'Run For Your Lives': Euro Zone Considers Solution of Last Resort

[marmar]

The ink on the most recent European Union summit agreement was hardly dry before it became clear that it was insufficient. With investors now increasingly wary of Italy, the consensus is growing that the European Central Bank -- and the IMF -- will have to play an even greater role. But will it be enough? By SPIEGEL Staff

When government heads from Germany and the US get together, protocol usually calls for as much pomp as possible: honor guards, hymns, flag parades and the like.

But the tone was decidedly more businesslike at the G-20 summit in Cannes last Thursday. German Chancellor Angela Merkel and US President Barack Obama, together with US Treasury Secretary Timothy Geithner and German Finance Minister Wolfgang Schäuble, met in a mundane conference room at the five-star Intercontinental Carlton Hotel. The group had serious issues to discuss.

.....(snip).....

'Run For Your Lives'

"Run for your lives" is the new motto in Europe, and not just among banks and insurance companies, which are selling off southern European bonds as quickly as they can, but also among ordinary holders of savings accounts. Banks and regulatory agencies are noticing that anxious citizens throughout Europe are trying to bring their money to safety. The flight of capital from Italy, Spain and Greece is in full swing. ............(more)

The complete piece is at: http://www.spiegel.de/international/europe/0,1518,796280,00.html

[ProgressiveProfessor]

1. I have spoken to some people who compared this to move to credit unions

Not even close. The volume of capital that is jumping ship in Europe is massive and in many cases the nations in trouble can do little about it.

[elleng]

3. No, not close or analogous;

move to credit unions is a political statement, dumping European bonds is a wise financial move, but I support each.

[ProgressiveProfessor]

7. Their response was "its all just moving money"

ignoring the scale and intent. It really is a stampede away from some countries in Europe right now.

Another interesting aspect of the move away from the big banks to CUs etc was that many people for the first time realized there were financial alternatives. Activists have understood this for years but your average working people clearly did not. It may not be a major political epiphany for all of them, but it may be a start for some.

[HopeHoops]

2. That's nothing. They're going to dump the Euro and go back to using sea shells and shiney rocks.

[FarCenter]

4. The Greek 1% is leaving Greece

From the story:

Switzerland is a popular safe haven. The Greeks have reportedly deposited about €280 billion in Swiss banks. At the airport in Athens, passengers are often caught leaving the country with upwards of €100,000 in cash, well in excess of the €10,000 limit.

This capital flight has triggered a boom in the European real estate market, especially in Berlin and London, where wealthy Greeks are buying second homes. Knight Frank, a real estate firm, estimates that about €290 million from Greece was invested in London in 2010 alone.

[ProgressiveProfessor]

8. It is a lot more than the Greek 1%

Anyone with liquidity in the troubled countries are getting it out of there in Euros while they can. The dumping of the national bonds is also a serious concern since those countries will also be unable to borrow at reasonable rates without collateral.

[femrap]

5. K and R....great article.

And from the article:

"Obama, at any rate, felt that they would have little value. Instead, he confronted the Germans in Cannes with a suggestion so radical that it alarmed both Merkel and Schäuble. To save the common currency, Obama proposed that the Europeans follow the example of the American Federal Reserve, which buys up almost unlimited amounts of US treasury bonds when necessary.

The Germans pointed out feebly that the ECB operates within a completely different tradition than the Fed, and that it also pursues a different mission. But it is becoming increasingly clear to Merkel and her finance minister that, in the end, only the ECB will be able to save the euro if the crisis continues to escalate. It is the only European fiscal policy institution capable of taking action, and it also comes equipped with unlimited firepower. It can never run out of money, because it can simply print new money when needed.

This is an approach Germany's representatives in the ECB council have strongly resisted. Former Bundesbank President Axel Weber and former ECB chief economist Jürgen Stark resigned from their posts in the dispute over ECB purchases of Greek and Portuguese bonds. Jens Weidmann, the new Bundesbank president, is likewise strictly opposed to funding government deficits by printing money. This position is understandable, given that the Germans have, twice in the last century, seen how this sort of monetary policy can end in hyperinflation and national bankruptcy. But how long can the Germans resist the pressure from other members?"



And quoting Larry Summers at the end of the article....WTF does he know? Look at the mess he has presided over and then split.


Italy should simply take over The Vatican...that would solve their financial troubles. It has plenty of money.

I just don't see why each nation can't do as Iceland did. And why not go back to their individual currencies...this 'New Money Order' is simply not working. Let the Banksters stew in their own juices. Let the bond traders take their losses. Let the Rich Fail!

[Romulox]

6. I predict a dollar-backed Euro will replace the dollar as the world's reserve currency!

:rofl: