Finance Monster

Since the beginning of the Greek crisis, we have to put some European authorities to their responsibilities: to act instead of decisiveness, the authorities of the Eurozone have left Greece without the patient care. It is true that he had hidden and denies the severity of its symptoms. The doctor Euro preferred to see how the disease would develop. The diagnosis is clear: the euro is on the verge of collapse and the Greek patient in a coma.

The Greek crisis sounded the death knell of the great European illusion.

The knell of European leadership as the Lisbon Treaty was intended to improve and where only one of five presidents (ir) responsible for the Euro, Jean Claude Trichet sounded the alarm. There is no pilot in the plane and we lied at the last summit in Brussels: the conditions for intervention at the bedside of Greece were totally impossible to bring together what has allowed political speech reassuring fund lack of decision. Europe is rich in rhetoric.

The knell of German responsibility Angela Merkel does not seem to states of mind to let slip the Euro has provided the abyss that no action be taken before the maturity German election. Yet its motto, no? But she is not alone and many countries, as often in our history, are happy to hide behind the refusal of Germanic measures they would be unable to “sell” to their public opinion. And Angela Merkel, ask a plan three years in Greece after months of missions on behalf of the discipline of the IMF is a shame. We do not ask a patient with high fever how they will recover his health in three years. Angela Merkel looks set to be elected on the ashes of the Euro.

The knell of fiscal discipline and tax: European countries have a heading or another have all accepted a budgetary drift now affecting the whole of Europe: Great Britain, Ireland, Italy, Spain, Greece, and possibly be others left their budgetary discipline and end up drifting, has title in difficulties. If we add Japan and the United States, the situation takes global proportions.

The death knell of the political action of vertices in tops, European leaders have after six months has not paid one Euro Greece. Europe is in fact powerless to take its responsibilities and confusing action and tense. It’s a travesty that support decisions for Greece and the lack of action by the Greek leaders (who have only to ask for help) and European leaders.

The death knell for the Greek political responsibility: not content with providing fake al’Europe figures, for hiding with the help of Wall Street, a portion of its debt, while denying the evidence that the Prime Minister Greek was in Washington to ask President Obama … the regulation of hedge funds.

The death knell for public debt. With a debt to two years pay 15%, Greece is now ensured to be in default on its debt in the coming days while the finance ministers at Washington was still considering the problems on a case by case basis. Only Dominique Strauss Kahn has consistently calmed everything that would listen, the risk of contagion. One wonders why the european central banks do not invest in such bonds: the yield is excellent and I can not imagine they speculate on default of payment of Greece.

The bell rings. The time counts. Without an advance of 30 billion Euro in the coming days, the whole of European government debt will collapse and with it the bond markets are representative of this debt.

A European leader had told me early in my career that smart people are not lacking, but the brave were rare. He did not say so.

For 24 hours a number of comments circulating in the press and on the net both in Europe and the U.S., arguing that one can not solve a debt problem through debt. That sounds good, but it is a shortcut misleading. Without an exhaustive analysis, point out some aspects of the decision this weekend end.

The European definition is by borrowing, and thus debt. A key change, however: If Europe ready for Greece, it will repay the debt more expensive. That should mitigate the risk of “snowball effect.” Greece will pay less interest in since it will benefit from better conditions than those it obtains on the marketplace. This will reduce its budget deficit.

In addition, it will seek capital markets for smaller amounts. Some loans will be under the signature of Europe (TBD). The total amount of bonds issued on the Greek Eurobond market decline. The weight of debt Greek is found distributed between Europe and the markets.

Finally, risk-taking will be made by Europe, and the Greek risk allocation will become more balanced. Somewhere in Europe, “improving” the rating of Greece. This should enable it to restructure its finances and the effects reforms helping, getting faster at a level of debt such as loans Europeans will no longer be necessary.There is a risk allocation that reduces the interest burden and the burden of debt.

All this presupposes that the European loans will be used to gradually reduce the outstanding bonds.At the macro level, the impression of a “zero-sum game.” But not at this level that things pass: we must add a credit analysis.

It is difficult not to feel deep sympathy for European leaders face a problem they did not see it coming, did not deal, but can not ignore. Back to the wall, they tell us that every state in the Eurozone will take steps to reduce potential budget deficits or excessive debt.

You feel the desperation with which they call all their wishes stabilizing the Euro. In various forms, they reaffirm what is at the heart of the device of the common currency. Their intentions are unquestionable and their appreciation for the work of the European Central Bank is moving. Nothing in their statement is questionable, but the question remains: the markets on Monday morning, they find in this effort of reason to trust al’Europe?

The quality of the statement is indisputable, but did reach a sufficiently concrete? Something Will it change that allows to believe that stability? Asking the question answers itself.

The call for financial regulation is pathetic. This week has u agreement between Democrats and Republicans on the financial reform in the United States. The 1,300 pages of this document are not a guarantee of high efficiency, but it exists, and it will be passed soon. In Europe, it does not, and when it will be proposed at least 18 months to put th application. It is also 18 months since the first summit of the G20 proclaimed the same thing: what has Europe done in this area for a year and a half? Where are the drafts? New structures are without power: the action is reserved for national supervisory authorities.

The President of the European Council in June will present a report on measures to reduce speculation in government bonds: What is it? Are there any specific sites? Credit Default Swaps (CDS)? The rating of sovereign debt? The organization of the bond markets? The transparency of information?

The impression that emerges from this statement is a form of fatigue government leaders. They are in Brussels for a summit or another every week. Yet their countries to manage public finance problems, problems of unemployment and social reforms under construction. The time is not it time to act in concert with the United States and can be coordinated financial reforms rather than reinventing the wire sliced bread?

As for the management of crises, one wonders if it will be the responsibility of the Commission, the Eurozone or the European Central Bank. Will it be a permanent structure? He does one allocate resources to intervene in markets or on recalcitrant states?

Greece will finally receive a substantial assistance. Even the German and Greek parliaments had approved, with necessary reform measures. To late it is, this intervention should reduce the pressure in global markets sour.

Because the crisis has now taken on global proportions. It will be difficult to reduce in perspective: a problem of indebtedness of a small country in the Eurozone. Was it to jeopardize the confidence in the European currency?

That Spain’s Prime Minister Jose Luis Rodriguez Zapatero is rather soft and take difficult steps when there is no other choice is not new. But it is far from alone.

The Spanish problem is totally different from that of Greece, and it is customary ignorance of the market which explains the panic of Tuesday.I must say it was caused by an irresponsible attitude of rating agencies that saw fit to reduce the grade of Spain for reasons related to the economic slowdown. This rating remains excellent at AA.

For three years, the Spanish property market overheating, and everyone knew that sooner or later the bubble would burst. The large Spanish banks, which had mostly avoided the ravages of the subprime crisis lie in a relatively robust against the economic recession and the real estate crisis.

But the bursting of the housing bubble, if it is assigned, has a much more serious on the number of students “cajas de ahorros” or “savings” regional or municipal. The latter as the initial granting of mortgage loans. They are now in trouble and must regroup. As these bases and political power for local politicians, they try by every means to delay the inevitable. Politics in the short term? Certainly, but it is not surprising.

It seems that the Spanish government, alarmed by the Greek crisis has finally decided to take the bull (!) By the horns al’approche major bullfights in San Isidro. Who spread the rumor this morning that Spain would have to borrow 280 billion euros to the IMF? Nobody knows, but short sellers are once again challenged. Such a rumor that the advantage is so hard not to blame that on which the crime benefits.

I shudder to write that I announced in my post on Monday that markets should be treated carefully because of the risk of contagion: nothing seems to have been made on this point.Markets, leads to themselves, did what they do naturally, even if it is not very beautiful, namely the work of dragons. Rising CDS, which guarantee the risk is far from Spanish wait Greek levels. (210 basis points against 750).

It is useless to attempt to change these behaviors or to announce sanctions against the markets who believe in these “wild rumors” as said Zapatero. We must let the markets set the inflection point and intervene only when the floor is solid. But this reminds us that a stabilization mechanism which needs the euro in more than one mechanism of crisis.

But it is also time to publish credible figures in real time. This is the only way we confront markets with reality. The idea of going directly to the IMF was absurd. It demonstrates the lack of basic education for investors and traders. Faced with such carelessness that is dependent on the system of rating agencies, the only weapon is information and facts.Denying the risk of infection as did the Spanish Prime Minister after visiting two of the five Presidents Europe is pointless. It must explain why. Or is the budget deficit? What is the actual ratio of debt? Do not ask investors deceived by Greece to Spain without believing in absolute transparency.

The over-reaction of markets is also a consequence of nervousness created by the slow response of the Eurozone. Only a clear explanation of the facts will stop the tornado on Tuesday on the steps of public debts.

The euro fell below $ 1.30. It will only improve when the Greek parliament will vote the austerity measures imposed Hellenic people.

The issue of approval of national budgets has been incorrectly installed from the beginning. It is clear that Member States may establish a fund that makes them potentially taking a risk of 500 billion euros without a preventive mechanism and control. It seems, therefore normal that a mechanism be put in place whereby a an independent European (and in any case not the Commission!) to conduct an objective review of national budgets.

It is presumptuous cons grant institutions it has in Europe or the right to approve the national budget BEFORE the debate, the government budget proposals. Both merge the finances of the States concerned.

For my part, I think there is a reasonable middle course and perfect: when the budget is tabled in Parliament, a European entity has issued a notice (a kind of “rating”) highlighting delinquency or default against the criteria of the Euro (for countries that are members) or European criteria (yet to be defined). This review, combined with the budget, would use all its weight in that consideration is non-political and completely objective and would be released when dépôt.Il can, therefore, be ignored in the debate budgetaiors.

If the Government and Parliament of the country is choosing to ignore the problems concerned, a procedure which would be implemented, it would be more strict and would aim to develop a process to “return to the nails.”It is only in the case of refusal to put the necessary measures in place systems that sanctions would be implemented: it is important that these sanctions do not increase the deficit, which was the case of existing sanctions and never applied: fines. In the case of the Eurozone, those sanctions should be absolutely coercive, under pain of being ostracized from certain aspects of the Eurozone.

This does not detract from national parliaments and governments. It is a light that ensures adherence to the principles of the Euro and we manage to avoid the crisis to Europe.