EU rescue costs start to threaten Germany itself

Discussion in 'Economy' started by Trajan, Nov 26, 2010.

  1. Trajan

    Trajan conscientia mille testes Staff Member

    Jun 17, 2010
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    The Bay Area Soviet
    this was/is inevitable of course. Germany has their own issues to worry about, yet they are seen as a cash cow court of last resort by many in the EU. Portugal, Spain have been mentioned, when does Italy check into the cash infusion clinic? Will the IMF EU and US hit the wall first with Spain or? What will be left?

    The escalating debt crisis on the eurozone periphery is starting to contaminate the creditworthiness of Germany and the core states of monetary union.

    Credit default swaps (CDS) measuring risk on German, French and Dutch bonds have surged over recent days, rising significantly above the levels of non-EMU states in Scandinavia.

    "Germany cannot keep paying for bail-outs without going bankrupt itself," said Professor Wilhelm Hankel, of Frankfurt University. "This is frightening people. You cannot find a bank safe deposit box in Germany because every single one has already been taken and stuffed with gold and silver. It is like an underground Switzerland within our borders. People have terrible memories of 1948 and 1923 when they lost their savings."

    The refrain was picked up this week by German finance minister Wolfgang Schäuble. "We're not swimming in money, we're drowning in debts," he told the Bundestag.

    While Germany's public and private debt is not extreme, it is very high for a country on the cusp of an acute ageing crisis. Adjusted for demographics, Germany is already one of the most indebted nations in the world.

    Reports that EU officials are hatching plans to double the size of EU's €440bn (£373bn) rescue mechanism have inevitably caused outrage in Germany. Brussels has denied the claims, but the story has refused to die precisely because markets know the European Financial Stability Facility (EFSF) cannot cope with the all too possible event of a triple bail-out for Ireland, Portugal and Spain.

    EU leaders hoped this moment would never come when they launched their "shock and awe" fund last May. The pledge alone was supposed to be enough. But EU proposals in late October for creditor "haircuts" have set off capital flight, or a "buyers' strike" in the words of Klaus Regling, head of the EFSF.

    Those at the coal-face of the bond markets are certain Portugal will need a rescue. Spain is in danger as yields on 10-year bonds punch to a post-EMU record of 5.2pc.

    more at-
    EU rescue costs start to threaten Germany itself - Telegraph
  2. william the wie

    william the wie Gold Member

    Nov 18, 2009
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    The key point is German demographics and the clamor of aged investors for outsourcing production. And shameless plug my evolutionary economics thread has already touched on this problem.

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