Rakesh Saxena

The Eurozone's Winter of Discontent Approaches Shakespearean Proportions

You are correct Sir. The East European situation wil get even more messy as we move along. - Rakesh


On Mar 01 11:11 PM The Mad Hedge Fund Trader wrote:

> Uh BBg While American banks have their subprime crisis, European
> banks are being dragged under by their lending to emerging economies
> in Eastern Europe. Ledd by UniCredit in Italy, Austria’s Erste Group
> Bank and Raiffeisen International, France’s Societe Generale, Belgium’s
> KBC, and Hungary’s OTP, banks have lent $1.6 trillion to companies
> in these formerly communist countries at cheap rates, with minimal
> documentation, and few questions asked. The easily available credit
> caused local money supplies to explode, and sparked bull markets
> in both stocks and currencies. Emerging Europe grew at rates double
> and triple rates in the West, as local companies pumped up on steroids
> became the master of leverage. Now $400-$600 billion is due for rollovers
> this year from nonexistent credit markets, and the chickens….make
> that vultures have come home to roost. Economic growth has fallen
> off a cliff, with Poland’s seasonally adjusted industrial output
> down in December a precipitous 7.4% YOY. The Polish stock market
> fell 48% last year, and the zloty of off 40% again the dollar from
> its June peak. The Central European Equity Fund (seekingalpha.com/symbo...)
> has crashed 80% in eight months. The crisis is so severe, it may
> postpone Poland’s entry into the Euro block, which had been scheduled
> for 2011. Home mortgage borrowers are in especially bad shape. Up
> to 50% of their loans were denominated in Swiss francs, so the collapsing
> Polish currency has caused a near doubling of borrowers’ monthly
> payments and principals since last year. Austria really has its knickers
> in a twist, as these heavily syndicated loans account for 80% of
> GDP. A 10% default rate could wipe out the entire banking system
> there. Germany has the smallest loan exposure, but has the most to
> lose, with 25% of its exports headed east. It is now in negotiation
> with its partners in the EC to cobble together a bailout with the
> help of the IMF to provide bridge financing for these loans, and
> hopefully ward off a further economic collapse. It looks like the
> headlines in Europe are about to get uncharacteristically sensational.

The Eurozone's Winter of Discontent Approaches Shakespearean Proportions

Seeking Truth: One consequence of curtailing welfare spending will be street demonstrations, and other forms of popular unrest. We are already seeing this phenomenon take shape, in traditional Europe and in the former Soviet satellites. Immigration is another very touchy issue now. Yes, a bit like late-18th century France but more like Europe in the 1920s--another very touch issue, but I guess we must deal with it, sooner rather than later. Many thanks - Rakesh


On Feb 04 01:17 PM SeekingTruth wrote:

> Rakesh, What happens when Welfare states significantly curtail welfare
> spending when the vast number of welfare recipients are already suffering
> more than at any time in memory?
> They have been conditioned for disproportionate assistance and like
> domesticated pets, have little or no ability (or opportunity) to
> fend for themselves.
>
> Are we in the early stages of a certain late 18th century type episode
> experienced by the French, at least in some of the countries?

The Eurozone's Winter of Discontent Approaches Shakespearean Proportions

Yes, numerous people have suggested that Angela Merkel's father (a pastor) must have had close communist links since the family was allowed to travel freely between East/West Germany. Ms. Merkel does not deny that she was a member of the communist-led Free German Youth movement.

On another note, I'm not sure if I agree with your view of the Marxist outlook for Europe. The works of Rosa Luxemburg and her contemporaries [pre-1920s] appear to express strong disagreements with European "socialist" parites with respect to control over the means of production. But this matter is certainly worth investigating further (particularly in today's context) and I will address this in a forthcoming article.

Finally, the failure of the German banks cannot be blamed on the poorer EU states; on the contrary, my view is that the German banks thought they saw a unique opportunity to lend at above-average rates and collect huge fees, and now they are paying the price. Many thanks - Rakesh


On Feb 04 02:29 PM R Jensen wrote:

> How is it that Deutsche Bank and Commerzbank are sinking and yet
> the blame is placed on the poorer EU states?
>
> I'm surprised Merkel was from the DDR. Since she went to school there,
> she must have been a member of the Communist party (otherwise you
> don't go to school, you go work in the factory).
>
> But Merkel is right about the idea of nations going bankrupt. <br/>
>
> I'd say that's more of an "Austrian school" philosophy than a Marxist
> one. After all, Marx would favor EU expansion and a socialist world
> government. And that is exactly what the EU is a building block for.