How Long Before The Eurozone Avalanche Occurs?
London, UK - 8th October 2011, 22:25 GMT
Dear ATCA Open & Philanthropia Friends
[Please note that the views presented by individual contributors are not necessarily representative of the views of ATCA, which is neutral. ATCA conducts collective Socratic dialogue on global opportunities and threats.]
1. Time left is limited now, as a number of well placed sources envisage weeks – not months – before the Eurozone crisis deteriorates into a catastrophic avalanche;
2. October 8th is the date the Greeks were expecting to receive 8bn Euros from the IMF-EU-ECB troika to enable payments of wages to public sector workers by mid-October and to maintain public services. This payment has been postponed as the conditions for the bailout and the total sum involved are being recalculated by the troika;
3. Inevitable Greek chaos – unleashed by the lack of liquid funds – may cause confidence to plummet as Greece’s imminent default further damages Tier-1 capital of a number of major Eurozone banks;
4. The first banking casualty of the Eurozone financial crisis has already occurred in Dexia with adverse consequences for the credit rating of Belgium. Credit rating downgrades of Italy and Spain announced before the weekend are likely to exacerbate further the Tier-1 capital ratios and balance sheets of many European financial institutions;
5. As banks get buried under the Eurozone avalanche, they will inevitably require national assistance. This will lead to additional downgrades of the credit rating of many sovereigns with unintended consequences spawning multiple black swans with myriad unknown unknowns;
6. As other banks across Europe and different parts of the world wobble in intricate counterparty chain reactions many may seek national support, but not all nations will have sufficient funds to recapitalise their banks;
7. The idea of a single co-ordinated pan-European recapitalisation programme for banks is likely to be rendered obsolete by the domestic considerations of the major Eurozone powers. They are not keen to share the intimate details – including weaknesses and vulnerabilities – of their own banking system with other sovereigns;
8. Non-eurozone western European countries like the United Kingdom, Switzerland and Sweden as well as eastern European countries may also suffer substantially from the fallout of the Eurozone avalanche including domestic banking crises and loss of export orders. North and South America as well as Asia could also be substantially affected by the Eurozone crisis;
9. For businesses, risk mitigation may lie in having multiple credit lines and banking relationships across non-Eurozone entities, reducing loan exposures, and recapitalising loans across different sources swiftly;
10. As the business liquidity crisis worsens, the lack of oxygen beneath the Eurozone avalanche may disrupt normal business life in the coming months, quarters and years;
11. Counterparty risk and credit risk is likely to multiply exponentially, damaging the capacity to do business-as-usual, as financial markets deteriorate and continue to demonstrate extreme volatility; and
12. The Great Crash of 1929, Black Monday in 1987 and The Panic of 2008 all took place in October. Is the Eurozone avalanche likely to occur in October as well?
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