Tuesday, September 01, 2015 03:57pm
North Adams, MA now: 84 °   
Send news, tips, press releases and questions to info@iBerkshires.com
The Berkshires online guide to events, news and Berkshire County community information.
LOG IN | REGISTER NOW   

Home About Archives RSS Feed
Independent Investor: Europe Goes the Full Monty
By: Bill Schmick On: 11:24PM / Thursday July 21, 2011

Full Monty: "everything which is necessary, appropriate, or possible; 'the works.'"    

— Oxford English Dictionary

A new rescue plan for Greece is being hammered out in Brussels today, Thursday. Although the details are yet to be released, it appears that the European Community is finally going for an overall plan that will do more than just Band-Aid over the debt crisis of southern Europe.

Greece, of course, is the bad boy of that continent but Ireland, Portugal and even larger economies like Spain and Italy are being added to the list of troubled nations. Up until now, the EU has grudgingly provided bailout money in exchange for economic austerity measures that have only driven these countries into deeper recessions and increased social discontent.

The new aid package to be announced will be a departure from this bankrupt strategy. Instead, the EU will tackle the root cause of the issue and reduce the overwhelming debt burdens of Greece, Portugal and Ireland. It will allow the EU's rescue fund, called the European Financial Stability Facility (EFSF), not only to buy that debt but also reissue new debt (loans) at much lower interest rates. It could also extend the maturities on new loans to these countries from an average of 7.5 years to 15 years or more.

The EFSF will also be able to aid troubled banks by lending money to various euro-zone governments (who will then bail out their banks) pre-emptively. No longer will governments have to wait for the crisis to hit before doing something about it. The EFSF will also be able to buy and sell sovereign debt of any of these countries on the open market in cooperation with the European Central Bank. That should discourage rampant speculation in these instruments, which has exasperated the crisis.

These moves, which were all rejected by Germany up until now, will form the basis of the equivalent of a Marshal Plan for Europe. I believe it is the best plan yet to address the financial contagion that has been pulling down one country after another within the EU. By reducing existing debt to manageable proportions and giving the beleaguered nations breathing room to repay it over many more years, the burden becomes more manageable. No longer will Greece, Portugal and Ireland have to slash spending and raise taxes while scrambling to find a way to pay back the loans and grow their economies all at the same time.

I had maintained that it was impossible to accomplish that feat. Readers may recall that over the last year I have been writing (and hoping) that the EU would see the light. This program, while not exactly the route I would have taken, is far more comprehensive than their past plans of simply kicking the can down the road.

An important change, and one that the European Central Bank had been resisting, is the possibility of allowing a "selective" default occur in Greek government debt. How that would happen is still not clear but it might include a bond-exchange program, a write-down of some of the debt or a buy back by the EFSF of a portion, say 20 percent, of heavily discounted Greek bonds.

The markets have been wrestling with just how such a default would impact Europe's banks, which hold billions of Euros in the sovereign debt obligations of the PIGS (Portugal, Ireland, Greece and Spain). Will a "selective" default of some Greek debt trigger the credit agencies to move toward a more negative stance on EU banks? If today’s prices of European bank stocks are any indication, the markets believe that there is a plan to avoid the credit agency's wrath.

All we know at this time is that private institutions in the financial sector will be given a number of alternative methods on how to assist in financing Greece's debt now and in the future. Some of the ways this can be accomplished are debt exchanges, roll overs and/or buy backs of existing debt.

I am sure that the details will need to be ironed out and, as usually happens with a plan this large, it will be a work in progress with lots of trial and error. What is important is that Europe's leaders have finally come to understand that the theatre we have been watching for almost two years needed drastic changes. The solution to the Greek financial crisis demanded that the actors revisit the stage with a new act. This week they have responded with an economic Fully Monty. I say, Bravo!  

Bill Schmick is an independent investor with Berkshire Money Management. (See "About" for more information.) None of the information presented in any of these articles is intended to be and should not be construed as an endorsement of BMM or a solicitation to become a client of BMM. The reader should not assume that any strategies, or specific investments discussed are employed, bought, sold or held by BMM. Direct your inquiries to Bill at (toll free) or e-mail him at wschmick@fairpoint.net . Visit www.afewdollarsmore.com for more of Bill's insights.



0 Comments
Tags: Greece, PIGS, bailout, Europe      
News Headlines
Early Cost Estimations Show New Taconic Project On Budget
MCLA Opens 'Year of Transition' With New Faces, New Leader Search
Peter Fohlin: He Worked for Williamstown
Freight Yard Attorneys File Motion to Begin Collections
Pittsfield Schools Staff Ready For First Day of Classes
SVHC to Honor 2015 Vision Award Honorees
Library Challenge Celebrates 20th Year
Mount Everett Teacher Wins $10,000 Kapteyn Prize
Northern Berkshire Adult Basic Education Program Fall Programs Begins
Best Buy In Berkshire Mall To Close At The End of October

Bill Schmick is registered as an investment advisor representative and portfolio manager with Berkshire Money Management (BMM), managing over $200 million for investors in the Berkshires. Bill’s forecasts and opinions are purely his own and do not necessarily represent the views of BMM. None of his commentary is or should be considered investment advice. Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of BMM or a solicitation to become a client of BMM. The reader should not assume that any strategies, or specific investments discussed are employed, bought, sold or held by BMM. Direct your inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com Visit www.afewdollarsmore.com for more of Bill’s insights.

 

 

 



Categories:
@theMarket (178)
Independent Investor (242)
Archives:
August 2015 (7)
July 2015 (6)
June 2015 (8)
May 2015 (6)
April 2015 (8)
March 2015 (6)
February 2015 (7)
January 2015 (9)
December 2014 (7)
November 2014 (4)
October 2014 (9)
September 2014 (5)
Tags:
Recession Housing Fed Europe Stock Market Interest Rates Rally Commodities Jobs Federal Reserve Markets Fiscal Cliff Currency Election Taxes Japan Oil Congress Euro Bailout Debt Energy Crisis Stocks Selloff Debt Ceiling Deficit Europe Pullback Greece Metals Stimulus Banks Economy Retirement
Popular Entries:
The Independent Investor: Don't Fight the Fed
The Independent Investor: Understanding the Foreclosure Scandal
@theMarket: QE II Supports the Markets
The Independent Investor: Does Cash Mean Currencies?
@theMarket: Markets Are Going Higher
The Independent Investor: General Motors — Back to the Future
The Independent Investor: Will the Municipal Bond Massacre Continue?
@theMarket: Economy Sputters, Stocks Stutter
The Independent Investor: Why Are Interest Rates Rising?
The Independent Investor: How Will Wall Street II Play on Main Street?
Recent Entries:
@theMarket: Are We There Yet?
The Independent Investor: The Marijuana Market
@theMarket: Markets Are Supposed to Pullback
The Independent Investor: Not All Bonds Are the Same
The Independent Investor: The Risk of Rising Rates
The Independent Investor: Boomers' Kids Don't Want Your Stuff
@theMarket: Month-End Musings
The Independent Investor: Supermarkets Evolve to Survive
The Independent Investor: Are You Ready for El Niņo
@theMarket: O Ye of Little Faith


Motorama Winners 2015
Plenty of trophies, plaques and jackets were awarded to...
Motorama 2015
The 5th annual Motorama filled downtown North Adams with...
Live on the Lake: Madison...
Madison Avenue wrapped up the 2015 Live on the Lake concert...
Whitman's Wins Torchia League...
The Pat Torchia Women's Softball League playoffs concluded...
Berkshires Craft Beer Fest...
The 9th annual Western Mass beer festival drew hundreds of...
Pat Torchia Women's Softball...
Whitman's took the first game in the best two out of three...
Third Thursday August 2015
It was another beautiful night for 3rd Thursday on North...
Berkshire Chamber @ Darrow...
The Berkshire Chamber of Commerce held its monthly...
Shire City Sessions August...
Wild Adriatic performs at Monday's Shire City Sessions, a...
BYP Networking @WTF
The Berkshire Young Professionals held its networking event...
Softball: VFW Post vs Pizza...
VFW Post vs Pizza House at DiSanti field on Monday night.
Second Cheshire Block Party
Cheshire resident enjoyed good food and music by the...
Downtown Celebration 2015
The annual Downtown Celebration brought hundreds to Main...
Pittsfield Ethnic Fair
Pittsfield Ethnic Fair was held at the Pittsfield Common on...
Annual Cruz Nite And...
Cheshire residents enjoyed classic cars, good food, a BMX...
Adams National Night Out 2015
Adams recognized its first responders on Tuesday night...
Motorama Winners 2015
Plenty of trophies, plaques and jackets were awarded to...
Motorama 2015
The 5th annual Motorama filled downtown North Adams with...
Live on the Lake: Madison...
Madison Avenue wrapped up the 2015 Live on the Lake concert...
Whitman's Wins Torchia League...
The Pat Torchia Women's Softball League playoffs concluded...
Berkshires Craft Beer Fest...
The 9th annual Western Mass beer festival drew hundreds of...
| Home | A & E | Business | Community News | Dining | Real Estate | Schools | Sports & Outdoors | Berkshires Weather | Weddings |
Advertise | Recommend This Page | Help Contact Us
iBerkshires.com is owned and operated by: Boxcar Media 102 Main Street, North Adams, MA 01247 -- T. 413-663-3384 F.413-664-4251
© 2012 Boxcar Media LLC - All rights reserved

Privacy Policy| User Agreement