HBG

Greece is leaving the Eurozone in September, and it's not going to cause that much trouble - and others may follow soon. Not my words, my brain isn't big enough, but here's someone whose brain is:

http://www.telegraph.co.uk/finance/c...mic-gains.html

It's a big read, but worth it for expats especially.

steviedeluxe

I still think that Spain may pre-empt them - but I admit they could prove me wrong, they have done so far
My reasoning is this - Spain has so far asked for a minor (if 30 billion can be called minor) loan/bailout to help their banking sector. Now to do this they've had to undergo severe measures that are very unpopular - and it hasn't helped on the bond markets, quite the reverse now it seems. Now, if the government (not the private sector which is fighting back hard) wants to continue funding itself and stay within the Euro-zone, it knows that a major bailout from the EU will come with even more severe conditions a-la-Greece. Problem with this is the medicine is killing the patient.
I'm positive that Rajoy would sooner pull Spain out of the Euro, rather than undergo more humilating lectures from the men in black. Spain could claim they would honour existing debt repayments, but then, in charge of their own currency could reflate in order to keep going - and the private sector would earn even more from exports, tourism etc as they'd have a 20 or even 30% kickstart advantage (downside of this is that imported goods would rise in price). HOWEVER, I'm not sure that Rajoy would have either the bottle, nor the support from others in his party, to follow this through.

steviedeluxe

It's very likely to happen in the next 40 days - could be sooner than we think

http://www.zerohedge.com/news/black-...-money-40-days

jackytoo

Now Murcia wants a bailout er. loan. How long will this last Perhaps they will struggle on until September.

http://www.diariosur.es/rc/20120722/...207221234.html

Rambling Rose

Fact or prediction??

steviedeluxe

Now or never. Either Rajoy shows his mettle and pulls Spain out of the Euro (he has the perfect excuse domestically - the ECB have not backed Spain in the bonds markets), or they have to request a full bailout which will come with further cuts and loss of control to the Germans.
No-one is claiming there won't be problems in reverting to an independent currency, but it will restore hope and allow the Spanish freedom again.

rugbymatt

As predicted by the more savvy among us.... bugger all happened.

JLFS

steviedeluxe

You obviously haven't seen developments so far this morning.
Apart from stock markets generally down, and Spanish yields soaring to record highs, the news has come in that trading in Italian bank shares have been suspended.

Maybe this is the worse that will happen today, but let's see?

cricketman

Its easier to predict WHAT will happen rather than WHEN it will happen

The when is crucial for anyone who wants to make money from what is happening!

Either there has to be a huge deal with the EU this next week or two or Spain will have to pull out of the Euro

Due to the markets, Spains borrowing costs will be 3% higher in 2013 than in 2012. This negates all the cuts the Spanish goverment have just made. So all this suffering and job losses for absolutely nothing

The situation is unsustainable

amideislas

Hmm.. just a few months ago, I believe you were tossing ROFL icons at anyone who was daft enough to suggest anything like this might ever come to pass.

After all, Spain is the envy of all of Europe, and the world.

HBG

I always think that when politicians go quiet, something major is about to happen, and Rajoy has gone into silent mode.

Roger Bootle, who wrote the Telegraph article that I quoted, elegantly explained that a devaluation of the currency, which in this case would be the Peseta, will help employment levels.

In Spain's case, anything that brings down the horrific unemployment levels must be welcome, and membership of the Euro no longer appears as beneficial as it once was.

(Wasn't Rajoy spotted visiting the Spanish 'mint' recently?)

steviedeluxe

I've been guilty of criticising Rajoy for being inept and indecisive, but the strain and pressure he's under must be enormous.
He must realise that it's far better for the long term future of the Spanish workforce to grasp the nettle now and revert to an independent currency.
Countries will inevitably leave the Euro-zone, so why not get a head-start?
Of course it's not an easy option to take. Apart from anything various hypocritical Euro-politicians will criticise and blame Spain for the unravelling of the "project". But at least the retort can be "look - we received no help from your ECB when our bonds became unsustainable, despite our savage cuts and tax rises"
One consequence of withdrawal will be that public sector pay, pensions generally etc will become a mere fraction. Companies and businesses that earn from foreign sources eg exporting companies, food producers, tourist companies, will find (eventually) trade will surge, as their prices will suddenly be a lot cheaper abroad.
Another consequence - imports may double in price overnight.
It's horrific in some ways to comptemplate - but if it's inevitable, better to get it done asap? I'm reminded of that Shakespeare quote "If it were done when 'tis done, then 'twere well / It were done quickly"

amideislas

Well, considering the circumstances, it wouldn't matter who is in charge, or what party they represent, they naturally will be the target of mass criticism. The situation is simply untenable, and there isn't any light at the end of the tunnel, and naturally, he's going to be unpopular no matter what. So they might as well implement the neccessary policies, rather than popular ones.

Truth is that if any member leaves the Euro, there will be chaos both in the markets and on the streets. If it can manage to be contained, the extreme pain will be short-lived, and slow economic growth will likely return in a few short years.

But if the public mananges something really extreme, such as a "coup" of some sort, then it's likely we'll fall into a very-long-lasting abyss of economic strife, ending up in a system of either extreme socialism or even some form of totalitarianism (although highly unlikely). Call me a nutter, but there are still a few around who believe everything was better under Franco.

The consequences, as you point out, may actually be the golden ring that puts Spain back into prosperity. We could very well become competitive and end up out-performing the "economic" powerhouses at the end of the day.

In any case, if history is any guide, in the end the EU will likely claim responsibility for any successes, and dismiss any responsibility for failures.

HBG

I discovered this morning that the government controlled Chemists (famarcias) have gone on indefinite strike in the Valencian region from today. Because they haven't been paid by the Valencian government, who in turn haven't got the money left to pay them. They haven't got the money to pay their civil servants, police, teachers, pensioners and unemployed people either.

It sort of brings home the reality of the situation, the government has run out of money and has to borrow at punitive rates which will only make matters worse.

Spain has had a 30 billion bail-out over the weekend and should be able to send money to Valencia to allow the Spanish people to get their life-saving medicines for another six weeks or so, until they need more money.

What a terrible state of affairs! How did it come to this? The housing bubble and incredible corruption doesn't explain it, nor the reluctance of people to pay their taxes, there must be more to it, surely?

(Thank God for the many expats pumping money into the local economy, and the tourists).