Stress Tests Are A Wish For More Time

Has anything changed? Do Greeks now believe in austerity?  Do Italians now see that honesty is the best policy, and Spanish see that ‘practices’ are inappropriate?  Does the EU now understand that the corruption that lies at its heart is the real problem ?  Where is there an island of truth amongst this sea of lies, to which an optimist could tie up a storm-tossed hope-seeking vessel?

Investment needs above all else trust, faith, confidence.  Yet apart from a stress test which will only measure at best the financial state of various banks, based on their unproven answers to pre-advised questions, how can confidence and trust suddenly be created from thin air, just because the EU wants to avoid facing a financial crisis?
Do people trust the Germans not to lie about the current state of affairs?  Possibly, and yet the regional Landesbanken are known to be in serious deficit.  Angela Merkel has determined to invest all her own political, as well as her country’s financial capital in turning the situation around, and save the Euro.  But be honest.  This will need ten or more years of hard austerity in many countries, and a willingness from the stronger Euro countries to carry them for a long time, while they repair and change their ways after generations of falsehood.  
Are the Greeks really going to put up with a decade-long programme of austerity?  The signs are that they will not.  And will the Germans be willing to carry them all?  The signs are that they will not be willing either.  Yet that is what both sides are currently promising to each other. All sides to the Euro bargain are either kidding themselves or each other.
To try to create a message of Euro-hope, the bank stress tests, to be followed shortly by the launch of the much reduced in scale, shock & awe EU bail-out fund, are intended to delay the crisis.  With America offering euros, able to be re-exchanged without loss for dollars, it is in fact America, and international bankers, that are paying for the lack of willingness to change by Europeans, not European themselves.  The longer money is showered over Greeks, and others, the longer they will go on spending the largesse on the lifestyles to which they have become accustomed.  If the Euro holds its value, American losses will not be too great, but if the Euro falls back to its values pre-2002, there could be some big write-downs for the bankers who are trying to stop the Euro collapsing.
More troubles lie beneath the surface.  Whether the situation will become untenable within the eurozone, maybe Slovakia refusing to pay up, or in Germany if Merkel falls, or Greece not cutting as much as promised, or outside the eurozone in Hungary, where the country is refusing to impose a regime of austerity to IMF commands, we will wait to see.  But somewhere, somehow, reality will spill, and the stress tests, the bail-outs and American currency swaps, will not save a situation that fewer and fewer believe in.  
Bureaucracy can intervene in markets and shower the news media with cheerful sounding ‘news’, but while no one trusts anyone else,  while banks cannot borrow from each other, or countries, except on terms that will ultimately prove unacceptable to both the lender and the borrower, the drift towards a European default gets closer.  The news machine is doing a great job this week, and no doubt next, when the bail-out fund is declared operational.  But sadly not much will have changed.   Only a little time will have been bought.

http://the-tap.blogspot.com/2010/07/greek-10-year-bond-rates-soar.html“>High Spending Greeks Don’t Want The Euro.

The Tap Blog is a collective of like-minded researchers and writers who’ve joined forces to distribute information and voice opinions avoided by the world’s media.
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