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Generational Dynamics Web Log for 16-Nov-2010
16-Nov-10 News -- Europe speeds toward new financial crisis

Web Log - November, 2010

16-Nov-10 News -- Europe speeds toward new financial crisis

Cholera epidemic in Haiti triggers anti-UN violence

Europe speeds toward new financial crisis over Ireland, Greece and Portgual

I really had to laugh on Monday when I heard the news report that Irish officials have finally admitted that they're in bailout talks with European Union officials. They've been denying it for days, and it's been pretty obvious all along that the politicians were lying. But I can't take any credit for figuring that out, because anyone with half a brain could tell. These guys are getting so predictable that you can almost predict which lie they'll tell next.

The narrative that we've been hearing the last few days was that Ireland wasn't asking for a bailout, but that the Europeans were prepared to offer a bailout if asked.

By Monday, the narrative was that the Europeans really wanted to help the Irish, but that the Irish were a proud people and that they preferred to get through this crisis by themselves, without having to take charity from the EU.

However, a different story is emerging, according to Ambrose Evans-Pritchard, reporting for the Telegraph. What seems at first to be the proud Irish people fighting for honor and country turns out to be negotiating gambit over monetary terms.

EU officials are furious at Ireland for refusing a financial rescue. Why? Because the refusal is panicking investors further, and the contagion is spilling over to Spain's bonds and Portugal's bonds, whose yields (interest rates) are beginning to approach crisis levels themselves.

So the reasoning is that Ireland is at fault for harming Spain and Portugal by not asking for aid. The anger reflects suspicion, according to the article, "that Ireland is holding the eurozone to ransom, allowing the crisis to fester until it extracts a pledge from EU officials that it will not suffer a loss of economic sovereignty."

So panic is setting in, and tempers are flaring. Things are getting messy.

There's new anger directed at Greece, as well. Eurostat, the European statistical agency, published a report on Monday that confirmed a widely circulated story that Greece's debt situation was much worse than previously understood, according to the Guardian. Six months ago, at the time of the $150 billion bailout, it was thought that Greece's 2009 budget deficit was 13.6% of its GDP. The new figure is 15.4% of GDP, making their debt ratio the highest of all the European Union states.

Greece has been experiencing violent riots in response to the austerity program that Prime minister George Papandreou announced last spring, but it was thought that the pain was worth it because Greece would be able to escape from debt by 2015 or so. But the new figures indicate that that goal is impossible. Furthermore, the new figures mean that Greece is violating the terms of the bailout, and they put into question whether Greece should be allowed to receive the next installment of the bailout aid, which they're due to receive this month.

There's one more very important target of widespread anger: Chancellor Angela Merkel of Germany. The Germans HATED bailing out the Greeks because, as Europe's strongest economy, Germany had to bear the greatest burden in the bailout. Furthermore, the penny-pinching Germans were furious at having to bail out the profligate Greeks, who had lied about their debt for years.

So now the time is approaching when Germany may be asked to help bail out Ireland -- and Greece and Portugal as well. This has led Merkel to take a tough stance on euro bailouts, according to Spiegel.

Merkel is demanding that the rules change so that profligate nations should not be bailed out by other nations; instead, they should be bailed out by the investors who hold the nation's debt. In other words, Merkel is saying that Ireland and Greece should go into default, and restructure the debt so that investors get only a fraction on the dollar.

Greek Prime Minister George Papandreou accused Merkel on Monday of worsening the crisis, because her remarks had pushed up bond yields. "This could create a self-fulfilling prophecy ... This could break backs. This could force economies towards bankruptcy," he said. Others joined in the criticism of Merkel.

So investors are panicking, politicians are getting angry, and a major crisis is gathering steam. We should be seeing some real chaos during the next 3-4 weeks. Merry Christmas!

Additional links

A cholera epidemic is spreading rapidly across Haiti, in the aftermath of a recent hurricane, and a major earthquake in January. Over 1,000 people have died from the disease. Violent Haitian protesters are blaming the United Nations peacekeepers for having introduced the disease, and are particularly claiming, without proof, that the Nepalese contingent of the peacekeeping forces are to blame. About a dozen people have been hospitalized from injuries caused by the violence. Haiti is well into a generational Crisis era, and so it's not inconceivable that this violence could spiral into a civil war. AFP

Turkey begins its celebration of the Muslim festival of Eid al-Adha on Tuesday. The festival of sacrifice is traditionally marked by families killing sheep or cattle. But the price of meat rising to an alarming levels over the past few weeks, with the price of a single animal going as high as $2000. So there will be far fewer animal sacrifices this year. VOA

Russia is ready to cooperate with NATO in several areas, including the joint European anti-missile shield and the war in Afghanistan. Voice of Russia

(Comments: For reader comments, questions and discussion, see the 16-Nov-10 News -- Europe speeds toward new financial crisis thread of the Generational Dynamics forum. Comments may be posted anonymously.) (16-Nov-2010) Permanent Link
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Generational Dynamics Web Log for 16-Nov-2010 16-Nov-10 News -- Europe speeds toward new financial crisis

Europe speeds toward new financial crisis over Ireland, Greece and Portgual

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Generational Dynamics Web Log for 16-Nov-2010
16-Nov-10 News -- Europe speeds toward new financial crisis