Chuck Spinney: Eurozone Headed for a Crash

Commerce, Commercial Intelligence, Corruption, Government
Chuck Spinney

It’s 2008 All Over Again

The Eurozone is Headed for a Crash

by MIKE WHITNEY

Counterpunch, AUGUST 29, 2011

EXTRACT:

The banks aren’t required to mark down most of their holdings of government debt to market prices. If they did, some would be forced to default or seek a bailout.” (“How Long Can the ECB Prop Up Europe’s Sick Banks?”, Businessweek)

Are you kidding me? The banks are sitting on a mountain of garbage paper and EU regulators haven’t even forced them to write down the losses. Is it any wonder why public confidence is at all-time lows?

. . . . . . .

Doomsday Scenario seems to be on the mind of central bankers at the ECB, too. According to CNBC: “The Sunday Times in the UK reported that policy makers in Brussels are drawing up radical plans to offer central guarantees over certain types of debt issued by banks. The move is reported to be a direct response to the sharp fall in U.S. funding for Europe’s banks. If true, this is clearly something the boss of the ECB can’t be discussing in public….” (“Trichet Gives Master Class in Saying Nothing”, CNBC)

Indeed, how can one publicly discuss their intention to disregard the democratic process altogether, overstep their mandate, and underwrite hundreds of billions in garbage bonds held by thieving bankers? That’s hardly the kind of policy that would elicit a riotous display of support from the people.

So, it’s a mess, and it’s going to get a whole lot messier because EU banks need to roll over more than $4.5 trillion in the next two years and the funding flywheel is already gummed up. So, if there’s not a political solution to the trans-EU fiscal issues in the next few months, the eurozone is toast. When the credit markets start to groan, bad things can happen fast.

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