Re: The Eurozone Thread

[bb1]

http://www.arabianmoney.net/us-dollar/2011/11/27/germany-printing-deutsche-marks-british-foreign-office-warns-of-euro-chaos/


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Germany printing Deutsche Marks, British Foreign Office warns of euro chaos


Posted on 27 November 2011 with 8 comments from readers

Germany has its printing presses working overtime but they are not printing euros but Deutsche Mark notes in case the eurozone sovereign debt crisis ends in a return to national currencies.

At the same time the British Foreign Office has issued warnings to embassies in the eurozone to prepare to handle the problems of its expatriates who may be unable to access local bank accounts and face rioting mobs.

Perhaps this is only an example of highly developed countries planning for all eventualities but disaster planning always adds to fear as it shows that the previously unthinkable is now being contemplated: a break-up of the eurozone single currency.

Euro failure

But there is no mechanism in place to achieve this in an orderly fashion. The planning has not been that good. The euro’s founding fathers thought that allowing for failure might encourage it to happen. No matter we have gotten there anyhow.

It is only a matter of time before the long-awaited Greek debt default brings the house of cards down. Greece has to repay its next debt instalment on December 17th so a pre-Christmas financial market crash is very likely now.

Credit markets are tightening across the eurozone with German bond rates higher than those of the debt-ridden UK, Italian rates well in the danger zone of no-return and Belgium losing triple-A status at the end of last week.

Wilder economic projections in a eurozone break-up have GDP plunging by 50 per cent and unemployment soaring. It is essentially the realization of the armageddon scenario that the world thought it managed to avoid in early 2009.

What really happened then was that the can got kicked down the proverbial road. The huge bailouts and balooning of global debt levels then just postponed the inevitable day of reckoning for a massively over-indebted world. That is after all where the totally unsustainable eurozone sovereign debts originated.

US bond yields

The US is already feeling the heat from Europe in its own financial markets. Stock prices are low because the contagion from Europe will hit US banks and multinationals. But US bond prices are high and yields low because capital has fled the sinking eurozone.

Going forward that gives the US and currencies with dollar-pegs a short-term advantage in terms of cheap capital. However, the enemy is then at the gate because the US bond market will become an unsustainable bubble itself and when it breaks that will be devastating for the highly leveraged US economy.

That said the immediate worries are confined to the eurozone. But the outlook elsewhere is hardly encouraging.

===============

This might be a very good time to buy dollars, or gold. Maybe even sterling. Anything except euros.

[Lamplighter]

That is dated 2 weeks ago, before the meeting that chucked the UK onto the sidelines. It is, as it says 'in case' things go pear-shaped. I had heard this story that the Germans were printing Deutsche Marks about 3 weeks ago, via a friend who lives in Berlin. At the time he said the stories were flying around like locusts. I asked him how serious it was; he replied that all we could do is wait and see, but that he thought this was one of those rumours designed to cause a run on the markets. He is usually very astute in these matters. Personally, I have a Euro account in Austria, a sterling account in the UK and an account here and have no intention, at this moment in time, of panicking. I would add that we are not in the Eurozone, nor likely to be for a few years yet. LL.

[bb1]

I came across a story somewhere or other about Deuschmarks being printed, LL, and just checked to see if there was any truth in it.

It all seems a bit like rearranging the deckchairs on the Titanic to me, frankly.

But be of good cheer - the bit of Britain that is already semi-detached is planning ahead and forging links with our neighbours in Scandinavia:

http://www.independent.co.uk/news/uk/politics/bye-bye-england-snp-plans-closer-scandinavian-ties-after-independence-6272337.html

[bb1]

[bb1]

http://news.sky.com/home/business/article/16130705

Cracks Start To Appear In EU Finance Pact

The Czech Republic and Hungary have said they will not sign the new European Union pact unless tax harmonisation plans are dropped.

The announcement comes less than one week after the EU summit hailed as bringing unity to all but one of its member nations.
In Brussels, 26 of the 27 members of the EU backed new fiscal rules to keep budgets in line, with only the UK abstaining.
Neither Hungary nor the Czech Republic uses the euro, and tax harmonisation plans were not explicitly discussed as part of the changes at the summit.
Nonetheless Hungarian prime minister Viktor Orban and his Czech counterpart Petr Necas said they wanted to take active roles in negotiations, adding they are concerned the pact may take away their independence on tax policy.
Mr Necas said: "We support the solutions which result in the stabilisation of the eurozone.

"But we are convinced that tax harmonisation would not mean anything good for
us."
Stock markets dipped following the news, but the major European indices remained in positive territory.
Sky's economics editor Ed Conway said the announcements from Budapest and Prague underlined the fact that Britain was not the only nation uncomfortable with the treaty - and that it is not a done deal yet.
"It's not just those two countries that have issues with it," he said.
"Whether you look across at Sweden, Finland, Denmark, Ireland - a number of countries' representatives have gone back to their parliaments and have examined what's in front of them and have said they're not 100% pleased with what they've signed up to in some cases."
Negotiations are due to continue until March, with the next EU summit expected at the end of January or early February.

Meanwhile, the eurozone is likely to slip back into recession next year, according to a report by Ernst & Young.
The audit firm said it expects the economies of the 17 member countries to shrink in the first two quarters of 2012.
The report predicts growth of just 0.1% for the whole of the year and warns unemployment in the eurozone is unlikely to fall below 10% before 2015.
The warning was backed up by economic data from Markit suggesting output continued to contract across the 17-nation bloc over the past month.
Although the headline Purchasing Managers Index (PMI) figure rose slightly, at 47.9 it remained below 50 which separates economic growth from a slowdown.
The survey compiler said the slight improvement was down to strength in France and Germany, with peripheral eurozone economies still struggling.

"The reforms agreed at the summit on December 9 were a step in the right direction and the response seems to have been mildly positive," Ernst & Young said.
It added: "Investors remain very concerned about the commitment and ability of eurozone governments to implement reforms quickly."
However, the leading economist and chairman of Goldman Sachs Asset Management has expressed his confidence in the single currency.

[Lamplighter]

Link to Hungarian Parliament article re the eurozone debate; it isn't just the Czechs and Hungarians who are making waves, so are the Swedes, the Finns and Ireland. Many of the new democracies in Eastern and Central Europe don't like the idea of losing their sovereignty especially as the main movers seem to be the Germans with whom they all have past history - Hungary has deep issues with the French as well! I can see tears before bedtime at this rate and the eurozone slipping into chaos. LL

http://www.politics.hu/20111213/orban-defers-to-parliament-on-eu-treaty-defends-appeal-to-imf/

[bb1]

I know it takes very little for the nations of Europe to start arguing with each other, but I confess, I didn't know Hungary and France didn't get along, LL...

I personally cannot see the euro surviving; did I read that one of the problems is that it never occurred to the people who started it that the euro could fail? So there is no Plan B?

[Lamplighter]

In 1921 France was instrumental in setting up the Treaty of Trianon, which stripped Hungary of nearly 70% of its pre-1914 land. As a result of this more than 2/3rd of ethnic Magyar live outside Hungary; Czech Republic, Slovenia, Slovakia, Romania, the old Jugoslavia, Moldava, Moldavia and many other areas were once part of the Kingdom of Hungary. Trianon was punishment for Hungary ending up on the losing side (due to it being partnered by Austria in the Austria-Hungary Empire), it decimated the country and even today there are many tensions between ethnic Magyar and other nationalities mainly in Serbia and Slovakia. Hungary picked the wrong side in WW2; the leaders believed that, by siding with Germany they might get Trianon revoked if the Germans won. The Magyar, even today, do not look kindly on France .... the final insult is that Sarkosy's father was an ethnic Magyar! LL

[bb1]

So the roots of this go back a hundred years? I think it might be better if the nations of Europe go back to being trading partners and stop pretending they like each other...

[Lamplighter]

It's all rather silly, but the resentments run deep. The problem at present is that Oban the PM, likes Putin very much and wants to bind Hungary close to Russia; the Magyar do not have fond feelings for the Russians; they remember the Uprising in 1953 and the appalling repression that followed that. It is hard for them; the PM is a commie, the last PM was a crook, one of the political parties is nazi (Jobbik). For their sins, the Magyar suffer from a temperament rather likes the Danes, moody, introspective, sometimes suicidal (but not so bad now as it used to be) but at the same time, kind, gentle - make a friend of a Magyar and they will stick by you through hell and high water. The people are poor, yet the country is full of history. LL

[Sabot]

Well, I have to say that the exchange rate is looking fractionally more in my favour today. Meaning that the Euro is losing strength against the pound. But only fractionally. I might get an extra couple of quid on my pension next month.

Me Me Me, as usual.

[bb1]

Ah, but if you put it in terms of your pension, then people, well, me, can understand the exchange rate stuff, Sabot.

[Sabot]

If things don't change then I might 520 Euros this month instead of the usual 500 Euros.
Or, I will get a few more Euros for my Pounds than I usually do.
This doesn't mean that The Pound is necessarily stronger, only that The Euro is a teensy bit weaker.

[bb1]

And now France and the UK are exchanging the traditional insults.

I guess we won't be sharing aircraft carriers after all?

[bb1]

What on earth??? I was idly reading CdM when I came across this:

http://www.cmjornal.xl.pt/detalhe/noticias/internacional/mundo/governo-ingles-planeia-retirar-os-seus-nacionais-de-portugal-se-o-euro-colapsar

British government plans to withdraw their nationals from Portugal to the Euro collapse

The British Government has a contingency plan to withdraw their nationals from Portugal and Spain airplanes, boats and buses to the euro collapse, reports the British press on Sunday.
"Crisis in the euro area: Foreign Affairs has expatriate withdrawal plan" is the headline in the Daily Telegraph. The newspaper said the British living in Spain and Portugal "may have helped the Government to leave the country if the crisis in the eurozone dragging its banks" and they stop "access to their bank accounts."
According to the newspaper, living in Spain about a million Britons and 55 000 in Portugal. The Sunday Times, the Ministry of Finance confirmed the plans but declined to give further details.
The Foreign Ministry told the daily that is preparing for a "nightmare scenario", with thousands of Britons out of money to sleep in airports and no means to get home.
Among the contingency plans that the Government is preparing to send consists of planes, ships and buses. According to a source of the ministry, plans are being discussed to go into action if there is a worst case scenario.
At issue is the sovereign debt crisis in the euro area countries has been to focus on the key markets.

I am currently trying to find something about this elsewhere...

[bb1]

Times:



The full story is behind a paywall.

[crazytony]

What on earth??? I was idly reading CdM when I came across this:

http://www.cmjornal.xl.pt/detalhe/noticias/internacional/mundo/governo-ingles-planeia-retirar-os-seus-nacionais-de-portugal-se-o-euro-colapsar

British government plans to withdraw their nationals from Portugal to the Euro collapse

The British Government has a contingency plan to withdraw their nationals from Portugal and Spain airplanes, boats and buses to the euro collapse, reports the British press on Sunday.
"Crisis in the euro area: Foreign Affairs has expatriate withdrawal plan" is the headline in the Daily Telegraph. The newspaper said the British living in Spain and Portugal "may have helped the Government to leave the country if the crisis in the eurozone dragging its banks" and they stop "access to their bank accounts."
According to the newspaper, living in Spain about a million Britons and 55 000 in Portugal. The Sunday Times, the Ministry of Finance confirmed the plans but declined to give further details.
The Foreign Ministry told the daily that is preparing for a "nightmare scenario", with thousands of Britons out of money to sleep in airports and no means to get home.
Among the contingency plans that the Government is preparing to send consists of planes, ships and buses. According to a source of the ministry, plans are being discussed to go into action if there is a worst case scenario.
At issue is the sovereign debt crisis in the euro area countries has been to focus on the key markets.

I am currently trying to find something about this elsewhere...

Surely France wouldn't dare, as for Portugal, bang goes their tourist industry?

[bb1]

I think France is OK, Tony - we really are doomed if France goes under - but Spain and Portugal are on very shaky ground; both countries have a lot of UK ex-pats, and the worry seems to be that their banks will collapse leaving these people penniless.

I think it's the people living there who are most at risk, but whole swathes of the Portuguese economy in the Algarve, etc., will simply go under without the ex-pats bringing in money.

ETA, when you read Pedro's links to the Resident's stories, you can see how many businesses, etc., ex-pat Brits run in the Algarve.

The region would go back to, what, the 50's, when it was very poor indeed.

[crazytony]

I think France is OK, Tony - we really are doomed if France goes under - but Spain and Portugal are on very shaky ground; both countries have a lot of UK ex-pats, and the worry seems to be that their banks will collapse leaving these people penniless.

I think it's the people living there who are most at risk, but whole swathes of the Portuguese economy in the Algarve, etc., will simply go under without the ex-pats bringing in money.

ETA, when you read Pedro's links to the Resident's stories, you can see how many businesses, etc., ex-pat Brits run in the Algarve.

The region would go back to, what, the 50's, when it was very poor indeed.

That's a bit off.

[bb1]

I don't know what to make of it, Tony - I thought it was more CdM nonsense, but there it is, in the Times:

http://www.thesundaytimes.co.uk/sto/?CMP=INTni26

[bb1]

Expresso:

http://aeiou.expresso.pt/reino-unido-plano-de-contingencia-nao-tem-foco-particular-em-portugal=f695157

UK: contingency plan has no particular focus on Portugal
The Foreign Ministry says it has a contingency plan for "any kind of situation in the euro area."
19:06 Sunday, December 18, 2011


The contingency plan of the British Government for nationals living in the Eurozone has no "particular focus" in Portugal and Spain, the Lusa said today the official source of the British Foreign Ministry.

"There is no intention of our contingency plan to focus mainly in Spain and Portugal," he told the Lusa agency official source of the NAM British newspapers after the Sunday Times and The Daily Telegraph reported that they had a specific plan to withdraw their citizens of both countries.

However, "we have contingency plans for any type of situation in the euro area," added the same source, noting that the news published by the Sunday Times "is not accurate."

Don't ask me; it sounds like Whitehall is seriously worried about a complete collapse leaving tens of thousands of ex-pats stranded, but they don't want to start a panic just yet.

[Lamplighter]

Doesn't affect me; we are in the EU but NOT the Eurozone. Slight worry over my Austrian € bank account, but I have already made provisions for that if anything happens; it gets transferred over here the moment anything goes pear-shaped. LL

[bb1]

Good, LL - you should be in pretty much the same situation as anyone in the UK, then?

[Lamplighter]

Good, LL - you should be in pretty much the same situation as anyone in the UK, then?

Yes, the people here are okay with the EU but not at all happy with the €uro; joining it has been put off for at least the last 6 years, the excuse being we do not fulfil quite all of the rules for joining. Latest is probably 2015/16 - who knows whether the €uro will still exist by then. I saw an item on a German TV channel today that said over 150 millions DMmarks are still in circulation but not legal tender, however you can still pay with DMarks - you will get back €uros at the day's exchange rate. My bank manager says as soon as he feels it is going bad he will transfer my money into either bonds or to my UK bank account. LL

[bb1]

I will be amazed if the euro makes it to the end of 2012, personally, LL.

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