Tuesday, April 27, 2010

Gates of Vienna News Feed 4/27/2010

Gates of Vienna News Feed 4/27/2010The financial crisis in Europe continues to intensify. Greek bonds have been downgraded to junk status, and the government says that if it does not get aid, it might go down the tubes. Portugal is also headed into trouble: its bonds have been downgraded, and both credit default swaps and yields on bonds have reached levels not seen since the 1990s. Spain’s real estate market has picked up, but Prime Minister Zapatero warns that his country’s unemployment level remains alarmingly high.

In other news, Palestinian Authority president Mahmoud Abbas says that NATO troops could be deployed to guarantee a peace settlement with Israel.

Thanks to Barry Rubin, C. Cantoni, Gaia, Insubria, JD, TB, TV, Vlad Tepes, and all the other tipsters who sent these in.

To see the headlines and the articles, open the full news post.

Commenters are advised to leave their comments at this post (rather than with the news articles) so that they are more easily accessible.

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Zenster said...

In other news, Palestinian Authority president Mahmoud Abbas says that NATO troops could be deployed to guarantee a peace settlement with Israel.

Are these NATO forces going to "guarantee a peace settlement with Israel" like the UN did by transporting Palestinian terrorists with weapons in their ambulances?

Jedilson Bonfim said...

Zenster, the suggestion that NATO forces be deployed to the Middle East to force Israel to surrender its land to ayrab squatters, though voiced by one of the squatters' leaders, might very well have come from that single odd, antagonistic-to-Western-values-and-interests member of the alliance: Erdoganistan/Anatolian Arabia. Given how that country's leading hydrophobic babble-screamer, Recep Erdoclown, never misses a chance to blast Israel or try to get it on its knees before the ayrabs that surround it, such a possibility wouldn't be surprising at all.

Afonso Henriques said...

About the economical crisis:

In Portugal it is all about American speculation to bring the Euro down.

About Greece, it seems that they will ask for another 90 billions, that is half the GDP of Denmark or something...

I say: Leave us (the PIIGS) alone and let Greece burn! I also say to Northern Europeans to not fall on the French trap of giving tones of money to Greece or other countries.

Green Infidel said...

I know about Ireland... but who's the other I?

Jedilson Bonfim said...

Another news article that is quite interesting is the one about Erdoganistan's foreign minister, Ahmet Davutoglugluglugluglu, pimping the idea that no NATO missile shield ought to be aimed at deterring any particular country (any Iranian mullahcracy, that is) while demanding that Israel be de-fanged through the destruction of its nukes.

Whenever I see that idiot's name, it makes me wish there were folks like William Eaton doing diplomatic work for the West these days. That would certainly guarantee that such a giant-headed weasel would get no respect from the leaders of any civilized country, but instead he'd be talked about solely for the enormous size of its head and the minuscule size of his eyes, which make him look like those nearly blind rodents that live deep below the ground. The same would go for his bug-eyed, gibberish-screaming boss. But that's not realistic in our PC/MC world of today... Therefore, we've got to see mainstream media outlets publishing stories where Erdoclown claims that, while we're supposed to believe that Iran's nuclear program is 100% peaceful, Israel ought to be rid of its nuclear weapons... As though there were really that many stupid people in this world who wouldn't see that what Erdoclown truly wants is a nuclear-armed Iran ready to blow a nuclear-weapon-deprived Israel to smithereens.

X said...

@Green Infidel: Italy. I'd been predicting they would be the first to crash out of the Euro. Looks like I was wrong, and whoever predicted Greece was right.

@Afonso, the problem is that several major European economies are heavily exposed to Greek debt. France has the largest exposure to greek debt which is why they're pushing for a bailout in the face of German opposition. If Greece goes under and stays under, France will probably be pushed close to bankruptcy - and they can't accept that for obvious reasons. But if they force the issue,. the German public will be pretty pissed off at having to pay for Greece's profligate spending. Either way it's going to create a huge strain on the EU.

However you look at it, the Greek crisis is the deathknell of the Euro.

I'd agree with letting Greece "burn". The country needs to be set free of the artificial restraints of the Eurozone so it can devalue its currency and restructure its debt. And perhaps learn a little restraint instead of having all its money supplied by Germany and France...

However, the problem with saying "leave the other PIIGS alone" is that economics doesn't work like that. All these countries have a structural weakness in that they're heavily in debt, continuing to borrow to shore up that debt and, by virtue of their Eurozone membership, are unable to take direct action to increase their competitiveness. The PIIGS countries all got into the Eurozone by short-circuiting their accounts to appear to be in compliance, and their governments have all used the subsequent largesse of the Eurozone to create the appearance of economic growth. The problem is that they're like a body-builder taking massive amounts of steroids. The appearance of growth is there and plain for all to see, but it can't be sustained by normal behaviours, and it has some rather nasty side-effects.

You might want to be left alone but it won't happen. Your government has engineered a situation where economic reality will eventually screw you over. Your government has taken on massive debts that it cannot hope to repay in order to create the appearance of wealth, apparently in the belief that they would continue to receive money from the big EU economies forever. Portugal is going to face a major economic crisis whether it likes it or not and all you can do is stock up and wait for the storm to pass.

Afonso Henriques said...

The other I is Italy. I never know who the I really is, if it's Italy or Ireland and I've seen some versions of the "PIIGS" with both Ireland and Italy considered in.


I never looked at it that way with the French (and others) expousure to the Greek debt.
But while it is interesting, I think it does not matter that much because the debt the Greeks have to pay will, after all, be payed, and the later it is payed the more interests Greece will have to pay on the top of that debt.

"However you look at it, the Greek crisis is the deathknell of the Euro."

I don't believe it, honestly. The Greek GDP is of about 300 billion dollars or Euros while the German GDP is about 2200...
After all, Greece is really unimportant to Europe economically speaking, I believe it's not even 5% of the E.U. or 10% of the Eurozone.
The problem with the E.U. is that little countries have not power or weight.

For instance, in the Eurozone we have the following GDPs:
Germany ~2200
France ~1900
Italy ~1600
Spain ~1000

the next country in line is the Netherlands with some 400. After that it is Belgium with about the little more than the Greeks.

Not to mention that Greece is damned peripherical and it is not really part of Western Europe.

Greece might shake the trustability of the Euro, but it cannot bring the Euro down on its own.

A Spanish (or less likely, Italian) meltdown however, would be catastrophic. And I believe no one would be able to bail out a country which is economically about half of Germany.

The crisis is to start in America, the rest will follow apart. And when it comes to Europe it will strike countries like Britain, France or Spain first. Greece is just an isolated case, like Argentina or Iceland.

(Besides, Iceland is still a great place, isn't it? Because they are so small, it's difficult for them to go down while the world is not going down. "Weight" matters a lot.)

Afonso Henriques said...


Honestly, I don't see it like that. First, who is not in debt? Greece is like 125%, we are like 78% and a Germany or a Netherlands or a Sweden may be like 50%...
The US's debt is crazy. So, the debt problem is a problem that will only hurt us when the bubble bursts. In Greece it is almost bursting but in the rest of the World it's not...
I believe that the bubble will burst when the U.S.'s bubble bursts and then, God help us all because the World as we know it will disappear rappidly.

And about competitivity. We're all very competitive. Well, Portugal probabily is not, but still we have special relations with Brazil and Angola and supposedly with half of Africa, coastal Asia and all of the Atlantic. We get along with the North Africans and stuff.
Even the Greeks were more competitive in that they were "a light in the Balkans".
So, we will not die due to compet issues. Because countries like Portugal who once had a vibrant export/import sector and a currency that was devaluated every now and then... when Portugal got in the EU, some of the conditions were that we would abdicate some of that competitiveness.
Millions of liters of milk, tones of apples, oranges, potatoes, etc. go to waist because if those things would be in the market, it would upset the French farmers.
So, we used to compete with each other, but now the EU establishes the rules and there's little margin to competition amongst European States.
The competitions is not any more between the production of German vs French cars. Because there are largely "quotas" or "margin of quotas" to what can be produced in the European Union.

Devaluating the currency while you are limited on your exports and competitiveness, will only lead you to more dynamic exports. But you wouldn't make much money as you would be devaluating the money you got as well.

"The PIIGS countries all got into the Eurozone by short-circuiting their accounts to appear to be in compliance"

Greece yes, the others did not. And the French were the ones who wanted to expand the Eurozone well beyonde the Empire of Charles Magne, so they ought to know what they were doing: Northern Euros are not innocent on this.

"You might want to be left alone but it won't happen."

Good. Then transfer the money to Southern Europe right now. Just don make me pay for Greece BECAUSE I AM POORER, I BEHAVE BETTER and I WILL NEED THE MONEY AS MUCH AS GREECE!

If you bail out Greece now, you will have to face similar problems with other countries. The only difference is that we have payed tones of money to Greece already.

"Portugal is going to face a major economic crisis whether it likes it or not and all you can do is stock up and wait for the storm to pass."

Maybe. Probabily, I'd say. But there is no reason that Portugal will pass through that before 20% unemployed Spain, or before very wellfare dependent Walonia.
And I also mention the disgraced move by the rating agencies to predate on Portugal in order to damage the Euro. Even if Portugal and Greece go down, the Euro will continue because Portugal and Greece have little economic power or weight: It's like the dollar going down because Kentucky and Louisiana have a deep crisis.

Economically speaking, the dollar will still continue on, speculatively, some may abstain from buying dollars or see their confidence in the dollar shaken.
*THAT* is what would then bring the dollar down and impact on the real economy.

Afonso Henriques said...

P.S. - Stocking up money is pointless because when the crisis comes, our currencies will vallue nothing. Like in Argentina.

X said...

Who said anything about stocking up money? I'm thinking food and water at this point. We're due for an absolutely massive crash.

And as for the Euro, you're forgetting that it's a prestige project. It never had any economic reason to exist, it was always a political construct, so if any country leaves the Euro after joining the political image of the Euro will be damaged. It will collapse because it will be shown that the economic arguments for Euro membership are so much hot air.

Afonso Henriques said...

Archonix, the Euro will not fall because of what you're saying because despite the euro had started as a "political prestige project" ir already is a great economical power, and the second world currency after dollar.

And, for these attacks on the Euro, maybe the Euro will be stronger...
come on, the Euro is already stronger than the dollar (more valluable) so, if people start buying more Euros than dollars, it will became the World's main currency.

I've heard some speculations that explain the American invasion of Iraq in the scenario that Sadam quoted its oil in Euros, and those people also say that American "pickiness" over Iran is due to the Ayathola's preference of the Euro over the dollar.

Archonix, the Euro is a strong currency. Yes, it started from no where and it is overtly dependent on the European Union. But it is nonetheless a very strong currency.