I started writing the blog in the early summers of 2008 with the intension of sharing views on the global financial markets and macroeconomics:- In the autumn of 2008, the banking sector collapsed with remarkable rapidity. It seemed that every weekend something remarkable happened, from the demise of Lehman Brothers, through the sale of Merrill Lynch to Bank of America, the rescue of AIG and so on. My initial post FAIRY TALE OF INVESTMENT BANKING in 2008
In contrast the euro zone crisis has unfolded in slow motion so we all feel a bit battle-weary, like First World War soldiers; if we date the problem to the start of 2010 . There is the same feeling that those in charge don’t know what they are doing; that all this sacrifice is going to waste.
Quoting from Reuters the current scenario :
“Regional debts, soaring borrowing costs, a higher deficit and souring market sentiment are all making it nearly impossible for Spain to find 50 billion euros in funding it needs by year-end without external aid. Madrid will need 10 billion euros more than expected at the start of the year to fund a softer deficit target agreed with the European Union, and 12 billion extra euros for a new liquidity line to highly indebted autonomous regions.That raises the total funding requirements for the rest of the year to around 50 billion, squandering the advantage Spain had gained in the first half of the year by “frontloading” its funding at a time when the European Central Bank was giving banks cheap money to buy government debt.Spanish officials had boasted that the second half of the year would not be difficult after they raised 59 billion worth of their expected 86 billion euro funding requirement in the first half of the year.But the benefit has evaporated now that the Treasury needs to find extra funding to meet a deficit target revised to 6.3 percent of Gross Domestic Product from 5.3 percent, and provide the new cash for its rescue fund for the regions.”
It has been tempting, on many occasions, to feel that the end game must be in sight – say, around the time of the proposed Greek referendum or the second Greek election. The temptation is strong now with the Der Spiegel report that the IMF will no longer finance Greece. One possibility is that the Greek exit will act as the Lehman moment, causing such chaos in the markets that the Germans will be forced to rescue Spain, as Hank Paulson was forced to rescue AIG. Or the ECB will step in, promising to cap Spanish and Italian bond yields.