A bad bank for the Good of Europe (ver1.4draft)

A bad bank that will put a stop in dependence of Governments from Credit ratings Houses in advance I strongly believe that is a creative tool for removing uncertainty (about state bonds validity) from money market. Furthermore Band Bank institution in is very likely to promote solidarity and political maturity/unification of EU t
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  A proposal to ECBA BAD BANK FOR THE EUROPEAN GOOD  Theodoros Pitikaris BAB,BSc,MScUniversity of Athens – State Scholarship Foundationthodoris@pitikaris.euNowadays the hottest question in EU area is “how to treat the debt crisis”.Unfortunately Gordon Brown is not anymore here; in other words Europe, issuffering the lack of political leadership that will transform the question toreal action towards a real resolution on the debt problem.At the beginning were the Greek Statics, accounting methods that spreadthe depths and deficits in such way in order to present them significantlylower than other accounting methods. Then was the turn of some populistnewspapers in Germany and other northern EU member state, whichincorrectly presented Greeks as lazy people that live on German’s money. Then we had the Irish case as result of the problematic Irish bank sector.Ireland was called for bailing out IMF and EU, and a few weeks later was theturn of Portugal to bow before extreme austerity measures in exchange of troikas’ financial assistance. Spain and Italy are now into the eye of thefinancial typhoon. The trust between European nations is broken. This deficit of trust is now themajor reason o of what we face nowadays as a Greek Default. If HellenicRepublic declare bankruptcy will draw all the other European economies todark paths, and the Eurozone will face a real threat for his own existence.One the one hand Portugal, Greece, Spain, Ireland are countries with theirown weak points, points that are built into their social and economic life, andis extremely difficult to overcome them in a sort term, on the other handItaly, UK, Germany and for sure France and Italy are too small against Chinaor USA alone, but united under EU Flag are strong commercial and financialplayers. Furthermore is essential that our political leaders will keep in mind  that the European Union and Eurozone were results primarily, of commonpolitical decision. A decision to unified Europe under one federal schemaand promote a strong financial and economic player that will be able tostand and against USA and China. The European Union is the vital zone for the strong European economies, astrong internal market of 700.000.000 people/ customer that allow them tokeep a competitive advantage and inject inter-European development. Therefore is to our interest to, follow the right strategies that will allow theeuro to survive and Eurozone to expand. The current treatment wasn’t veryeffective (in Greece salaries went down at 12% including inflation but deficitget bigger).Firstly we need to make the European debt manageable, and the solution of a European bad bank seems to be a logical way. There are several sourcefrom which that, this bank can accumulate the appropriate amount of capitals to buy the whole European debt. For instance we can print newmoney; but this will increase the inflation in the EU, on the other hand alower public depth means lower taxes so a lower lever of inflation, can beexpected in a long term period.But this bail out is essential to be followed by a real European ministry of finance that will coordinate the national economies and guarantee that wewill never again, face the same chaos again. The total debt of Greece, Ireland, Spain, Italy, Belgium, Portugal and Franceand Germany is 13,141 Billions of Euros. And here is the magic world: themost of EU Debt is in euro. In case we inflate the debt by 50% in 30 yearsperiod that will cost will cause cost something like 0.5 Euro of buyingpower for every European that his/her country belongs to Eurozone.Additionally the procedure will be transparent (nobody has to pay real cash),and will come via inflation. From ethical point of view maybe is not a fairsolution, but If we start scratching wounds and debates about fairness inhistory, and the impact of two world wars to Greece, to Italy, to France andGermany then we will end up with a big zero.Even if we go for a 5% haircut over the nominal prices using PSI theorganization that will participate in that agreement by exchanging a bad ratingcoupon with a good one will take advantage from the opportunity to use leveragethat this new coupon provides, to cover some of the loss  In addition the devaluation of euro should be expected and that will benefit theEurozone exports and development outlook, we may suggest that a 5% of GDPGrowth will transferred to the Bad Bank institution.  The past is past; today we are all in the same boat. Technical and monetarysupport is essential for a stronger Europe. In other words a band bank with aMarshal’s Plan is in great need for the good of all Europeans. Country2,011.002,011.00GPD(Euro)Debt/GDB   $€ Greece 518.4360200 1.80Italy 2,430.002,089.801519 1.38Spain 948.00815.281020 0.80Portugal 198.65170.84167.5 1.02Belgium 463.64398.73274 1.46Ireland 205.02176.32124 1.42France 2,217.001,906.621917.5 0.99Germany* 8,4007,224.002516.9 2.87Total15,380.7113,141.597,738.90   Table 1 The debt in Europe source:;; OECD *Including Hidden debt as estimated by   Handelsblatt .  Figure 1 DEBT/GDP ration **UK will follow … and will join euro in the forthcoming years since HRMtreasury debt and deficit are very high and the 3brothers ready to eat theflesh of UK people.

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Dec 21, 2017


Dec 21, 2017
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