Dear,
As you could read in this community in the past, we’re not in the way to the recovery. The exit strategy of this crisis, from the Financial Services perspective, is efficient management of Capital and Liquidity and we’re not there yet.
What are the main actors of the drama saying at this moment?
- Southern European countries (Greece, Spain, Portugal, Italy) and Ireland think that the responsible of the situation is Germany, as Germans are not willing to help them.
http://www.guardian.co.uk/business/2012/feb/15/eurozone-debt-crisis-greece-eurozone-gdp
- Germany is blaming the irresponsible countries for the debt crisis.
http://www.guardian.co.uk/business/2012/jun/14/angela-merkel-warning-eurozone-crisis
- Finally, for some economists, the responsibility lies in the Euro
http://www.nytimes.com/2012/06/18/opinion/krugman-greece-as-victim.html
Ok, just some remarks here.
Obviously there’s been a huge real estate bubble in the southern European countries, big trade unbalances and as a consequence, a huge debt (private and public).
Central Banks of these countries were responsible of controlling the debt levels and auditing the solvency of their Financial System. Why Germany (Finland or Netherlands) has to be co-responsible of their mistakes?
On the other hand the bubble was financed by German and French banks. Those Banks decided to believe that financing Spanish banks for building apartments in the coast was as safe as investing in Leverkusen for developing new medical treatments (actually the trick is that it was much more profitable, at least in the short term).
Finally, building a monetary union without coordinated control mechanisms for avoiding fiscal unbalances is a risky business. Very risky if the economic area includes regions of very different productivities. Prices tend to equalize in a common monetary area, but not the productivity.
This is the past and we cannot change the past, so let’s look ahead.
We all know that the current situation in the southern European countries is very delicate.
Only for them?
Not really, with the tiny expected growth of those countries is going to be very difficult (for not saying impossible) that they pay their whole debt (private and public), and sooner than later more write-offs will have to be accepted.
German banks have exposures of around US$500 billion to the debt issues of peripheral nations. What will be the impact in the solvency of those banks when the borrowers prove to be incapable of fulfilling their obligations? Is this a German problem?
Additionally, the problematic countries have been an excellent market for Germany. Does anybody believe that the fall of consumption rates in those countries is not going to affect their main providers?
http://www.reuters.com/article/2012/07/04/germany-economy-diw-idUSL6E8I4ATA20120704
Unfortunately, this is a global crisis and the solution requires coordination and agreement, first inside the main economic areas and later globally.
On the other hand coordination requires giving sovereignty to supranational entities with different priorities and interests. A very difficult challenge indeed.
We have serious problems and we need serious leadership. Looking for somebody to blame can be a good excuse in the short term, but in the midterm is a waste of Political Capital, and wasting Capital is something we cannot afford.
Looking forward to read your opinions.
Kindest Regards.
Ferran.
As you could read in this community in the past, we’re not in the way to the recovery. The exit strategy of this crisis, from the Financial Services perspective, is efficient management of Capital and Liquidity and we’re not there yet.
What are the main actors of the drama saying at this moment?
- Southern European countries (Greece, Spain, Portugal, Italy) and Ireland think that the responsible of the situation is Germany, as Germans are not willing to help them.
http://www.guardian.co.uk/business/2012/feb/15/eurozone-debt-crisis-greece-eurozone-gdp
- Germany is blaming the irresponsible countries for the debt crisis.
http://www.guardian.co.uk/business/2012/jun/14/angela-merkel-warning-eurozone-crisis
- Finally, for some economists, the responsibility lies in the Euro
http://www.nytimes.com/2012/06/18/opinion/krugman-greece-as-victim.html
Ok, just some remarks here.
Obviously there’s been a huge real estate bubble in the southern European countries, big trade unbalances and as a consequence, a huge debt (private and public).
Central Banks of these countries were responsible of controlling the debt levels and auditing the solvency of their Financial System. Why Germany (Finland or Netherlands) has to be co-responsible of their mistakes?
On the other hand the bubble was financed by German and French banks. Those Banks decided to believe that financing Spanish banks for building apartments in the coast was as safe as investing in Leverkusen for developing new medical treatments (actually the trick is that it was much more profitable, at least in the short term).
Finally, building a monetary union without coordinated control mechanisms for avoiding fiscal unbalances is a risky business. Very risky if the economic area includes regions of very different productivities. Prices tend to equalize in a common monetary area, but not the productivity.
This is the past and we cannot change the past, so let’s look ahead.
We all know that the current situation in the southern European countries is very delicate.
Only for them?
Not really, with the tiny expected growth of those countries is going to be very difficult (for not saying impossible) that they pay their whole debt (private and public), and sooner than later more write-offs will have to be accepted.
German banks have exposures of around US$500 billion to the debt issues of peripheral nations. What will be the impact in the solvency of those banks when the borrowers prove to be incapable of fulfilling their obligations? Is this a German problem?
Additionally, the problematic countries have been an excellent market for Germany. Does anybody believe that the fall of consumption rates in those countries is not going to affect their main providers?
http://www.reuters.com/article/2012/07/04/germany-economy-diw-idUSL6E8I4ATA20120704
Unfortunately, this is a global crisis and the solution requires coordination and agreement, first inside the main economic areas and later globally.
On the other hand coordination requires giving sovereignty to supranational entities with different priorities and interests. A very difficult challenge indeed.
We have serious problems and we need serious leadership. Looking for somebody to blame can be a good excuse in the short term, but in the midterm is a waste of Political Capital, and wasting Capital is something we cannot afford.
Looking forward to read your opinions.
Kindest Regards.
Ferran.
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