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Tuesday, 12 July 2011

UK Taxpayers sucked into the Eurozone black hole

Taxpayers sucked into the Eurozone black hole

Now they have landed on a big snake.  Yesterday, top ratings agency Standard & Poor’s – as we predicted – officially confirmed that the sundry finagles and wangles Brussels and Paris have cooked up to fudge Greece missing payments due on its debts, cut no ice with them.

If the Greeks don't meet the original due date and amount for any repayment to one of the numerous big Euro banks to which they owe huge sums of money, that debt will be declared by S&P as 'in default'.  Other top global ratings agencies are almost certain to follow suit.
This means that any such debts automatically legally turn from an asset to a liability on the affected bank’s books.  So great are the amounts involved that for a number of big banks, notably in France and Germany, that would transform them, at the stroke of a pen, from solvent to insolvent. They then must either cease trading or, as in 2008, be bailed out by their hoist country’s taxpayers, causing another Bankers’ Slump in the only parts of the Eurozone not already in economic meltdown.
Not surprisingly, the markets greeted the news by downgrading the affected banks’ share prices - in France Credit Agricole and Societe Generale fell about 2%, while in Germany Commerzbank slipped 1.7%.  British-based banks are not immune either – Royal Bank of Scotland and Lloyds shares fell 2.3%, reflecting their exposure to Greek debt and the danger that British taxpayers will be sucked into the Eurozone black hole.
This all means that the latest £10.4 billion bailout loans the Greeks got last weekend in return for doing as they are told will not be enough.  The only way now to avoid a Greek default and a string of bank collapses would be if the European Central Bank – the Bank of the Euro – took on the burden of the debt.
This won’t happen as the actual cost would fall ruinously on the German taxpayer, who would revenge themselves savagely at the polls on the current German Government whose Chancellor Angela Merkel has made it very clear that she will not lay down her political life for the Euro.
This enthralling drama continues apace . .