promises to a veritable Armageddon for euro-federalism upon which the entire fate of the undemocratic EU project may hinge.

    All that remains in question is the timing, and whether the fall of the Spanish or Italian domino will be decisive. My bet is on Italy. It has a higher debt than Greece. Italian labour costs rose 32% in the first decade of the euro compared to 34% in Greece but almost nothing in Germany. The greek government of course did engage in cooking the books, which those puritanical Italians did not. But it is ironic that euro-federalists must now put their faith in the prudence of their bogeyman Berlusconi and the willingness of Italians to listen to pleas for fiscal and monetary restraint from Mr. Bunga Bunga himself. Let the Games begin...

  • Comment number 12.

    Buzet23 @10 et al

    It is all a bit of a mystery this this blogger with respect to Portugal.

    Whilst not knowing any of the overall economic picture in Portugal, I do know a Portuguese family living here in England who tell me bluntly that whilst they are entitled to, and do, claim various benefits in England from the Government, in Portugal, they insist they would 'get nothing' from the State.

    Accepting that comment at face value, one wonders where the Government money is being spent in Portugal?

  • Comment number 13.

    Switching from the micro-political and economic to the macro - how will it all pan-euro out?

    One of the periodic pre-Euro events was concerted attacks by currency speculators on weaker countries, they would be picked off one-by-one.

    That is slightly harder for them to do now that many Euro countries have joined to Euro, sort of safety in numbers from these fiscal wolf-packs.

    The fiscal might of the ECB is arraigned against the speculators but nevertheless, they will probably still get some flesh as 'haircuts' must ensue on some of the sovereign debts, if only to punish moral hazard/reckless lending, for example, by various Euro banks to fuel the insane Irish property boom.

    Not letting a good crisis go to waste, I expect the Euro policymakers will use this opportunity to ensue that PIIGS et al behave themselves in the future, in the economic sense and the overall effect {of this crisis} will be to generate closer political, economic and military integration across the EU.

    The trillion-Euro question for England is when the throw the hat fully into the Euro ring.

    It is simply a matter of timing.

  • Comment number 14.

    We're getting this all wrong ! This morning I had a Labour party leaflet through the door for the Scottish elections which clearly explains how Gordon Brown and the Labour party saved the world's economies from meltdown. How then can all these countries be going bust ? Oh ! dear, we might have to send out an emergency call for Super Gord. and Little Ed. to save the world again.

  • Comment number 15.

    7. At 08:07am 9th Apr 2011, burtine wrote:
    And in the meantime, in the real world, not the 'Gavin's BBC world', the Euro has risen to a 2 year high.... 1.45 to a USD..."


    Honestly, sometimes I wonder if the 'pro-EU' are so blinded by wishful-thinking they are incapable of rational thought on any aspect of the EU!?


    E.g. In the 'real' factual reality World and not 'burtine's EUro-dreamzone' a 3rd member of that 'zone', Portugal has just had to ask for a 'Bail-out' fund of 70+ Billion Euros - - thus, the "...2 year high.." Euro Portugal is borrowing is even more costly to that 'zone' member - - and, to those 'in/out' -zone' EU Nations that are having to find the massive Fiscal handout the risk to their own Economies rises!



  • Comment number 16.

    barlaventoexpert @8

    "It is for this reason that the minute any government proposes far reaching changes in any sector, that sector goes out on strike"


    Completely agree! And, this one is probably the best argument for the government NOT being a large-scale employer. Anything that the government runs directly becomes political. And, the people it employees become politicised. And, that’s before we mention the word clients.

    And, Buzet23 @10, is spot on. The EU construct is inherently socialist, and it seeks to control everything. The way we’re heading, the EU will make Labour’s ‘big government’ seem like laissez faire capitalism

  • Comment number 17.

    #12. At 09:50am 9th Apr 2011, JohnConstable and #13,

    "Accepting that comment at face value, one wonders where the Government money is being spent in Portugal?"

    Portugal and Spain have had Socialist governments for a long time, yet the poor who they claim to represent have very few benefits as you say, yet you wonder where the money is spent. It is clear you have not yet seen that Socialism is not about helping the poorer of society but more about enslaving the population into a new form of serfdom where a few scraps are thrown once in a while to ensure the poor vote Socialist. Meanwhile the new 'lords of the manor' i.e. the Socialist hierarchy live a life of luxury and spend like mad on various useless hobby horses that benefit few. No doubt in Portugal a lot has been spent on bureaucracy and over regulation so that the Socialist government can employ the families and friends of the party, which is the modus operandi of all Socialists. Look at Gordon Brown's achievements in increasing the public sector head count, racial awareness, diversity, elf & safety, pathetic targets, clipboard operatives, management advisor's who tend to be party hacks, the list is endless. This is where the money goes, at least what's left after the corrupt have had their take.

    "The trillion-Euro question for England is when the throw the hat fully into the Euro ring."

    I hope that England is never so foolish as to take the Euro as it currently exists, when it was being implemented I worked on the project in a central bank and it was well known what the flaw was. Dissimilar economies were never suitable for the Euro which is why the convergence criteria was invented and supposed to be rigorously applied. However, since the Euro is a political construct the various countries fiddled their books and lied like hell so that they could claim to fulfil the convergence criteria when they could not. The demise of the Euro was sealed from that moment and these bail-outs do not resolve the fundamental economical problems in those countries, they merely prolong the agony and throw good money we can't afford after bad money. Were the Euro to be split into two or more currencies based on the true economies of the various members then maybe there would be a chance of success for the individual parts, but as a single currency it will merely stutter along until we are broke.

  • Comment number 18.

    7 burtine writes:
    "And in the meantime, in the real world, not the 'Gavin's BBC world', the Euro has risen to a 2 year high.... 1.45 to a USD..."
    ----------------------
    And that's just looking at it in the short term. In the last decade the euro has gained over 40% over the dollar and no doubt even more against the poor shrinking pound. It is the secod most traded currency after the dollar and has the highest combined value of banknotes and coins in circulation in the world having surpassed the US dollar.
    Based on IMF estimates of 2008 GDP and purchasing power parity among various curencies, the Eurozone is the second largest economy in the world. Apart from being the currency for 327 million Europeans, it is also the main trading currency for 175 million more worldwide. Not bad for a 'failing currency'!

  • Comment number 19.

    Loans, loans and more loans--a pox on loans. It is loans that have got us where we are. What the PIGS need is not more loans but rather outright gifts of cash to enable them to pay down their huge high interest loan totals and so reduce their burden of servicing.

    I didn't say this was likely to happen but only along these lines could anything be said to have been done to help solve the problem.

    Granted it's not going to happen because Germany et al understandably see no reason simply to burn their money. At present we are arguably simply making matters worse. Acknowledging this is as sound a proof that one is likely to see that the eurozone cannot continue as it is.

  • Comment number 20.

    @Gavin Hewitt
    "That is why many economists believe that, sooner or later, debt restructuring will follow. "

    Let us be quite frank here. It is blooming obvious what game these economists are playing. Equivalent blogs in Germany openly ask for capital punishment for crooked economists who ask for debt restructuring. Same punishment as in China for corruption!

    Everybody in Germany knows, that they are asking for restructuting, because then the economists' Credit Default Swaps, which bet on the default of Eurocountries, would pay out.

    Everybody also knows that German journalists and politicians are probably also in on the game of defrauding the taxpayer.

    Does Gavin Hewitt not know that - he is the Europe correspondent after all?

    Everbody in Germany knows that CDS only need to be banned.

    Does not cost anything - would be immediately effective of ending this Eurocrisis.

    Time for the BBC to catch on to the news!

  • Comment number 21.

    Hi matt_us

    There is a book, "The Greatest Trade Ever." which explains how John Paulson made $20,000,000,000 dollars from the crash. In essence he bought insurance against the property bubble. He only made money because he was in a very small minority of people who recognised the incipient problem and had the know how to profit from it. The key problem was not the existence of CDS; it was the inaccurate evaluation of the risks in the subprime mortgage markets that set the global economy unravelling.

    The were bubbles before CDS. There will be bubbles if CDS is banned. Why ban CDS?

  • Comment number 22.

    8. At 08:46am 9th Apr 2011, barlaventoexpert wrote:

    "This is the nature of the country's 1976 constitution, which written in the wake of the 1974 revolution by Socialists and Communists, essentially entrenches socialist philosophy and "social inclusion" within Portuguese society."

    I have not read Portugal´s constitution --but I doubt that after the Fascist Salazar, "social inclusion" was considered to be an evil by most of the society.

    Both Portugal and Spain were determined to leave their Fascist history behind them --as quickly as possible and it was the communists and "Socialists" (for the lack of a better word) -- who for decades led the struggle.

    The EU offered them (as with Eastern Block countries) a way to ensure that such Fascist and totalitarian dictatorships never oppress them again and offer a "social inclusion" in a united Europe.

    That banking de-regulation and "innovation" (advanced by the UK and America) has ruined more European economies than social overspending should be kept in focus --as should the poverty in Portugal and Spain while under Salazar and Franco.

    While the contributions of barlavento and Buzet 23 do not praise Salazar or Franco -- the impression they give is that a Europe with both of them would be an improvement.

    --- Please correct me if misunderstand your appreciations of the role of communists and "Socialists" in both Portugal and Spain !

  • Comment number 23.

    #21 Ulkomaalainen

    "--it was the inaccurate evaluation of the risks in the subprime mortgage markets that set the global economy unravelling."

    --we have had the same discussions about gun control !

    --Didn´t Warren Buffet call them WMD´s ?

  • Comment number 24.

    Hi quietoaktree

    You seem to blame the current economic crisis on de-regulation. This is a bit of a stretch; there have been plenty of economic crashes before de-regulation.

    A fundamental truth; every so often banks crash.

    A bank has only ever a small percentage of the cash it owes to depositors on hand as cash. Even a bank with the collateral to cover all of its obligations cannot, in practice, survive a serious loss of customer confidence that leads to a run. That is; however stringently regulated the bank, and however well run there is always a chance of collapse. If one bank has 10% of itse depositors' money on hand and another bank has 20% of its depositors money as cash in hand; both will collapse if 50% of their customers demand their money back.

    The Northern Rock was the first British bank to go to the wall. This bank had far less exposure to the US sub-prime market than the majority of British banks. The Northern Rock crashed because its customers lost confidence in the bank and once a run starts then the bank is going to collapse and any sensible depositor exerts themselves to join in the panic and get as much of their money as they can. The loss of confidence need only affect a small proportion of the account owners but the effects of their loss of confidence can snowball.

    The decision of governments to buy the banks was motivated by the perceived need to prevent a widespread meltdown. In the short term this paid off; the banks were stabilised and the account holders didn't lose their money. In the long term it has meant the transfer of debts from the banks to the governments and then back to the general population, which incidentally contains those very same account holders. In the case of Ireland at least it is this transfer of debts to the state that is the cause of their current economic woes.

    I wonder if maybe the governments should have allowed the banks to collapse?

    I'm pretty sure that more regulation won't help anyone but the lawyers who help draft it.

  • Comment number 25.

    Hi quietoaktree #23

    Warren Buffet did indeed call them WMD. But this is to reduce a complex argument to a pithy quote. A good quote though, I'll give Warren that.

    Why did Warren Buffet call CDS' WMDs? You've given me his quote, can you also give me his argument?

  • Comment number 26.

    @Ulkomaalainen
    "The were bubbles before CDS. There will be bubbles if CDS is banned. Why ban CDS?"

    The short answer is because the hedgefunds, speculators and any hangers on who bought a book how people made money through CDS in 2008, and have invested in CDS, need a good kicking. For trying to bankrupt Eurocountries.

    Banning CDS would then shut them up immediately - we would not read any more articles which state economists ask for a restructuring, because there would not be any economists asking for restructuring.

    There would not be any more cheerleaders for leaving the euro-area in the pink pages of the press in Europe, there would not be anymore bribed politicians who act like pom-pom girls for the Soros and Gross/El-Erians of this world advocating haircuts for Eurocountries.

    And there would not be any suspicious journalists, who make just a little bit too much panic with their articles about Europe. And for some reason never mention that there is ten times as much money to be made with CDS, than with bonds in this crisis! As if these things did not exist? No financial journalists in the press makes the connections CDS/Eurocrisis - funny that - isn't it?

    Credit Markets are manipulated - as CDO markets were - and CDS markets are. Credit Rating agencies are bent. We know that since 2008. Anbody can draw their own conclusions about journalists!

    The accurate evaluation of Portugal is AAA, as it has less deficit by far than Germany in 2010, and about the same government debt. It pays interest rates which are 3 times as much, though!

  • Comment number 27.

    @Ulkamaalainen
    "I'm pretty sure that more regulation won't help anyone but the lawyers who help draft it."

    Based on your blind market believes? Better regulated banks (Texas) and better capitalised ones (Spain) came out better. And always will.

    There is no fundamental truth that "every so often a bank fails." Only if they are badly regulated. That is the truth.


  • Comment number 28.

    @Ulkomaalainen
    "Why did Warren Buffet call CDS' WMDs? You've given me his quote, can you also give me his argument?"

    Just look at them being set off in each European country after another - tell me - its Saturday night - did you just come in from the pub - or something?

  • Comment number 29.

    #25 Ulk.

    I forget his argument -- but what happened was the packaging in no way represented the true evaluation. Laws were broken to allow quick transactions.

    European banks do not have the bank failure rate as in America. Canada and Germany did not have housing-bubbles --Canada was not exposed to the sub-primes (to a great extent) -and Germany was exposed through their international business.

    The leverage (deposits to lending ratio) was up to 40:1 -- far too high to be called responsible.

    --- deregulation allowed this.

    My #3 gives link to the present UK discussion.

  • Comment number 30.

    In the 20th century, Japan & Germany became AAA by dint of work not photocopy.
    In the 19th century, USA became AAA by dint of work not photocopy.
    In the 18th century, UK became AAA by dint of work not photocopy.
    Audaciously, in the 21st century, ClubMed became AAA by photocopy.
    Photocopies fade. Originals do not.
    The EU was seen as a heaven-sent photocopier by ClubMed.
    The longer ClubMed tries to pass off as AAA, the harder is the fall to the truth.
    Meanwhile, China, India, Brazil, Russia have faced the real world in order to move towards AAA - there is no shortcut to AAA.
    ClubMed has only to look at Brazil in the 1980s - the Latin Amercian debt crises were Bradied. The Latin European debt crises is looking for Bradies as well.
    Only it is Merkel, not Brady this time around.

  • Comment number 31.

    Burtine,

    The real world is the same world for the both of us. And the UK Pound vs dollar and the Euro vs dollar ratio is very similar, so why not? And is this a good thing for buying domestic items?...when our dollar is less valuable but then Our products are cheaper than your products....

    Yes?

    So, what does your statistic actually mean...only that the Euro is real money backed by solvency...somewhere...and you should be happy about that.

  • Comment number 32.

    I mean one gets the impression of a rivalry that doesn't exist here in the USA--we only think of the EU of the news...and sadly just the more interested in the E U "troubles"...over hyped?... are the better educated---ironic, no?--

    and moneyed Republicans (religious people dont believe in psychiatry, I think, while poorer people--uneducated liberals here--do not believe in economics OR voting--too depressing to self esteem, maybe?)

    ...but, ewww, GOP.... spits on ground twice for good luck:))

    A choir being told what They--not me..an American as well--

  • Comment number 33.

    26. At 23:05pm 9th Apr 2011, matt_us wrote:
    Banning CDS would then shut them up immediately - we would not read any more articles which state economists ask for a restructuring, because there would not be any economists asking for restructuring.
    =====================
    There is a much simpler solution: the governments in question start acting prudently i.e. living within their means then there will be no more talk of defaults and restructuring.

    I said simple, not easy.

  • Comment number 34.

    Question posed by Mr Hewitt's previous blog:

    "How will these countries - facing a severe financial squeeze - find the growth and the funds to sort out their debts in the long term?"

    Observation by Mr Hewitt's previous blog:

    "Portugal will be in the same position. The gap between it and countries like Germany is widening. Its economy is predicted to shrink this year by 1.4%."


    Heading of Mr Hewitt's present blog: '....The danger is not over."


    Query from this longtime 'anti-EU' sceptic and antagonist of the blinkered 'pro-EU' dogma, 'EU is good! All else is bad!":

    Just when will any 'pro-EU' on this blog present any sort of coherent, logical, rational response to Mr Hewitt's question & observations because (with the notable exception of #8 which has some perspective) upto now it has all been about a **'blame-game'**, but no factual reality on the EUro-zone crisis!?


    E.g. **blame-game** = see below.

    5. At 00:21am 9th Apr 2011, pedrolx wrote:
    "It's amazing the type of pics you always pick.... It's already also sad enough that you refer to us as PIIGS. ANd it's not like the UK isn't in trouble itself..."

    6. At 01:03am 9th Apr 2011, Ellinas wrote: "...British Subliminal stimuli propaganda (commonly known as BBC special effects) ... enjoy ..."


    8. At 08:46am 9th Apr 2011, barlaventoexpert wrote: "... These politicians would much rather hide behind the camouflage of blaming changes on the "IMF" and "Brussels", than honestly admit that the country has and is living beyond its means and that to fund the deficit, productivity must be increased through dismantling restrictive labour legislation, state bureacracy and other key pillars of the statist socialist society..."


    13. At 10:07am 9th Apr 2011, JohnConstable wrote: "..That (currency speculation) is slightly harder for them to do now that many Euro countries have joined to Euro, sort of safety in numbers from these fiscal wolf-packs.

    The fiscal might of the ECB is arraigned against the speculators but nevertheless, they will probably still get some flesh as 'haircuts' must ensue on some of the sovereign debts,..."


    20. At 17:15pm 9th Apr 2011, matt_us wrote: "...Let us be quite frank here. It is blooming obvious what game these economists are playing. Equivalent blogs in Germany openly ask for capital punishment for crooked economists who ask for debt restructuring....
    ...Everybody in Germany knows, that they are asking for restructuting, because then the economists' Credit Default Swaps, which bet on the default of Eurocountries, would pay out...."


    22. At 22:06pm 9th Apr 2011, quietoaktree wrote: "... Both Portugal and Spain were determined to leave their Fascist history behind them -- ...
    .... The EU offered them (as with Eastern Block countries) a way to ensure that such Fascist and totalitarian dictatorships never oppress them again and offer a "social inclusion" in a united Europe.

    That banking de-regulation and "innovation" (advanced by the UK and America) has ruined more European economies than social overspending should be kept in focus --as should the poverty in Portugal and Spain while under Salazar and Franco..."


    26. At 23:05pm 9th Apr 2011, matt_us wrote: "...Credit Markets are manipulated - as CDO markets were - and CDS markets are. Credit Rating agencies are bent. We know that since 2008. Anbody can draw their own conclusions about journalists!"










  • Comment number 35.

    #22. At 22:06pm 9th Apr 2011, quietoaktree

    "While the contributions of barlavento and Buzet 23 do not praise Salazar or Franco -- the impression they give is that a Europe with both of them would be an improvement.

    --- Please correct me if misunderstand your appreciations of the role of communists and "Socialists" in both Portugal and Spain !"

    You certainly have not changed one iota, your 'impressions' are as fatally flawed as your logic has always been, Socialism, Communism and National Socialism are equally as bad as they are in effect the same.

    Now that this has been put to bed once more lets evaluate the irresponsible Socialism within the EU that has caused these countries to create such huge debts. The spend spend mentality that justifies expenditure of money you don't have, firstly to try and ensure you stay in power, secondly to employ family, friends and party hacks in non-jobs, and thirdly to blow money on various head in the clouds projects that are ideological only. This is why Socialism does not work, and add to that the preoccupation with total nanny control by excessive regulation and you have the almost stagnant economies we see throughout the EU.

    Excessive politics has always been destructive, it needs to be in moderation only and for the moment the pendulum is far to much in the left side of the political spectrum. Until the middle ground is reverted to there can be little improvement, but as we know all too well, Socialists are ideologically committed and can accept no alternative as they think they know best, therefore it will be difficult to dislodge this destructive Socialist mentality from the EU.

  • Comment number 36.

    To many posters above.

    The strong Euro.

    This seems to be seems by some as an indicator of economic stability. Actually, it is a problem. A strong Euro forces up the price of exports and reduces the competitiveness of European goods and services in the global market. Recognising this and, especially the apparent deliberate policy of the Chinese to keep the currency artificially low has prompted the US Fed to adopt a policy which deliberately keeps the value of the USD low and goes some way towards addressing the issues of US growth. The marginal increase in Euro zone interest rates seems to point in the opposite direction. Like it or not, it is the relative strength of the north European economies which is driving a European recovery such as it is. The driving force appears to be the ongoing growth of the German and other economies. Any action that mitigates against the competitiveness of these economies will slow growth. If, as seems likely, there will continue to be pressure to bail out peripheral economies, the funds are going to come from the economies with sustainable growth which are prepared to carry the greater part of the risk. If, as some above seem to think, a major player in on the verge - say Spain or Italy - we are in an entirely new territory and anything that tends to slow European growth can only make it harder for the big boys to keep putting their hands in their pockets if only because their electorates will eventually rebel. I therefore deplore the ECB decision which has the 'double whammy' effect of making the economies which are in trouble even less competitive while tending to slow the growth of those which are relatively prosperous. They should be looking at what Bernanke is doing and learning from it.

    Britain against the Wall.

    I do wish those who relish UK knocking would take a more balanced view. It is the case that the senior partner in the coalition was elected on a program of reducing the public deficit and cutting public spending. In doing so now, they are fulfilling their mandate. You can argue till you are blue in the face as to whether they are directing their arrows in the right direction. However, it simply is not true to take this as a signal of panic measures. Of course unemployment is a problem but so is it throughout the western economies in the aftermath of a major recession. It would be surprising if it did not happen. Cuts in public services will probably mean that it gets worse before it gets better. But these are defensive measures. Government has been overspending for far too long and this issue was going to have to addressed sooner or later recession or no recession. Of course I do not live there now so it may be easy for me to pontificate but there are consequences for expats as well. I would rather see the UK taking the haircut now than wait for Sweeny Todd to shave the lot off in desperation further down the line (the razor might slip). Britain is not on the verge of bankruptcy.

    Socialism.

    Much talk about this as well. The word - as an indicator of an ideology - has become distinctly unfashionable but we need to distinguish between ideological Socialism with a capital 'S' and the meaning of the word with a lower case 's'. In the sense that there is no society within the EU of which I am aware that is not committed to free health care at the point of need, free education for those who cannot afford the private sector, elements of social housing in some form, some kind of safety net for the jobless, disabled and unemployable and a pension system. The methodology may vary but the commitment is deeply buried in the European mentality and will not be easily removed. Neither, in my view, should it be. In a very real sense, we are all socialists now.

    This is quite different from the popular conception of socialism as a mechanism for over regulation and a plethora of unwanted and unnecessary rules and regulations which tend to restrict individual personal liberty. In this regard, political correctness has a great deal to answer for. You need look no further than the UK for the perfect example. I believe that parliament over the 14 year period of the three Labour administrations succeeded (if that is the right word) to create on average a new criminal offense every month. But in the process, they undoubtedly created huge numbers of jobs which simply did not need to be done. Now not just Britain but all of Europe has to address the question af what it is going to do with all of these people if the absurd administrative burden is to be rolled back. Nowhere is this more true that at EU level.

    But this is not socialism. It is simply bureaucracy gone mad. We in Europe are over governed. At best, it is well intentioned people going over the top in their pursuit of what they see as social justice. At worst, it is 'jobs for the boys' pure and simple. To dress this up as a political ideology is to give it a respectability it does not deserve.

  • Comment number 37.

    @Another engineer
    "There is a much simpler solution: the governments in question start acting prudently i.e. living within their means then there will be no more talk of defaults and restructuring."

    Now, Mr Engineer, I do not know much about engineering, but I know a bit about economics and financial markets.

    Portugal acted much more prudently than Germany, and has a government deficit of 2/3rds of Germany (as percentage of GDP) and government total debt about equal to Germany. Why is it picked out by the markets? Pays 3 times as much interest as Germany, 9.5%, rather than 3% on its government bonds?

    Because it is easy (if you are a hedgefund and collude with 2 or 3 big players) to tilt the market in your favour. That is what has been done!

    And it is easy to make billions with Credit Default Swaps - if you really interested what goes on in financial markets get the bood "The Big Short" by Michael Lewis. Than you know how bent, manipulated and crooked all the big players are!

    That is why small countries like Greece, Ireland and Portugal do not have a chance, no matter what they try - unless CDS are banned!

  • Comment number 38.

    #37 - matt_us

    You probably know more about this than I do and I have no idea whether this would fly but what about this?

    If the Eurozone as whole were to auction bonds and distribute the raised monies as required between the members, the opportunity for speculators to play on the relative strengths of the individual economies would be taken away from them. They would simply have the choice to bid or not to bid for ECB bonds and would have no idea whether the capital raised was going to Portugal or Germany. There is, after all, only one currency they can play their games with so how come they get to play speculative games within the area?

  • Comment number 39.

    #36. At 11:43am 10th Apr 2011, threnodio_II

    Re your analysis of Socialism and socialism, I can see the points you make but take them a bit further. My PS friends in Belgium explained to me many years ago that the Socialism of the UK as exhibited by the Labour party, and which is ideological, is very different from the socialism of this part of the EU which believes in a social Europe rather than ideology. Both forms of Socialism share some common failings, reluctance to control spending, over regulation to ensure total control, jobs for the boys and plenty of non-jobs, but ideological Socialism fails due to its inability to accept alternatives. In the case of the enigma that is the EU it exhibits both social socialism and ideological Socialism, and it is the ideological Socialism that refuses to accept that the EU and the Euro are flawed and need to be drastically restructured.

    The Euro was fatally flawed from the outset as it was a political construct based on ideology, even Germany did not meet the 3% convergence criteria when it was introduced, and as for the fabricated accounts from most of the other countries it has never been a surprise as to what is happening now. If the politicians put ideology and prestige to one side they would dismember the Euro into several parts whereby only countries with similar economies shared the same currency. That was what the convergence criteria was supposed to create but ideology and political prestige put an end to it, what amazes me is why people prefer to blame the banks, investors, CDS etc for the failings of a flawed ideological project that was created to benefit only politicians and bureaucrats.

  • Comment number 40.

    To which I would add that there is nothing stopping other central banks, including the ECB, from participating in bond auctions as a mechanism to contain excessive interest rates. I am pretty certain that the Bank of England did this with Irish bonds on a number of occasions.

    It would take a huge international effort to ban CDS - although I agree with the thrust of your argument - but there are other ways of fighting back.

  • Comment number 41.

    @coolbrushstrokes
    "Just when will any 'pro-EU' on this blog present any sort of coherent, logical, rational response to Mr Hewitt's question & observations ...but no factual reality on the EUro-zone crisis!?"

    You take Gavin Hewitt's concerns for real - where do countries get the growth from? (I am not sure whether Mr Hewitt is an economist - it does not seem to be the case from what I can see.) You do not need growth to pay back debt. If there is a debt problem, you can pay back debt, even if your economy is shrinking. Ireland, the baltic countries, the US, the UK all demonstrate that. You could, for example, tax the rich and wealthy - that would be a brilliant idea to pay back government borrowing. There is always enough wealth in all the countries to do just that.

    Ultimately, the Euroarea problem is one of unequal current accounts, too. The peripherie countries buy too much, and don't sell enough abroad. Although they are holiday destinations, they need many more tourists to equal that current account deficit out. The EU currency area will only work in the long term if current acoounts are balanced between countries (the same is incidentally true for all countries, globally). That does not mean Germany and Portugal have to be exactly in balance, but for the whole area Germany cannot sell more as it buys (and holidays count as purchases, too.)


    So basically, a solution would be a lot more holidays by Germans (and other current account surplus countries such as Dutch and Austrians) to equal out current accounts.

    Have a look at Keynes and what he said about his Bancor proposals - that is basically it in a nutshell.

  • Comment number 42.

    36. At 11:43am 10th Apr 2011, threnodio_II wrote:

    Excellent analysis by You on all 3 points of order.

    It is stunning to read some 'pro-EU' (e.g. Manneken, JohnofHendon, Burtine, ptsa etc.) utterly blind to the overmighty political-judicial reality of this vast, intrusive, bureaucratic-laden, power-grasping entity.

    I would be one who'd support an EU if only it did not in & at every stage of its policy-deliberation & formulation display a compete lack of sensitivity to the 'Democratic' Rights & Responsibilities of the Citizens Brussels tries to claim it represents.

    At least this blog has one sane 'pro-EU' in Your good self - - aware that what is presently on offer from Brussels simply will not do in the longterm - - in contrast to those 'pro-EU' who waffle on about what could be improved at Brussels though oblivious nothing is significantly improving in the Democratic deficit.
    As for those 'pro-EU' who keep harping about the faults of the UK they stretch credulity to breaking point! The many faults of the UK is neither a reason for Britons to sign-up to Brussels nor an excuse for Brussels to do nothing about its own many faults!

    Again, I say, excellent, measured, considered contribution Threnodio.

  • Comment number 43.

    #37. At 11:59am 10th Apr 2011, matt_us,

    You make it sound so so easy, ban CDS and all known ills will go away, unfortunately life is never so easy as by now you should have realised. You compare Germany and Portugal by using statistics, but as anyone who has any knowledge of accounts knows, statistics can be easily manipulated and made to show or prove almost anything. The economies of Germany and Portugal are dissimilar and just quoting gdp etc proves little as it is how the economies are constructed that counts.

    I fail to see why CDS should be banned as it is no more than a form of gambling, in this case the speculator buys an insurance and gambles that a borrower will never pay back the loan. Why do you not blame the insurance company instead, as they also gamble that the borrower will pay back the loan. The sub prime scam was far more nasty as assets were, I think, fraudulently valued, this is where legislation is more important not with CDS.

    What these crises have shown is that there are few out there who are any good at their jobs but regretfully consider themselves to be super bright, the few real sharks out there have made fortunes gambling on the stupidity of the so called financial experts. Remember a fool and his money are soon parted, with or without CDS.

  • Comment number 44.

    #28 matt_us
    Perhaps his confusion is because Warren Buffett called derivatives WMD, not CDS's.

    Mr Hewitt - One 'pores' over documents, one does not 'pour'.

  • Comment number 45.

    36 threnodio 'The strong Euro' writes:
    "A strong Euro forces up the price of exports and reduces the competitiveness of European goods and services in the global market."
    --------------------------------
    How does your theory explain that many of these eurozone countries have some of the strongest and most successfull export-driven economies in the world? Could it be that if you manufacture quality goods people world-wide will want to buy them?

  • Comment number 46.

    #40. At 12:16pm 10th Apr 2011, threnodio_II,

    Only one problem with bonds, they are a liability that needs to be paid back when they mature, thus Eurobonds or ECB bonds or Central Bank bonds rely on the ability to repay in the future. Unfortunately some companies, especially private member/shareholder companies often assume that the shareholders will let the money rest in the company on maturity thus evading the need for repayment. In the case of Eurobonds etc I can't see the speculators who buy such bonds being happy to let their money stay there, they will want repayment so as to be able to re-invest for more profit. Maybe this is a bit simplistic but I can't see how Eurobonds will solve anything as they are just another loan.

  • Comment number 47.

    #45. At 12:39pm 10th Apr 2011, margaret howard,

    "How does your theory explain that many of these eurozone countries have some of the strongest and most successfull export-driven economies in the world? Could it be that if you manufacture quality goods people world-wide will want to buy them? "

    Many implies the majority, now we all know of Germany which is the world number two exporter but who are the other major exporters in the Eurozone whose name is a byword for quality. Remember there are 17 members which means 9 is a majority so please let us know of at least another 8 world export leaders whose names are renowned for quality. In the top 20 there are only 6 eurozone members so I guess you are going to find it very difficult, and I hardly think France, Italy, Netherlands, Spain and Belgium are ranked in the same ball game as Germany for world wide renown.

  • Comment number 48.

    #41 matt_us
    ...You do not need growth to pay back debt. If there is a debt problem, you can pay back debt, even if your economy is shrinking. Ireland, the baltic countries, the US, the UK all demonstrate that. You could, for example, tax the rich and wealthy - that would be a brilliant idea to pay back government borrowing. There is always enough wealth in all the countries to do just that.

    Do you really think that any of the currently bailed out countries could do that ? Given the nature of the Greek and Portuguese governments, do you not think they would have if they could ? Even more so for Spain.

    Ultimately, the Euroarea problem is one of unequal current accounts, too.

    ...So basically, a solution would be a lot more holidays by Germans (and other current account surplus countries such as Dutch and Austrians) to equal out current accounts.


    Given that that has not happened so far, why would it start now ?

    Have a look at Keynes and what he said about his Bancor proposals - that is basically it in a nutshell.

    The Bancor proposal by the Chinese may well happen over time. That being so, I would have thought that as the US dollar and Euro unravel as reserve currencies that would mean more trouble for those economies that use them.

    What you have said is quite true, I believe - but free of hope.

    The question is not what should or could happen but what will happen.

    It's not use calling for the demise of derivatives trading. WMD cannot be disinvented. All derivatives have done is make world economic imbalances liquid. The problems are in the imbalances.

  • Comment number 49.

    #45 margaret howard
    How does your theory explain that many of these eurozone countries have some of the strongest and most successfull export-driven economies in the world? Could it be that if you manufacture quality goods people world-wide will want to buy them?

    I'm sure you are at least partly right. Quality goods will prevail. There are other factors, however, some explained in this article...In fact, German workers were once the ones known for being too expensive and inflexible. But for years, unions have accepted modest wage increases, and they agreed to measures that help companies address fluctuations in demand without resorting to mass firing.

    For example, Glasbau Hahn — which is not unionized — managed to avoid any layoffs last year by deploying so-called work-time accounts, a widely used tool. Employees bank overtime hours during busy periods. When business is slow, they work less but draw on the accounts to keep receiving the same pay....


    Another major factor is education of the correct type. Not the Holy Writ of academic skill prevalent in the UK but acknowledgement that other skills - gained through apprenticeships, for instance - are to be respected as much and paid as well.

    Then there is Hartz IV...The Hartz IV reforms continue to attract criticism in Germany, despite a considerable reduction in short and long term unemployment. This reduction has led to some claims of success for the Hartz reforms. Others say the actual unemployment figures are not comparable because many people work part time or are not included in the statistics for other reasons, such as the number of children that live in Hartz IV households, which has risen to record numbers....

    Broadly speaking, Hartz IV gives people greater incentives to work. It's the kind of thing Labour and now the Coalition are trying to do here against union opposition, e.g. to an increase in part time working.

  • Comment number 50.

    Buzet 47 writes:
    "In the top 20 there are only 6 eurozone members so I guess you are going to find it very difficult, and I hardly think France, Italy, Netherlands, Spain and Belgium are ranked in the same ball game as Germany for world wide renown."
    -------------------------------------
    Six of the top 20 is pretty good going when you compare the populations of these countries to those of the rest of the world. Four eurozone countries are among the top ten exporters in the world. Even little Netherlands exports more than GB for instance. France is the biggest food exporter in the world and there is no-one to beat Italy for style and design in clothing and quality goods.

  • Comment number 51.

    @threnodio_II
    "If the Eurozone as whole were to auction bonds and distribute the raised monies as required between the members, the opportunity for speculators to play on the relative strengths of the individual economies would be taken away from them."

    Abosolutely, institutional investors have to buy bonds. Life insurance and pension funds have to set off their liabilities with long term assets such as government bonds. If Eurocountries got together, and organised the markets like that, rather than allow investment banks to organize it for them (guess for whose benefit investment banks organize issues?) the problem would be quickly solved. Your idea is good, as would be an idea to only sell German bonds, if you also buy say, Greek bonds, at a price which we, the issuer, decide. As any car dealer sets the price of the car he sells.

    Chinese and Japanese investors have to buy bonds - due to their current account surplusses. They do not have a choice, they can buy American or European. Which would you rather buy? The guys who are dealing with government issues for governments have not got a clue. (see Klaus Regling, Head of the EU Rescue Fund EFSF) Investment banks pull a fast one on them every time!

  • Comment number 52.

    @Buzet23
    "I fail to see why CDS should be banned as it is no more than a form of gambling, in this case the speculator buys an insurance and gambles that a borrower will never pay back the loan. Why do you not blame the insurance company instead, as they also gamble that the borrower will pay back the loan. The sub prime scam was far more nasty as assets were, I think, fraudulently valued, this is where legislation is more important not with CDS."

    Its not gambling. Any gambling the bookies set the odds, as bets come in. They shorten or lenghten depending on how much money is bet. CDS is not like that at all. That is why it is a scam from the beginning to the end, for the banks, selling them, for the hedgefunds buying them. It is just a money making scheme. The only thing you have to do is to doubt the creditworthiness of a country, sell a few of its bonds, and its mayhem. CDS prices shoot up, making tens of billions for hedgefunds and speculators! Banks know that ultimately it is the taxpayer bailiing them out, as usual.

    Its not gambling, CDS is a scam, from the beginning to the end!

    This is not just my view, by the way. If you read Nobelprice winner Joseph Stiglitz "Freefall", you will find arguments along the same line.

    This scam has to be stopped immediately! Ban these CDS contracts immediately.

    Again, does not cost anything - could be done tomorrow, by the EU governments. And if American banks would like to keep their EU licences - they better play ball, and ban selling them worldwide!

    That is the quickest, simplest and cheapest way to solve this "Eurocrisis"!

  • Comment number 53.

    37. At 11:59am 10th Apr 2011, matt_us wrote:
    And it is easy to make billions with Credit Default Swaps - if you really interested what goes on in financial markets get the bood "The Big Short" by Michael Lewis. Than you know how bent, manipulated and crooked all the big players are!
    =======================
    So after giving the impression that you are an expert on this subject, are you now saying that your multitude of posts (most of which are almost identical) are based on a conspiracy theory book?


  • Comment number 54.

    47. At 12:54pm 10th Apr 2011, Buzet23 wrote:

    versus...


    50. At 13:34pm 10th Apr 2011, margaret howard wrote:


    Oh dear, the fragrant one 'poring' over her scant research and coming up minus factual reality yet again!
    If she fell through a trap-door she'd claim it was stair-lift!

  • Comment number 55.

    @Another Engineer
    "So after giving the impression that you are an expert on this subject, are you now saying that your multitude of posts (most of which are almost identical) are based on a conspiracy theory book?"

    No, I only read that book a couple of weeks ago. It was clear to me the first instance I looked at the EUrocrisis in earnest and in detail, about beginning of December, that there was something foul here. Don't forget, if you can speak a few languages, the European press is now a few clicks away! It is not normal for people to ask for a rescheduling of debt, if there some financial trouble. Normally, everybody is trying very hard to contain a debt situation. But here, there seem to be an awful lot of third parties recommending restructuring, haircuts, Euroexit, without mentioning that CDS would become payable. throughout Europe and the States (why do they care?). So everything has gradually fallen into place.

    But think about it - how much have you heard about the CDS market on European debt recently? Its now a bigger market than the bond market. That means, that more people by certificates betting that countries go bust, than buying bonds. So that they write negative articles about Europe, to make sure that happens, goes without saying.

    What do financial journalists invest their money in? The Building Society at 2%? Or perhaps CDS, where you can make 10 or 20 times the money you invested - already by prices of CDS going up! If yields double, prices of CDS quadruple, so if you can influence that general panic, so much the better!

    Same of course is true for economists, same for newspaper publishers. Read the FT. Should be called Hedgefund Times. Its alphaville blog's primary purpose seems to be to rubbish Eurocountries. It is sponsered by MarkIt, which handily publishes all Euro CDS prices, next to the alphaville blog.

    I personally think, they should all be arrested, and their financial affairs investigated in detail!

    Can, however, all be avoided, if CDS are banned tomorrow morning!

  • Comment number 56.

    @Clive Hill
    "The question is not what should or could happen but what will happen.
    It's not use calling for the demise of derivatives trading. WMD cannot be disinvented. All derivatives have done is make world economic imbalances liquid. The problems are in the imbalances."

    CDS did not barely exist 10 years ago. Now they make billions for investment banks, hedgefunds, journalists, crooked politicians, and economists.

    We have invented and banned slavery, child labour and prostitution, taking opium and other hard drugs. You are right, there is now illiquidity in all these markets, and people go to jail if they are found out.

    The same should happen for CDS. They have the same destructive effects on society, and they should be banned. What is so hard to understand about that?

  • Comment number 57.

    matt_us,

    sounds intelligent -- is --but it wasnt the hedge funds or derivitives markets that were necessarily the banks problem or the recession reason. He is spelling out a one sided view And then ignoring all other reasons for debt related growth --which Obama is using to spur the USA economy.

    ...throwing the baby out with the bath water or something in effect . Ideology/moral imperatives argument plus nationalistic narrative is key here. Rivalry to make an argument against "Anglo-Saxon" capitalism..

    But congrats on seeming very informed..tho sounding dubiously partisan in the process.

  • Comment number 58.

    49. At 13:09pm 10th Apr 2011, Clive Hill wrote:

    "..For example, Glasbau Hahn — which is not unionized — managed to avoid any layoffs last year by deploying so-called work-time accounts, a widely used tool. Employees bank overtime hours during busy periods. When business is slow, they work less but draw on the accounts to keep receiving the same pay...."


    So, not like in Finland where various relatives & friends have shown me their lay-off slips (most recent a fully-qualified Welder who moved to Helsinki on a contract & was laid-off 2 months after getting the job, but not his Estonian colleagues) whilst Estonians, Poles, Russians continue to work in the heavy engineering, construction, transport, road maintenance, dockyards etc.

    How does that come about?

    Well, those 'foreign' guest-workers all sign contracts which promise one rate of pay that has been agreed with the State/Unions and then accept a lower-rate of pay under the table with the missing bit creamed off by either a Finnish business or the Agency that brought the 'workers' to the job. Don't complain & they keep the job.

    But that's all illegal!

    Yes, it is.

    However, that doesn't stop it happening all over Finland & 'western EUrope'.



    My welder friend complained, but as the Estonians all produced wage-slips showing they received the same rate as him there was no proof of anything untoward - - everything gets paid into a bank, so You'd think the authorities could check it out - - well, not if the Estonians hand the 'extra' over by transfer from one account to another! That's not illegal!

  • Comment number 59.

    #45 - margaret howard

    Some 45 years ago when I first embarked on my studies, my economics lecturer stated that the science of valuation was complex and theoretically driven but that the bottom line was that - monetarily speaking - the only true value of anything was what someone was prepared to pay for it. In the intervening years, I have never encountered evidence to contradict this bald truth so -

    'Could it be that if you manufacture quality goods people world-wide will want to buy them?' Only if the price is competitive. Why do you think that almost every component in the computer on which you wrote that post was designed and developed in the States or Europe but all made in China? Why am I constantly dodging BMWs and Mercs but hardly ever see a Roller or a Bentley. Price, Margaret. It's as simple as that. So anything that forces up the price of quality European product makes it less competitive. That is was raising interest rates does. That is what an over valued Euro does and no amount of sentimental attachment to our (Europe's) unmatched quality will change that. If it did, the UK would still be building the best up to a standard rather than down to a price.

    And at #50.

    I assume that your calculations are based on the CIA World Fact Book or some source which derives it's information from it. If so, you should take note of the rider that "The sums listed include re-exports that constitute the majority of the activity in smaller post-industrial countries". The port of Rotterdam, as the largest container handling facility in Europe, could account for most of your figures in one hit. White goods that come from the Far East, non-European made cars - for heavens sake, even British built cars destined for mainland Europe - much of this passes through Holland. Re exportation may be a nice little earner but it says nothing about the strength of the manufacturing base.

    #51 and 52 - matt_us

    Thanks for 51. On 52, may I add to your response to Buzet? I am inclined to agree with him that this is a form of gambling but we all know that there are a number of ways in which the gambling community can influence the odds. It is no coincidence that even the language - 'hedge funds' - can be traced to the betting business of 'hedging your bets'. Consortia will commonly stay away from backing a runner to force out the odds and come in at the last moment to make a killing. The bookies are pretty wise to such techniques. Central banks seem rather less so. For example, the speculators could afford to force up interest rates on Portuguese bonds because it was, if you will forgive the analogy, a 'racing certainty' that the ECB would bail them out. In other words, the punters will get their money back at an increased premium because they engineered the market in the first place. In sport, we might call that match fixing. In the markets, it seems, it is fair game. We do not seem to hear much criticism of the ratings agencies, however, and they seem to me to bear a significant share of the blame. After all they are little more than racing tipsters in this great game.

  • Comment number 60.

    @Stevenson
    "sounds intelligent -- is --but it wasnt the hedge funds or derivitives markets that were necessarily the banks problem or the recession reason."

    Thanks - they did not start it, but hedgefunds and speculators are taking advantage, and as far as I can see, there is no particular bank problem in Portugal. Hedgefunds and speculators are using CDS to bet on a default. I cannot bet on a fire destroying your house, or a car running you over on your way to work, why should I be allowed to bet on Portugal being bust?

    @Stevenson
    "But congrats on seeming very informed..tho sounding dubiously partisan in the process."

    What do you mean dubious? Darn right I am partisan here. As I will be one of the taxpayers who has to pay for the mess when not only countries have to reschedule their debts (most of it now held by the European Central Bank - that is the taxpayer), but also bail out banks which gave out Credit Default Swaps in the first place.

    Just to pay big profits to CDS speculators who have done absolutely nothing productive in this "eurocrisis", only destructive! These wreckers of economies should be jailed - thrown behind bars - as somebody would, who puts fire to your house, or runs you over!

  • Comment number 61.

    #58 - cool_brush_work

    I suppose I should be pleased to learn that corruption is not confined to the primitive world of south central Europe. I can understand Estonians getting away with it as Schengen members but Russians? They must need work permits?

    This is all about the level playing field, good intentions and delusions of grandeur. My favourite analogy is too long to bore everyone with but the central point is that a manageable group of people - call it the nations state if you like - set out to build a level playing field which is credible. Then someone comes along with the bright idea of merging these into one damned great recreation ground. Before you know it, the touch judges can't see each other, still less the state of play and the ref is on a hiding to nothing. All sorts of other officials are engaged to stop players armed with machetes and automatic weapons from getting involved but the professional foul gets overlooked altogether.

    I don't know Finnish law but I assume the employers are, at the very least, in breach of trade agreements and possibly guilty of a criminal offense. The overseas employees are guilty of something we would probably call 'conspiracy to pervert' but the bottom line is that, in the unlikely event that they are spotted, the worst that can happen is a yellow card and you certainly don't show a red card to anyone but the direst offender.

    We are very keen in Europe about lecturing others about corruption while turning a blind eye to the fact that is happening all around us every day. We cannot play each match using different rules but we do owe to ourselves to keep the games within the confines or a practical playing area where the officials have a fighting chance. At least that way, there is a chance that if someone shouts foul, someone in authority will have spotted it.

  • Comment number 62.

    #60 - matt_us

    You cannot put people behind bars for doing something which was not illegal at the time - obviously not. If CDS are banned on a nation by nation basis, you will simply drive them into another jurisdiction which will achieve nothing. What you can do - an informed guesswork in advance of tomorrow's report suggest might happen - is to force the banks and financial institutions to isolate ordinary punters like depositors, domestic mortgage borrowers and account holders from the inherent risks of speculative banking. This will also help investors, both private and institutional, but having a choice between the danger zone with the potential of high returns or the calmer waters of normal day to day finance. People are not dumb. The institutions post recession are painfully aware that the money they are investing can be traced back eventually to ordinary joes and they are nervous for their reputations. maybe - just maybe - you can eventually starve the cowboys of the one thing they need to survive - other peoples' money.

  • Comment number 63.

    @threnodio_II
    "You cannot put people behind bars for doing something which was not illegal at the time - obviously not."

    What is exactly legal about journalists making panicabout Eurocountries, saying that they might have to default, even advocating it; but then never, ever, mentioning, that the main beneficiaries might be hedgefunds, speculators and themselves. Bonds and CDS are publicly traded markets. Material information is not disclosed. Clearcut case of fraud - market manipulation. They are in possession of material facts, which would influence both bond and CDS markets, but they are choosing not to tell us about them. That, my friend, is against the law!

    The serious fraud office should be involved!


    @threnodio_II
    "If CDS are banned on a nation by nation basis, you will simply drive them into another jurisdiction which will achieve nothing."

    Europewide ban of CDS tomorrow, of course. As I said before, any investment bank, which does not play ball will have their license withdrawn, and the CEO put into jail. They will comply.

    Can hedgefunds then speculate in Singapore or the Cayman Islands on the default of Eurocountries. Not if they have to open up all their books, which is part of the legislative program for hedgefunds in Europe anyway.

    The "markets will start somewhere else" idea is rubbish. Not if it is properly regulated. That does not mean that separation of investment from normal banking is not a good idea!

  • Comment number 64.

    61. At 16:45pm 10th Apr 2011, threnodio_II wrote:

    'Russians': Yes, an interesting point to raise.

    Over the last decade Russians have been by far and away the largest population group (50,000+ & rising in 5.2mil popn) to buy-up property in Finland - - some Finns joke (half-heartedly) that the 'east' Karelia border with Russia is now a 'russian colony' - - at the National level the 'russians in Finland' issue is a hot-potato amongst politicians as the General Election is next week.

    I'm unsure how the 'visa' thing works, but there is anecdotal evidence Russians staying at properties already purchased by russians are making themselves available for employment at lower-rates.

    Finland is a land of very tight regulation and from the perspective of someone used to the laissez-faire approach of Britain to such matters it is amazing how much documentation Finland imposes on its Citizens: However, illegality exists and it is my observation the tighter the systems the more likely it is the determined, knowledgeable criminal-minded will find a way and the authorities, confident of having everything buttoned-up are the very last to think of looking behind the dried ink on the official paperwork.

    I don't say all Finland is 'at-it' as clearly it is a remarkably successful Economic-Fiscal State, but there is a 'black economy' and if it can happen someone where as efficiently Civil Serviced as Finland then we can all bet our bottom 'euro, 'pound', 'krone' & 'forint' that it is occuring all over the EU27.

  • Comment number 65.

    #35 Buzet 23

    My remark was---


    "--- Please correct me if misunderstand your appreciations of the role of communists and "Socialists" in both Portugal and Spain !"

    Your reply was --

    "You certainly have not changed one iota, your 'impressions' are as fatally flawed as your logic has always been, Socialism, Communism and National Socialism are equally as bad as they are in effect the same."

    Your inability to give praise where it is due --is both enlightening and depressing.

    -- it shows your lack of appreciation of recent history --and one mind set !

  • Comment number 66.

    A very interesting development for Europhobe referendum lovers and their unelected tabloid bureaucrats:

    http://www.bbc.co.uk/news/business-13029210

    "UK and Netherlands to sue Iceland over lost deposits"

    "The UK and Dutch governments are preparing court action against Iceland to recover 4bn euros (£3.5bn) lost when the country's bank system collapsed."

    "It follows a referendum in Iceland which rejected a repayment plan. ...The UK said it was "disappointed" by the "no" vote"

    So basically, the referendum lovers are suing the Icelandid people for voting the 'wrong way' in a referendum. How hypocritical can they get?

    And in the same news item we can read this:

    "Moody's and other ratings agencies look set to downgrade the country even further, making it prohibitively more expensive to borrow on the open markets."

    Gosh... have nobody bother to tell Moody's and the rest of self important money merchants that Iceland is not in the Eurozone?


  • Comment number 67.

    59 threnodio
    The Roller and Bentley became oldfashioned, pompous dinosaurs and once rock stars bought them as their vehicle of choice, they were destined for the dustbin of history. The Chinese produce cheap rubbish at the moment, and as soon as people get fed up throwing out broken tat, they will buy a quality product that lasts. My new christmas tree lights gave up the ghost on boxing day. They had replaced a German set that had lasted for forty years. I know what I will buy next year.
    As for explaining the Netherland's trading success, if as you say that is simply due to Rotterdam's shipping success (what about their thriving flower and vegetable markets) how do you explain the success of the other two top countries I mentioned, France and Italy? Will people suddenly stop buying quality French food and replace it with cheap Chinese takeaways or brilliant Italian designed goods for tatty imports from the Far East? Quality aways sells, as does reliability.

  • Comment number 68.

    66 Jorge writes:
    "It follows a referendum in Iceland which rejected a repayment plan. ...The UK said it was "disappointed" by the "no" vote".

    Disappointed by the "no vote" - where have we heard that before?

  • Comment number 69.

    @ 45. margaret howard :

    "36 threnodio 'The strong Euro' writes:
    "A strong Euro forces up the price of exports and reduces the competitiveness of European goods and services in the global market."
    --------------------------------
    "How does your theory explain that many of these eurozone countries have some of the strongest and most successfull export-driven economies in the world? Could it be that if you manufacture quality goods people world-wide will want to buy them?"

    I would add: how is it that the UK, which is outside the euro and can indulge in competitive devaluations to work its way to bananarepublicanisation, has the worst trade deficit in the whole of the EU? And not only that, despite the mythical benefits of sterling's devaluation, the UK's trade deficit increased by a whopping 24% in 2010:

    http://epp.eurostat.ec.europa.eu/portal/page/portal/publications/collections/news_releases

    Go to 'Euro area external trade deficit 14.8 bn euro' - page 5

  • Comment number 70.

    I would kindly request FBJ to reply to my previous post:

    Why if the UK is such a successful economy, outside the eurozone, where it can indulge in competitive devaluations, has the worst trade deficit in the whole of the EU and it has increased by 24% in 2010.

    Also, why Iceland, a country that is not in the Eurozone either, is having so much trouble that the money merchants are downgrading their credit rating.

  • Comment number 71.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 72.

    28/2011 - 24 February 2011
    Regional GDP per inhabitant in 2008

    In 2008, GDP per inhabitant1, expressed in terms of purchasing power standards2, in the EU27's 271 NUTS-23 regions ranged from 28% of the EU27 average in the region of Severozapaden in Bulgaria, to 343% of the average in Inner London in the United Kingdom.

    This information is taken from data released by Eurostat, the statistical office of the European Union.

    Eight capital regions in the ten first places
    The leading regions in the ranking of regional GDP per inhabitant in 2008 were Inner London in the United Kingdom (343% of the average), the Grand Duchy of Luxembourg (279%), Bruxelles/Brussels in Belgium (216%), Groningen in the Netherlands (198%), Hamburg in Germany (188%) and Praha in the Czech Republic (172%). Among the 40 regions exceeding the 125% level, ten were in Germany, five in the Netherlands, four each in Austria and the United Kingdom, three each in Spain and Italy, two each in Belgium and Finland, one each in the Czech Republic, Denmark, Ireland, France, Slovakia and Sweden, as well as the Grand Duchy of Luxembourg.

    One in four regions below 75%
    The lowest regions in the ranking were all in Bulgaria and Romania, with the lowest figures recorded in Severozapaden in Bulgaria (28% of the average), followed by Nord-Est in Romania (29%), Severen tsentralen and Yuzhen tsentralen in Bulgaria (both 30%). Among the 64 regions below the 75% level, fifteen were in Poland, seven each in the Czech Republic and Romania, six each in Bulgaria and Hungary, four each in Italy and Portugal, three each in Greece, France (all overseas departments) and Slovakia, two in the United Kingdom, one in Spain, as well as Estonia, Latvia and Lithuania.


    The above would seem to indicate 'swings & roundabouts' apply across the immensely variable Regions of the EU27 Economies.
    They seem also to indicate the utter absurdity of Brussels attempting a 'one-size-fits-all' remedy to the whole EU entity when there are such clear divergencies within sovereign Nations, geographic-bands of Nations and across the whole 27 members.

    Blanket EU Policy & Regulation is surely the very last thing required: It is patently obvious much more localised Policy implementation & flexible Regulation is essential.

  • Comment number 73.

    69 Jorge
    Thanks for the eurostat link - makes interesting reading. I didn't know for instance that the Spanish trade deficit was less than half that of the UK. The UK growth forecast is just 1.7% and inflation a whopping 4.6%. However, these inflation figures are not based on the real increases for the average householder here. If you take all the daily outgoings into account, insurance, heating, car maintenance etc, we find that true inflation runs at more than 9-10%.

  • Comment number 74.

    @cool_brush_work
    "The above would seem to indicate 'swings & roundabouts' apply across the immensely variable Regions of the EU27 Economies.
    They seem also to indicate the utter absurdity of Brussels attempting a 'one-size-fits-all' remedy to the whole EU entity when there are such clear divergencies within sovereign Nations, geographic-bands of Nations and across the whole 27 members."

    What exactly is your point? Have you ever been to the USA? Much more divergent than in the EU - in loads of things. Go to some hillbilly town in Arkansas and then drive down 5th Ave in NYC. Should they all quite the USA, because they are so divergent?

    What is these statistics about Spain, and I know somebody in Finland who knows a Russian who is buying everything up/getting someone's job? What does that have to do with the price of bread? Have you ever seen who is buying up properties in Southall and Leicester? This is normal migration, happened before the Euro, happened before the £, happened before the $!

    The only reason you are making panic is that you are invested in instruments which try to make some profit of the misery of eurocountries, and you are trying to bend the rules in your favour, by thinking up all kinds up non-issues, which are supposed to worry people.

    If not, might I invite you to join me in the call for an immediate ban on Credit Default Swaps, Mr cool_brush_work? That would put all doubts about your 'genuine' concerns to rest.

  • Comment number 75.

    63. At 17:58pm 10th Apr 2011, matt_us wrote:
    @threnodio_II
    "You cannot put people behind bars for doing something which was not illegal at the time - obviously not."

    What is exactly legal about journalists making panicabout Eurocountries, saying that they might have to default, even advocating it;
    ======================
    Firstly, congratulations on having your own conspiracy theory!

    From where I am standing, Greece, Ireland and Portugal have already defaulted but the ECB and Germany, France etc. are trying to avoid the embarrassment of a Euro zone sovereign default so they have lent them loads of money that the markets would not. The real bet, I think, is on how long they can keep this up until voters in Germany etc. really rebel (see recent Lander elections for the start).

  • Comment number 76.

    "71. At 19:46pm 10th Apr 2011, You wrote:
    Your comment has been referred for further consideration. Explain

    Complain about this comment"



    Hmm, the unbiased hand of Moderation strikes again!

    Now let's see: Ah yes, my entire #71 was about Spain's Economic difficulties - - that apparently ISN'T TO BE SEEN....

    Meanwhile 4 Posts between JorgeG1 & MHoward ALL commenting on the UK's Economic difficulties IS TO BE SEEN....


    I forget the comedian who used to say, 'Life just isn't fair!' But for sure MODERATION on a BBC Blog is far, far, far, far, far, far, far, far, far, far, from FAIR!

  • Comment number 77.

    Hi matt_us

    A couple of things. Firstly CDS works like an insurance contract, I believe that this has been made clear by other contributors. What has not been explored is that this means that there is a seller as well as a buyer. CDS cannot exist without there being two parties with differing opnions on the risk; one that thinks that the insurance will be needed and one that thinks the insurance is unneccesary.

    If someone is buying CDS on Portugese bonds and the derivatives thereof then someone else is selling. That someone has a positive view of Portugal's ability to pay its debts and will turn a profit should Portugal do so and suffer a loss should Portugal fail to pay. For every banker who wins through the collapse of the Portugese economy there will be another that loses. The discussion thus far has failed to mention these sellers who will profit should things go well for Portugal and suffer should Portugal collapse and solely focused upon those that profit when things go badly.

    First point done, now onto the second...

    If you are a hedge fund thinking of investing in Portugal then taking out CDS insurance on Portugese bonds makes a great deal of sense. If Portugal experiences strong economic growth and your investments prosper then the cost of the CDS will trim a little off your profits. If Potugal goes broke and your investments collapse then CDS allows you to recoup at least something.

    The point is that CDS allows investors to hedge against failure and so it can make investing in shaky economies more attractive because they provide a good mechanism whereby an investor can hedge their bets.

  • Comment number 78.

    JorgeG1, 66:

    There's a difference between being disappointed by a referendum result (as Iceland's prime minister also was, in this case) and regarding a referendum result as illegitimate (as the EU did with the Irish Lisbon vote, as shown by the fact that immediately after that vote the EU started planning for another one).

    So what is this hypocrisy you talk about? Are those who were disappointed by the Icelandic referendum result insisting, EU-style, that the Icelanders vote again until they get it right?

    -----

    On the subject of referendums, here's a funny thing:

    On 5 May, Britain will be holding a nationwide referendum on whether to adopt the AV (Alternative Vote) system. Now, in the context of debates on this blog and elsewhere about the European Constitution and the Lisbon Treaty, I've seen many comments along the lines of:
    "referendums are not a reliable way of making important decisions", or
    "referendums are not democratic", or
    "referendums are not the way we do things in Britain and there's no reason why we should start now".

    On that basis, one would expect many objections to have been raised to the 5 May AV referendum. But, in actual fact, I haven't heard a single one.

    Can anyone explain that?

  • Comment number 79.

    74. At 20:23pm 10th Apr 2011, matt_us wrote:

    "...What exactly is your point? Have you ever been to the USA? Much more divergent than in the EU - in loads of things. Go to some hillbilly town in Arkansas and then drive down 5th Ave in NYC. Should they all quite the USA, because they are so divergent?"

    Well, I guess for someone who promotes the idea that banning one form of Fiscal Trade will solve the entire EUro-zone crisis and with one bound make the EU impregnable from further Market Forces' speculation You would find the notion of 50 States with divergent Economies based on 235 years of Federal Government a tad difficult to comprehend as NOT being 27 totally diverse National Economies with entirely different structures!


    Then You write, "..What is these statistics about Spain, and I know somebody in Finland who knows a Russian who is buying everything up/getting someone's job? What does that have to do with the price of bread? Have you ever seen who is buying up properties in Southall and Leicester? This is normal migration, happened before the Euro, happened before the £, happened before the $!2

    Well, the statistics about Spain are a direct response to JorgeG1's obsessive pointing-the-finger at the UK as if it is requesting 'bail-out' & has a Monetary Union based on a decade of lies, deception and outright fraud by some of its membership!

    The 'price of bread'? After reading Your stuff I'm unsure You know any of Your onions never mind staple foods, or for that matter that examples of corrupt practises within the EU are one of the measures of its weakness because if it can't do better than a sovereign Nation then there is no point in its existence.

    Then, incredibly, You of all people, 'Mr Market Conspiracy Theorist' supreme (e.g. "..they did not start it, but hedgefunds and speculators are taking advantage, and as far as I can see, there is no particular bank problem in Portugal. Hedgefunds and speculators are using CDS to bet on a default. I cannot bet on a fire destroying your house, or a car running you over on your way to work, why should I be allowed to bet on Portugal being bust?") have the nerve to ramble on about, "...The only reason you are making panic is that you are invested in instruments which try to make some profit of the misery of eurocountries, and you are trying to bend the rules in your favour, by thinking up all kinds up non-issues, which are supposed to worry people..."

    And finally, "..join me in the call for an immediate ban on Credit Default Swaps,.."

    You are having a laugh, aren't You: You are the bloke who 3 blog articles ago criticised Mr Hewiit and told him he was "..behind the times.." after he'd written predicting Portugal must ask for a 'Bail-out'!?

  • Comment number 80.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 81.

    #69

    jorge;

    What about "invisibles"? That link seems to only show goods.

  • Comment number 82.

    Ah! So the BBC moderators think that calling "stupid liars" to the people of Greece, Ireland and Portugal is not offensive... Ok then! Sounds like a real charming bunch the british!

  • Comment number 83.

    @Another Engineer with CDS in his investment portfolio
    "Firstly, congratulations on having your own conspiracy theory!"

    Just because somebody might have a theory, does not mean he is a conspiracy theorist. And even if he were, that does not mean, he is not right!

    You can easily put my suspicions to rest, by calling for an immediate end of CDS. Why don't you? Does not cost you anything, does it? Nobody has any CDS as far as I can see in this blog, nobody here anyway is speculating with money on the default of Eurocountries. What the Dickens is your problem for not calling for an immediate end to CDS?

    Do it, shout it out loud and clear: BAN CDS TOMORROW!

  • Comment number 84.

    #65. At 18:48pm 10th Apr 2011, quietoaktree,

    "- it shows your lack of appreciation of recent history --and one mind set !"

    It seems you know yourself very well.

  • Comment number 85.

    Mr. Hewitt, can you please make us a favour and stop putting things in erroneous terms? That bankrollers vs bailed-out notion is just wrong. Nobody is bailing-out Greece, Ireland or Portugal. Its a loan. With interest! And that those countries will have to repay. Very quickly. In case of Portugal, what is being discussed is that it shall repay in 3 years. So stop fuelling the xenophobia, please.

  • Comment number 86.

    #83. At 22:07pm 10th Apr 2011, matt_us,

    Do it, shout it out loud and clear: BAN SOCIALISM TOMORROW

    Now that would be intelligent.

  • Comment number 87.

    #81 CC

    "What about "invisibles"? That link seems to only show goods."

    ---you mean those things that made everybody rich -- and you are paying for ?

  • Comment number 88.

    And how about the thought that when and if Spain falls victim of the markets, the UK is next in line? If this happens and it's possible that it will; then we will all have a good laugh on YOU commenting on southern europeans as if we were 2nd quality european citizens.

  • Comment number 89.

    @Ukkamalainen
    "A couple of things. Firstly CDS works like an insurance contract, I believe that this has been made clear by other contributors....."

    Well, these other contributors do not know what they are talking about. Banks do not make any reserves against CDS, as insurance companies do against normal insurance. Therefore the cost of an insurance event is externalised to the taxpayer (see AIG, which had to be rescued by taxpayer to pay for CDS contracts when Lehman went belly up) - it will be the same if CDS become payable here.

    If other contributors think it works like insurance, they are wrong. They should read Joseph Stiglitz "Freefall" and he would put them right - he argues as I do here.

    @Ukkamalainen
    "You are having a laugh, aren't You: You are the bloke who 3 blog articles ago criticised Mr Hewiit and told him he was "..behind the times.." after he'd written predicting Portugal must ask for a 'Bail-out'!?"

    You misunderstood the point I was trying to make. The Europe correspondent is behind the times, because he has not figured out that there is bent economists calling for restructuring of debt. It is common knowledge in Germany, and they are generally ridiculed in blogs by people who can see why they are asking for rescheduling of debt. German economists are generally a cause for derision, anyway, but here it is even more obvious. As by now the ECB is the biggest creditor, there is not chance whatsoever, these CDS ever pay out. Why should the ECB voluntarily allow itself to go bankrupt at a massive cost to the European taxpayer. And why should econmists ask for such nonsense!

    The CDS are a big con by the people who sold them to blue eyed investors who thought they knew what they were doing, and wanted to be the new Cornwall Capital - it seems that Cornwall Coastal Path is all they will be good for. Take your CDS contracts over there, make some paper airplanes, and see how far they get. They are not worth anything, you guys might as well admit it - and call for an immediate ban!

  • Comment number 90.

    @Buzet23
    "Do it, shout it out loud and clear: BAN SOCIALISM TOMORROW"

    You are absolutely right, as the state is the ultimate re-insurer of CDS, the proper rallying cry should be:

    BAN CDS AND BAN SOCIALISM TOMORROW!

  • Comment number 91.

    85. At 22:18pm 10th Apr 2011, t6a wrote:

    "..That bankrollers vs bailed-out notion is just wrong. Nobody is bailing-out Greece, Ireland or Portugal. Its a loan. With interest!"

    Well, in the strictest sense of the term You are correct, but You surely realise 'bail-out' is the blog shorthand for the following, 'EUropean Union Stability Mechanism'.

    In another sense You are wrong:

    The term 'bail' in this usage is very much like 'money etc. required as security against the temporary release of a prisoner' (Oxford English Dict.).
    Although I much prefer the OED' 3rd option for the particular state of Greece, Ireland & Portugal's Financial affairs, i.e. 'bail/bale out' = use of bucket or other receptacle to scoop up inundation (water etc.). Yes, that just about sums up the EU's Stability Mechanism!

  • Comment number 92.

    #87

    quietoaktree;

    "What about "invisibles"? That link seems to only show goods."

    ---you mean those things that made everybody rich -- and you are paying for ?

    Call it what you like, its £50bn worth of trade surplus that isn't included in his figures. It might offend your sensibilities to imagine that £1 earned by selling financial services is worth exactly the same as £1 earned by selling cars ,or oil ,or pharmaceuticals, or advertising space...but it is...really it is. A quid is a quid.

  • Comment number 93.

    #90 matt_us

    ---do you really believe THIS mess is Socialism ????

    (in the sense of social-democracy)

    --or do I suspect a justified sarcasm ?

  • Comment number 94.

    82 Joulupukki writes:
    "Ok then! Sounds like a real charming bunch the british!"
    ----------------------------
    I should like to apologise for we are by no means all like that. But I suppose every nation has its own Neanderthals.

  • Comment number 95.

    #93. At 23:03pm 10th Apr 2011, quietoaktree

    Are you truly capable of suspecting even the nose that protrudes from your face, somehow I doubt it by the posts you make.

  • Comment number 96.

    #92 CC

    ----- It´s always handy to have two sets of books for the calculations ?

    --- How many quid in the hole ?

  • Comment number 97.

    #92 CC

    I see that Britain and Kenya are back in the news -- any connection ?

  • Comment number 98.

    #95 Buzet 23

    I can accept that Americans can confuse Communism, Socialism and Fascism --however a similar confusion from a European is a bit much to accept.

    ---- are you a secretive Monarchist or an Anarchist ?

  • Comment number 99.

    96. At 23:17pm 10th Apr 2011, quietoaktree wrote:
    #92 CC

    "----- It´s always handy to have two sets of books for the calculations ?

    --- How many quid in the hole ?"

    Not a clue what this means.

    #97

    quietoaktree;

    "I see that Britain and Kenya are back in the news -- any connection ?"

    Connection with what?

  • Comment number 100.

    #67 -margaret howard:

    "The Roller and Bentley became oldfashioned, pompous dinosaurs . . ."

    If you have never driven either - and I suspect you have not - I would not be surprised at your profound ignorance of quality engineering. I am, however, slightly surprised at your arrogant assumption that European product is inherently superior to that of everyone else. Do you really want me to go into the tedious details of the Alfa that was so badly constructed that the body rusted off before the engine had grown up, the Lamborghini that was designed to do 260 km ph but the back end went at 180? You are confusing style with quality - a common problem with people who have nothing better to do than read the glossies. OK enough sarcasm but you really need to engage brain before driving keyboard unless you want the entire planet took take the proverbial.

    #69 - JorgeG1

    I am genuinely astonished. I credited you with intelligence and even thought of you as an ally but -

    ". . . how is it that the UK, which is outside the euro and can indulge in competitive devaluations to work its way to bananarepublicanisation . . ."

    Please - competitive devaluation is a major part of the game plan post recession. What the hell do you think the Fed has been doing all these months? The creation of that extremely long and tedious 'banana . . whatever' word sums up your case - entirely invented.

    And at 70 - because they consistently vote not to honour their debts - which does not bode well for the confidence of those with whom they wish to partner.

    I thought I had commented on the dross and could move on to intelligent debate. How wrong can you be.

    Thank heaven for #92 - champagne_charlie

    "...but it is...really it is. A quid is a quid".

    Thanks Charlie . . you got my vote!

 

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