EC PRESIDENT CALLS URGENT MEETING FOR TOMORROW #2

Hi Angelique, thanks for this. I really am at a loss as to what is going on in the EU. When the Euro was first introduced there was a policy
for all Countries to follow which stated that no Countries should have debt larger than 3% of GDP...........how did all these Countries get in
such a state without the ECB noticing?

It"s obvious one currency does not fit all and had Merkel and Sarkozy allowed Greece to default almost 2 year ago, it would have taken some
time for the Country to get back on it"s feet, but now it is worse . To me it just shows how the EU is ill prepared for a crisis like this so you have Merkel considering leaving the EU, taking the most stable Countries with her because the IMF nor G20 will bail out Greece or Italy.

Panda wrote:

Badboy wrote:I HAVE HAD A THOUGHT,PERHAPS FIRMS SHOULD HAVE A PROFIT SHARING SCHEME OR SIMILIAR, THE MONEY GIVEN IN SUCH SCHEMES COULD STIMULATE THE ECONOMY.
IF EVERYONE BROUGHT FROM FIRMS WITH SUCH SCHEMES,THE UNWORTHY FIRMS WOULD SUFFER.

You mean like the Co-op Badboy and Tesco, except you don"t get the money, you get a voucher for the discount you have earned so it goes back into the Store anyway.

I WAS THINK OF THE CO-OP,OTHER COOPERATIVES,I LOOK THEM UP ON INTERNET(WIKIPEDIA ETC) AND IT COME UP WITH PLACES LIKE GILSLAND SPA TO HOLIDAY IN.
ALSO JOHN LEWIS,WAITROSE AND CO HAVE A PROFIT SHARE AMONG PARTNERS(THEY ARE EXPANDING AS WELL)
PEOPLE COULD ALSO DO MORE BUSINESS WITH SOLE TRADERS AND BUSINESS PARTNERSHIP AS WELL AS BUSINESSES WITH EXPANSION PLANS.

ALSO SUPPORTING BUSINESSES THAT ARE EXPANDING

I ALSO HAVE AN IDEA THAT IF SOME GREEK/ITALIAN ISLANDS(LIKE KYTHERA OR THE AEOLIAN ISLANDS) FOLLOWED A PROFIT SHARING SCHEME,THEY COULD BOOST THEIR LOCAL COMMUNITY/ECONOMY CREATING JOBS,ALSO MANY PEOPLE MIGHT BE MORE INCLINCED TO HOLIDAY IN SUCH PLACES KNOWING IT DOING SOME GOOD.

It"s worth thinking about but the situation in Greece and Italy threatens the stability of the World so what happened to the monitoring by the
Banks lending millions of euros to other banks , treating it like monopoly money.

I WONDER IF SOMEONE SHOULD PUBLISH A LIST OF ALL SUCH BUSINESSES.
PERHAPS A SAPARATE POST SOMEWHERE
IDEA OFF TO START ANOTHER POST

I HAVE STARTED A NEW POST IN BIRTHDAYS AND MESSAGEBOARD ABOUT ABOVE

Euro’s Possible Disintegration Scares U.K. Government

October 3rd, 2011 by Barbara Zigah

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By Barbara Zigah

(eToro Blog) The U.K. Treasury is very worried about the risks that the fragile economy would face if the Euro should break apart, and Chancellor George Osborne believes that they must face up to what could soon be a reality. At the Conservative Party conference being held in the U.K. today, the Chancellor is likely to be as optimistic about Britain’s economic outlook as he is pessimistic in the Eurozone’s ability to avoid a catastrophe. As he sees it, the uncertainty of a break-up is already adversely affecting the U.K. economy, and the actual risks of one would be tremendous.

According to the director of one U.K.-based think tank, trade linkages would be directly severed, and given that 40% of the U.K.’s exports go to the Eurozone, the damage to the export sector would be significant. A decline in the value of the Euro relative to the Pound would make trading conditions even worse for U.K. exporters.

Indirectly, but even more worrying to economists, the U.K. would feel the effects through its financial ties. British banks with holdings in Eurozone sovereign debt instruments would be hard hit by a break-up, and harder hit if and when the sovereign defaults begin.

On the periphery, confidence levels could take a crushing hit, among consumers and businesses alike, who would curtail spending and investment as their worries grew. That in turn could mean a money market freeze, or at the very least, put a tighter squeeze on domestic credit.

HSBC’s chief economist was not the least bit optimistic, seeing another great depression as the outcome of a Euro break-up. Economists point out that while the U.K. is not part of the European Monetary Union, that fact makes no measurable difference in the grand scheme of things. Simply put, theU.K.is not immune because the economy’s very dependence on the survival of the Euro negates it. Mr. Osborne admits that a Euro break-up is not in Britain’s best interests, but there is little that the U.K. government can do except watch and worry and stand ready to pick up the pieces.

Copyright 2011eToro Blog

Angelique wrote:Having thought about this situation "in the whole" as it were - this does seem to me exactly like a comment I read some time ago in a blog:

It went something like this - "Germany has tried several times to defeat not only this country, as in the past, but any country which it feels it can overpower. The Germans are a very patriotic and hard working people, but only in the sense of "their country". They would, if given the opportunity, like to govern over a vastly larger area. This Europe which has been created can so easily facilitate their power lust." (see previous post about "Why Germany Won't Act")

Merkel talked a few days ago about "there should be more Europe" - I took this to mean that the Members should be increased. Am I wrong in thinking that this could be a way of these countries that join who really are not very economically viable, joining but finding they are eventually in the same position as Greece and Italy? Victims of being drawn in a "spiders web" and then left at the mercy of who - Germany?

Hello Angelique that puts a shudder through me. It says exactly what I think myself.

Do you remember our discussions about the euro not losing it's value no matter what happens that day. Well yesterday or Thursday it went up against the pound. How does that one work then???? A currency that does not know it's future gaining. The mind boggles

There are 2 Countries waiting to join the Union , but that was before this crisis, hopefully they will not want to now. The reason the German
Euro has gone up is because the Country is not as exposed to Italian debt, even British Banks are , and it"s economy is bouyant even though it
has cut its growth forecast to 0.5%.

Panda wrote:There are 2 Countries waiting to join the Union , but that was before this crisis, hopefully they will not want to now. The reason the German
Euro has gone up is because the Country is not as exposed to Italian debt, even British Banks are , and it"s economy is bouyant even though it
has cut its growth forecast to 0.5%.

Hello Panda I did not know the German euro was different currency to the euro in other countries. The euro is in big trouble. So coming down to basics why did it go up against the pound? In fact why is it staying stable? We can make all sorts of explanations by going through all the blurb they put but in the end it does not add up.

When countries have problems their currency value goes down. Many countries with this currency are in trouble. Is the German economy that good that it can bail the lot of them out? I doubt it and will it , I doubt it.

Maybe the reason it is staying stable is because they are all going to be cast adrift or made a vassal. It is all strange and very worrying.

fuzeta wrote:

Panda wrote:There are 2 Countries waiting to join the Union , but that was before this crisis, hopefully they will not want to now. The reason the German
Euro has gone up is because the Country is not as exposed to Italian debt, even British Banks are , and it"s economy is bouyant even though it
has cut its growth forecast to 0.5%.

Hello Panda I did not know the German euro was different currency to the euro in other countries. The euro is in big trouble. So coming down to basics why did it go up against the pound? In fact why is it staying stable? We can make all sorts of explanations by going through all the blurb they put but in the end it does not add up.

When countries have problems their currency value goes down. Many countries with this currency are in trouble. Is the German economy that good that it can bail the lot of them out? I doubt it and will it , I doubt it.

Maybe the reason it is staying stable is because they are all going to be cast adrift or made a vassal. It is all strange and very worrying.

Hi Fuzeta, Germans are a very industrious Nation , enterprising enough to get up early in the morning to put their towels on the Loungers
around the Pool in Hoiday Hotels before anyone else .........true!!!!

They forecast a growth of 2% so to revise it to .5% means they too are affected. The difference between it and other Nations is that it
only pays 1.7% on Government loans, whereas Greece, Italy, Spain et al pay a much higher rate. The Germans are much more disciplined
than most Nations, with a fear of inflation which meant a long time ago that it was cheaper to light a fire with Deutchmark Notes than pay
for firewood. Now of course they see the Southern Countries in deep trouble and Merkel is considering bailing out taking Northern Countries
with her and using Drachmas as their currency.

It was a dream to expect 17 Nations to act together, with a fiscal policy from the start it might have worked , but now the dream is in tatters and God knows where we go from here.

fuzeta

Sorry a bit late seeing your post - Panda has very kindly explained why this strange phenomenon with the Euro has occurred.

One lives and learns likewise.

We are more exposed than Germany and our growth rate is lower.

But you must remember that if we hadn't joined the EU we would have been exposed to the vagaries of stronger countries and our ability to trade/export may be affected. So are we exposed now? According to Osborne we are and our Banks.

See Panda's previous post : Euro's Possible Disintegration Scares UK's Government

Italy Looks To Future After Berlusconi Exit

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Silvio Berlusconi was jeered as he left office after handing in his resignation to the president





5:26am UK, Sunday November 13, 2011





Italy's president is attempting to fill the prime minister's
office left vacant when Silvio Berlusconi left power as part of moves
to rescue the economy from crisis.


Giorgio Napolitano will hold consultations will each of Italy's main
political factions on Sunday, with former European commissioner Mario Monti likely to be asked to form a new government to implement tough economic measures.


Ten-minute meetings are scheduled throughout the morning and a new
administration could be in place in time to reassure the markets when
they open on Monday.


The end of Mr Berlusconi's 17-year political career, which included
three stints as premier, sparked celebrations late into the night in
Rome.










Former European commissioner Mario Monti is likely to be named PM





Outside the president's office, where the prime minister handed in
his resignation, several dozen singers and classical musicians performed
Handel's "Alleluia".


Others uncorked bottles of sparking wine and danced while jeering Mr Berlusconi as a "buffoon".


The 75-year-old billionaire had survived numerous sex scandals and corruption allegations but his grip on power was finally ended after he lost his parliamentary majority amid a mounting debt crisis.


Italy's debts stand at €1.9 trillion ($2.6 trillion), or a huge 120%
of economic output. It will have to roll over a little more than €300
billion ($410 billion) of its debts next year alone.


Mr Berlusconi stepped down after the Chamber of Deputies approved
economic reforms demanded by the European Union and Mr Napolitano signed
them into law


The measures include a rise in VAT from 20% to 21%, an increase in the retirement age and widespread job cuts.


When Mr Monti was suggested as a possible candidate on Friday it had a
positive impact with the markets, as the yield on benchmark Italian
10-year bonds fell to 6.48%, below the crisis level of 7% reached
earlier in the week.


Greece, Ireland and Portugal all required international bailouts after their own borrowing rates passed 7%.


The head of the International Monetary Fund, Christine Lagarde, said
on Saturday that the political transition over the next few days should
send a "clear sign of clarification and of credibility" that the country
is now on the right path to get its finances back in order.

Speaking to reporters in Tokyo, she praised Mr Monti, saying she had
great esteem for the "quality" economist with whom she had long enjoyed a
"extremely warm" and effective relationship.

Mr Monti is expected to be sworn in tomorrow as President until an election is called. However, Berlesconi is expected to still be influential
because of his many Business interests and will be working in the back room..

Crowds were last night jeering as Berlesconi was being driven from the Presidents Office. Question:- If Berlesconi was hated so much, how did he manage to rule the Country for 17 yrs ?

There is still talk of Germany setting up a two tier Europe, mainly because there is so much contagion amongst the Southern Countries and
the certain knowledge that Greece and Italy will not easily reduce their debt . Apparently Germany has a storage of Deutchemarks.

Angelique wrote:fuzeta

Sorry a bit late seeing your post - Panda has very kindly explained why this strange phenomenon with the Euro has occurred.

One lives and learns likewise.

We are more exposed than Germany and our growth rate is lower.

But you must remember that if we hadn't joined the EU we would have been exposed to the vagaries of stronger countries and our ability to trade/export may be affected. So are we exposed now? According to Osborne we are and our Banks.

See Panda's previous post : Euro's Possible Disintegration Scares UK's Government

Hi Angelique whatever they tell us, whoever tells it to us. Whatever I read, it still does not add up.

There is a school of thought that it will not affect us as badly as the way they are saying it will. Banks, big business and Governments have their own agendas of course. JMO

Latest News, Berlesconi wants to choose some of the Cabinet Members for the new Party, Monti , the new Prime Minister until the Election
wants all technocrats like himself, this latest demand means there could be a delay until Wednesday, spooking the Stock Market tomorrow
in the process. Berlesconi wants his cronies in the Cabinet because of his Business and has no regard for the People or his Country.

Who is Italy's 'Super Mario' Monti?

By Laura Smith-Spark, CNN
November 13, 2011 -- Updated 1929 GMT (0329
HKT)


Mario Monti has been nominated as a successor to
Italian Prime Minister Silvio Berlusconi.

STORY HIGHLIGHTS

• Mario Monti has been nominated to succeed Silvio Berlusconi as prime
  minister
  
• He recently was made a "senator for life" by Italy's president
  
• Monti was a European commissioner, part of rulings challenging Microsoft and
  GE
  
• He has advised governments, founded a think tank and now leads an Italian
  university
  

(CNN) -- Cool, calm and collected, Mario Monti could not be
more different from Italy's flamboyant former Prime Minister Silvio
Berlusconi.

The former European commissioner on Sunday was nominated to succeed
Berlusconi.

Italian President Giorgio Napolitano announced Wednesday that he had
nominated Monti as a "senator for life," a title bestowed on those who have held
distinguished roles, heightening speculation about his candidacy.

If he becomes prime minister, Monti could be expected to bring a distinctly
different approach to governing than Italy has experienced over the past three
years.

While the hot-blooded Berlusconi was for many years a master of forming
political alliances, Monti is known for his achievements as a "Eurocrat," at the
heart of Europe's institutions.






Mario Monti named Italian
Prime Minister

Dubbed Super Mario for his work in international finance, he served as a
leading European Commission member for a decade -- including as commissioner for
its financial services, market and taxation committee between 1995 and 1999 and
as head of its competition committee from 1999 to 2004.

In the latter role, Monti gained prominence for his part in blocking a merger
between U.S. firms Honeywell International and General Electric, thought to be a
move that highlighted Europe's newfound regulatory clout.

He also tangled with U.S. computing giant Microsoft, ruling in 2004 that it
had broken EU competition law by having "abused its virtual monopoly power over
the PC desktop in Europe." Microsoft was hit with a huge fine and ordered to
share key information with its rivals.

While such moves made headlines, Monti's interactions in business are still a
stark contrast to that of Berlusconi.

Besides being active in politics, the outgoing prime minister is also a
business personality as the owner of media and financial companies, as well as
the legendary football club A.C. Milan.

But beyond advisory roles with investment firm Goldman Sachs and Coca-Cola,
Monti's resume suggests he's as much a creature of academics and policy-making
as business.

Born in 1943 in the town of Varese in northern Italy's Lombardy region, Monti
earned an economics and business degree from Milan's Bocconi University. He then
did his post-graduate studies at Yale University, before returning to
Europe.

In 2005, shortly after leaving the European Commission, according to a bio on
that international organization's website, Monti launched Bruegel, a
Brussels-based think tank focused on economic issues.

The next few years saw Monti remain busy in international affairs. That
includes being appointed by French President Nicolas Sarkozy to a panel to look
at promoting French economic growth, as well as helping broker a 2008
electricity-sharing agreement between France and Spain.

All the while, he has appeared to remain closely linked to his alma mater,
Bocconi. Holding the position rector from 1989 to 1994, the university notes
that Monti is president of the school.



CNN's Nina Dos Santos contributed to this report.

France Keeps a Watchful Eye on Financial Turmoil in Italy

By NELSON D. SCHWARTZ and LIZ ALDERMAN

Published: November 13, 2011

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First it was Athens. Then Rome. Could Paris be next?

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While Italy has replaced Greece as the focus of anxiety amid Europe’s worsening debt crisis, investors are increasingly concerned about the outlook for France, whose banks are among the world’s biggest and are closely linked with their counterparts in the United States.
One crucial gauge of investor sentiment, the difference between what France pays to borrow versus what Germany pays, has doubled since the beginning of October, and last week reached its widest point since the formation of the euro currency zone in 1999. Meanwhile, speculation that France could soon lose the sterling triple-A rating on its sovereign debt intensified after Standard & Poor’s mistakenly told clients on Thursday that it was downgrading France’s debt.
The jump in Italian bond yields to more than 7 percent last week, on concern about Rome’s ability to borrow, reminded investors just how much Italian debt French banks hold.
But French banks also hold a lot of French government bonds, whose yields have risen in tandem with concerns that Paris’s finances may be strained as it foots a larger bill to help prevent the crisis from engulfing Italy.
“Once you are dealing with Italy, you are dealing with France as well,” said Hans Mikkelsen, senior credit strategist at Bank of America Merrill Lynch. “This is cutting into the core.”
French banks are also more dependent on short-term financing than their rivals elsewhere, leaving them vulnerable if Italy’s problems create a Lehman-like freeze in credit markets.
For the moment, the ascent of a new interim government in Rome and the appointment of Mario Monti, a former European commissioner, as prime minister, have calmed those fears. French politicians, regulators and bankers insist that Italy’s problems are contained, and will not affect French banks, which have slashed their holdings of Italian sovereign debt in the last few months.
But French banks, and others on the Continent, have traditionally turned to American money-market funds to finance the gap between what they possess in deposits and what they owe, and though French banks have cut this borrowing substantially in recent months, it is still huge. At the end of October, money-market funds in the United States owned $84 billion worth of French debt.
Estimates for total American bank exposure to France vary widely. Direct holdings of French sovereign debt are small but total exposure runs into the hundreds of billions, according to the Bank for International Settlements. A recent Congressional Research Service report estimated that American bank exposure to German and French banks totaled more than $1.2 trillion
The roots of France’s exposure to Italy lie in the decision by French banks to expand aggressively over the last decade by acquiring banks there and operating big branch networks. BNP Paribas, which bought Banca Nazionale del Lavoro of Italy five years ago, holds 12.2 billion euros in Italian sovereign debt, despite reducing its Italian bond holdings by 40 percent since the summer and whittling its exposure to Italy to 1 percent of its total commitments.
“We are in a much better position to face any problems than we were three to four months ago,” said Antoine Sire, the head of communications at BNP Paribas in Paris. A recent stress test by the European Banking Authority showed that BNP did not need to raise more to guard against a worsening of the crisis.
Crédit Agricole, another French financial giant, holds 8.7 billion euros worth of Italian bonds. Société Générale, whose shares have been pounded in recent months on fears of a Greek default, holds 1.5 billion euros in Italian bonds after it also slashed its holdings.
Indeed, among banks on the Continent, French institutions have been the most exposed to Italy, according to a recent report by Keefe, Bruyette & Woods, holding more than $100 billion worth of sovereign Italian bonds and on the line for an additional $300 billion in loans to private borrowers like Italian companies and consumers, though these figures have been dropping in recent weeks.
As a result, imposing a write-down in the value of Italy’s debt, a so-called haircut, would have a much more devastating effect on bank capital levels than the 50 percent reduction in the face value of Greek debt agreed to by European leaders last month.
What is more, the amount of money owed by Italy — just under 2 trillion euros — dwarfs the 350 billion euro debt load of Greece.

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Angela Merkel is to address the German Parliament and is calling for fiscal union and , for the first time POLITICAL Union. There is no way
the rest of the EU will agree to this , and suggests Merkel has run out of ideas. It is possible the German Government will want to distance
itself from the European Countries in crisis by opting out of the EU , because no one believes Greece will not default , nor that the people
of Italy will not strike against the harsh measures Monti will have to take to bring down Italy"s monetary crisis.

The ECB is resisting calls for backstop lending.

Portugal is facing more financial problems and is getting little support now that Italy has taken centre stage. Spain too is not likely to meet
it"s target for decreasing it"s debt with the Telefonica crisis making 6000 job losses in Spain. France does not bear close scrutiny with it"s
banks heavily exposed to Greek and Italian loans.

Former Greek Economy Minister says Papademos is an excellent choice , will be in power long enough to secure the loan but opposition Parties
will impede his efforts to implement reforms. Mitarachi of the New Democracy Partys says it is imperative that the new Leadership has a clear
mandate to adopt the measures necessary, the previous measures suggested by Berlesconi were inadequate.

Apparently Merkel is not ruling out a breakaway from the EU if the German Government agrees this is the only alternative.

European Countries stock market down ahead of Italian Bond issue at 10.30am of 3 billion 10 year notes. If Italy sells these at a reduced rate
to the 6.37% on current Bonds it will be a sign that the Market is willing to gamble .

The sale of Spanish Bonds today incurred a higher yield of 6.12% as did Italian Bonds 6.7%, output is 50% down in Spain .

Merkel insists EU must complete Political Union although analysts say the logistics for this are "mind blowing" and in no way feasible . One
analyst suggested Merkel knows this, but if the rest of the EU Countries reject this plan it gives her the reason to withddraw from the EU.

Spain is considered very weak and with so many Banks in trouble they will find it is not easy to borrow, some will merge others will fail.

The ECB is adamant that it will not print money which would devalue the Euro, and is slashing it"s purchase of Bonds. The general concensus
is the EU will weaken further.

CNN) -- The Euro crisis is not just a Greek crisis, or an Italian
crisis, or now even a French crisis.

It is an American crisis, too, a crisis that may thrust the U.S. economy back
into recession in 2012.

If the Euro cracks up, many European banks who hold Euro-denominated bonds
will discover that their bonds have lost value. The bonds won't fall to zero
(hold on a second for the reason why not), but they will lose enough value to
play havoc with the bondholders' capital. The banks will then either have to
seek government help or stop their lending to businesses and consumers or
both.
David Frum



The bank crisis will translate into a severe Europe-wide recession, just as
the U.S. financial crisis of 2008 created a severe recession in 2009.

Recessions that originate in the financial system cause more suffering and
last longer than other kinds of recessions, a record painstakingly (and
painfully!) documented by Ken Rogoff and Carmen Reinhart in their now-classic
study, "This Time It's Different."

The European Union represents a bigger economy even than the United States.
If the euro cracks, and euro-holding banks fails, the pain will cross the
Atlantic, as the pain of the U.S. crash of 2008 crossed the Atlantic in the
opposite direction.

European financial institutions may lose the ability to repay U.S. creditors,
inflicting more losses on an already traumatized U.S. financial system.






Europe's moment of truth over
eurozone






Europe's crisis, America's
problem






Pimco CEO on Euro crisis


Collectively, the eurozone countries are far and away the largest foreign
investor in the United States. If the eurozone economies slump, Americans will
find it harder to raise capital for new projects and businesses.

As a single economy, the EU is America's largest trading partner. If it buys
less, American exporters will suffer.

This catastrophe could erupt almost literally at any minute.

The United States is not helpless to avert this crisis. In fact, the United
States could play an important role to avert the crisis, not only with money
(although money may be needed), but also by standing with those Europeans
willing to run the political risks to address the crisis.

But the indispensable first step is to understand the crisis.

Many Americans perceive the euro crisis as a crisis of government deficits
and government debt. That may have been true of Greece, but it's certainly not
true of France, the latest eurozone country to come under pressure in the
financial markets. The German public debt is actually slightly larger than the
French public debt, yet it is French bonds that the market is selling off.

Why?

If the euro cracks up, each country in Europe will be forced to (re)create a
new currency of its own.

In such a world, German bonds would probably rise in value, while French
bonds would probably fall quite sharply. As the markets become more anxious that
the euro may fail, they exert pressures that help rip the euro apart.

Let me present some very simplified math, using made-up numbers, just to help
explain the idea.

Imagine you were to buy a German bond worth 1,000 euros. That bond now pays
interest of 20 euros a year, equivalent (let us say) to $30 U.S.

The crisis hits. The euro cracks up. Germany creates a new deutschemark equal
to 1 euro. Your 1,000 euro bond is now a 1,000 new DM bond, paying 20 new DM a
year. But because the euro implicitly undervalued German currency, it is highly
likely that the new DM will rapidly appreciate against the dollar. In that case,
your interest payment of 20 new DM would soon buy more dollars than your old
interest payment of 20 euros.

Result: You are very happy to own German debt, despite the fact that
Germany's total debt equals 83% of GDP.

Now imagine you were to buy a French bond worth 1,000 euros. That bond
currently pays interest of 30 euros a year, equivalent to (say) $45.

But if the euro were to crack up, and France were to adopt a new French
franc, that franc would probably decline against the dollar, because the current
euro arrangement implicitly overvalues French currency. Instead of buying $45,
your interest payment of 30 new francs might be worth only $30, perhaps even
less.

Result: You are increasingly nervous about holding French debt, despite the
fact that France's total debt equals only 82% of GDP.

People say: "The U.S. could become Europe if we keep accumulating debt."

Yet America's debt burden is already higher than France's, and markets accept
U.S. debt with profound calm. The difference: it's not that markets are worried
that France can't pay its debts. They are worried that France won't pay its
debts with euros. By contrast, nobody doubts that the U.S. government can pay
its debts with dollars.

America has in the past faced the kinds of problems that France, Italy and
the others face now.

In the panic of 1893, holders of American silver certificates (the paper
money of the time) suddenly panicked that gold was going to become more valuable
relative to silver. They began demanding gold in return for their paper,
eventually draining federal gold reserves to the legal minimum. At that point,
the federal government refused to release any more gold, and the country plunged
into one of the worst depressions in U.S. history, exceeded only by the Great
Depression of the 1930s.

The U.S. in 1893 was a very rich country, and its debt burden was really
quite light. The total resources of the country more than sufficed to pay its
total debts, as the resources of France and Italy more than suffice to pay their
debts.

This was not a debt crisis, such as you might have today in a genuinely poor
African country. It was a crisis caused by issuing debt in a currency (gold back
then, euros now) that the issuing government did not control.

Europe's options now basically reduce to two: Either smash up the euro to
restore each individual government with its own individual currency (accepting a
horrific recession along the way) or else build a single new pan-European
government to control the new pan-European currency (with considerable inflation
risk along the way).

Neither option is hugely attractive. Mistakes are easier to make than to
undo. But the second choice does look seriously less ugly. Because the United
States would suffer some of the pain from option one, it would be in the
national interest to urge, and to contribute to support, the cost of option
two.

Option two will involve transition costs. The original purpose of the
International Monetary Fund, to which the United States remains the single
largest contributor, was to ease monetary shocks. Here at last is the biggest of
them all. The IMF needs to involve itself actively, and Americans should not
begrudge the cost of averting what otherwise could be a financial and economic
catastrophe of global impact.

How might Greece leave the euro?

By Kabir Chibber Business reporter, BBC News The "drachma", an ancient Greek
currency unit, translates as a "handful" - a lot less than what Greece will need
to pay off its debts
Continue
reading the main story
Greece
crisis

• Q&A: Greek debt crisis
  
• Confronting suicide as problems mount
  
• Austerity plans in full
  
• Banks bristle at Greek haircut plan
  

Greece's latest woes have raised
something that was previously unthinkable - the possibility of the Greek people
rejecting the euro.

Prime Minister George Papandreou has said that rejection of the bailout would
mean an exit from the euro. And the exasperated French leader, Nicolas Sarkozy,
told Greeks: "Abide by the eurozone rules or leave."

So, for the first time, the subject of a country leaving the eurozone has
been raised at the highest levels of the 27-member European Union.

With Greece unable to devalue its currency, the country is hobbled with
crippling debt payments it can't afford.

Many economists (and Greek people taking to violent protests) think leaving
the euro is the best way to get out of this mess.

So how would leaving the euro work?

New old currency

If Greece were to act unilaterally and just do it, the so-called "nuclear
option" involves introducing a new currency - the new drachma - and letting
supply and demand do what it does.

In this case, probably more supply than demand.

"The new currency would fall through the floor and inflation would go through
the roof," says Peter Dixon, an economist at Commerzbank.



What went wrong in the
eurozone?


It would be a legal minefield, as basic financial transactions such as
mortgages would have to be redenominated. But that would not be the end of
it.

"Living standards would be hit hard. It might seem like an attractive option,
but the short-term costs are massive."

Wouldn't banks - who have already agreed to take a "haircut" of 50% - just
accept the devalued new drachma-denominated debt?

"Well, no, because it may well halve in value again," Mr Dixon says.

The assets of banks inside Greece and those outside holding Greek debt would
be devalued. And of course, they would not be able to borrow commercially.

Greece would probably have to impose capital controls to prevent all the
money leaving, much as Malaysia did in 1998 after the Asian financial
crisis.

So in the best-case scenario, Greece would have no buying power, everything
would be extremely expensive and it would also be broke.

Lessons of the past

But the idea is that, with its currency so weak, Greece's economy would grow
rapidly.

People often use Argentina as a comparison of such an outcome, which
Nobel-prize winning economist Paul Krugman has said is "an imperfect parallel".


Argentina, which had its peso linked to the US dollar, defaulted on $102bn of
debt during a financial crisis in 2001-02.

In 2005, the country persuaded 76% of creditors to accept a debt swap that
reduced the value of their bond holdings by nearly two-thirds.

But Argentina had to go through years of pain, and at least had the advantage
of its own currency. The mechanics of de-pegging were easier.

Greece has to start afresh.

One comparison is Iceland, which in 2008 had a run on its currency when its
banks failed.

The Icelandic krona lost more than half its value in one summer. It quickly
faced interest rates at 15%, and inflation at 14%.

But Mr Dixon suggests the closest recent parallel to a euro exit might well
be the splitting of Czechoslovakia.

In February 1993, the Czechoslovak koruna was split into the Czech koruna and
the Slovak koruna - at a par of one-to-one. (One version no longer exists;
Slovakia adopted the euro in 2009.)

But in that scenario, as with the replacing all the major currencies of
Western Europe with the euro, people had time to adjust to the concept of a new
currency.

"You had a long period of time to get used to the single currency," Mr Dixon
says. "You're not going to to get it the other way around.

Treaty of good-bye

One major issue is that there simply is no mechanism to leave the euro.

It was never envisaged by the bright-eyed politicians who created the impetus
for the currency, which debuted in 1999.

"The treaties indeed confirm what we have been saying here: the treaty
doesn't foresee an exit from the eurozone without exiting the EU," said a
European Commission spokeswoman on Thursday.

The treaties she is referring to are the Maastricht treaty from 1992, which
led to the creation of the euro, and its successor, the Lisbon treaty in
2007.

So under its current obligations, for Greece to exit the euro, it would have
to leave the EU. This option was only added in Article 50 of the Lisbon
treaty.

Leaving is straightforward; it involves a member state notifying the European
Council - that is, the heads of state of the EU - that it wants to go.

The Council then agrees the terms of the exit via a qualified majority.

Would leaving the EU be the end of the world for Greece? Probably not.

The key part of Article 50 involves "setting out the arrangements for its
withdrawal, taking account of the framework for its future relationship with the
Union".

Iceland, Liechtenstein and Norway all do fine and they are not in the EU.
They are part of the European Economic Area, meaning they get access to the
single market.

Switzerland is not even a member of this organisation, and it trades with the
EU with few problems - the odd tax exile aside.

The EU could then bail out Greece at a lower exchange rate, even.

But again, the chaos of going from inside the EU to a country outside of it
but still slap bang in the centre of Europe could possibly be even worse than
what it is going through right now.

"What happens then is that cure ends up being worse than the disease," Mr
Dixon says.

And the question would then become whether a queue would form at the door to
leave the EU.

Would other bailed-out nations say enough is enough and join Greece? Would we
then get the new punt? The new escudo? The new lira?

A Small Businessman's View Of The EEC

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Russell Luckock

November 14, 2011 2:21 PM

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When Edward Heath took the United Kingdom into the EEC in 1973, I believed that
this would be very beneficial to British industry. The Prime Minister told us that this
would create a vast trade area, cutting at a stroke, the enormous amount of paperwork
that had to go with every delivery of goods made abroad.
However, whilst it became much easier to export on to the Continent, the amount of
extra trade acquired was disappointing. I soon learnt that many countries were very
nationalistic, especially France and Germany. I would quote, learn that my price was
favourable, but not win the order. It took time to realise that my prices were being laid
before local suppliers, who were invited to undercut the British quote.
Making and exporting component parts is not easy. Over the years, I have found
that this nationalism has been increasing. To add to the problems, my competitor’s
governments go out of their way to support manufacturers, irrespective of the rules
of the EEC, whereas, in this country, we do not enjoy such assistance. It is a fact that
successive British Governments have gone out of their way to “gold plate” new EEC
regulations handed down, which puts our industries at a disadvantage.
Despite constant lobbying, nothing has been done and British industry continues
to have to work at a disadvantage. There now appears to be a rising ground swell of
opinion, which was reflected by some Members of Parliament, who recently took part
in a protest vote in the House of Commons. David Cameron is beginning to realise
that he could have a developing problem, and has stated that he supports change and
reform.
The snag is that he will have to persuade 26 other nations to his point of view, and
the plain fact is that many of those do not like the British attitude to the Common
Market.
Nevertheless, opinion polls suggest that the voters are not happy at the way this
nation is being required to toe the line in so far as EEC legislation is concerned. I for
one, back in 1973, did not realise that our courts and parliament would eventually
become subordinate to Brusselles, and quite frankly, I do not like it.
David Cameron is reluctant to test public opinion by way of a referendum, for such
a move could prove extremely embarrassing. However, if this rising tide of protest is
to develop, some action will have to be taken.
I am all for a free trade area, keeping paperwork to the absolutely minimum, but
am very unhappy of the prospect of being ruled from Brusselles. Many continental
leaders are wishing to pursue a policy of further integration, and I think that we have
gone to far already.
Edward Heath told us that it would be a level playing field for commerce. There
never has been, and never will be such a state of affairs. Reform is therefore badly
needed, and Government would be wise to realise that action must be taken. Failure to
act could be fatal!

Super Mario' Races To Pick Italy's Cabinet

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4:48pm UK, Monday November 14, 2011





Mario Monti has begun talks over the selection of his
cabinet, as he meets with Italy's numerous political parties just hours
after being appointed Italy's prime minister.


The respected economist accepted President Giorgio Napolitano's offer
to form a new government after he won crucial backing from Silvio
Berlusconi's conservative party.


Financial marketswelcomed
his appointment, but fears over the wider eurozone crisis resurfaced as
the country's five-year bonds demanded their highest yields since 1997,
and Portugal fell back into recession.


:: Follow the latest on the eurozone crisis on the live blog


Soon after the decision, Mr Monti said: "Our country needs to redeem
itself with strength. We need to give our children a concrete future.


"There is an emergency, but we can overcome it with a common effort.


"In a moment of particular difficulty, Italy must win the challenge
to bounce back, we must be an element of strength and not weakness in
the European Union, of which we are founders."


Mr Monti is expected to pick academics from Milan's two top business
schools, Bocconi and Universita Cattolica del Sacro Cuore, for the top
positions in his cabinet.













His
appointment came a day after Mr Berlusconi resigned, bowing out after
world markets heaped pressure on his country's borrowing ability,
reflecting their loss of faith in his economic programme.


He had survived numerous sex scandals and corruption allegations but his grip on power finally ended after he lost his parliamentary majority amid a mounting debt crisis.


Italy's debts stand at 1.9trn euros (£1.6trn), or 120% of its economic output.


It will have to roll over a little more than 300bn euros (£2.57bn) of its debts next year alone.


When Mr Monti - dubbed "Super Mario" by the Italian press - was
suggested as a possible candidate on Friday it had a positive impact on
the markets, with Italy's 10-year bond yield benchmark falling to 6.48%.







BERLUSCONI ADDRESSES NATION AFTER HE QUITS












Minutes before he was appointed to the top job, Mr Berlusconi made an
address on television in which he said he was "sad" that his "generous
gesture" to resign was greeted by "hoots and insults" from crowds
outside parliament.


He vowed to keep up his efforts to "renew Italy" through his continued presence as a lawmaker.


He also made a parting call for the European Central Bank to become a lender of last resort to prop up the euro.


"This has become a crisis for our common currency, the euro, which
does not have the support that every currency should have," he said.


"That is to say a bank which is a lender of last resort and a
guarantor for the currency as other currencies have, such as the dollar
or sterling.


"This is what the European Central Bank should become if we want to save the euro and with it, Europe."

Germany votes to allow any EU Country to leave.....don"t the other 16 Countries get to vote? What about the Treaty?

France teetering on the edge of losing it"s AAA rating,

EFSF cannot operate with less than 6 AAA rated Countries

Papademos opening speech pledges to keep Greece in the EU.