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The Financial Crash: Europe Continues to Plunge into the Maelstrom
10 January 2012
Hungary, Greece, Italy, Spain, Ireland could each be the fuse that sets off the Euro bomb, at any moment. As the New York Times reported yesterday in an article headlined "Crunch Time for the Euro Is Not Far Off:" "The euro zone crisis seemed to vanish from the headlines for a brief moment as 2011 ticked over into 2012, but it is about to return with a vengeance." Yesterday’s Spiegel Online makes the same point, reporting that Greece is teetering at the edge of bankruptcy, while Spain and Italy have debt rollover requirements that cannot be met. Among the flashpoints, latest developments include: * Hungary: After Hungary was downgraded by all three rating agencies, because the government dared to pass a law somewhat reducing the central bank’s autonomy, and the IMF refused to even talk about a credit loan unless that law was revoked, Tamas Fellegi, Hungary’s chief negotiator with the IMF, arrived in Washington today, and is expected to meet with Lagarde later in the week. Fellegi told the Financial Times that Hungary was now prepared to discuss a standy agreement, with no preconditions—ie that they are open to modifying the new law. As the Financial Times put it, "Mr. Fellegi must convince the two institutions [the IMF and the EU] that Budapest is serious about wanting a deal and is prepared to amend new fiscal and central bank laws." Otherwise, the markets will blow the forint out of the water and the country will default. * Italy: Ten year bonds rose to 7.1% at the end of last week, while appointmed Prime Minister Mario Monti issues daily assurances that "the euro is not in crisis" and that Italy’s "banking system is not under threat." * Spain: New Prime Minister Mariano Rajoy’s additional austerity package announced last week is going to make a disastrous situation far worse. El Pais reports that, before Rajoy took over, most economists were already forecasting that the current unemployment rate of 21%, would rise to 22-23% in 2012. But now, groups such as Funcas and the German Institute for World Economics are saying that unemployment will hit 23.6% this year. These are of course the usual linear extrapolations based on current "trends"—not the reality of meltdown—but even they are talking about one-quarter of the labor force being officially unemployed. * Belgium: The new government rushed today to announce 1 billion euros in new cuts in public spending, after the European Commission fined them and gave them a deadline of today to come up with new measures. The Financial Times reports that this is "the first time an EU government has been forced to take urgent corrective action to avoid fines for breaching EU budget rules, under semi-automatic sanctions adopted last month to avert the need for future bail-outs"—not to mention "avert the need" for sovereign governments, under London’s gameplan. |