Saturday, 26 November 2011


Saturday 26 November 2011
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Prepare for riots in euro collapse, Foreign Office warns

British embassies in the eurozone have been told to draw up plans to help British expats through the collapse of the single currency, amid new fears for Italy and Spain.

British expats braced for collapse of Euro
The Treasury confirmed earlier this month that contingency planning for a collapse is now under wayPhoto: BLOOMBERG
James Kirkup

By , Deputy Political Editor






25 Nov 2011

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.

A senior minister has now revealed the extent of the Government’s concern, saying that Britain is now planning on the basis that a euro collapse is now just a matter of time.

“It’s in our interests that they keep playing for time because that gives us more time to prepare,” the minister told the Daily Telegraph.

Recent Foreign and Commonwealth Office instructions to embassies and consulates request contingency planning for extreme scenarios including rioting and social unrest.

Greece has seen several outbreaks of civil disorder as its government struggles with its huge debts. British officials think similar scenes cannot be ruled out in other nations if the euro collapses.

Diplomats have also been told to prepare to help tens of thousands of British citizens in eurozone countries with the consequences of a financial collapse that would leave them unable to access bank accounts or even withdraw cash.

Fuelling the fears of financial markets for the euro, reports in Madrid yesterday suggested that the new Popular Party government could seek a bail-out from either the European Union rescue fund or the International Monetary Fund.

There are also growing fears for Italy, whose new government was forced to pay record interest rates on new bonds issued yesterday.

The yield on new six-month loans was 6.5 per cent, nearly double last month’s rate. And the yield on outstanding two-year loans was 7.8 per cent, well above the level considered unsustainable.

Italy’s new government will have to sell more than EURO 30 billion of new bonds by the end of January to refinance its debts. Analysts say there is no guarantee that investors will buy all of those bonds, which could force Italy to default.

The Italian government yesterday said that in talks with German Chancellor Angela Merkel and French President Nicolas Sarkozy, Prime Minister Mario Monti had agreed that an Italian collapse “would inevitably be the end of the euro.”

The EU treaties that created the euro and set its membership rules contain no provision for members to leave, meaning any break-up would be disorderly and potentially chaotic.

If eurozone governments defaulted on their debts, the European banks that hold many of their bonds would risk collapse.

Some analysts say the shock waves of such an event would risk the collapse of the entire financial system, leaving banks unable to return money to retail depositors and destroying companies dependent on bank credit.

The Financial Services Authority this week issued a public warning to British banks to bolster their contingency plans for the break-up of the single currency.

Some economists believe that at worst, the outright collapse of the euro could reduce GDP in its member-states by up to half and trigger mass unemployment.

Analysts at UBS, an investment bank earlier this year warned that the most extreme consequences of a break-up include risks to basic property rights and the threat of civil disorder.

“When the unemployment consequences are factored in, it is virtually impossible to consider a break-up scenario without some serious social consequences,” UBS said.





All I want for Christmas … - by Richard... Friday, November 25, 2011


A couple of years ago, this news would have been unthinkable. Now it doesn't even make the front page. Even Failygraph hacks are predicting it, eight years after we said it would happen in our book. It is getting so serious that even The Boy is noticing, although TBF is not falling over himself with admiration at the Brogan perspicacity.

Nevertheless, there are very few truly free things in this world, but saying "I told you so" is one of them, so we might as well enjoy the moment while we can. Zerohedge paints the picture of decline. It has Jim Reid of Deutche Bank asking: Should we get excited ahead of the treaty changes? The answer is that we are undoubtedly slowly moving closer to the start of a path towards fiscal union.

"However this process, even if it runs smoothly, will likely be a long, drawn-out, arduous journey," he says. "Unfortunately markets are moving at a much, much faster pace and we probably don't have the time for a slow measured path towards fiscal union."

The "colleagues" are well and truly domed.

A lost decade - by Richard... Saturday, November 26, 2011


Public indifference is probably the great killer, although some pundits put it down to a lack of ambition on the part of the negotiators. Either way, The Independent is very far from being alone in predicting deadlock at the forthcoming COP17 climate summit at Durban.

The amount of human energy being expended is terrifying, with 10,000 officials from 194 countries meeting to discuss the next moves. And although the number of hangers-on and journalists attending will not match Copenhagen levels, about 25,000 people in all are expected to attend.

However, says the Independent, "entrenched disagreements" over renewing the current climate treaty, the 1997 Kyoto Protocol – between China and India on the one hand and Japan, Canada and Russia on the other – look likely to produce a stalemate at best, and at worst, a collapse of the talks.

The dispute over Kyoto, essentially an argument between rich and poor countries about who does what to combat global warming, brought the 2009 Copenhagen conference to within a whisker of complete breakdown.

Crucially, the Kyoto treaty expires on 31 December 2012. Developing countries, led by China, now the world's biggest carbon emitter, and India, now number three, want Kyoto renewed because it commits them to no action of their own, while imposing binding emissions cuts on industrialised states.

Yet some of the industrialised nations increasingly see this as unfair – America, the world's second-largest carbon emitter, was the first major country to refuse to join Kyoto in 2001 – and a group of three major economies, Japan, Canada and Russia, have stated they will not sign a renewed Kyoto under any circumstances.

Thus, hope is being pinned on an initiative being pushed by Britain and the EU, where the original Kyoto treaty is abandoned in favour of "mark two" version, which would commit China and India eventually agree to take part in a parallel new climate treaty, which would involve all countries in a binding agreement to cut CO2 at different rates.

Such a deal, though, is not expected at this conference and the Huhne team is not expectinganything form until at least 2015, by which time Huhne himself may be history. But then, as Dellers points out, Huhne hasn't got a leg to stand on. As significantly, the economic climate may have deteriorated so drastically that climate activism may by then be history.

Even then, the 2015 date may be fiction, with 2020 being marked down as the more realistic date for a full-blown international agreement. In diplomatic terms, though, that sort of timescale effectively means sometime never. In nine years time, the world may have changed beyond recognition.

The New Scientist's Fred Pearce is thus talking of a "lost decade" in climate talks. And if even he is acknowledging this, it is hard to see how the momentum can ever be recovered. The climate "community" is another one of those which has run out of options and is looking down its nose at failure – trumped by a potential global economic crisis. The scare has all but run its course.

Failure is the only option - by Richard...


In almost a parody of himself José Manuel Barroso is telling us that "Europe" has still not found a solution to its sovereign debt crisis that would restore investor confidence. Then, from the school of "the solution is simple, something must be done", he advocates "greater integration as the way to move forward".

"The truth is", he says, "that so far there is no response to the sovereign (debt) crisis that restores confidence to investors … as long as that does not happen we will have very serious problems and debates in Europe".

Reflecting the German hang-up on the ECB, Barroso went on to say that the bank had to remain "independent", code it would appear for refusing to allow it to become the lender of last resort.

"I can say that in the commission, we always respected the independence of the European Central Bank, it is essential to have an independent central bank which is not subject to political pressure," he says.

This is a bizarre statement, not rooted in fact. The ECB was formally absorbed as an EU institution under the Lisbon treaty, subject to the aims objectives of the European Union. It can be no more independent than the commission itself, bound as it is by the same set of rules.

Nevertheless, reading the code, the commission is acknowledging that the ECB cannot take on the role of lender of last resort, as long as Germany is blocking this development. And Germany must because its own constitution does not allow this to happen.

Despite this, there is manoeuvring aplenty, as the commission tries to square the circle on itsintegration proposals.

Says Barroso: "We though [sic] it was the time to launch the discussion. We, in the commission, have the duty to launch and propose ideas and afterwards, obviously, it is up to member states to adopt them or not". He adds that the commission "is open to treaty revision if it is to reinforce and to give greater governance and more integration in the eurozone, and not to divide Europe".

And so the grotesque ritual is being played out by people who have run out of all other options and are staring failure in the face. Failure, it seems, is their only option, even if they have yet to come to terms with it. Yet fail they will, because fail they must. There is nothing else left.

Posted by Britannia Radio at 21:24