EL FIN DEL EURO: UNA GUIA DE SUPERVIVENCIA.
Os dejo un interesante extracto de dos conocidos autores, y tomamos nota, amigos, por la que pueda caernos encima:
"Some European politicians are now telling us that an orderly exit for Greece
is feasible under current conditions, and Greece will be the only nation that
leaves. They are wrong. Greece’s exit is simply another
step in a chain of events that leads towards a chaotic dissolution of the euro
zone.
During the next stage of
the crisis, Europe’s electorate will be rudely
awakened to the large financial risks which have been foisted upon them in
failed attempts to keep the single currency alive. If Greece quits
the euro later this year, its government will default on approximately 300 billion
euros of external public debt, including roughly 187 billion euros owed to the
IMF and European Financial Stability Facility (EFSF).
More importantly and currently less obvious to German taxpayers, Greece will
likely default on 155 billion euros directly owed to the euro system (comprised
of the ECB and the 17 national central banks in the euro zone). This
includes 110 billion euros provided automatically to Greece through the Target2 payments
system – which handles settlements between central banks for countries using
the euro. As depositors and lenders flee Greek banks, someone needs
to finance that capital flight, otherwise Greek banks would fail. This
role is taken on by other euro area central banks, which have quietly leant
large funds, with the balances reported in the Target2 account. The vast
bulk of this lending is, in practice, done by the Bundesbank since capital
flight mostly goes to Germany,
although all members of the euro system share the losses if there are defaults.
The ECB has always
vehemently denied that it has taken an excessive amount of risk despite its
increasingly relaxed lending policies. But between Target2 and direct bond purchases alone, the euro system
claims on troubled periphery countries are now approximately 1.1 trillion euros
(this is our estimate based on available official data). This amounts
to over 200 percent of the (broadly defined) capital of the euro system.
No responsible bank would claim these sums are minor risks to its capital or to
taxpayers. These claims also
amount to 43 percent of German Gross Domestic Product, which is now around 2.57
trillion euros. With Greece
proving that all this financing is deeply risky, the euro system will appear
far more fragile and dangerous to taxpayers and investors.
Jacek Rostowski, the Polish
Finance Minister, recently warned that the calamity of a Greek default is
likely to result in a flight from banks and sovereign debt across the
periphery, and that – to avoid a greater calamity – all remaining member
nations need to be provided with unlimited funding for at least 18
months. Mr. Rostowski expresses concern, however, that the ECB is not
prepared to provide such a firewall, and no other entity has the capacity,
legitimacy, or will to do so.
We agree: Once it dawns
on people that the ECB already has a large amount of credit risk on its books,
it seems very unlikely that the ECB would start providing limitless funds to
all other governments that face pressure from the bond market. The Greek
trajectory of austerity-backlash-default is likely to be repeated elsewhere –
so why would the Germans want the ECB to double- or quadruple-down by suddenly
ratcheting up loans to everyone else?
The most likely scenario is
that the ECB will reluctantly and haltingly provide funds to other nations – an
on-again, off-again pattern of support — and that simply won’t be enough to
stabilize the situation. Having seen the destruction of a Greek exit, and
knowing that both the ECB and German taxpayers will not tolerate unlimited additional
losses, investors and depositors will respond by fleeing banks in other
peripheral countries and holding off on investment and spending.
Capital flight could last
for months, leaving banks in the periphery short of liquidity and forcing them
to contract credit – pushing their economies into deeper recessions and their
voters towards anger. Even as the ECB refuses to provide large amounts of
visible funding, the automatic mechanics of Europe’s payment system will mean
the capital flight from Spain
and Italy
to German banks is transformed into larger and larger de facto loans by the
Bundesbank to Banca d’Italia and Banco de Espana– essentially to the Italian
and Spanish states. German taxpayers will begin to see through this
scheme and become afraid of further losses.
The end of the euro system
looks like this. The periphery suffers ever deeper recessions — failing
to meet targets set by the troika — and their public debt burdens will become
more obviously unaffordable. The euro falls significantly against other
currencies, but not in a manner that makes Europe
more attractive as a place for investment.
Instead, there will be
recognition that the ECB has lost control of monetary policy, is being forced
to create credits to finance capital flight and prop up troubled sovereigns —
and that those credits may not get repaid in full. The world will no
longer think of the euro as a safe currency; rather investors will shun bonds
from the whole region, and even Germany
may have trouble issuing debt at reasonable interest rates. Finally,
German taxpayers will be suffering unacceptable inflation and an apparently
uncontrollable looming bill to bail out their euro partners.
The simplest solution will
be for Germany
itself to leave the euro, forcing other nations to scramble and follow
suit. Germany’s
guilt over past conflicts and a fear of losing the benefits from 60 years of
European integration will no doubt postpone the inevitable. But here’s
the problem with postponing the inevitable – when the dam finally breaks, the
consequences will be that much more devastating since the debts will be larger
and the antagonism will be more intense.
A disorderly break-up of the euro area will be far more damaging to
global financial markets than the crisis of 2008. In fall 2008 the
decision was whether or how governments should provide a back-stop to big banks
and the creditors to those banks. Now some European governments face
insolvency themselves. The European economy accounts for almost 1/3 of
world GDP. Total euro sovereign debt outstanding comprises about $11
trillion, of which at least $4 trillion must be regarded as a near term risk
for restructuring.
Europe’s rich capital
markets and banking system, including the market for 185 trillion dollars in
outstanding euro-denominated derivative contracts, will be in turmoil and there
will be large scale capital flight out of Europe into the United States and Asia.
Who can be confident that our global megabanks are truly ready to
withstand the likely losses? It is almost certain that large numbers of
pensioners and households will find their savings are wiped out directly or
inflation erodes what they saved all their lives. The potential for political turmoil and human hardship is staggering.
For the last three years Europe’s
politicians have promised to “do whatever it takes” to save the euro. It
is now clear that this promise is beyond their capacity to keep – because it
requires steps that are unacceptable to their electorates. No one knows
for sure how long they can delay the complete collapse of the euro, perhaps
months or even several more years, but we are moving steadily to an ugly end.
Whenever nations fail in a crisis, the blame game starts. Some in Europe and the IMF’s leadership are already covering
their tracks, implying that corruption and those “Greeks not paying taxes”
caused it all to fail. This is wrong: the euro system is generating
miserable unemployment and deep recessions in Ireland,
Italy, Greece, Portugal
and Spain
also. Despite Troika-sponsored adjustment programs, conditions continue
to worsen in the periphery. We cannot blame corrupt Greek politicians for
all that.
It is time for European and
IMF officials, with support from the US and others, to work on how to
dismantle the euro area. While no dissolution will be truly orderly,
there are means to reduce the chaos. Many technical, legal, and financial
market issues could be worked out in advance. We need plans to deal with:
the introduction of new currencies, multiple sovereign defaults,
recapitalization of banks and insurance groups, and divvying up the assets and
liabilities of the euro system. Some nations will soon need foreign
reserves to backstop their new currencies.
Most importantly, Europe needs to salvage its
great achievements, including free trade and labor mobility across the
continent, while extricating itself from this colossal error of a single
currency.
Unfortunately for all of us, our politicians refuse to go there – they
hate to admit their mistakes and past incompetence, and in any case, the job of
coordinating those seventeen discordant nations in the wind down of this
currency regime is, perhaps, beyond reach.
Forget about a rescue in the form of the G20, the G8, the G7, a new
European Union Treasury, the issue of Eurobonds, a large scale debt
mutualisation scheme, or any other bedtime story. We are each on our own."
Peter Boone is chair of Effective Intervention,
a UK-based charity, an associate at the Centre for Economic Performance, London
School of Economics, and a principal in Salute Capital Management Limited.
AUTHORS: PETER BOONE, SIMON JHOSON.
