More Euro bail outs?

 

         The bail outs are coming thick and fast now. Greece is about to request its third in a row.  Saying they just want to go a little slower with hitting their targets means they are asking for more money on easier terms. It is yet another loan request. It’s interesting that the junior partners in the Coalition, Pasok, do not ant any places in the Cabinet. It does not sound like a close and long lasting coalition relationship.

        Meanwhile Spain may now  formally request a banking bail out, which in turn means a state bail out given the way the state is expected to stand behind the banks. Cyprus also needs help. Isn’t it time the bail out fund got busy raising serious money? That too will all be borrowed. The politicians as always are good at thinking of many ways of spending bail out money, but less good at working out who pays the bills.

67 Comments

  1. lifelogic
    June 22, 2012

    Indeed but can they ever bail out faster than they are sinking? How are Darling’s and Osborne’s “profitable” PIGIS investment getting on? I think he assured us we would make a profit did he not?

    1. Drayner
      June 22, 2012

      Ha! Maybe Osborne should have held back until everything went belly up properly and then cruised in for a spot of asset stripping at a knock down price. Like China probably will.

    2. zorro
      June 22, 2012

      Yes lifelogic a sure fire Gideon winner (not)…..just like we can never ever lose out by giving money to the IMF…..

      Zorro

      1. lifelogic
        June 22, 2012

        The IMF loan (soft) terms mean we certainly do lose out – even if do they repay in full as per the agreement.

        1. zorro
          June 22, 2012

          Indeed, I know….. but Mr Morally Repugnant has been using the ‘we can’t lose out argument’ for a while now….

          zorro

          1. APL
            June 23, 2012

            Zorro: “Mr Morally Repugnant has been using the ‘we can’t lose out argument’ for a while now”

            Depends on your perspective.

            From inside the magic circle; politicians, civil servants, NGOs etc. it is true, they cann’t lose out. In fact it is an imperative that in order for them not to lose out, the system as it exists now must be kept going at all costs.

            From our perspective out here, those of us who actually have to pay for this crap, we lose out BIG!

    3. lifelogic
      June 22, 2012

      I see the government owned banking group, RBS/Natwest, with its satirical “Helpful Banking” adverts has now (in addition to not lending and crippling businesses by sucking finance back) also had technical problems for 3 days – so people cannot apparently complete on house purchases, pay wages, mortgages and the like.

      I wonder if Hester’s salary and bonuses (£1.2+£6.5M in 2010 I understand) will be delayed in the system that would be rather sad – but then perhaps the Coutts section deal with that. It does seem rather a lot though just for saying “no we cannot lend you anything and yes we would like all the money back now” to many of its good customers.

    4. lifelogic
      June 22, 2012

      Clegg is still going on about “green jobs” (clearly green subsidised jobs are on balance net job destroyers – through extra taxes and higher energy costs) – I know he only studied Archaeology and Anthropology at Robinson College but can this man not do simple sums?

      Or perhaps he could just look at the lack of statistically significant warming for the past 15 years perhaps and give us his thoughts on that. Each “green” megawatt installed destroys 5.28 jobs elsewhere analysis suggest. Or each green job destroys 2.2 real ones.

      I tend to think rather more because it also suggest the country is lead by complete donkeys. Which is perhaps not very good for business confidence.

      1. uanime5
        June 22, 2012

        Do you have any studies to support you claims about green jobs destroying real jobs, or did you just make it up?

        1. lifelogic
          June 22, 2012

          Lots of studies give similar numbers just search. Anyway it is obvious that if they use money to produce energy at say 3-5 times its true value you will destroy jobs. The other part of the money has to be stolen from someone with a predictable effect on employment and jobs being pushed abroad.

          1. uanime5
            June 23, 2012

            I notice you weren’t able to name one study. Shall I assume this is because they don’t exist.

          2. APL
            June 24, 2012

            uanime5: “I notice you weren’t able to name one study. ”

            You could of course use Google, but that is probably too easy for a fellow who doesn’t like facts put under his nose.

            uanime5: “Shall I assume this is because they don’t exist.”

            A sometime manager of mine occasionally cautioned me to reflect on the fact that the first three letters of ‘assume’ are ‘ass’.

        2. lojolondon
          June 25, 2012

          Ok, I did it – I Googled for ‘green jobs destroy good jobs’. There were 52,400,000 hits. Here is the first link –

          http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a2PHwqAs7BS0

          Bloomberg shows that at least two jobs are lost for every one created in Spain by their solar strategy. Enjoy!

  2. Alan
    June 22, 2012

    Mr Redwood seems to me to be a bit harsh on the politicians, who are at least trying to solve the problems. Unlike the bankers and bond market traders whose profligacy in making unwise loans caused the problems, and whose response is to insist that the politicians hand over taxpayers’ money to make the banks solvent again.

    But the politicians seem to have little choice unless we are willing to accept the consequences of the banks’ collapse.

    1. Bob
      June 22, 2012

      @Alan

      On the contrary – It was political interference by the Clinton regime and the tripartite system put in place by New Labour to regulate the economy which was responsible for the financial crisis.

      And Gordon Brown’s knee jerk reaction to prop up the failing banks just made matters worse in the long run.

      This with the backdrop of the economically destructive green-washing program has conspired to create a perfect storm.

      If John Redwood had been running the country, we would never have gotten into this mess in the first place.

      1. APL
        June 24, 2012

        Bob: “On the contrary ”

        Quite.

        Nor should we forget that it wasn’t all that long ago, admittedly, before this current shower masquerading as our government, that Blair, Brown, Balls et al, were exhorting the banks to lend to people who couldn’t afford to borrow. All in the interests of ‘social justice’, don’cha know!

    2. zorro
      June 22, 2012

      You mean like Iceland did?…..Why not?…..They are recovering now, they didn’t bail out the banks and have arrested the bankers…..It sounds great fun! 🙂

      Zorro

      1. zorro
        June 22, 2012

        They haven’t sunk into the Apocalypse, the last time I looked…..

        Zorro

    3. zorro
      June 22, 2012

      It’s a win win situation, the politicians show that they have some use and the bankers are held responsible and not bailed out…..

      Zorro

    4. Tad Davison
      June 22, 2012

      Are you Barroso in disguise?

    5. lifelogic
      June 22, 2012

      The choice they are making won’t work – they need to stop digging or they need full unification which won’t work either.

  3. Acorn
    June 22, 2012

    Nigel Farage: “Listen! The Whole Thing’s a Giant Ponzi Scheme!” You may have to Google the quote on YouTube; JR will blow a fuse if I include the URL link 😉 Which I will anyway:- http://youtu.be/zTN7hL5fgWo . I have to quote sources in the day job, politicians don’t.

  4. Brian Tomkinson
    June 22, 2012

    The politicians and eurocrats are hell bent on achieving their objective – a country called Europe – and no price is too high to pay for that achievement. The madness of what they are doing seems so clear but there is no one prepared to stand up to them and prevent them wreaking more harm.

    1. Mike
      June 22, 2012

      I would go farther and say they want to build a totalitarian socialist country called Europe, a sort of watered down USSR with unelected ex commies and maoists like Barroso as our “Dear Leaders”

      1. lifelogic
        June 22, 2012

        Certainly looks like that with Cameron (oddly described by a BBC interviewer as a eurosceptic the other day) cheering on.

      2. zorro
        June 22, 2012
  5. stred
    June 22, 2012

    The Russsians are bailing out our’ replacement aircraft carrier’ for the Middle East- Cyprus.

  6. Sue
    June 22, 2012

    They have nothing to lose. They know that “the powers that be” will preserve the EU at all costs. Look at the suffering in Greece, the EU don’t care one jot. If they did, they would be insisting some of the money went to help their citizens. Instead, all the money does is a round robin via the national government (to ensure it’s sovereign debt) and back to the banks.

    What’s the worse that can happen? They default on their debts and start with a clean slate. It may be a struggle for a while but Iceland has managed to recover. Can you imagine what would happen if one of them left and almost immediately their economies started to recover? For countries like Spain and Greece to devalue a new currency would make their hospitality industry and property markets boom.

    The EU can’t afford for that to happen, it will show the world what a failure the project has been.

    1. uanime5
      June 22, 2012

      The EU is leading Greece money to pay its debts so it won’t go bankrupt. Greek taxes are collected to help Greek citizens.

      Iceland wasn’t able to default on their debts and were forced to pay them back to the UK and the Netherlands.

      Unless Spain or Greece suddenly discovers an alternative to petrol when their new currencies devalue the higher price of oil will cause them a lot of problems.

      Given that many of Spain’s problems are due to a property bubble bursting I doubt it will boom any time soon.

  7. Mike Stallard
    June 22, 2012

    I am afraid I did follow up Acorn’s link. He is, after all, one of your longest serving and loyal supporters.
    Do you know what? Nigel Farage is right.

    You only have to look at the way M. Rompuy read the newspaper during Nigel Farrage’s personal attack, or the arrogance with which Dan Hannan is treated every time he speaks, to see that there can be no negotiation with these people. The contempt when Mr Hofstadter spoke the other day in the hemicycle, the sheer arrogance of the man, ought to be enough in itself. The contempt, the sureness and the lumbering attempts to be funny disgusted me.
    I think that if we draw yet more red lines in the sand, etc etc, they will simply be slowly ignored and rubbed away every time.

    That is why I am honestly considering voting UKIP in 2015 unless there is a serious change of mind by the Conservatives. Yes, I know it will split the right and maybe let Labour in. I know that. But I sense real danger if we don’t get out before the wheels come completely off the EU.

    1. Tad Davison
      June 22, 2012

      Mike,

      I am of the same mind, but it isn’t a problem of our making, it’ one of the Conservative Party’s refusal to bend towards their own supporters. We stick rigidly to our conscience and our beliefs. The Conservative party continues toward a diluted form of socialism. There is now a strong divergence and disparity between the two, but they cannot expect us to remain loyal to the party for ever. After all, (and in deference to our host, for it was not he) it was the left-wing of Conservative party that gave us this EU mess in the first place. Labour only exacerbated the problem.

      Tad

      1. lifelogic
        June 23, 2012

        It was the left-wing of Conservative party yes all 75%+ of it.

      2. APL
        June 24, 2012

        Tad Davison: ” but they cannot expect us to remain loyal to the party for ever. ”

        Mr Redwood will have that ‘change from within’ the Tory party any moment now ………

  8. alan jutson
    June 22, 2012

    John

    Do you think anyone is doing any calculations on this at all, as to when, how, and by what method, they believe this will finally work out.

    No seems to want to actually cut costs, they all seem to want to print, spend, borrow and grow.
    But by increasing everyones costs and taxes, growth is totally out of the question.

    How many politicians in Europe have actually run their own businesses, or even been involved in the growth of a business in a major way.

    1. uanime5
      June 22, 2012

      The bailouts are only being given to Greece if they make enough cuts (I believe they call this austerity and it’s why the Greeks are protesting about these bailouts). So some countries are trying to cutback.

      Running a country and running a business are very different; the main difference being a country can create as much many as it needs to pay its debts.

      1. zorro
        June 23, 2012

        Unless it’s in the Eurozone…….

        Zorro

      2. APL
        June 24, 2012

        uanime5: “The bailouts are only being given to Greece if they make enough cuts .. ”

        1. The bailouts, don’t bailout Greece, they bailout French banks.

        2. austerity, simply means you are being forced to live within your income.

  9. Chris
    June 22, 2012

    Cyprus is apparently getting money from Russia, and on more favourable terms than it would from the EU.

    1. APL
      June 24, 2012

      Chris: “Cyprus is apparently getting money from Russia, .. ”

      Russia would love to have Cyprus as a Mediterranean military base.

  10. Atlas
    June 22, 2012

    This is turning out to be a very strange season. As well as the dismal weather we are also treated to (selective) lectures on financial morality by the PM; we have a Eurozone that is rushing from pillar to post with increasing speed on the road to dictatorship; we have the interesting sight of Miliband trying to utter the words “we got it wrong”, but the words failing to come out. What next – a Plan B?

  11. Leslie Singleton
    June 22, 2012

    So France Germany Italy and Spain are going to meet again and France are going to ask Germany to payout and backstop everybody else and, wait for it, Italy and Spain are going to agree with France. Well blow me down, who’d a thought it? I never thought I would, but I now have every sympathy with Germany except that perhaps Angela could tease less meaning she should say, Listen, the answer is No and is going to stay No and mean it. It’s all so much agony because Debt is not the main problem anyway.

  12. Bill
    June 22, 2012

    I should be interested to know how the Press in other countries is reporting all this. I understand that the merchant bankers in Germany reckon on a 30% chance of the Euro collapsing and that they are broadly in favour of what Merkel is doing. The ordinary German taxpayer has only just finished paying war reparations, so I understand, and they have also had to pay for unification with East Germany. I understand that many are fed-up with the continual bail outs. The result is that Merkel has a balancing act to perform. But what of everyone else? The Greeks depict themselves as ‘victims’ (for goodness sake!) and the French, by lowering the proposed age for retirement, seem to have become detached from reality.

    In short, I don’t think we can understand all this unless we understand the domestic pressures on the various key players. The only people who seem to be acting entirely out of self-interest are the Eurocrats.

  13. zorro
    June 22, 2012

    Cyprus is indeed in difficulties but is also looking to Russia for some assistance. Italy will come knocking soon as Javelin has been saying. John, I think that it’s time for you to take a sojourn to Luxembourg to check out this EFSF facility/arrangement to see the viability of its financial base. Doubtless you will see a few hapless EU civil servants rattling a few tins on the streets of the Grand Duchy!

    zorro

    1. Denis Cooper
      June 22, 2012

      There’s a website to start with:

      http://www.efsf.europa.eu/about/index.htm

      As far as subscribed capital is concerned, there was very little; really just some millions – NOT billions – to get it started with offices, staff etc.

      On page 4 of the Articles of Incorporation, here:

      http://www.efsf.europa.eu/attachments/efsf_articles_of_incorporation_en.pdf

      €28.4 million subscribed, another €1.6 million authorised.

      Everything it disburses for bailouts has to be borrowed, in one way or another, in a straightforward way by selling its bonds to investors, or in more crooked ways eg paying in its own bonds rather than in money so that the recipient can use them as collateral to borrow money eg from the ECB.

      1. zorro
        June 23, 2012

        My comment was tongue in check…..I know about the website and its funds (lack of)……

        Zorro

  14. zorro
    June 22, 2012

    Good to see that the Government is concentrating on the big issues again – body dysmorphia – ticks all the right boxes diversity, everyone is beautiful etc etc, prizes for all. I just hope that we can employ enough diversity and body dysmorphia counsellors to confront this ‘immense challenge’ in case parents can’t be bothered. Doubtless, this will help stimulate lasting growth….

    zorro

    1. zorro
      June 22, 2012

      Just as well we have a no nanny nonsense Eurosceptic Tory led government……

      zorro

      1. Tad Davison
        June 22, 2012

        Zorro, we’re all just as fed up with it as you are. Many are thinking ‘revolution’.

        Tad

  15. Richard1
    June 22, 2012

    There is a constructive contribution which the UK Government could make in this deabte. We should insist that there is a proper clean-out of bank balance sheets prior to any recaps of banks by Govts. i.e. all losses are recognised and non-performing loans sold at the clearing price, whatever that is. The UK should also insist that bank bondholders bear the resultant loss before new govt money comes in. This is the opposite of what is happening now (eg in Spain) and the opposite of what Gordon Brown did in the UK in 2008. 2 purposes would be served by such an approach: taxpayer money would be properly protected (as it was not by Brown in the UK) and banks would start again with a clean balance sheet. Thats the key pre-requsisite for credit flowing again. Not recognising losses in the banking sector is the big problem in Japan. The other Asian countries in their 1998 crisis did clean up their banks (at the insistance of international rescue funders).

  16. Normandee
    June 22, 2012

    One aspect of this which is very much more long term, but could be a very important sideshow is the potential of Russia gaining influence in Cyprus. Taking a pessimistic view, the potential of a Russian military presence in Cyprus is highly dangerous from a middle eastern political point of view. I know I am getting well ahead of the curve on this, but the way things are going, and with Putin at it’s head, a new “evil empire” should not be written off.

    1. Tad Davison
      June 22, 2012

      It’s a very valid point, and let’s not forget China is still a communist country, with a much subjugated people.

      I wonder what past leaders of the free world would have made of today’s situation, where it looks as though we’re going to be dependent upon communist countries (one totalitarian, and another totalitarian in all but name) for our salvation and energy needs (Russian gas)?

      This has to rank as gross mismanagement however we look at it, but the danger is only just beginning to dawn on Joe Public. Meanwhile, weak countries just keep on borrowing on the never-never. That’s certainly how it looks. When will they be able to repay the debt?

      Never-never! So these other undesirables will buy up their assets until the endebted nations own nothing at all, not even their liberty. Still, you can’t tell ’em!

      Do you ever get the feeling that Barroso is a (word left out) stooge, a kind of Manchurian Candidate? Surely nobody could be as consistently stupid as that bloke, without there being some ulterior motive?

      Tad

  17. peter
    June 22, 2012

    Why don’t Greece just pull out of the Euro, devalue to their natural level and set themselves up as some sort of tax free haven to attract the wealthy?

    Got to be better than all this pantomine. This type of medicine would be a shock but in a year or two they could be well out of this.

  18. Simon
    June 22, 2012

    They should just print the money, use it to part-nationalize the banks in trouble, and sell them later when the economy has recovered sufficiently.

    Sure it’d lead to inflation in Germany, but that’s actually a good thing as far as the rest of Europe is concerned – fewer BMWs, more Fiats & Renaults sold (or less Bratwurst and more Feta, possibly).

  19. BobE
    June 22, 2012

    kicking the can down the road continues.

  20. Denis Cooper
    June 22, 2012

    If you look at this “Lending operations” page on the EFSF website:

    http://www.efsf.europa.eu/about/operations/index.htm

    you can see that it has now become very complicated.

    It says:

    “Initially the EFSF used a simple back-to-back funding strategy”

    ie it sold bonds to borrow money to lend on to the government of a particular distressed eurozone state as required.

    Now it’s much more complicated, with items such as this for Greece:

    “PSI participation PSI sweetener 29.7
    Accrued interest 4.8
    ECB collateral 35”

    a total of €69.5 billion disbursed, with another €1 pending disbursement.

    While if you look at the “Transactions” page:

    http://www.efsf.europa.eu/investor_relations/issues/index.htm

    you can see the lists of long term and short term bonds which have been issued, and the largest long term bond issues were two tranches of €15 billion each launched on March 8th but without any launch details, and on the same date a €5.5 billion 6 month bond with the footnote “as part of the Greek PSI contribution”.

    I don’t understand everything that’s going on here, but it seems that the EFSF resorted to paying out in its own bonds rather than selling bonds to private investors and paying out in money.

    The recipients of EFSF bonds can use them as collateral for loans from the ECB, but of course eventually those ECB loans would have to be repaid, failing which the stronger eurozone states such as Germany would have to pick up the tab for any shortfall.

    1. zorro
      June 22, 2012

      Denis, so is the EFSF a realistic proposition to undertake these bailouts? I think the answer is no.

      Zorro

      1. zorro
        June 22, 2012

        Let’s face it the Germans won’t back it up, particularly if the Greeks beat them tonight…….Come on Greece!

        Zorro

  21. Daniel T Thomas
    June 22, 2012

    In the USA the words ‘Europe’ and ‘European’ are now used as terms of abuse.

    Politicians advocating tax, borrow, spend and debt are losing the argument, they have the European disease.

    To put the fear God up Americans, mention the eye watering levels of European taxation. It works every time.

    The newsclip of Nigel Farage mentioned by Acorn has gone viral.

    Fear of following Europe down the tubes is tangible, not just among political junkies but among ordinary working Americans one would meet on the top of the Clapham omnibus equivalent.

    1. lifelogic
      June 22, 2012

      Indeed all the things the Libdems like so much are falling to pieces as you would expect them to. The EURO, the EU, the global warming religion and Coalition government all a disaster.

  22. Lindsay McDougall
    June 22, 2012

    Why bail out at all? It’s just throwing good money after bad.

    The one thing that might work (other than ending the Euro) is to loan sine die at 5%. However, Germany would want political union and strong fiscal controls in place before agreeing to that. Of all the nations in trouble, only Ireland (at tremendous cost) has behaved ‘responsibly’. Greece, Portugal, Spain, Italy and now France to some extent want to carry on bingeing.

    People say that Italy is in fiscal surplus, to which my response is: how come its sovereign debt keeps increasing? Maybe someone forgot to include debt interest.

  23. Bill
    June 22, 2012

    could anybody please tell me when Angela Merkel was voted to be in charge of the EUs Finances and why the UK should follow as we are being told that it has nothing to do with us .

  24. Jon
    June 22, 2012

    There was a time not so long ago that by Germany exiting the Euro would have eased a major problem. Through indecision I think Germany is now locked in, she is beyond the point of no return.

    Coalition served Germany well in the recent past in benign times but where will it take it in these times?

  25. Tad Davison
    June 22, 2012

    Hereward the Wake, Edward the Confessor, Ivan the Terrible. All names that have stood the test of time. Add to the list, the name of another – Cameron the Gutless, for that one will be around for as long as we are allowed to have a history!

    He could grasp this nettle, and deliver us from this evil, but he considers himself resolute in doing precisely nothing. Just waiting for the day when QMV kicks-in, so he can say, ‘sorry folks, there’s nothing I can do, it was all down to the last lot!’

    Of course there’s something he CAN do. He can initiate the process that will see Britain leave the EU!

    I’d hate to see Labour get back to power by default, but unless Cameron the Gutless gets his act together, and pretty damned quick, that’s where we are headed.

    I am going to campaign for UKIP at the next Euro-elections, and if the Tories, and the Lib Dems for that matter, lose out to UKIP in a big way, as well they might, expect a new Tory leader to be in charge before the next general election. If that doesn’t happen, forget any notion of ever getting out of the EU short of civil insurrection and uprising.

    Those are the stakes. That is the powder keg Cameron is happily throwing lit matches into. And if anyone doubts the strength of the antithesis towards the EU, they are seriously deluded and living in a bubble. All it will take, is for opposition to the EU to organise themselves.

    Respect the will of the people Cameron, not the lily-livered pro-EU Toadies in your own party!

    Tad Davison

    Cambridge

    1. APL
      June 23, 2012

      Tad Davison: “expect a new Tory leader to be in charge before the next general election. ”

      Then the new Tory leader will need to ‘deal’ with the turncoats and traitors that infest the Tory party on day one of his leadership.

      Offering Ken Clarke to join the Labour party could be a good first step.

  26. zorro
    June 22, 2012

    Slightly off topic but I have been following this for a while and this may well influence Presidential election. I haven’t seen it mentioned before in mainstream Daily Papers………http://blogs.telegraph.co.uk/news/timstanley/100166854/the-fast-and-furious-scandal-is-turning-into-president-obamas-watergate/

    Zorro

    1. zorro
      June 22, 2012

      But this is a President whose first Executive Order was to seal up any access to his personal records without his permission……

      Zorro

  27. Tad Davison
    June 22, 2012

    Never mind about the posts you excluded John, I’ll find a place for them somewhere!

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