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There's trouble ahead, it seems in the EU.

The Ireland bank bail out of a two years ago is now proving to be more expensive than the Irish had hoped, and there is a real danger, it appears, that Ireland and Portugal's financial mess may be the start of the end of the Euro and the start of the end of the European Union.

The economics editor of the BBC has a good write up discussing the latest issue with Ireland:

The implausible in pursuit of the indefensible?
http://www.bbc.co.uk/blogs/thereporters ... it_of.html

But the latest is that the EU 'will intensify' work to help out Ireland. Ireland for its part is talking the talk and trying to make out that it has everything under control. It doesn't seem to be able to convince itself, let alone the markets!
http://www.bbc.co.uk/news/business-11771574

..there may be trouble ahead.. methinks.

What's your view?

Cheers,
Shafique

Everything stands are falls on how much tax payers of other countries (read Germany) are willing to sacrifice. After Greece, that is not much imo. After Greece was bailed out, but the Greek protested that violently, there is a certain "up yours" attitude. The eu bail out fund still consists of 800-900 billion euro, so there is still some room. If the PIGS will use the fund more and more, of course it will become more straint, and the public might be opposed to it. Mostly, its the Germans that can make or break the Euro.

From the beginning the Euro (and the EU for that matter) was pushed through the throats of respective populations, so it doesn't have much public support to begin with. While emotionally a large proportion (maybe most) want their old currency back, question is what will happen afterwards.

The EU is a democratic black hole, and that might break them in the end, no public support.

I agree FD - the Euro was primarily politically motivated and the economics were always on shaky grounds (particularly with the weaker economies).

Germany is certainly the key - that's why one of the interesting measures to watch are the government bond yields and the difference between Bunds and the rest.

I'm not sure the Euro can survive this in the long run.. but let's see.

Cheers,
Shafique

VW previously pointed out that Ireland's debt is offset by its "International Investment Position which equals EUR 2.5 Tn".
Just cut them loose from the eu and let them sort it out themselves.
They might actually be forced to sell something then.

benwj wrote:Just cut them loose from the eu and let them sort it out themselves.

If Ireland cuts loose and has to default this will have an enormous effect on the rest of the EU countries. Next to the turmoil and possible domino-effect, most western european have claims up to a third of their BNP against the PIGS.

benwj wrote:They might actually be forced to sell something then.

These days its not that easy to make investments liquid.

http://www.telegraph.co.uk/finance/economics/8135582/Contagion-hits-Portugal-as-Ireland-dithers-on-rescue.html

The EU authorities have begun to vent their fury against Ireland over its refusal to accept a financial rescue, fearing that the crisis will engulf Portugal and Spain unless confidence is restored immediately to eurozone bond markets.

The outburst reflected suspicion at the European Central Bank that Dublin is holding the eurozone to ransom, allowing the crisis to fester until it extracts a pledge from EU officials that it will not suffer a loss of economic sovereignty or be forced to give up its 12.5pc corporate tax rate under any deal.

Simon Derrick from the Bank of New York Mellon said the negotiations over Ireland's bail-out have been astonishing. "The creditors say please take the money, and the debtor says 'we don't want it'. It's very odd."
Premier George Papandreou said the country may ask for an extension of its debt repayment schedule, a move interpreted by investors as the start of a slippery slope towards default.

Taxpayers are not going to accept this. No way Jose!

Ireland want their cake and they are going to eat it.

To prevent the domino-effect, the EU can buy the bad debt from the western european countries exposed, instead of bailing out Ireland.

That'll f*ck em!

We are lucky that there are no pending eu referendums!

benwj wrote:We are lucky that there are no pending eu referendums!

Why? Politicians didnt do anything with previous EU referendums that were negative for the EU. They just put them in the drawer and invented some political trickery.

^I'm with you on this one FD.

The EU referendum system seems to work along the lines 'keep holding them until we get the answer we want!'

Ireland certainly wanted their cake and did eat rather too much of it. I was a regular visitor to Dublin before and during the early part of the boom there - the transformation was quite remarkable, but even at the time there were many there who recognised the boom for what it was and were worried about what would happen when the bubble burst. But that was early on and the bubble went on growing for quite a good few years after that.

Fundamentals always apply in the end. That is why I'm a pessimist when it comes to the chances of the dollar surviving as the reserve currency in the nearish future, and why I'm increasingly convinced that the Euro is heading for major trouble too.

Cheers,
Shafique

Don't worry about Ireland, the UK has bailed in and said we will help them out of their economic mess. Just how we intend to do that aswell as pay millions to those terrorists when we haven't got two pennies to scratch our ar&es with remains to be seen. I think the British Government forget we have a wedding to pay for.

Looks like you were right BM - Ireland's central bank is reporting that it will get a bail out - in the form of a loan. Ireland is borrowing money to help it pay its debts.... hmmm. Isn't there a flaw in this logic..

http://www.bbc.co.uk/news/business-11782356

Cheers,
Shafique

^lol

Photoshop has a lot to answer for!

Anyway, it looks like the EU is bailing out Ireland, and the Irish man-on-the-street isn't happy - and there are calls for the Taoiseach, Brian Cowen to go (so he may end up like his picture above! )

Cheers,
Shafique

There will be more bailouts after Ireland is done....Portugal even though it has a much lower debt burden has some real structural problems....Spain as well with unemployment around the 20% mark. Ultimately if you look at it every country within the EU has a ridiculous social net and others have that combined with a troubled banking system following 2008 bailouts. Without the German balance sheet the EU does not look particularly strong. I think when you get problems on the larger countries....Spain, Italy than the games over....not sure the Euro will survive following that. All currency unions should be based on political unifcation (ie like the US when the north and south combined for a single currency) - without political, legal, etc union a currency union is always going to be on shaky ground in my opinion.

^There's a lesson there for the proposed Gulf region currency union, I guess.

But as regards the Euro-zone - do you think there's enough money to bail out everyone??

As I said, like you, I'm sceptical about the prospects for the Euro's long term survival.

Cheers,
Shafique

Ultimately there is no hard cash at work here -- when you ask is there enough money its all about what the markets perceive. For example Greece in trouble so a bunch of more stable european countries and the IMF get together and say we will bail them out. What does this exactly mean? It means that either (a) european countries (like Germany, Frnace, etc) issue some debt (ie borrow more themselves) and give the money to Greece directly or (b) that they guarantee Greece's own debt. As long as the markets perceive/believe that the amounts borrowed or given for bailouts are sustainable it continues but it will unravel in my opinion.

The middle east/gulf is a little different - countries here with the exception of Dubai harly have any material debt. They borrow more as an excercise to give the bond markets something to do -- I mean Abu Dhabi has a bunch of bonds as does Qatar - why in the world do they need to borrow when their soverign wealth funds completely outsize the amount borrowed? No need - I guess they are just bored or responding to some pitches from clever investment banks.