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Old 11-23-2011   #21
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Nov. 23 (Bloomberg) -- Russian President Dmitry Medvedev ordered the military to prepare to "destroy" the command capability of the planned U.S. missile-defense system in Europe.
*
"I have ordered the armed forces to develop measures to ensure, if necessary, that we can destroy the command and control systems" of the U.S. shield, Medvedev said. "These measures are appropriate, effective and low-cost."
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"This is a Cold War-style issue that can be damaging for Russia-U.S. relations," Gevorgyan said by phone. "Unfortunately, it's going to stay for a while and during an election period it is an issue that can attract a lot of attention."
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"The West has been listening to Russian concerns, but it's true that the Russians are disappointed with the dialogue," Roman Kuzniar, an adviser to Polish President Bronislaw Komorowski, said by phone today. "I don't think they'll station missiles in Kaliningrad though. I'm more worried about the Russian threats to withdraw from the arms control treaty."

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"This is a Cold War-style issue that can be damaging for Russia-U.S. relations," Gevorgyan said by phone. "Unfortunately, it's going to stay for a while and during an election period it is an issue that can attract a lot of attention."
Read more: http://www.sfgate.com/cgi-bin/articl...#ixzz1eYGdjYZq
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Old 11-27-2011   #22
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Prepare for riots in euro collapse, Foreign Office warns, By James Kirkup, Deputy Political Editor10:00PM GMT 25 Nov 2011, The Telegraph

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As the Italian government struggled to borrow and Spain considered seeking an international bail-out, British ministers privately warned that the break-up of the euro, once almost unthinkable, is now increasingly plausible.
Diplomats are preparing to help Britons abroad through a banking collapse and even riots arising from the debt crisis.
The Treasury confirmed earlier this month that contingency planning for a collapse is now under way.
Wikipedia backgrounder on The Telegraph paper

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The Daily Telegraph is a daily morning broadsheet newspaper distributed throughout the United Kingdom and internationally. The newspaper was founded by Arthur B. Sleigh in June 1855 as the Daily Telegraph and Courier, and is since 2004 owned by David and Frederick Barclay.

According to a MORI survey conducted in 2005, 64% of Telegraph readers intended to support the Conservative Party in the coming elections.[3] It had an average daily circulation of 634,113 in July 2011 (compared to 441,205 for The Times).[2]
Germany, France plan quick new Stability Pact: report, BERLIN | Sun Nov 27, 2011 7:43am EST, Reuters

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France and Germany are planning a quick new pact on budget discipline that might persuade the European Central Bank to ramp up its government bond purchases, Welt am Sonntag reported on Sunday.
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In an advance release before publication, Welt am Sonntag said that because it would take too long to change existing European Union treaties, euro zone countries should just agree among themselves on a new Stability Pact to enforce budget discipline - possibly implemented at the start of 2012.

It could be similar to the Schengen Agreement which applies to EU countries that choose to take part and enables their citizens to enjoy uninhibited cross border travel. Among the countries in the Stability Pact, there would be a treaty spelling out strict deficit rules and control rights for national budgets.
****Actually it seems the story was broken in Bild (ack ) but let's follow the trail******

Geheimverhandlungen ber neuen Euro-Vertrag, 26.11.2011, Die Welt

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Deutschland und Frankreich wollen offenbar bis Anfang 2012 einen neuen Euro-Stabilittsvertrag notfalls auch ohne Rcksicht auf die EU-Kommission.
Quote:
Auf die angestammte Rolle der EU-Kommission wollten Merkel und Sarkozy notfalls keine Rcksicht nehmen. Schon beim nchsten EU-Gipfel am 8./9. Dezember wolle das Duo seine Plne vorstellen. Scharfer Protest werde vor allem aus Grobritannien erwartet, das zwar nicht zur Euro-Zone gehrt, aber nicht weiter an den Rand gedrngt werden wolle.
Wikipedia backgrounder on the newspaper Die Welt

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It was founded in Hamburg in 1946 by the British occupying forces, aiming to provide a "quality newspaper" modelled on The Times. It originally carried news and British-viewpoint editorial content, but from 1947 it adopted a policy of providing two leading articles on major questions, one British and one German. At its peak in the occupation period, it had a circulation of around a million.[1]

The modern paper takes a self-described "liberal cosmopolitan" position in editing, but Die Welt is generally considered to be conservative.[2][3]

The average circulation of Die Welt is currently about 209,000 and the paper can be obtained in more than 130 countries. Daily regional editions appear in Berlin and Hamburg, and in 2002 the paper experimented with a Bavarian edition. A daily regional supplement also appears in Bremen. The main editorial office is in Berlin, in conjunction with the Berliner Morgenpost.

Die Welt is the flagship newspaper of the Axel Springer publishing group. Its leading competitors are the Frankfurter Allgemeine Zeitung, the Sddeutsche Zeitung and the Frankfurter Rundschau. Financially, it has been a lossmaker for many years.
Merkel und Sarkozy wollen neuen EU-Vertrag, 26.11.2011 07:55 Uhr, Bild

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Deutschland und Frankreich drcken aufs Tempo! In Rekordtempo soll ein neuer Euro-Stabilittsvertrag erzwungen werden -mglichst schon zu Beginn nchsten Jahres! Damit soll endlich Ruhe an den Finanzmrkten einkehren.
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Nach BILD-Informationen erwgen Kanzlerin Angela Merkel und Frankreichs Staatsprsident Nicolas Sarkozy sogar, den neuen Stabilittspakt zunchst als Vertrag zwischen den Nationalstaaten zu schlieen -hnlich dem anfnglichen Abkommen ber den Wegfall der Personenkontrollen in der EU ("Schengen-Vertrag"). Der Vorteil: Das geht schneller und lsst skeptischen Mitgliedsstaaten weniger Raum fr Widerstand. Auf die EU-Kommission wollen Merkel und Sarkozy notfalls keine Rcksicht nehmen.
Wikipedia backgrounder on the Bild newspaper

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The Bild (formerly Bild-Zeitung[clarification needed], lit. Picture Newspaper; pronounced [ˈbɪlt]) is a German tabloid published by Axel Springer AG. The paper is published from Monday to Saturday, while on Sundays, Bild am Sonntag (lit. Picture on Sunday) is published instead, which has a different style and its own editors. Bild is tabloid in style, although actually broadsheet in size. It is the best-selling newspaper outside Japan and has the sixth-largest circulation worldwide.[1] Its motto, prominently displayed below the logo, is unabhngig, berparteilich (independent, nonpartisan). Another slogan used prominently in advertising is Bild dir deine Meinung!, which translates as "Form your own opinion!" (i. e., by reading Bild), a pun based on the fact that in German, Bild (more properly Bild'!, a short form of Bilde!) can also be understood as the imperative form of bilden, "to shape, to form".

Bild's nearest English-language stylistic and journalistic equivalent is often considered to be the British national newspaper The Sunthe second highest selling European tabloid newspaperwith which it shares a degree of rivalry.[2][3][4]
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Old 11-27-2011   #23
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It's at this point useful to remind everyone that the German government is a bunch of dilettantes in regard to economic policy.

The seat of the minister of the economy is assigned 100% based on politics, 0% based on competence. The current owner is a yuppie who for reasons unknown to me leads the junior coalition partner party.
The economic competence of his secretaries is uninspiring as well (there's one professional politician (in this case a lawyer-politician) and a professional bureaucrat (who studied bureaucracy) as right hands of every minister in Germany.


The ministry of finance is no better; there's the former 'law & order' minister of the interior, a man whose psyche is in my opinion too affected by a near-fatal assassination attempt that bound him to a wheelchair.


The advice that comes from the German central bank is heavily influenced by a focus on the German economic situation and not helpful in this case either.


The advice from our half dozen leading economic research institutes is usually contradictory and thus an all-inclusive buffet; every politician can pick what he likes the most (a systematic disadvantage in comparison to small countries such as Denmark or Netherlands - and a suspected reason for why big countries are worse at actual reforms).



We really need to clean up this incompetence mess once we got rid of Merkel, but that's not so easy. Powermongers and master politics strategists are difficult to displace for people who want to push for competence over politics.
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Old 11-27-2011   #24
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Default Prepare for riots?

Surferbettle,

Please note the quoted UK press report is in the Sunday edition of The Telegraph and is based on a convenient "leak" from part of the UK government on a reported contingency plan. The UK government has plenty of reasons at home to distract the public, including that decisions over the Euro crisis are largely taken without it.

Considering there are half a million French citizens resident in the UK, plus a larger number of Poles and small numbers from most EU members I doubt if any other government is making similar "leaks".

Most governments have contingency plans, although here many have argued HMG has not done so for a collapse of the Euro - the Conservatives coalition partner is rather committed to the EU.
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Old 11-27-2011   #25
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David,

I am not advocating that everyone start stocking up on remote farm real estate, precious metals, guns & ammo, and rice & beans

You are correct that political pressure is indeed applied through the media and that responsible governments do conduct contingency planning. As you are aware there is ferocious multi-spectrum pressure being brought to bear, upon Germany in particular, to have the ECB fire up the printing presses (even more than currently ) using the Federal Reserve model.

Zone euro : un nouveau pacte de stabilit l'tude, LEMONDE.FR avec AFP | 26.11.11 | 19h34 Mis jour le 27.11.11 | 16h36

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Interroge sur le sujet dimanche sur Canal +, la ministre du budget franais, Valrie Pcresse, n'a pas confirm l'information, voquant toutefois un pacte pour renforcer la discipline budgtaire, avec de "vraies sanctions", mais qui s'appliquerait tous les pays de l'eurozone. Par ailleurs, l'Elyse a fermement rejet toute volont de confrer des "pouvoirs supranationaux" la Commission europenne. "On veut pouvoir discuter des moyens d'avoir des pouvoirs plus intrusifs de Bruxelles pour surveiller un pays comme la Grce", a nuanc la prsidence, faisant valoir que "mme l'Allemagne ne demandait pas de donner la Commission des pouvoirs supranationaux".
Thinking the unthinkable on a euro break-up, November 27, 2011 4:20 pm by Gavyn Davies, Financial Times, www.ft.com

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It has suddenly become respectable to ask the question: what would happen if the euro broke up? Last weeks rise in German bond yields signals that a euro break up is being taken more seriously by investors. I am told that London law firms are allocating large amounts of time to examining the validity, following a break-up, of cross-border contracts written in euros. And, to judge from my own inbox, asset managers are beginning to ask about the economics of how it could occur.
Take flight from Europes policy food fight, By Bill Gross, MARKETS INSIGHT November 15, 2011 4:53 pm, Financial Times, www.ft.com

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The investment message to be taken from this policy food fight is that sovereign credit is a legitimate risk spread from now until the twelfth of never.
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The European Unions imposed fiscal solution is to clean up your act, but, in the process, to impose years of deflationary relative wage policies on a rather spoiled southern citizenry. Perhaps they will stand for it, perhaps they wont. But, as time winds on, a rather permanent credit spread of damaging proportions threatens these economies with higher bond market yields, increasing rather than decreasing debt to GDP levels. Sovereign creditworthiness and potential default become greater downside probabilities, indicating a greater likelihood of significant losses.
Perhaps the time is drawing nearer for the judicious use of long straddle strategies?
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Old 11-27-2011   #26
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It's at this point useful to remind everyone that the German government is a bunch of dilettantes in regard to economic policy.

The seat of the minister of the economy is assigned 100% based on politics, 0% based on competence. The current owner is a yuppie who for reasons unknown to me leads the junior coalition partner party.
The economic competence of his secretaries is uninspiring as well (there's one professional politician (in this case a lawyer-politician) and a professional bureaucrat (who studied bureaucracy) as right hands of every minister in Germany.
Sounds like business as usual in politics.

Anyway it really seems that banks are overall pulling a lot of money out of gov. bonds, both due to internal and external reasons. Even the "Germanic" countries (Austria, Belgium, Germany, Luxenbourg and the Netherlands) plus Finland have to pay now quite a lot more this week due to fears and demand.

Italy had to pay roughly 8% this week. Personally I'm buying as we are reaching 10-11 % yields for short-term bonds running only a bit over a year. I can not imagine Italy leaving the Euro. Making a haircut for Italian gov. bonds denominated in Euro would cause a massive outroar as so many Italians hold them. Leaving the Euro zone without making a haircut would however greatly increase the debt as a new Lira can just suffer against a Northern Euro. At least this was always the case with the old Lira, which was devalued (avoiding a internal uproar) quite a number of times to make the economy more competitive. The danger of a massive outflow of Italian captial would be a very real threat too, something already happening in Greece where so much Greek money already left the country toward Switzerland and Germany.

Hungary, who still has the Florint is now rated below investment grade while once gain the currency is tailgating against the Euro. In this case I understand at least partly the rating agencies, as the recent government is really a nationalistic mess in many ways.

In general the situation is of course bad. While it is good that at last chronical economical problems get tackled in quite some countries doing so now is in the short- or medium term depressing the economy and will influence the overall growth long-term also negatively. Stimulating the economy or better avoiding drastic cuts would help the real economy a great deal but will be hard to finance unless the ECB does it's part.

P.S: I do think that the big three rating agencies are partly upkeeping the top rating for the US due to massive political pressure. While in theory it would be not too difficult to balance the budget especially due to higher taxes it seems almost impossible to do so due the polical dead-lock...

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Old 11-28-2011   #27
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Icap tests systems for eurozone collapse, By Nicole Bullock in New York, November 27, 2011 11:03 pm, Financial Times, www.ft.com

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Icap, the world’s largest electronic trading platform for foreign currency, said on Sunday that it had been preparing for the possible break-up of the euro.

The region’s debt crisis has mounted in recent weeks, leading to concerns about the exit of some troubled peripheral countries or even the ultimate dissolution of the common currency.

Icap is testing its EBS platform to trade the Greek drachma against both the euro and the US dollar. This follows discussions with clients – largely dealer banks – and third parties such as CLS, a settlement system for currency trades, about the need to be prepared for “any number of possible outcomes”, said Ed Brown, executive vice-president of business development and research at Icap Electronic Broking.

“There has been enough discussion about a break-up of the euro that we are knocking the dust off the pre-euro [currencies] and making sure everything works,” Mr Brown said. “Some of these currencies have not traded in a decade.”
ICAP website

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ICAP is the world’s premier voice and electronic interdealer broker and provider of post trade risk and information services. The Group is active in the wholesale markets in interest rates, credit, commodities, FX, emerging markets, equities and equity derivatives.

We are active in both established and emerging markets and operate a global network covering more than 32 countries.

We believe that we can best provide the service our customers need by combining the strengths of our people together with technology – continuing to set the standard for our industry.

ICAP's strategic goals are clear. We aim to be the main infrastructure provider to the world's wholesale OTC markets, be the leading global intermediary and also the leading post trade risk services provider. ICAP aims to generate operating profit evenly between its main businesses.
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Old 11-28-2011   #28
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P.S: I do think that the big three rating agencies are partly upkeeping the top rating for the US due to massive political pressure. While in theory it would be not too difficult to balance the budget especially due to higher taxes it seems almost impossible to do so due the polical dead-lock...

In Germany the executive/gubernative has permission to deviate by 20% from the budget given by the legislative by shifting money and they have permission to not spend money altogether unless there's some juristic/natural person entitled to it.

The German minister of defence, for example, could as far as I know stop all 'his' new procurement with a simple sheet of paper and some ink within minutes as far as I know.

So we could basically balance our budget (about a tenth not paid for by revenues) today if we wanted to. It only takes eradication of thousands of small pet projects* and few big ticket projects.



Instead, our government has just decided that having more revenues means you can spend more and increased the planned budget deficit. Part of this increase is due to one-time expenditures that shall make it easier to stay within the new constitutional limits for the budget once they're in force. Another part is due to new nonsense such as paying parents for not sending their child to a Kindergarten.


With Adenauer as chancellor we had a foreign policy grand strategy that mastered what failed during the 20's.
With Ludwig Erhard as his minister of the economy we had an economic and fiscal grand strategy rivalling the grand strategies of von Bismarck.
Later (and shortly) with Brandt as chancellor we had a reform movement towards more democracy and more liberties in the society.

Ever since, our governments were quite crappy:

70's: Schmidt government fails to react properly and forcefully to the structural economic changes and both oil crisis. Unemployment and public debt grow.

80's: Little progress if any in politics. Kohl's chancellorship survives well into the 90's only because of the reunification. Introduction of Deutsche Mark in East Germany with a wrong exchange rate destroys East German industry's liquidity and thus even many potentially profitable businesses.

Early and Mid-90's: A tired Kohl preserves power, mismanages the economic development of East Germany.

Late 90's: A supposedly social-democrat-green yuppie-mentality government partially dismantles the welfare state to boost 'competitiveness' (a common fearmongering of the industry lobbies at the time) and yields a terrible trade balance deficit (for the competitiveness was OK, and was raised to unhealthy). The supposed pacifists of the green party went to war asap ('99). Some other nonsensical reform such as subsidies for private retirement plans were enacted as well (made zero sense macroeconomically).

2000's: Merkel as chancellor has mastered politics (especially the destruction of party-internal opposition) and displays an increasingly astonishing ability to throw 'conservative' key political positions overboard at will.


It's so totally no surprise that the political Germany of our time is not capable of doing much right in this economic and European crisis.



*: Best medium-term savings measure is to fire ministerial bureaucrats. I've learned at work that even low-level ministerial bureaucrats are causing excessive costs with pet projects. A bureaucrat known to me (ranking so low that he really only had one guy as subordinate) had a 60 million Euro pet project (spread over six years) that was about 40-70% waste of money. His retirement couldn't possibly be more expensive than keeping him on the job.

Less bureaucrats in ministries = less advocates for new pet "pilot" projects and wasteful spending in general. A 1/3 personnel cut in all ministries would be a wise move. At the same time, outsourcing of ministry tasks (from kitchen to program offices) should be reduced by 1/3 as well.

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Old 11-28-2011   #29
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It is impossible to know for sure what would happen but there is no doubt that a disorderly Greek default and exit from the Euro will have big consequences both in Greece and around the rich world. In Greece, many businesses will find that they still owe external debts in Euro that they have little hope of repaying causing many failures. The cost of European imports will become prohibitive for many businesses as well with similar results. Outside of Greece, a good many banks have at least some exposure to Greek debt although those that can unload it are doing so but more harmful than that is risk of spreading contagion. Italian and Spanish bonds are already trading at near unsustainable levels. A disorderly Greek default followed by its exit from the Euro may throw the bond market into chaos and leave Italy and Spain as well as possibly others unable to service their debts, which could lead to defaults or even a collapse of the Euro. The contagion could be contained but only by swift and decisive action by Europe's politicians, which we have not seen thus far.
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Old 11-29-2011   #30
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In Greece, many businesses will find that they still owe external debts in Euro that they have little hope of repaying causing many failures.
That's no issue this time. Remember, the old currency (Euro) would not lose value as in other monetary reforms. They would still be able to do business in Euro.
A new indigenous currency would rather be introduced through requiring payment of taxes in it and through paying public servants as well as contractors with it.

The Greek industry would not have substantially greater difficulties paying Euro bills then than now.
Besides; bankruptcy laws can be written to national advantage.
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Old 11-29-2011   #31
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That's no issue this time. Remember, the old currency (Euro) would not lose value as in other monetary reforms. They would still be able to do business in Euro.
A new indigenous currency would rather be introduced through requiring payment of taxes in it and through paying public servants as well as contractors with it.

The Greek industry would not have substantially greater difficulties paying Euro bills then than now.
Besides; bankruptcy laws can be written to national advantage.
How would Greek industry not have significantly greater difficulties repaying Euro bills? The Drachma will still be worth much less than the Euro and Greek monetary policy can only go so far to alleviate that. Ultimately Greek industry will be required to pay a much larger percentage of their available capital to purchase Euro than many of them can afford.
As for the Greek government re-writing bankruptcy policy, I am not sure how making bankruptcy easier to declare is going to help.
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Old 11-29-2011   #32
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How would Greek industry not have significantly greater difficulties repaying Euro bills? The Drachma will still be worth much less than the Euro and Greek monetary policy can only go so far to alleviate that. Ultimately Greek industry will be required to pay a much larger percentage of their available capital to purchase Euro than many of them can afford.
As for the Greek government re-writing bankruptcy policy, I am not sure how making bankruptcy easier to declare is going to help.
Right now Greek industry is in peril because it has a fixed currency exchange rate, while with Drachma it would have a flexible one. That's a much better situation and will yield greater exports. Those exports plus the cash available right now needs to suffice for paying imports and foreign debt. It may not be easy, but what counts is the change.
Right now they're proved their inability to compete on large scale on foreign markets simply because they'd need a different exchange rate than 1:1. Their ability to gain Euros domestically doesn't appear to help enough, for the macro picture shows that this ain't enough. Greece has a major trade balance deficit.
The value of the Drachme would be of no concern, actually. I don't know why people are so interested in the value of foreign money. All you need to know is whether you can exchange it easily into another currency. There's no economic substance between the difference of printing a 10 or a 100000 on a piece of paper.
Besides; the Drachme might even grow stronger in regards to the exchange rate if the Euro : Drachme exchange ratio is being set to too weak initially.

Besides; all domestic debt could be converted by law into Drachme.


There were a couple examples for introduction of a new currency for leaving a currency that continues to exist. All the break-away state on the Balkan and in East Europe and Caucasus region did it. Sadly, none mirrors the Greek case very well.


About bankruptcy laws; it's possible to write a bankruptcy laws in which all outside capital simply turns into equity capital during a bankruptcy, without termination of the business. No company would ever need to die just because it cannot pay bills. That's simply a matter of will of the legislative.
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Old 02-12-2015   #33
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Stratfor has published another of George Friedman’s masterly sitreps: this one on Germany’s current and largely self-generated problems relating to Ukraine and Greece.

https://www.stratfor.com/weekly/germ...eid=5da0feb2eb
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Old 02-12-2015   #34
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Compost,

An interesting article thank you. Germany certainly has issues and concerns over the potential decisions by the new Greek government - they are not alone.

There was a tweet yesterday showing the minimum wage level in four EU countries, Greece had the highest by a good margin. The other three were all small Northern European nations, who are IMHO in effect being asked to pay Greece. I cannot now locate that Tweet.

This morning on BBC Radio Four a Finnish person commented that the budget support requested by Greece meant a 5% GDP transfer, something he appeared to doubt any Finn would support.

Supporting Greece could easily become a unpopular political issue, which I am sure affects such Euro-enthusiasts as Chancellor Merkel.

Incidentally the cited author refers to few nations wanting to join the EU now. That is simply wrong. Seven nations are waiting, all but one small: Albania, Bosnia, Iceland, Kosovo, Macedonia, Montenegro, Serbia and rather hesitantly nowadays Turkey. See:http://www.bbc.co.uk/news/world-europe-11283616

Latvia even started to use the Euro January 1st 2015.
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Old 02-12-2015   #35
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I was going to point that out too, there are quite a few countries eager to join the EU. In fact that there are just no large European nations left to join the EU apart from Ukraine, Russia and Turkey shows the great success of the EU as a political and economic project. The Euro fiasco has been a terrible blow and is partly responsible for the economic hardship of millions, the political system of the EU has some well known flaws but as 'the Germans say, 'you must empty-out the bathing-tub, but not the baby along with it'*

The article rightly points out that Germany has emerged as Europe's most important political player and quite reluctantly so in some areas. Isn't it ironic that the growing importance and political power is according to the article linked to the 'extraordiarily uncomfortable position'?

Quote:
If it is too much to say that Merkel's world is collapsing, it is not too much to say that her world and Germany's have been reshaped in ways that would have been inconceivable in 2005. The confluence of a financial crisis in Europe that has led to dramatic increases in nationalism — both in the way nations act and in the way citizens think — with the threat of war in Ukraine has transformed Germany's world. Germany's goal has been to avoid taking a leading political or military role in Europe. The current situation has made this impossible. The European financial crisis, now seven years old, has long ceased being primarily an economic problem and is now a political one. The Ukrainian crisis places Germany in the extraordinarily uncomfortable position of playing a leading role in keeping a political problem from turning into a military one.
Personally I don't think that Germany is feared as it is fully integrated into the European system in many ways and a web of larger alliances. It is far from being isolated even in that Greek tragedy°. The big role it plays currently is also in part due to Merkel's strong internal position. No other large EU members have no political figure which dominates the internal landscape in such fashion and none of it's had the less bad economic performance then Germany. All in all it is important to keep in mind that it is still a great luck to be currently in such an 'uncomfortable position' as Germany, or the EU as a whole or the USA.

*German proverb

°I largely support the Greek position on austerity.
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Dealing With Uncertainty: The Future Requires Flexibility SWJED Futurists & Theorists 0 12-29-2005 12:28 AM


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