Europe can't get their financial houses in order. They try to put out one financial meltdown and they turn around and another country is in financial peril. The fact is they don't adhere to their own rules of the Euro Union, The Maastricht Treaty.
From The Daily Pfennig:
"The Maastricht treaty set a limit of 60% for Government debt as a Percentage of GDP. As of May, 2011 only 4 of the 17 countries in the Euro-zone are below this requirement. The worst violators of the debt limit requirements are probably obvious: Greece at 157.7%, Italy at 120.3%, Ireland at 112%, Portugal at 101.7%, and Belgium at 97%. (By the way, Belgium debt was downgraded on Friday following downgrades of Portugal and Hungary.)
But readers will probably be surprised by the next two countries which are currently above the Maastricht limit: France currently has 84.7% debt to GDP and Germany is close behind with 82.4%. Both of the two 'fiscal leaders' of Europe have a worse debt to GDP than Spain which is three places better than Germany at 68.1%!
The only countries which currently adhere to the Maastrict treaty limit for debt to GDP are Finland, Slovakia, Slovenia, and Luxembourg, certainly not what most investors would consider the leaders in Europe! The average Euro-zone debt limit as of last May is 87.7%, over 25 percentage points above the required limit. I have gone on a bit too long about this, but the slide really brings home the fact that the treaties of the EU don't need to be tightened, but instead the adherence to these treaties need to be strengthened. Leaders can talk about new requirements all they want, but what good is this talk if no-one is going to adhere to these new requirements anyway?"
Chris Gaffney, The Daily Pfennig, 28 Nov 2011
In the real world of global finance the reality is that any country that is forced to accept an IMF bailout is also blocked from issuing debt in the public markets. IMF (or other supranational debt) is ALWAYS senior to other indebtedness of the country. That’s just the way it works. When Italy borrows money from the IMF it automatically subordinates the existing creditors. Lenders hate this. They will vote with their feet and take a pass at Italian new debt issuance for a long time to come. Once the process starts, it will not end. There will be a snow ball of other creditors. That's exactly what happened in the 80's when Mexico failed; within a year two dozen other countries were forced to their debt knees. (I had a front row seat.)
I don’t see a way out of this box. The liquidity crisis in Italy is scaring us to death, the solution will almost certainly kill us.
And so it goes....Please don't ignore the warning signs. You future is quickly eroding away.
From The Daily Pfennig:
"The Maastricht treaty set a limit of 60% for Government debt as a Percentage of GDP. As of May, 2011 only 4 of the 17 countries in the Euro-zone are below this requirement. The worst violators of the debt limit requirements are probably obvious: Greece at 157.7%, Italy at 120.3%, Ireland at 112%, Portugal at 101.7%, and Belgium at 97%. (By the way, Belgium debt was downgraded on Friday following downgrades of Portugal and Hungary.)
But readers will probably be surprised by the next two countries which are currently above the Maastricht limit: France currently has 84.7% debt to GDP and Germany is close behind with 82.4%. Both of the two 'fiscal leaders' of Europe have a worse debt to GDP than Spain which is three places better than Germany at 68.1%!
The only countries which currently adhere to the Maastrict treaty limit for debt to GDP are Finland, Slovakia, Slovenia, and Luxembourg, certainly not what most investors would consider the leaders in Europe! The average Euro-zone debt limit as of last May is 87.7%, over 25 percentage points above the required limit. I have gone on a bit too long about this, but the slide really brings home the fact that the treaties of the EU don't need to be tightened, but instead the adherence to these treaties need to be strengthened. Leaders can talk about new requirements all they want, but what good is this talk if no-one is going to adhere to these new requirements anyway?"
Chris Gaffney, The Daily Pfennig, 28 Nov 2011
A rather Sad state of affairs, Euroland. So, if France and Germany, "The" Euroland financial behemoths can't control their debt, how will the weaker economies solve their financial debts?
They won't. They will default. The math doesn't lie, it is factual. There is no easy way out. The IMF will not come to the rescue, even though next weeks headlines will make you think they have. Italy will be hosed along with the rest of Euroland. You can't paper this problem over with more debt. The problem is the same here in America. It is a three card monte street hustle and the "noobs" and those on "hopium" will get sheared once again.
Bruce Krasting summed it up succinctly here:
I don’t see a way out of this box. The liquidity crisis in Italy is scaring us to death, the solution will almost certainly kill us.
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