The End of the Euro is Fast Approaching

Posted by PITHOCRATES - May 12th, 2012

Week in Review

This is the end.  Beautiful friend.  This is the end.  My only friend, the end.  Of our elaborate plans, the end.  Of everything that stands, the end.  No safety or surprise, the end.  I’ll never look into your eyes…again. 

Of course, Jim Morrison wasn’t writing about the Euro when he wrote The End.  And the Doors didn’t sing much about public finance.  But whenever a love affair ends it is painful.  Whether it be with your significant other.  Or a common currency that was going to change the economic order of the world.  Especially when foolishly rushing in mistaking desire for love.  The warning signs were there.  The lying.  And the cheating.  Fudging their numbers to meet the requirements of the Maastricht Treaty.  But what love can ever last when based on a lie (see Fitch Warns Euro Zone of Downgrades If Greeks Exit by Reuters posted 5/11/2012 on CNBC)?

Credit rating agency Fitch put the whole of the euro zone on notice on Friday that were Greece to leave the currency bloc as a result of its current crisis, the remaining countries could find their sovereign ratings at risk…

It said those countries were France, Italy, Spain, Cyprus Ireland, Portugal, Slovenia and Belgium…

The leaders of Greece’s once-dominant political parties were making a last push on Friday to avert a new election, which a poll showed would give victory to a radical leftist and doom an EU bailout — its second — agreed in March.

The majority of Greeks want to stay in the euro zone but voted last Sunday for parties that reject the severe terms of a bailout negotiated with foreign lenders.

European leaders say Greece will be ejected from the common currency [EUR=X  1.2914  —  UNCH  (0)   ] if it turns its back on the package of tax hikes and wage cuts.

Well, then, goodbye Euro.

You can’t stay in the Euro if you need a Euro bailout but reject the terms of that bailout.  For if you’re in need of a bailout you really can’t dictate the terms of that bailout.  That usually falls to the party who has the financial wherewithal to bail you out.  And that’s not Greece.  So sad considering so much of Western Civilization came from Athens.

So what will it take to learn that an ever expanding welfare state does not work?  How many more nations must fall?  All of Europe?  Will that be enough for the United States to learn the folly of their current economic policies?  Probably not.  They will follow Europe.  Who will follow Greece.  Buying votes with welfare spending.  Until they cross the point of no return.  Where the people will reject austerity.  And responsible governing.  Because their government taught them to.  Always assuming that the day of reckoning will come in some other generation.  Not in the current one.  But the day of reckoning has arrived.  Greece cannot borrow enough money to meet their spending requirements.  For when a government spends more than they can borrow it’s time to cut your spending.  They fudged their debt and deficit numbers to join the Euro.  And their numbers have only grown worse ever since.  And no amount of Keynesian math or class warfare can change that. 

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Moody’s follows Fitch and Standard & Poor’s and downgrades Eurozone Countries

Posted by PITHOCRATES - February 18th, 2012

Week in Review

Now it’s Moody’s turn to show their lack of confidence in the Eurozone (see Moody’s downgrades European countries by James O’Toole posted 2/14/2012 on CNNMoney).

Moody’s cut the credit ratings of six European countries on Monday amid continued anxiety over the continent’s debt crisis and its sluggish economy.

Italy, Malta, Portugal, Slovakia, Slovenia and Spain were all downgraded, while three other countries — Austria, France and the United Kingdom — had the outlook on their current Aaa ratings changed to “negative…”

The move follows similar downgrades of European nations recently by fellow rating agencies Fitch and Standard & Poor’s, and comes as investors are waiting to see whether euro-area finance ministers will approve the latest bailout for Greece this week…

Investors may be heartened by the fact that Moody’s didn’t downgrade the eurozone’s bailout fund, the European Financial Stability Fund.

Interesting.  They didn’t downgrade the European Financial Stability Fund.  But they downgraded the countries that fund it did.  Interesting because the member states guarantee the loans.  The interest costs.  And the capital raising costs of this Eurozone bailout fund.  So if the member states are greater risks one would think the thing they fund and guarantee would be a greater risk, too.

Looks like those social democracies of Europe are learning their lessons about socialism.  It’s costly.  And it bankrupts nations.  Capitalism doesn’t do this.  Only those nations that abandoned capitalism in favor of social democracy find themselves in these financial messes.  Sadly, two of the great nations of capitalism are limping down this same road.  The UK.  And the USA.  Who had their credit rating downgraded themselves only last year.  And the latest budget offered by the Obama administration forecasts a $1.3 trillion deficit.

Those who do not learn the lessons of history are condemned to repeat history’s worst mistakes.  And, apparently, we are.

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Fitch follows S&P and Downgrades Eurozone Countries which doesn’t Help the Eurozone Debt Crisis

Posted by PITHOCRATES - January 29th, 2012

Week in Review

First Standard & Poor’s.  Now Fitch.  Things are not looking up for the Eurozone (see Greek debt deal hit by eurozone ratings downgrades by Angela Monaghan posted 1/28/2012 on The Telegraph).

Following similar action from rival Standard & Poor’s (S&P) earlier this month, Fitch downgraded Italy, Spain and Slovenia by two notches and Belgium and Cyprus by one notch. Fitch took no action on France’s AAA credit rating despite S&P downgrading the country two weeks ago.

The rating agency warned that the eurozone crisis would only be resolved “as and when there is broad economic recovery” and with “greater fiscal integration”.

It was also being reported last night that the German government wants Greece to hand over control of tax and spending decisions to a ‘budget commissioner’ appointed by the rest of the eurozone, before the country gets its second bail-out.

The budget commissioner would have to power to veto decisions made by the Greek government, according to a proposal seen by the Financial Times, marking a significant step-up in the EU’s powers over the sovereign governments of member states…

Eurozone finance ministers said that while there were still considerable challenges ahead, they believed in the future of a united eurozone.

They’re still trying to save the Eurozone because they can’t save the Eurozone.  Greater fiscal integration?  Hand over tax and spending decisions?  Having a veto over other sovereign nations?  It sounds like to save the Eurozone will require some erasing.  Of the borders between these sovereign states.  Something that sovereign states don’t like.  Being conquered.  Only with Euros and debt.  Instead of artillery and bullets.  Or sword and lance.

So to save Greece all the Greek people have to agree to is to become a vassal of the greater power.  Sort of a step back in time.  To the days of feudalism.  Where the poorer states serve their lord.  Who serves their sovereign.  The new Eurozone structure.  Whatever that may be.  Where the stronger member states will be among the nobility and have greater privileges than the poorer states.  Who will be among the serfs.  Grateful for the generosity of their masters.  And showing due gratitude and obedience.

It’s a simple plan.  But knowing the history of Europe one that is not likely to work.  Not in an age when the trend is towards independence.  Not subjugation.  Hell, even Scotland is talking about their independence from the United Kingdom.  So to think the Greeks are just going to surrender their sovereignty is wishful thinking.  Not in the land where Western Civilization was born.  Not in the country that contains the once great city-state of Athens.  That inspired Alexander the Great.  And the Romans.  No.  That’s just a wee bit too much history for the Greeks to surrender.

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