peterbirks: (Default)
[personal profile] peterbirks
Well, it's official; the Birks theory, first expounded when quantitative easing/fiscal stimuli started spreading in late 2008, of multinationals becoming safer repositories of money than states, has come to pass.

The FT reports this morning that the combined risk of default of the 15 developed European nations (i.e., including France, Germany and the UK, but excluding the developing east European basket cases) is higher than for Europe's top 125 investment-grade companies. In hard numbers, it will cost you $63,000 a year to insure $10m of debt with a basket of the top 125 companies, and $71,500 to do the same for the 15 developed EU nations.

And don't even think about Greece. It will cost you $263,000 to insure against Greece defaulting (i.e., a more than 10% chance of the country not paying on its bonds at any time in the next five years), while you could insure against BP defaulting for less than $50,000.

In other words, countries are no longer the safe haven for investors that they once were. Rather than buy bonds or gilts, a less risky strategy would be to buy investment-grade corporate debt.

Now, an idle question here is, have the fund managers caught up with this? When they are investing your pension money in "the safest" asset classes (perhaps because you are heading towards your retirement at a worryingly fast pace), are they still putting the money into government bonds rather than investment-grade private companies? My hunch would be that they are, and that's worrying.

A second idle question sprung into my mind while I was reading about Greece. We've long known that a standard strategy amongst some EU countries is to vote in favour of regulations in Brussels, which the UK promptly obeys (despite voting against) and the countries that voted in favour (say, Portugal), promptly ignore. Greece has taken this to new heights by supplying the EU with incorrect numbers in the first place. Its 2009 deficit was probably nearer 18% than its estimated 12%. So any promises to get back to a "required" deficit of 3% by 2012 are pure pie-in-the-sky. Apparently Greece's numbers have been utterly unreliable for more than a decade.

So, what will be done? Well, either Greece's austerity measures will fail, or the government will fail, which was what prompted my idle thought -- what's the planned procedure if an EU member ceases to be a democracy? Would the EU parliament have a new division for the colonels to sit in?

More likely, I guess, would be that the colonels (or whoever was really in charge) would maintain a facade of democracy, a fudge that would allow the EU to save face. And the chances of that happening somewhere in the EU within five years? Higher, I reckon, than the chances of Greece defaulting on its debt.

________________

Date: 2010-01-13 09:38 am (UTC)
nwhyte: (eu)
From: [personal profile] nwhyte
The EU can't expel mambers, but they can withdraw under Article 50:
1. Any Member State may decide to withdraw from the Union in accordance with its own constitutional requirements.

2. A Member State which decides to withdraw shall notify the European Council of its intention. In the light of the guidelines provided by the European Council, the Union shall negotiate and conclude an agreement with that State, setting out the arrangements for its withdrawal, taking account of the framework for its future relationship with the Union. That agreement shall be negotiated in accordance with Article 218(3) of the Treaty on the Functioning of the European Union. It shall be concluded on behalf of the Union by the Council, acting by a qualified majority, after obtaining the consent of the European Parliament.

3. The Treaties shall cease to apply to the State in question from the date of entry into force of the withdrawal agreement or, failing that, two years after the notification referred to in paragraph 2, unless the European Council, in agreement with the Member State concerned, unanimously decides to extend this period.

4. For the purposes of paragraphs 2 and 3, the member of the European Council or of the Council representing the withdrawing Member State shall not participate in the discussions of the European Council or Council or in decisions concerning it.

A qualified majority shall be defined in accordance with Article 238(3)(b) of the Treaty on the Functioning of the European Union.

5. If a State which has withdrawn from the Union asks to rejoin, its request shall be subject to the procedure referred to in Article 49.

How many divisions, etc?

Date: 2010-01-14 04:46 pm (UTC)
From: [identity profile] real-aardvark.livejournal.com
That's all legal bullshit, Nicholas, and you know it.

On the simple side, any EU state that wishes to exit the EU would simply have to pass a domestic law, or diktat, or Order in Council (no prizes for guessing that particular state). Et voila! Article 50 is a piece of piss. Nobody will do it, because the downside is huge compared to the upside.

On the complex side, it's just about possible to imagine the EU expelling a member. I'm sure they'll dredge up some sort of harmonisation bullshit to do with not breaching 3% fiscal limitations here or there; not sending gypsies to ghettoes; not acting as a conduit for people or heroin smuggling; that sort of thing. These might all be valid and worthy reasons. But the legal underpinnings would still be artificial bullshit.

In practice, the failing states most likely to be expelled/demand out are so tiny and insignificant -- Bulgaria, Slovakia, and frankly Ireland spring to mind -- that the Germans will just twist a few financial arms, print some paper that isn't really paper, honest, and buy their silence.

As Mae West almost said, "legality has nothing to do with it."

August 2023

S M T W T F S
  12345
6789101112
13 14151617 1819
20 212223242526
27282930 31  

Most Popular Tags

Page Summary

Style Credit

Expand Cut Tags

No cut tags
Page generated Jul. 12th, 2025 04:33 pm
Powered by Dreamwidth Studios