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Post by jonjel on Mar 25, 2011 14:52:55 GMT 1
Forgive me if this sounds naive, but as I understand it if Portugal can not raise 5 billion in the next couple of months they will 'go broke' and we will have to find the money for them.
And I ask, why?
Even if we do find the loot does it make Portugal any less a risky place to lend money.
And what happens if we decide not to 'bale them out'
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Post by principled on Mar 25, 2011 15:50:24 GMT 1
I too am mystified. The UK is broke and owes nearly a trillion £. Yet we seem to be able to go to the "bank" and borrow even more at an interest of x, which we then give the Portuguese at a slightly higher rate of y. So for a small increment of interest the UK takes on the whole risk of possible default, whilst the international banks make a much better return because of their interest rate "x" yet have a much lower risk of default (ie only if the UK defaults).
Good business being a banker.
I'm a regular visitor to Spain and the Euro has not been good news for them, IMO. So now, with little industry, nearly 1 million unsold and overpriced apartments/houses (many on the banks' books at an asset price way beyond their real value), some real structural labour problems in the bloated public sector(You may have heard that that their air traffic controllers have just agreed to take a pay cut to 200k euros!), they are effectively robbed of the only thing that can bring things back to an even keel- a currency devaluation. The issue is the same and maybe worse in Portugal/Greece/Ireland.
The interesting thing is, what will happen if those countries have to come out of the Euro and devalue...will they pay back the loans at their value in Euros or at a lower value depending upon how low their new currency drops?
P
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Post by jonjel on Mar 25, 2011 16:09:29 GMT 1
I am delighted I am not the only one who is thinking this.
If Portugal defaults on the loan - so what? Are the European or international courts going to instruct bailiffs to seize goods to the value of x billion Euros, or pounds, or dollars?
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Post by rsmith7 on Mar 29, 2011 21:20:24 GMT 1
If portugal defaults they'll have to live off their tax receipts because no-one will lend them money again unless it's at a crippling interest rate.
This would mean collapse of the public sector, loss of services and massive unemployment.
But give them ten years of misery and they'll come out of it in a strong financial position with a healthy private sector, minimum regulation and reducing tax.
Market capitalism in other words.
Statism NEVER works.
A lesson the left seem blissfully blind to accept.
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Post by jonjel on Mar 30, 2011 9:57:25 GMT 1
But surely Mr Smith if someone else is paying the debt for them they are defaulting, and any further money they borrow will be at a higher interest rate.
And I assume that if the EU bales them out they will still have to pay the EU back?
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Post by principled on Apr 1, 2011 9:45:25 GMT 1
Jonjel
It would seem that we haven't only got Portugal to worry about. Did you catch Robert Preston (BBC) yesterday? Ireland has had to give another £20 billion to its banks after a "stress test" revealed a short fall following the banks "coming clean" about their real balance sheets. The total bailout (60 billion) equates to the equivalent in the UK of 650 billion! Preston also said that the total Irish bank/corporate/private debt is around 700% of their GDP.
He then mentioned as an aside, what would happen in Portugal and Spain if their banks "came clean". As I said before, in Spain there are around 1 million unsold apartments sitting as assets on the banks' books, most at an inflated price. What would happen if their true value were declared...?
P
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