26th October 2011
What are the issues?
The bottom line here is that several European banks are in trouble. The European Central Bank is deploying a range of exceptional measures to try to help the situation but even so the situation is getting worse. An example of this was the nationalisation of the Franco/Belgian bank Dexia which I discussed on the tenth of this month. If we look now at the implications of this it has affected adversely bond yields in both Belgium and France so we have a benchmark for what might happen if more banks fail.
Today has seen more signs of problems as the French newspaper Le Soir has reported more signs of trouble at BNP where it is using funds from a subsidiary in a similar fashion to the way that Dexia behaved before it collapsed, sorry excuse me, gave taxpayers an opportunity to benefit from its future profits.
The problem that the Euro zone has here is that whilst we got talk of a 108 billion Euro rescue over the weekend there was no definitive plan to do so and not even an explanation of why 108 billion. As the group Sweet put it:
"We just haven't got a clue what to do. Does anyone know the way, there's got to be a way?"
Of course the politicians would like to present something with the effect of the title of the song. Blockbuster.
What to do about Greece?
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