ktlight
9th August 2011, 07:06
FYI:
Europe is on the verge of collapsing and the world is again in the quagmire, the reason being Europe, rather than just Greece, is the planet's soft belly, and the impact of Europe's eventual downfall would make itself felt throughout the world, even if Germany, or France, could somehow be spared.
The scale of impact is unpredictable, but potentially worse than that of the recent toxic assets crisis. The European bloc is the second largest economy, the first trade partner of China, the largest importer of Russian energy and the first buyer of high quality raw materials (it still holds the Hilton quota, the world's most expensive meat quota).
All over the world European debt holders and many states maintain their reserves in euros. China, for example, has one-fourth of its reserves in such currency and holds a large amount of Greek, Portuguese and Spanish debt bonds....
Without debt restructuring involving important debt amount reductions and extended maturities, Greece will not be able to meet her commitments, just like the rest of Europe's debt-overhung Europe's periphery economies - Ireland, Portugal, Spain, and Italy, and the effects would certainly contaminate the rest of Europe including the region's strongest economies.
The illusion of dampening the fire by deferring debt maturities is just that - a chimera. Unless public and private bondholders' debts are reduced and longer maturities granted, default and meltdown are around the corner.
Debt restructuring means debt renegotiation of debts on behalf of those unable to honour them. In case of default it entails sovereign default. A country notifies its debtors that it is unable to pay and goes into default, outright failure, or proposes to renegotiate its debt and pay less or get extended deadlines.
Amount reductions may involve paying a percentage of the original debt, or the original amount during a longer period, or even paying one's whole debt over longer periods.
Greece, Unable To Pay A Debt Exceeding 150% of GDP
The latter solution is not available to Greece: with negative real GDP growth, fiscal and trade balance deficits, among other negative indicators, the country is unable to pay a debt exceeding 150% of GDP, even in a far off future.
In the April 2009 London G-20 summit, whose dubious merit was the rescue of private banks with public money, the developing world bought the idea that the worst was over - and emerging countries bought the idea that this time they would emerge unscathed from the crisis just by adopting local measures to mitigate the domestic impacts.
The customary commitments to regulate financial activity and prohibit purely speculative operations were once again heard at the summit, in London, and such formulae are now at the centre of the European blistering scenario.
Europe Lost The Opportunity To Avoid The Current Crisis
The bloc was the only space where you could have regulated and blocked financial activity; controlled or prevented purchase of sovereign debt by private investors; prohibited sovereign debt rating by risk rating entities in conditions such as those of reportedly fraudulent qualifications of toxic bonds as AAA, which collapsed from 2007 on, simultaneously with recommendations to purchase default swaps against those very bonds; capital flight control, and even tax the sector itself to create a sovereign debt buyback fund and / or even for future bailouts and to propel viable adjustment and reform mid- and long term programs.
Such elementary measures would have been, at least, survival plans.
source to read more
http://globalresearch.ca/index.php?context=va&aid=25932
Europe is on the verge of collapsing and the world is again in the quagmire, the reason being Europe, rather than just Greece, is the planet's soft belly, and the impact of Europe's eventual downfall would make itself felt throughout the world, even if Germany, or France, could somehow be spared.
The scale of impact is unpredictable, but potentially worse than that of the recent toxic assets crisis. The European bloc is the second largest economy, the first trade partner of China, the largest importer of Russian energy and the first buyer of high quality raw materials (it still holds the Hilton quota, the world's most expensive meat quota).
All over the world European debt holders and many states maintain their reserves in euros. China, for example, has one-fourth of its reserves in such currency and holds a large amount of Greek, Portuguese and Spanish debt bonds....
Without debt restructuring involving important debt amount reductions and extended maturities, Greece will not be able to meet her commitments, just like the rest of Europe's debt-overhung Europe's periphery economies - Ireland, Portugal, Spain, and Italy, and the effects would certainly contaminate the rest of Europe including the region's strongest economies.
The illusion of dampening the fire by deferring debt maturities is just that - a chimera. Unless public and private bondholders' debts are reduced and longer maturities granted, default and meltdown are around the corner.
Debt restructuring means debt renegotiation of debts on behalf of those unable to honour them. In case of default it entails sovereign default. A country notifies its debtors that it is unable to pay and goes into default, outright failure, or proposes to renegotiate its debt and pay less or get extended deadlines.
Amount reductions may involve paying a percentage of the original debt, or the original amount during a longer period, or even paying one's whole debt over longer periods.
Greece, Unable To Pay A Debt Exceeding 150% of GDP
The latter solution is not available to Greece: with negative real GDP growth, fiscal and trade balance deficits, among other negative indicators, the country is unable to pay a debt exceeding 150% of GDP, even in a far off future.
In the April 2009 London G-20 summit, whose dubious merit was the rescue of private banks with public money, the developing world bought the idea that the worst was over - and emerging countries bought the idea that this time they would emerge unscathed from the crisis just by adopting local measures to mitigate the domestic impacts.
The customary commitments to regulate financial activity and prohibit purely speculative operations were once again heard at the summit, in London, and such formulae are now at the centre of the European blistering scenario.
Europe Lost The Opportunity To Avoid The Current Crisis
The bloc was the only space where you could have regulated and blocked financial activity; controlled or prevented purchase of sovereign debt by private investors; prohibited sovereign debt rating by risk rating entities in conditions such as those of reportedly fraudulent qualifications of toxic bonds as AAA, which collapsed from 2007 on, simultaneously with recommendations to purchase default swaps against those very bonds; capital flight control, and even tax the sector itself to create a sovereign debt buyback fund and / or even for future bailouts and to propel viable adjustment and reform mid- and long term programs.
Such elementary measures would have been, at least, survival plans.
source to read more
http://globalresearch.ca/index.php?context=va&aid=25932