Alan Kohler is one of Australia’s most experienced commentators and journalists. Alan is the founder of Eureka Report, Australia’s most successful investment newsletter, and Business Spectator, a 24-hour free business news and commentary website. He also hosts Inside Business, a half-hour Sunday programme on the ABC, is the finance presenter on the ABC News - and producer of the nightly graph (or two).
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Comments on this article
Comments PolicyHi Karen, some points are well done others not so (Sidestepping a Spanish crisis, March 28). For example:
1. The ECB has accepted junk from Spain and as a result the ECB will have problems once the Spanish bonds become non performing.
1a) Hence Merkel's acceptance to increase the firewall.
2. So far the present funds are light and only have about $250 billion ready and able to go.
2a) Several EU countries have refused to add to and some can't.
2b) Germany so far has not put in more.
The point about the ECB will require some focus in the coming months as the totality of what Draghi has done becomes apparent.
And lastly, our own RBA will drop interest rates by 1 per cent next week, as why.
The ECB has become the de facto source of euro bank funds (Sidestepping a Spanish crisis, March 28).
This is to supposedly to stop the real estate prices imploding which would make the banks insolvent.
If the ECB had just enforced a 5 per cent interest rate in the beginning and told Greece to go to hell, none of this mess would have happened.
Saving the banks will not save the governments. The deflation of real estate will continue. The lowering of tax revenue will go down with the real estate price and the lack of construction activity. The pain is extended by saving the bankers.
Houses that are too expensive are not affordable by immigrants. Better that these banks get nationalised and a firesale of bank assets occurs. A house that gets sold for $1 still creates taxable activity.
It's time for the ECB to work for Europe. If a bank cannot meet its obligations it should be nationalised, the board removed and most of its employees made redundant.
Unless the underlying structural deficits are addressed this fabulous magic pudding of the ECB's will soon need another 0 added to the right hand end (Sidestepping a Spanish crisis, March 28).
I wonder what the effect will be on EU stability, given that such political capital has been effectively (well not very) spent on papering over the symptoms, when the causes of the situation must be addressed.
Very well reported Karen. Thanks for the detail (Sidestepping a Spanish crisis, March 28).
We can clearly see what will transpire though over the next forward period. These Euro supporters are living in a dream world and I agree with Tony Holland (March 28, 9.23am) except in his last point and only because I don't think the RBA has a clue what is required or what they are or indeed, should be doing. They are out of their depth and probably because they don't exist in the real world.
Regarding the eurozone situation, simply put: anything pretty much information and decision wise that comes out of Europe pertaining to the euro will be flawed very badly (though not in the reporting). This entire euro situation should have been wrapped up a couple of months ago or sooner by simply doing the numbers and deciding on evidence based that the euro should be disbanded/and buried for all time as an interesting but very fundamentally flawed idea that is impossible to work with over the long term. No reinvention or modification to make it work will in fact not work because of the ever volatile nature of the membership of its member states and the politics surrounding them.
When I first saw the heading of this article I thought Karen is the bearer of good news (Sidestepping a Spanish crisis, March 28). Unfortunately, it wasn't to be. Europe and the euro are still a mess and as others point out likely to disintegrate. For any one who has travelled through the eurozone this is a real pity as the bugbear of having to change currencies at each border is a real pain particularly in the rear pocket where you invariably get ripped off by the money changers.
That there is a severe financial crisis in Spain and that the country now is in recession is obviously a real problem for Spain and its people. However, every crisis provides opportunities and if one was to study the Spanish bourse one would find many companies with fairly attractive valuations e.g. below book market valuation (Sidestepping a Spanish crisis, March 28).
What is a surprise to me and probably other is how passive Australian companies are on the world scene. Now, with a high Australian dollar and low company valuations is a prime time to invest in overseas companies e.g. in Europe.
Regarding Tony suggesting the RBA should drop rates by 1%, would this not hurt a lot of retirees who supplement their income with interest from bank deposits? For every person with a loan who would benefit from lower rates, there's another person (or more), who would be hurt. Do all our ills require lower rates? Or perhaps where they are now is about right? (Sidestepping a Spanish crisis, March 30).