Tuesday, December 20, 2011

Contingency planning for euro collapse underway

Governments and companies around the world have been preparing for a collapse of the Eurozone—simple prudence requires them to do that. Theoretical exercises for a hypothetical scenario, they call it. But recently, these theoretical exercises have taken on practical overtones.
Read the rest Zero Hedge
The Previously Unthinkable Becomes A Planned Event
by Wolf Richter
The fact that major newspapers advise their readers on how to deal with a Eurozone collapse suggests that the people are coming to grips with the scenario. And once a certain comfort level sets in, popular support for the many financial, political, monetary, and democratic sacrifices required to save the euro will dwindle. Which would spell the end of the euro. Meanwhile, the European Union would go on as a free trade area, though perhaps in altered form.
I see the major push coming from social unrest. The current plan to save the euro is based on expansionary fiscal austerity. This strategy it is politically and socially unsustainable due to the economic cost push onto ordinary people, who also happen to be voters and potential protest demonstrators.

The European Central Bank warned Monday of a perilous year ahead as the sovereign debt crisis collides with slower economic growth and a dearth of market financing for banks.
The dire prediction, contained in the E.C.B.’s twice-yearly report on the risks to the euroarea financial system, came as E.U. governments fell short of their target to expand their backup plan for the euro by channeling more resources through the International Monetary Fund.
Read the rest  at The New York Times
By Jack Ewing and Stephen Castle
“The transmission of tensions among sovereigns, across banks and between the two intensified to take on systemic crisis proportions not witnessed since the collapse of Lehman Brothers three years ago,” the report said. [emphasis added]
Read "systemic risk is rising."
Meanwhile, slower economic growth, which could become a recession, is likely to lead to an increase in bad loans, which will further weaken lenders. [emphasis added]
Read "Fisher debt-deflation is looming."

1 comment:

googleheim said...

The very act of Bernanke buying the bonds and swap protecting the Eurozone in of itself is a clear indicator that the Euro cannot hold itself together and that the measures only predicate the collapse yet providing a soft landing.

If everything was OK then it would not be happening as such - the Euro would protect itself via MMT.

Finally this shows that the Euro was created by Germany as a final measure to offset the reunion of the two Germanies - a large hoodwink-athon to make Europe think they could be part of the reunion but in fact pay for it by making Germany THE EXPORT power house.

Alles Klar Communizar ?