Blogs' News : 29th October

The Bank Bailouts Are Very Well Intended, But Where Is All The Money Going To Come From? Edward Hugh, A Fistful of Euros (en)
" ... So the big question now is, do these various institutions have the resources to back up their guarantees, should the need arise? ...
... According to the FT article the difficulties Austria, which has a triple A credit rating, is facing only serves to highlights the extent of the deterioration in the sovereign bond market, where benchmark indicators of credit risk such as the iTraxx index hit fresh record spreads yesterday ...
... Spain, which alos currently has a triple A rating, and Belgium have both cancelled bond offerings in the past month because of the market turbulence, with investors again demanding much higher interest rates than debt managers had bargained for ...
... Also, another story in Bloomberg gives us a further glimpse of how the EU governments are planning to do all that financing. The German government, it seems, is going to print IOUs (sorry, bonds) and give them directly to the banks. That is, they are not going to auction bonds and give the proceeds, they are simply giving the paper, and presumeably paying a coupon (or interest) ..."

As One CEE Country After Another Visits The IMF Sick Room, Will Poland Be Next? Edward Hugh, A Fistful of Euros (en)
" ... Central European stocks declined for a fourth consecutive day on Monday, with indexes in Vienna and Budapest heading for record monthly drops, as concern mounts that the global financial crisis is going to have a severe impact on economic growth across the entire region ..."

Romania In “Close Dialogue” With IMF, Bulgaria To “Seek Advice”. Edward Hugh, A Fistful of Euros (en)
" ... Romania is in “close dialogue” with the International Monetary Fund, though it is not asking for a loan from the lender that has offered support for Ukraine and Hungary ... This news today is not entirely unexpected, since only yesterday S&P’s downgraded Romanian foreign currency debt to what is effectively “junk bond” status ..."

News That Scares Me. Edward Hugh, A Fistful of Euros (en)
First off, we have Iceland, where the central bank has just raised interest rates by a whopping six percentage points ... Now, I know they have to do something like this, but just think about it for a moment. Eighteen precent is a very attractive rate for you if you put your money there (and assume that the banks don’t default) - but how the hell are the Icelanders themselves going to pay all the interest that people will be clocking up? ....

If We Survive The Credit Crunch And Global Recession (Or Depression), Then What? financialguy, BlogActiv (en)

L'euro, objet de désir à l'Est et au Nord de l'Europe. Jean Quatremer, Les Coulisses de Bruxelles (fr)
" ... Jusqu'il y a peu, les autres monnaies européennes ont bénéficié du bouclier de la monnaie unique. C’est terminé : en dehors de la couronne slovaque, qui va intégrer la zone euro en janvier prochain, toutes les monnaies de l'Union sont attaquées. Les couronnes suédoise et danoise, le forint hongrois, les monnaies baltes (couronne estonienne, lat lettone et litas lituanienne), le lev bulgare, le leu roumain, le zloty polonais et la couronne tchèque perdent du terrain face à l'euro et au dollar ...

Serves them right. Richard, EUReferendum (en)
" ... Based on the assumption that this German company would share the fate of the rest of the automotive industry, speculative "short sellers" have been holding short positions in anticipation of the share price plummeting as the demand for vehicles drops in the recession.Instead, as news came though that Porsche - which has been attempting to take over the VW for some years – had secured a larger stake in the company than anyone had thought, shares rocketed, prompting "a huge scramble to cover short positions in Volkswagen, which had been the most shorted stock in Germany's benchmark DAX index." ...
... One hedge fund said: "There have been some dark moments over the past few months but none blacker than this. We couldn't have dreamt a worse scenario." ...
... We do not claim any great prescience – but then we are not highly-paid analysts who do this sort of thing for a living. But anyone with at least moderately-tuned political antennae would have cautioned that you treat VW issues with the very greatest of care, tainted as they were by a complex political overlay. The "normal" assumptions simply do not apply ..."

French Protectionism for Europe? Dodo, European Tribune (en)
" ... You may also remember that rejection from other EU members came swiftly, and with particular harshness from Germany, where Sarko's protectionist push is seen as yet another attempt by France to force its model on the EU after previous failed attempts.
However, a new poll for German magazine Stern shows that the political elite is totally out of tune with public sentiment: the overwhelming majority of the population would support Sarko's plan ...
... The Franco-German difference over the state's role in the economy goes back to well before the emergence of (modern) neoliberalism -- for the German side, in fact it has its ideological roots in what was back then also called Neoliberalismus, West German social liberalism. In the Rhenan model of capitalism, for the state to be an arbiter between employers and employees, it shouldn't be the former itself. Consequently, German politicians fought statist-dirigist proposals at the EU level for 50 years ...

Hungary facing default. Ironies Too (en)
" ...The IMF had two reasonable conditions. One: plan a budget in which even in the most pessimistic case, you plan spending which you have funds for. Two: in a situation like this, don't commit to reducing revenue ...
... The IMF conditions will be of interest for the UK ... At present Brown is expecting the independent Bank of England to reduce UK interest rates while the government itself plans huge new borrowings which could only be achieved with massively raised interest rates to compensate for the daily more severe sterling currency devaluation risks.In the absence of any real political opposition party it is now increasingly difficult to see any way for the UK to escape from the equivalent of an economic Armageddon ... "

Thatcher, Bruges and future Tory EU policy. Nosemonkey, EUtopia (en)
" ... the Tories under David Cameron still have no EU policy. I’ve been hunting for one for a while now ... and they still seem no closer to working out what they even think of the thing ... The thing is, Thatcher’s near-infamous Bruges speech remains a great starting point for the Tories to set out their position on Britain’s involvement with the rest of Europe ...
... The speech is well worth reading in full ... it actually contains much that is positive towards a European Union, and fully supports continued British engagement at the heart of the process. It’s just that it doesn’t support the direction the current EU has been heading for the last 30-odd years towards greater centralisation and uniformity. Pretty much all of Thatcher’s suggestions back then are still being made to this day - and not just by eurosceptics ..."

A constructive Vision for Eurosceptics. RZ, Re:Europa (en)
" ... Exactly! It would be a really positive devolpment if Europhobes would present a vision how they think the EU should be structured in the future along the lines of this article. This would finally enable us to have constructive debate about the EU ..."

Debunking the case against NATO enlargement: a reply to the WPR op-ed. Vitaliy, The 8th Circle (en)
" ...Balance of power theory tells us that if Russia grows more threatening, the European Union — now richer than the U.S. — will respond by investing more on defense than its current average of 2 percent of GDP, and by further integrating its military capacity ..."