It is a necessary step, from the usual politics, to get a glimpse of the big picture. Europeans need to ask themselves where they have been and their journey to the next stop.
Twenty years ago, in 1998, the exchange rates of many eu countries were irrevocably fixed in preparation for the euro. Suddenly, almost bankrupt southern European countries no longer have to pay a hefty interest premium of about five to twenty percentage points relative to Germany. As a result, cheap credit was rampant, and southern Europe experienced a debt-financed boom that pushed wages and prices higher. Eventually, the boom turned into a bubble.
Then, a decade ago, a bubble burst in the us subprime mortgage market, leading to a global financial crisis and then a bust in southern Europe. In their hour of need, crisis-ridden southern European countries have used the European payment system to overdraft on a large scale to replace private loans they no longer provide.
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Hans Werner Sinn –
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In addition, in order to curb these overdrafts, the Nordic countries have provided substantial financial assistance to their southern neighbours. But these funds proved insufficient, prompting the European central bank to offer unlimited guarantees to southern European creditors, all at the expense of eurozone taxpayers.
Of course, the ECB’s guarantee encourages creditors to extend more credit to crisis-hit countries and to rescue the investments of previous creditors. Protected creditors come from all over the world, including northern Europe. French Banks, by far the biggest exposure to southern European countries, have benefited the most from the bailout.
But creditors also have to bleed. They have little interest in their assets and have accumulated hundreds of billions of euros in interest losses on southern European loans.
As quantitative easing (QE), the European central bank’s aid measures made a climax, during 2015 to 2017, the euro zone central Banks in the newly printed euro securities (including 1.8 trillion euros worth of government bonds) bought 2.3 trillion euros (2 trillion euros).
In fact, qe is a huge debt restructuring operation. Its main beneficiaries are southern European countries, these countries to foreign investors to sell most of the debt, the proportion of funding before they trigger a global financial crisis the huge current account deficit.
Quantitative easing is planned to operate implicitly through a three-way trade. Securitization of southern European countries to obtain government bonds, as investors around the world will these bonds is replaced by the German assets, and to some extent, instead of the Netherlands and other assets of several euro-zone countries. In turn, the sellers of these assets received the euro and therefore lodged a claim against their national central bank. The central bank itself has accepted the so-called “target” claims made by the euro system against the southern European central bank.
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By the end of 2017, the total amount owed to the German federal bank was 907 billion euros. Germany, however, the central bank’s target of creditor’s rights is essentially worthless, because they can never be called maturing bonds, and to the European central bank’s governing council in the majority of the interest rate of the debtor. They have set interest rates at zero.
According to the bretton woods system, until the early 1970s, when currencies were pegged to gold prices, Germany would receive 19,000 tonnes of gold (based on prices at the end of 2017). This is almost four times the amount that the system actually accumulates (4,000 tonnes). The $907 billion in the bundesbank’s target claims is almost half of the net foreign wealth that the federal republic has so far accumulated through export surpluses.
For those dates back to 2028, when European politicians began to fiscal transfers to give up through north to south and reduces demand, starting from 2018 decade will be remembered for a decade. The transfer will be sent to you by France’s President, Mr Ma new el marolon has called for measures to strengthen his country in the heart of south, and Germany’s new temporary big alliance has approved measures (modify). In Mr Macron’s proposed plan, each euro, which moves from northern Europe to Europe, would reduce the target’s debt and debt by 1 euro.
In addition to France, the coming decade will be a particularly opportune time to create a transfer union due to the looming demographic crisis in most European countries. After the baby boomers retire, government warehouses will run out between 2028 and 2038. That means anyone wishing to tap the Nordic taxpayer’s resources needs to do so as soon as possible before it is too late. Mr. Depez-vous, Mr. President!