Europe Slips Towards The Abyss! Wheeeeeeeeee!
The European Union is about to shake itself apart, Greece is on its knees, and there are Western European nations sure to follow. So what’s the Democrats’ reaction? Hey, let’s be more like those guys. Let’s spend more like they do, let’s copy their health care systems, let’s make our government bigger, like their government.
What could go wrong?
Sir Howard Davies, former chairman of Britain’s Financial Services Authority, said on BBC Radio’s Today programme on Tuesday morning that he thought the French government was only days away from having to recapitalise the country’s banking system for a second time. It’s hard to disagree.
The panic seems to have been temporarily stemmed by a statement from BNP Paribas to the effect that it wasn’t having the problems widely reported of finding dollar funding. There was also an emphatic denial of discussions over state intervention. But no-one is kidding themselves. Italy had to pay the highest spread since joining the euro to sell its bonds on Tuesday. There are growing fears over whether Europe’s largest borrower can stay the course.
…In the increasingly likely event of Germany kicking the Greeks out of the eurozone altogether, Greek debt will become close to worthless. Greece is already effectively a cash only economy. Most forms of credit has effectively dried up, the Greek banking system is finished, and capital controls to prevent what little money that remains from leaving the country are surely only a matter of time. European banking must prepare for the worst as far as Greece is concerned.
…Record quantities of European term funding are set to mature in the first quarter of next year. It’s not clear that the European Central Bank can cope with the sort of liquidity support that banks will require if markets refuse to refinance it. Europe’s financial and monetary system is falling apart.
Since French banks are widely thought of as essentially arms of the French state, is there actually any point in recapitalising them? In France, the public subsidy issue which has so exercised the Vickers Commission on banking in the UK is taken for granted. Banks are understood to be underwritten by the state, and therefore require less capital and can hand the benefits of cheaper funding onto to their customers. Why not then just make this implicit support explicit?
You only need to take one look at what happened to Ireland to see why. In the early days of the crisis, the Irish government promised to stand behind all banking liabilities. By doing so, it ended up pushing the entire country into bankruptcy.
This is our future, in the present, in Europe. How bright is it looking? Do we want to continue down this path? We’ll see in 2012.
With all due respect, there were quite a lot of people on the Right getting upset over Obama’sdecision to do
Many elitist American leftists like to go about claiming that it is only Americans that are dunces on foreign matters.