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Current Events & Hot Topics Current Events & Hot Topics

Do we really want to use Europe as a model for our country??

Posted by on Mar. 18, 2013 at 10:57 AM
  • 33 Replies

 http://finance.yahoo.com/news/yen-firms-asia-shares-fall-001926588.html

By Marc Jones

LONDON (Reuters) - The surprise decision by euro zone leaders to part-fund a bailout of Cyprus by taxing bank deposits sent shockwaves through financial markets on Monday, with shares and the bonds of struggling euro zone governments tumbling.

The bloc struck a deal on Saturday to hand Cyprus rescue loans worth 10 billion euros ($13 billion), but defied warnings - including from the European Central Bank - and imposed a levy that would see those with cash in the island's banks lose between 6.75 and 9.9 percent of their money.

Parliament in Cyprus put off a vote on the measure - which has shaken depositors' confidence in banks across the continent - until Tuesday, however, and with public anger at the deal widespread the government said it was already looking to ease the pain for small savers.

Without the rescue, Cyprus would have be unable to avoid a default. That would have undermined the promise that Greece's debt writedown last year was a one-off, but the unprecedented move to hit depositors adds a radical new dimension to the crisis across the euro zone.

The initial response of investors was unambiguous. Shares lurched lower, the euro fell to a new three-month low, while safe-haven assets such as gold and German government bonds jumped.

The cost of insuring the debt of even high-quality European banks against default also rose sharply with analysts citing fears the decision could spark contagion across peripheral regions with the potential for widespread outflows of deposits.

"If I were a saver, certainly in Spain or maybe Italy, I think I'd be looking askance at these measures and think this could yet happen to me," Peter Dixon, global financial economist at Commerzbank said.

The European Markit iTraxx senior financials index, which tracks the most important European bank credit default swap (CDS) rates, widened by 17 basis points.

Some credit default swaps in Spanish, Italian and Portuguese banks widened more sharply with the five-year CDS for Spain's Santander 30 basis points higher, while for Italy's UniCredit it was 23.5 basis points wider.

However, some in the markets were drawing support from a view that the safety measures put in place at the European Central Bank should contain the fallout.

"Clearly this is a negative development for European assets but in the terms of contagion we think it is quite limited," said Guillermo Felices, head euro asset allocation at Barclays in London.

"There are tools - such as the ECB's OMT (bond buying program) and the option of more 3-year LTROs (ECB loans to banks) that can provide liquidity if needed - that the market will feel comfortable about when assessing the longer-term implications."

Three of the world's biggest central banks are also expected to signal their fresh commitment to loose monetary policies this week.

The Bank of Japan welcomes a new governor on Wednesday who is likely to begin pumping huge amounts of yen into the recession-hit economy. On the same day the Bank of England may get a new pro-growth mandate in the British government's annual budget, while the Federal Reserve is expected to reaffirm its commitment to the current aggressive U.S. bond-buying program.

Equity markets were underscoring the more immediate worries, however, that the Cyprus deal could see savers and firms in other highly indebted countries like Italy and Spain rush to pull money out of their own banks.

By 1115 GMT the pan-European FTSEurofirst 300 (.FTEU3) had clawed back around half of its initial losses but was still down 0.8 percent in its worst morning since last month's inconclusive Italian election.

London's FTSE 100 (.FTSE), Frankfurt's DAX (.GDAXI) and Paris's CAC-40 (.FCHI) were down 0.8, 1 and 1.4 percent respectively, leaving MSCI's global share index <.MIWD00000PUS> down 0.85 percent.

CENTRAL BANK SUPPORT

In the currency market, the euro staged a slight recovery after having dropped as low as $1.2882 in the Asian trade, to session be up 0.1 percent on the day $1.2950.

The dollar (.DXY) itself, which investors often head for when tensions in Europe rise, gained 0.45 percent.

"Euro zone politicians will be at pains today to manage down the danger of contagion to other markets. The euro will find a little bit of support from that but markets will remain jittery," said Jane Foley, senior currency strategist at Rabobank.

Italian and Spanish bond yields both jumped sharply as the two countries remain at the centre of concern in the euro zone due to the size of their economies which some economists warn would be too big to rescue.

If savers and firms did pull their money en masse from already strained banks it could tip the region back into full-blown crisis, although the ECB's backstop measures are designed to prevent such problems.

The widespread anxiety drove up German government bonds, the traditional favorite of risk-adverse European investors, and indiscriminately pushed up the cost of insuring against a sovereign default in the euro zone's southern rim.

German Bund futures were up 49 basis points at 144.09 by late-morning in Europe, while gold, another safe-haven asset, rising to a 2-1/2-week high of $1,608.30 an ounce before settling at $1,601.60, up 0.6 percent. (GOL/)

U.S. crude and Brent oil both tumbled, with Brent futures $1.70 a barrel lower at $108.12 before recovering a little to trade around $108.20 by 1030 GMT. U.S. oil declined $1.10 to $92.35. (O/R)

(Additional reporting by Richard Hubbard and Nia Williams. Editing by Peter Graff and Alastair Macdonald)

How many of you would be ok with your bank accounts being drained for a bailout? With the apparent financial insecurity of the Euro zone do you really think their policies regarding society and economics are working?

by on Mar. 18, 2013 at 10:57 AM
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Replies (1-10):
jaxTheMomm
by Platinum Member on Mar. 18, 2013 at 11:01 AM
8 moms liked this

1. Who wants to use Europe as a model for our country? 

2. Europe is not a country.  It's a continent, and a union of many different countries.  Some are doing great, some ok, and some really badly.  Each of the ones doing badly are doing badly for different reasons.

furbabymum
by Gold Member on Mar. 18, 2013 at 11:07 AM
1 mom liked this

 I realize Europe isn't a country. lol Thanks. I've seen a lot of people argue that Europe has socialized healthcare, schooling, this and that and it's doing great so why aren't we doing it.

Quoting jaxTheMomm:

1. Who wants to use Europe as a model for our country? 

2. Europe is not a country.  It's a continent, and a union of many different countries.  Some are doing great, some ok, and some really badly.  Each of the ones doing badly are doing badly for different reasons.

 

smalltowngal
by Platinum Member on Mar. 18, 2013 at 11:12 AM
2 moms liked this

The Euro zone is having more trouble where they are having a hard time getting all the countries to agree on how to address the situation. Germany wants austerity where your southern European countries want to print money. Cyprus is in trouble because their banks had a lot of CDS for Greek debt. Also, their banking system is 8 times larger than their GDP. All systems, including, the US will have to go through some sort of reset. In a way, I think it will be better to be one of the first countries to go through a reset than the last. Iceland is doing much better now even though it was rather rough for them for a while. 

babyblue415
by on Mar. 18, 2013 at 11:12 AM
1 mom liked this

America isn't doing it because they only care about money. which equals stupidity to me

Quoting furbabymum:

 I realize Europe isn't a country. lol Thanks. I've seen a lot of people argue that Europe has socialized healthcare, schooling, this and that and it's doing great so why aren't we doing it.

Quoting jaxTheMomm:

1. Who wants to use Europe as a model for our country? 

2. Europe is not a country.  It's a continent, and a union of many different countries.  Some are doing great, some ok, and some really badly.  Each of the ones doing badly are doing badly for different reasons.

 


brookiecookie87
by Platinum Member on Mar. 18, 2013 at 11:14 AM
1 mom liked this

Again as jaxTheMomm pointed out and as you oddily agreed to.

Europe isn't a country. It is made up of many different countries. Some of them are doing good and some of them are doing bad.

When people say, "Look at Finland doing so well in education". Pointing out a completely different country that is doing horrible in education and saying, "You want to be like that?!" Would not make sense.

But it is what you are doing here.


Quoting furbabymum:

 I realize Europe isn't a country. lol Thanks. I've seen a lot of people argue that Europe has socialized healthcare, schooling, this and that and it's doing great so why aren't we doing it.

Quoting jaxTheMomm:

1. Who wants to use Europe as a model for our country? 

2. Europe is not a country.  It's a continent, and a union of many different countries.  Some are doing great, some ok, and some really badly.  Each of the ones doing badly are doing badly for different reasons.

 



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If they enforced bank regulations like they do park rules, we wouldn't be in this mess

jaxTheMomm
by Platinum Member on Mar. 18, 2013 at 11:15 AM
1 mom liked this

Just checking - this is CM so you never know.  :) 

For the EU countries that are really in trouble, I'm not sure that their socialized programs can be blamed.  Every country is a little different - each one got themselves in trouble in a different way.

However, some of the most socialized (and somebody correct me if I'm wrong) are actually doing fine.

That said, I don't think we can ever "be" like any one particular country.  We are a different culture, population, issues, etc.  I would though like a UHC and more social programs that really help the people that want out of poverty.

Quoting furbabymum:

 I realize Europe isn't a country. lol Thanks. I've seen a lot of people argue that Europe has socialized healthcare, schooling, this and that and it's doing great so why aren't we doing it.

Quoting jaxTheMomm:

1. Who wants to use Europe as a model for our country? 

2. Europe is not a country.  It's a continent, and a union of many different countries.  Some are doing great, some ok, and some really badly.  Each of the ones doing badly are doing badly for different reasons.

 



eema.gray
by on Mar. 18, 2013 at 11:16 AM
3 moms liked this
Cyprus, and Greece before her, are part of the European Union. The economic powerhouse of the EU is Germany, which has demanded austerity measures of every country requesting bailout. The Scandinavian countries that are often cited as education and health care models are not full EU members. Like England, they participate in some EU measures but are not part of the "euro zone". I don't think successful models in some countries should be condemned because of economic issues in other countries.
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jaxTheMomm
by Platinum Member on Mar. 18, 2013 at 11:17 AM
2 moms liked this

Yep.

Greece's big problem is that they can't collect their taxes.  Nobody wants to pay them, but everybody wants to claim retirement.

Wasn't it Iceland that actually prosecuted the bankers that got them into trouble?

Quoting smalltowngal:

The Euro zone is having more trouble where they are having a hard time getting all the countries to agree on how to address the situation. Germany wants austerity where your southern European countries want to print money. Cyprus is in trouble because their banks had a lot of CDS for Greek debt. Also, their banking system is 8 times larger than their GDP. All systems, including, the US will have to go through some sort of reset. In a way, I think it will be better to be one of the first countries to go through a reset than the last. Iceland is doing much better now even though it was rather rough for them for a while. 



smalltowngal
by Platinum Member on Mar. 18, 2013 at 11:17 AM
2 moms liked this

The Nordic countries are doing ok but I wouldn't be surprised if Sweden and Finland end up breaking off from the EU. Northern European countries are doing much better than southern countries. It doesn't necessarily have to do with socialism but corruption. There is a big difference between Sweden and Greece although they both have socialized health care. 

Quoting furbabymum:

 I realize Europe isn't a country. lol Thanks. I've seen a lot of people argue that Europe has socialized healthcare, schooling, this and that and it's doing great so why aren't we doing it.

Quoting jaxTheMomm:

1. Who wants to use Europe as a model for our country? 

2. Europe is not a country.  It's a continent, and a union of many different countries.  Some are doing great, some ok, and some really badly.  Each of the ones doing badly are doing badly for different reasons.

 



furbabymum
by Gold Member on Mar. 18, 2013 at 11:18 AM

 Admit it, that kind of sounds like the U.S. except instead of countries it's states/parties.

Quoting smalltowngal:

The Euro zone is having more trouble where they are having a hard time getting all the countries to agree on how to address the situation. Germany wants austerity where your southern European countries want to print money. Cyprus is in trouble because their banks had a lot of CDS for Greek debt. Also, their banking system is 8 times larger than their GDP. All systems, including, the US will have to go through some sort of reset. In a way, I think it will be better to be one of the first countries to go through a reset than the last. Iceland is doing much better now even though it was rather rough for them for a while. 

 

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