The contagion crumbles eastward.
The developed world's tax predator ruling classes had created a variety of
international organizations since Bretton Woods to coordinate their central
planning of various national government created money supply systems.
And so they are crashing together!
We may be cursing our bankers but the one thing they have not done
is to get involved in lending vast sums to countries totally
unprepared to make good use of it. The collapse of East European
economies is inevitably going to rebound on the eurozone. [It's just
as well we are not in the euro!] Whatever rescue package they come
up with will destabilise the euro itself.
Germany - which at the time of the euro's start - insisted that no
one country should be held responsible for the debts of others. is
now presumed to be ready to pick up the debts of all the eurozone
banks which have behaved recklessly.
The worry is that Gordon Brown will be so looking to his own stature
as a would-be world statesman of renown that he will allow Britain to
get mixed up in the coming eurozone banking shambles.
We've problems enough of our own without that. We will suffer
indirectly as our European neighbours' economies will lessen their
international trading with us!
xxxxxxxxxxx cs
===============================
EU OBSERVER 19.2.09
World Bank calls for eastern Europe bail-out
ANDREW WILLIS
The World Bank called for intervention in central and eastern Europe
on Wednesday (18 February) as the region struggles to deal with the
financial crisis and economic downturn.
World Bank president Robert Zoellick said the bank was attempting to
help the region along with the International Monetary Fund but needed
more backing from Brussels, he admitted in an interview with the
Financial Times on Wednesday.
"It's got to have support from the European governments," he said.
"It's 20 years after Europe was united in 1989. What a tragedy if you
allow Europe to split again."
Mr Zoellick hopes to announce a €20 billion ($25bn) trade finance
plan before the G20 summit in London on 2 April.
Speaking at meeting on budget deficits on Wednesday, economy
commissioner Joaquin Almunia appeared to pour cold water on a co-
ordinated Brussels action for central and eastern Europe.
Listing countries such as EU member Romania, candidate country
Croatia, and Ukraine, Mr Almunia said their different relationships
with the EU executive meant that a single initiative for the region
was not feasible.
"We think a lot of authorities should be involved in the coordination
of the situation ... but from our point of view, what we can not do
is to use the same instruments to help these countries," he said.
However Lithuanian Prime Minister Andrius Kubilius echoed recent
Austrian calls for an EU support plan for the region, saying that the
root cause of the region's troubles was the banking crisis in the west.
"It would be good to see a more co-ordinated approach from the EU
authorities," Mr Kubilius said, also speaking to the Financial Times.
"We are all suffering in a similar way from the credit crunch and the
recession."
He also warned of the possibility of a collapse in Ukraine's or
Russia's economy and said such an event would have dire consequences
for eastern Europe.
European interconnectivity has been highlighted in recent weeks.
While central and eastern economies have been harmed by the economic
slowdown that resulted from the financial crisis in the west, several
western European states now fear contagion in the other direction.
Austria in particular has been calling for a support package for
eastern countries, fearing an economic collapse in the region could
devastate the Alpine country's banking sector. Vienna's financial
institutions are particularly exposed to the region, being owed €220
billion - equivalent to around three quarters of the country's GDP.
On Tuesday, Moody's, the credit rating agency, caused panic in global
financial markets after it reported that some west European banks
with east European subsidiaries risked ratings downgrades because of
the growing vulnerability of eastern Europe's banking system.
Following the news, the polish zloty approached all-time lows against
the euro and the Hungarian forint set a new record low.
Austria is not alone in its concern. On Wednesday, Hungarian Prime
Minister Ference Gyurcsany called for a €100 billion rescue plan from
the EU for troubled banks in central and eastern Europe and plans to
raise the idea at an informal meeting of European leaders on 1 March.
Central and eastern European leaders are calling for a meeting
beforehand with commission President Jose Manuel Barroso to discuss
the region's troubles, according to the Brussels-based European Voice.
==========================
TELEGRAPH 19.2.09
1. EU mulls action as Ukraine crumble triggers contagion fears for
Europe
Europe's institutions are scrambling for ways to prevent financial
contagion from Ukraine and the rest of Eastern Europe from setting
off a full-blown banking crisis in Austria, with risks of systemic
contagion across the eurozone.
By Ambrose Evans-Pritchard
Joaquin Almunia, EU's economic commissioner, said Brussels is ready
to co-ordinate a pan-EU response to contain the crisis before matters
get out of hand.
"I share with the Austrian authorities their concern about the
situation of these economies. Everybody shares their concern about
the risks involved. We are extremely concerned about the difficulties
with the Ukrainian government," he said.
West European banks have lent roughly $1.6 trillion (£1.13 trillion)
to the region, led by Austrian, Swedish, Italian, Greek, Belgian, and
Swiss banks. Almost $400bn must be rolled over this year in hostile
markets.
Lithuania's president Andrius Kubilius echoed the warnings on
Wednesday. "We are worried about what can happen in Ukraine and
Russia. The collapse of one of these markets would have a very
negative impact. It would be good to see a more co-ordinated
approach," he told the Financial Times.
Ukraine's travails appear to be snowballing out of control after the
central bank said the economy contracted 20pc in January year-on-
year, with a dramatic 34pc slide in industrial production. Valery
Lytvytsky, the bank's top adviser, said the collapse is the worst in
recorded Ukrainian history, exceeding the darkest days after the
Bolshevik revolution.
The currency has fallen 40pc since the crisis began, a crippling blow
to companies with large debts in dollars or euros. Three banks have
failed.
Credit default swaps measuring risk on Ukraine's state debt rose to
panic levels of 3,500 on rumours of imminent default following the
refusal of the International Monetary Fund to disburse the second
tranche of its $16.4bn rescue package. The IMF said the government
had failed to rein in public spending as agreed.
Premier Yulia Tymoshenko insisted there was no danger of default. "I
would like to tell the whole country that the state is paying all its
credits," she said.
She appeared unrepentant over the loss of her finance minister,
Viktor Pynzenyk, who resigned this week saying he was no longer
willing to serve as a political pawn. "Not all government officials
are capable of working in difficult circumstances. The weakest ones
abandon the battlefield," she said, in comments bordering on
political farce.
Neil Shearing from Capital Economics said Eastern Europe as a whole
is likely to contract by 5pc to 10pc this year. "It's pretty grim and
it creates the risk of a retreat into populism," he said.
The political risks in Ukraine are huge. The country has a large
Russian minority, much of it living in oblasts near Russia's
frontier, creating an open door for the Kremlin to intervene if the
crisis leads to civil disorder.
Lars Christensen from Danske Bank said ex-Soviet bloc had been a
casualty of the blanket extension of guarantees to banks across
Western Europe. "East Europe's governments are not strong enough to
offer such guarantees for their own banks. This has increased
relative risk." he said.
The European Bank for Reconstruction and Development said it is
mulling $500m in aid to boost Ukraine's banks, but first the country
has to restore credibility.
"We see an urgent need for conducive, comprehensive actions by the
Ukrainian authorities," EBRD chief Thomas Mirow said.
===============
international organizations since Bretton Woods to coordinate their central
planning of various national government created money supply systems.
And so they are crashing together!
We may be cursing our bankers but the one thing they have not done
is to get involved in lending vast sums to countries totally
unprepared to make good use of it. The collapse of East European
economies is inevitably going to rebound on the eurozone. [It's just
as well we are not in the euro!] Whatever rescue package they come
up with will destabilise the euro itself.
Germany - which at the time of the euro's start - insisted that no
one country should be held responsible for the debts of others. is
now presumed to be ready to pick up the debts of all the eurozone
banks which have behaved recklessly.
The worry is that Gordon Brown will be so looking to his own stature
as a would-be world statesman of renown that he will allow Britain to
get mixed up in the coming eurozone banking shambles.
We've problems enough of our own without that. We will suffer
indirectly as our European neighbours' economies will lessen their
international trading with us!
xxxxxxxxxxx cs
===============================
EU OBSERVER 19.2.09
World Bank calls for eastern Europe bail-out
ANDREW WILLIS
The World Bank called for intervention in central and eastern Europe
on Wednesday (18 February) as the region struggles to deal with the
financial crisis and economic downturn.
World Bank president Robert Zoellick said the bank was attempting to
help the region along with the International Monetary Fund but needed
more backing from Brussels, he admitted in an interview with the
Financial Times on Wednesday.
"It's got to have support from the European governments," he said.
"It's 20 years after Europe was united in 1989. What a tragedy if you
allow Europe to split again."
Mr Zoellick hopes to announce a €20 billion ($25bn) trade finance
plan before the G20 summit in London on 2 April.
Speaking at meeting on budget deficits on Wednesday, economy
commissioner Joaquin Almunia appeared to pour cold water on a co-
ordinated Brussels action for central and eastern Europe.
Listing countries such as EU member Romania, candidate country
Croatia, and Ukraine, Mr Almunia said their different relationships
with the EU executive meant that a single initiative for the region
was not feasible.
"We think a lot of authorities should be involved in the coordination
of the situation ... but from our point of view, what we can not do
is to use the same instruments to help these countries," he said.
However Lithuanian Prime Minister Andrius Kubilius echoed recent
Austrian calls for an EU support plan for the region, saying that the
root cause of the region's troubles was the banking crisis in the west.
"It would be good to see a more co-ordinated approach from the EU
authorities," Mr Kubilius said, also speaking to the Financial Times.
"We are all suffering in a similar way from the credit crunch and the
recession."
He also warned of the possibility of a collapse in Ukraine's or
Russia's economy and said such an event would have dire consequences
for eastern Europe.
European interconnectivity has been highlighted in recent weeks.
While central and eastern economies have been harmed by the economic
slowdown that resulted from the financial crisis in the west, several
western European states now fear contagion in the other direction.
Austria in particular has been calling for a support package for
eastern countries, fearing an economic collapse in the region could
devastate the Alpine country's banking sector. Vienna's financial
institutions are particularly exposed to the region, being owed €220
billion - equivalent to around three quarters of the country's GDP.
On Tuesday, Moody's, the credit rating agency, caused panic in global
financial markets after it reported that some west European banks
with east European subsidiaries risked ratings downgrades because of
the growing vulnerability of eastern Europe's banking system.
Following the news, the polish zloty approached all-time lows against
the euro and the Hungarian forint set a new record low.
Austria is not alone in its concern. On Wednesday, Hungarian Prime
Minister Ference Gyurcsany called for a €100 billion rescue plan from
the EU for troubled banks in central and eastern Europe and plans to
raise the idea at an informal meeting of European leaders on 1 March.
Central and eastern European leaders are calling for a meeting
beforehand with commission President Jose Manuel Barroso to discuss
the region's troubles, according to the Brussels-based European Voice.
==========================
TELEGRAPH 19.2.09
1. EU mulls action as Ukraine crumble triggers contagion fears for
Europe
Europe's institutions are scrambling for ways to prevent financial
contagion from Ukraine and the rest of Eastern Europe from setting
off a full-blown banking crisis in Austria, with risks of systemic
contagion across the eurozone.
By Ambrose Evans-Pritchard
Joaquin Almunia, EU's economic commissioner, said Brussels is ready
to co-ordinate a pan-EU response to contain the crisis before matters
get out of hand.
"I share with the Austrian authorities their concern about the
situation of these economies. Everybody shares their concern about
the risks involved. We are extremely concerned about the difficulties
with the Ukrainian government," he said.
West European banks have lent roughly $1.6 trillion (£1.13 trillion)
to the region, led by Austrian, Swedish, Italian, Greek, Belgian, and
Swiss banks. Almost $400bn must be rolled over this year in hostile
markets.
Lithuania's president Andrius Kubilius echoed the warnings on
Wednesday. "We are worried about what can happen in Ukraine and
Russia. The collapse of one of these markets would have a very
negative impact. It would be good to see a more co-ordinated
approach," he told the Financial Times.
Ukraine's travails appear to be snowballing out of control after the
central bank said the economy contracted 20pc in January year-on-
year, with a dramatic 34pc slide in industrial production. Valery
Lytvytsky, the bank's top adviser, said the collapse is the worst in
recorded Ukrainian history, exceeding the darkest days after the
Bolshevik revolution.
The currency has fallen 40pc since the crisis began, a crippling blow
to companies with large debts in dollars or euros. Three banks have
failed.
Credit default swaps measuring risk on Ukraine's state debt rose to
panic levels of 3,500 on rumours of imminent default following the
refusal of the International Monetary Fund to disburse the second
tranche of its $16.4bn rescue package. The IMF said the government
had failed to rein in public spending as agreed.
Premier Yulia Tymoshenko insisted there was no danger of default. "I
would like to tell the whole country that the state is paying all its
credits," she said.
She appeared unrepentant over the loss of her finance minister,
Viktor Pynzenyk, who resigned this week saying he was no longer
willing to serve as a political pawn. "Not all government officials
are capable of working in difficult circumstances. The weakest ones
abandon the battlefield," she said, in comments bordering on
political farce.
Neil Shearing from Capital Economics said Eastern Europe as a whole
is likely to contract by 5pc to 10pc this year. "It's pretty grim and
it creates the risk of a retreat into populism," he said.
The political risks in Ukraine are huge. The country has a large
Russian minority, much of it living in oblasts near Russia's
frontier, creating an open door for the Kremlin to intervene if the
crisis leads to civil disorder.
Lars Christensen from Danske Bank said ex-Soviet bloc had been a
casualty of the blanket extension of guarantees to banks across
Western Europe. "East Europe's governments are not strong enough to
offer such guarantees for their own banks. This has increased
relative risk." he said.
The European Bank for Reconstruction and Development said it is
mulling $500m in aid to boost Ukraine's banks, but first the country
has to restore credibility.
"We see an urgent need for conducive, comprehensive actions by the
Ukrainian authorities," EBRD chief Thomas Mirow said.
===============
2. It's bad – but it's worse for everyone else
Britain will not bear the brunt of the economic crisis, says Edmund
Conway.
Perhaps in the end it all comes down to the Great British psyche: the
subconscious yearning to be the underdog, the knee-jerk reaction that
prompts us to say "no" when we mean "yes".
For whatever reason, from the earliest throes of this economic
upheaval, we somehow talked ourselves into the belief that it would
hit the UK harder than anyone else. We were wrong.
Even before the crisis was properly under way, you could detect the
dull throb of resignation throughout the UK. Indeed, the statistics
seemed to bear this out. We had the worst of all worlds – a bigger
housing bubble than the United States; more consumer indebtedness
than any other major developed economy; a government deficit that had
scandalously yawned ever wider, even when the going was good.
In one fell swoop, the beating heart was torn out of the British
economy: with the City done for, what hope was there for the rest of
UK plc?
With British banks toppling like ninepins and house prices falling
faster than they ever have, such suspicions seemed initially to be
borne out by events. The silent implosion of what remained of British
industry seemed to confirm all our worst fears.
So convincing were the arguments that even the world's leading
economic authorities were persuaded that Britain would suffer unduly
following its years of excess. Only a few weeks ago, the
International Monetary Fund warned that the UK would have the worst
downturn of all the leading economies. We leapt on their conclusion
with vigour: this, surely, was a stunning indictment of Labour's
stewardship of the economy over the past decade.
However, had we looked closer at the history of recessions,
depressions and banking crises, we would have seen that Britain does
not necessarily face the worst fate. Yes, times will be tough:
tougher than for many years. Yes, many will lose their jobs, house
prices will plunge further, and more companies will fold. All of this
will be immensely miserable. But, just as in the 1930s, Britain may
not bear the brunt of the depression.
To see why, don't look at what is happening in London or Edinburgh,
or even Wall Street or Frankfurt, but some miles out to sea. There,
the shipping lanes that criss-cross the world – the arteries of
commerce – are eerily quiet. Some time in November, while everyone's
attention was focused on the travails of Lehman Brothers, world trade
was suffering a silent cardiac arrest.
Trade collapsed in a way it has never done before. The factories
churning out the cars and televisions simply ran out of willing
customers. And, just as financially reliant countries such as the UK
and US suffer when the banks collapse, nations wholly reliant on
trading experience one hell of a blow when the business implodes.
Germany, Japan and China can expect a difficult year ahead. It is the
countries that have apparently been living virtuously, building up
big trade surpluses as they pump out goods, that will be hardest hit.
Britain's dismal slump in economic output of six per cent in the
final quarter of 2009 (in annualised terms) looks positively breezy
in comparison to Germany's 8.4 per cent slide and Japan's 12.7 per
cent descent.
Further afield, the chaos is even more intense. Although China's
official statistics claim it is still growing at a healthy snap, many
economists suspect these numbers bear little resemblance to reality.
Even the Middle Eastern economies are now coming under tremendous
pressure. In Dubai, thousands of residents, fearful of being thrown
into debtor's prison, have simply upped sticks and fled the country
without even taking their possessions. The airport car park is filled
with abandoned cars.
Meanwhile, a second financial tsunami may be about to hit – one from
which Britain is sheltered. It's coming from the Eastern European
economies, which represent a greater threat to the continent than
subprime mortgages did to America. As they implode, they imperil the
financial systems of Austria, Germany, Belgium and Sweden. So great
are their problems that the German finance minister has now signalled
his willingness, if things deteriorate still further, to bail out
fellow euro members.
None of this misery should entitle Britons to much Schadenfreude;
indeed, it will intensify our own recession. But we can at least
afford ourselves a grim smile over the fact that this crisis is not
ours alone. And we should thank the Lord that we stayed outside the
euro. This is precisely the moment when free-floating independent
currencies and interest rates come into their own. The nasty dose of
medicine doled out to the patient is starting to work.
Alarming and discomforting as it is to see the Bank of England
pledging to start the printing presses, or to watch the pound slide
by more than a quarter, these are precisely the factors that will
ensure Britain's recession is less intense than that experienced by
other countries. The only worry is that the freeze in world trade
leads to a full-blown slide into protectionism, but that is a horror
story for another day.
Britain will not bear the brunt of the economic crisis, says Edmund
Conway.
Perhaps in the end it all comes down to the Great British psyche: the
subconscious yearning to be the underdog, the knee-jerk reaction that
prompts us to say "no" when we mean "yes".
For whatever reason, from the earliest throes of this economic
upheaval, we somehow talked ourselves into the belief that it would
hit the UK harder than anyone else. We were wrong.
Even before the crisis was properly under way, you could detect the
dull throb of resignation throughout the UK. Indeed, the statistics
seemed to bear this out. We had the worst of all worlds – a bigger
housing bubble than the United States; more consumer indebtedness
than any other major developed economy; a government deficit that had
scandalously yawned ever wider, even when the going was good.
In one fell swoop, the beating heart was torn out of the British
economy: with the City done for, what hope was there for the rest of
UK plc?
With British banks toppling like ninepins and house prices falling
faster than they ever have, such suspicions seemed initially to be
borne out by events. The silent implosion of what remained of British
industry seemed to confirm all our worst fears.
So convincing were the arguments that even the world's leading
economic authorities were persuaded that Britain would suffer unduly
following its years of excess. Only a few weeks ago, the
International Monetary Fund warned that the UK would have the worst
downturn of all the leading economies. We leapt on their conclusion
with vigour: this, surely, was a stunning indictment of Labour's
stewardship of the economy over the past decade.
However, had we looked closer at the history of recessions,
depressions and banking crises, we would have seen that Britain does
not necessarily face the worst fate. Yes, times will be tough:
tougher than for many years. Yes, many will lose their jobs, house
prices will plunge further, and more companies will fold. All of this
will be immensely miserable. But, just as in the 1930s, Britain may
not bear the brunt of the depression.
To see why, don't look at what is happening in London or Edinburgh,
or even Wall Street or Frankfurt, but some miles out to sea. There,
the shipping lanes that criss-cross the world – the arteries of
commerce – are eerily quiet. Some time in November, while everyone's
attention was focused on the travails of Lehman Brothers, world trade
was suffering a silent cardiac arrest.
Trade collapsed in a way it has never done before. The factories
churning out the cars and televisions simply ran out of willing
customers. And, just as financially reliant countries such as the UK
and US suffer when the banks collapse, nations wholly reliant on
trading experience one hell of a blow when the business implodes.
Germany, Japan and China can expect a difficult year ahead. It is the
countries that have apparently been living virtuously, building up
big trade surpluses as they pump out goods, that will be hardest hit.
Britain's dismal slump in economic output of six per cent in the
final quarter of 2009 (in annualised terms) looks positively breezy
in comparison to Germany's 8.4 per cent slide and Japan's 12.7 per
cent descent.
Further afield, the chaos is even more intense. Although China's
official statistics claim it is still growing at a healthy snap, many
economists suspect these numbers bear little resemblance to reality.
Even the Middle Eastern economies are now coming under tremendous
pressure. In Dubai, thousands of residents, fearful of being thrown
into debtor's prison, have simply upped sticks and fled the country
without even taking their possessions. The airport car park is filled
with abandoned cars.
Meanwhile, a second financial tsunami may be about to hit – one from
which Britain is sheltered. It's coming from the Eastern European
economies, which represent a greater threat to the continent than
subprime mortgages did to America. As they implode, they imperil the
financial systems of Austria, Germany, Belgium and Sweden. So great
are their problems that the German finance minister has now signalled
his willingness, if things deteriorate still further, to bail out
fellow euro members.
None of this misery should entitle Britons to much Schadenfreude;
indeed, it will intensify our own recession. But we can at least
afford ourselves a grim smile over the fact that this crisis is not
ours alone. And we should thank the Lord that we stayed outside the
euro. This is precisely the moment when free-floating independent
currencies and interest rates come into their own. The nasty dose of
medicine doled out to the patient is starting to work.
Alarming and discomforting as it is to see the Bank of England
pledging to start the printing presses, or to watch the pound slide
by more than a quarter, these are precisely the factors that will
ensure Britain's recession is less intense than that experienced by
other countries. The only worry is that the freeze in world trade
leads to a full-blown slide into protectionism, but that is a horror
story for another day.
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