Anorak News | Good Sense On The Euro, Finally

Good Sense On The Euro, Finally

by | 22nd, July 2011

IT’S not been all that fun watching our Lords and Masters running around like headless chickens over this euro crisis.

All along there’s been only a few viable solutions. The first is that those who shouldn’t be in the euro should bugger off out of it. But that would be a retreat from “ever closer union” and so wasn’t going to happen. The second is that pots and pots of money should be taken off Germans and sent the Mediterranean types.

Seems fair enough, Germans have pots and pots of money and the seaside dwellers increasingly don’t have pots to piss in. But Fritz doesn’t seem all that happy about this solution so this might not work either.

We could do a consolidation loan type thing: bundle up all that worthless debt that they can’t pay, stick a new guarantee on it (maybe the EU, maybe Germany) and then hope that everyone’s happy. This would be illegal so not going to happen either.

Finally, we could go and buy that distressed debt. Greek bonds can be bought for 50% off. So, buy them, cancel the 50% we didn’t have to pay for and Greece will then be fine, owing only half what it did before. The people who lose are the people selling the bonds but they must be happy or they wouldn’t be selling at this price.

And what do we get in this afternoon’s draft agreement?

7. To improve the effectiveness of the EFSF and address contagion, we agree to increase the flexibility of the EFSF, allowing it to:

– intervene on the basis of a precautionary programme, with adequate conditionality;
– finance recapitalisation of financial institutions through loans to governments including in non programme countries;
– intervene in the secondary markets on the basis of an ECB analysis recognizing the existence of exceptional circumstances and a unanimous decision of the EFSF Member States.

Exactly that. Someone’s just done something sensible about the euro. Glory Be, eh?

Posted: 22nd, July 2011 | In: Money Comments (6) | TrackBack | Permalink