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Puerto Vallarta News NetworkEditorials | Opinions 

Is Europe a Soap Opera or a Disaster Movie?
email this pageprint this pageemail usGuillermo Ramón Adames y Suari - PVNN
November 25, 2010



Yet another victim of the greediness: If you take a look at “what is the crisis”, in very very simple terms it happened this way: Banks and insurance companies (and many other companies willing to risk little and with large amounts of money heard of investments in the US which were very profitable. So everybody went to invest in the US in miraculous funds of doubtful nature. Everybody was going to become rich in no time.

As the eurozone marches toward this slow-motion train wreck of a result, there are voices yelling “STOP THE INSANITY” on both sides of the aisle.
So when those who were supposed to pay the incredible interests did not pay the investors (banks) that could not recover the money of their clients (it was not the banks’ money) the panic grew and there was no way out. The whole lot could have ended in something close to a civil war. Those who created this problem are enjoying fantastic health and masses of money; those who owed have lost everything. Ireland is no exception.

But then the governments should go after those who created this situation. Unfortunately they have the financial market in their hands and if you touch them they will make another financial mess. So governments have their hands tight up. They are in the middle of the very same game.

There are two ways to view the ongoing sovereign default drama in Europe. Call them the "soap opera" perspective and the "disaster movie" perspective.

Europe as soap opera: In this view, there will be a lot of sturm und drang - a lot of hand-wringing - but ultimately Europe will be fine. The eurozone will not be severely impacted, and the euro currency may not even weaken all that much. All the shouting and posturing and protests are just stirrings on the fringes - the TV drama equivalent of tears on the face of an actress.

Europe as disaster movie: From this perspective, Europe is marching toward an ominous conclusion, and the eurozone possibly toward doom. Rather than harmless bumblers in a romantic comedy, by this light Europe's politicians are the blowhard fools who wind up getting everyone killed. (Or all those with too much long exposure anyway.)

The Ireland drama - and news of a planned Irish bailout worth more than $100 billion - has something for both sides.

On the one hand, Ireland can be viewed, like Greece, as just another problem to be solved. Sure the road might be bumpy, but so what. All the fear has been played out in the headlines... Ireland's arm has been successfully twisted... and these are the only things that matter. Ireland is not another Greece because the eurozone already lived through Greece, and because the possibility has been discounted and dealt with.

On the other hand, the sense of calm resolution may be the false flag. This would be the case if, say, Ireland is merely the preamble to some bigger, darker story - like the downfall of Spain.

As it stands now, the Irish bailout is set to "dwarf" Greece's. Goldman Sachs estimates a total rescue fund package of $130 billion, or roughly 60% of the Irish economy.

Were Spain to receive apples-to-apples help, relative to the size of its economy, a whopping $875 billion would be required. (Oh, and don't forget another $100-billion-plus for overlooked Portugal between here and there.) What is difficult to understand with these last two, is that in the 1400’s to 1700’s they scraped Latin America and Africa carrying out all you can imagine in gold and silver (and more) and 400 yrs later they are in the verge of a crisis? If you understand please explain it to me - they had literally “all the gold in the world”… where is it?

And then there is Italy...

Too Big to Bail

At some point along the way, the math stops working. The ECB (European Central Bank) and IMF (International Monetary Fund) can throw money at peripheral countries like Greece, and possibly Ireland, but as the stakes rise the sums can no longer be choked down. "Too Big to Fail" eventually becomes "Too Big to Bail."

And even as the eurozone marches toward this slow-motion train wreck of a result, there are voices yelling "STOP THE INSANITY" on both sides of the aisle.

On one side you have German taxpayers and those who represent them - the "deep pockets" of Europe who feel their money is being squandered in terrible fashion, with good funds thrown after bad.

And on the other side you have local interests and the periphery governments themselves, wondering whether bailouts are just a torturous means of postponing the inevitable.

For the country that is so financially strapped as to make default inevitable, anorexic belt-tightening and extreme austerity measures are just a recipe for more pain between here and there. The Irish government - soon to be the ex-Irish government - agonized over taking a bailout for precisely this reason. They knew that the terms would be horrible (and possibly degrading in human terms).

Think of a family contemplating bankruptcy, even as debt collectors urge them to grimly hang on no matter what. Such collection advisors have nothing to lose in encouraging the family to put every ounce of blood, sweat and tears they can muster into paying off what pennies they can.

The end result from the collector's perspective: A total loss whittled down to a semi-partial loss.

Guillermo Ramón Adames y Suari is a former electoral officer of the United Nations Organization. Contact him at gui.voting(at)gmail.com.



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