Yip things are looking pretty bleak over here. Was in Madrid last week and the pesimism surrounding the place is almost unbeleivable. Things are only going to get worse and the recovery will be a LONG way away.
Germany never? haha Whose banks willingly funded the insane real estate building boom (with loans denominated in CHF and JPY) based on the "convergence trade" in Hungary, Poland, Bulgaria, Romania? Yes, Austrian and German banks. Somebody is on the hook for this madness and it's not banks in Eastern Europe because these guys have no banking industry to speak of. At the end of the food chain, it's all smart ass bankers from the EUR zone (and Russia). Just painting a hypothetical scenario here, which is unlikely but not impossible. Let's say a Ukraine default drives Hungary and Poland into a depression, causing billions of write downs for German banks, causing nationalizations leaving the German government with billions in debt. To top it off, the German car industry gets a 75bln EUR government bailout. Good bye AAA for the Deutsche Reich.
Is it even possible for Germany to default, practically speaking? Presuming (wrongly?) that Germany, a relatively conservative EU member, being near default would mean that nearly every other EU state were at or near default as well, wouldn't the ECB just start printing & distributing Euros to the member governments if Germany looked to be risking default? (I don't mean this as a rhetorical question -- just wondering if there's something I don't understand here.) For that matter, isn't that the same for the US -- just print to pay off debt, if worse comes to worse, and therefore never risk losing top ratings since default is hence impossible? Or do the ratings take into account currency risk (i.e., hyperinflation due to such printing)? The converse of this is the problem Iceland has -- you can't print another country's currency (well, at least not without really getting them riled up ) to pay off your debts. And it's a similar problem for the smaller and/or "riskier" EU members, it seems to me.
And if Spain and Italy will leave the euro, will they join the sterling then ? Or will Scotland leave the sterling and join the euro, like this guy suggest ? "we may well see sovereign defaults by EU national governments, both inside and outside the eurozone. But it is more likely in my view that Scotland will leave the sterling monetary union (and the United Kingdom) and adopt the euro as its currency than that an existing eurozone member will leave the eurozone." http://blogs.ft.com/maverecon/2009/...-breakup-of-the-eurozone-sloppy-thinking-101/ Seriously Mvic, stop believing all the cr@p written in the british financial press against the euro and the eurozone countries. There's a propaganda war going on.