Monday, May 21, 2012

UK's exposure is seriously higher than has been discussed , even if the EFSM liability is somewhat overstated here.....

http://hat4uk.wordpress.com/2012/05/21/euroblown-to-hell-with-the-rules-say-eurozone-members-maybe-britain-should-be-saying-the-same/


EUROBLOWN: ‘To hell with the rules” say eurozone members. Maybe Britain should be saying the same.

Far too few Brits are aware of our EU obligations

There is an inverse correlation between imminent poverty and the commitment to the Rule of Law. If ever you doubted that fact, then kop this from Poland’s finance minister Jacek Rostowski: he thinks the ECB should announce its intention to buy unlimited amounts of sovereign debt in the event of a Greek exit from EMU. As to whether this is against EU or ECB statutes, Rostowski describes the fundamental principle underpinning the role of central banking as “a moot point”.
The rules are rapidly being chucked out of the window. The Bank of Greece has adamantly denied media reports alleging plans to restrict deposit withdrawals and impose capital controls in the country. This too is the very antithesis of what the EU is supposed to be about, but I can confirm to you with reasonable certainty that the reports are correct.
So with things getting heavier by the day, perhaps we should all bear the following in mind:
The ECBis entitled to call upon the Bank of England for up to €50 billion of the UK’s currency reserves. Under Council Regulation 1010/2000 of 8th May 2000, the ECB has the legal right to call on individual member countries’ national reserves (€50 bn in the case of the UK) should the viability of the ECB be at risk.
The EIB can call upon up to €35.7 billion from the UK, should it lose money on the loans that it has made to governments and organisations in vulnerable economies such as Greece, Portugal, Spain, Italy and Ireland.
The UK currently has a €60 billion liability to the European Financial Stabilisation Mechanism (EFSM). Solvent members are required to jointly take on the insolvent member’s debt.
The UK’s €1.9 billion of paid-in capital to the EIB and a further €1.6 billion to the European Central Bank (lodged to pay the UK’s share of its costs) is also at risk.
Listen guys, if everyone else has decided the game is now no-holds-barred underwater Roman amphitheatre kick-boxing, maybe we should be reviewing our approach as well. As in, maybe we should just default on these commitments and take the consequences.
What are they likely to be? In the event of a European collapse, not very much frankly.
a correction to the missive above regarding UK EFSM liability.....

http://www.newstatesman.com/economics/economics/2012/05/uk%E2%80%99s-potential-debt-european-financial-institutions-%C2%A3119bn

The UK’s potential debt to the European Investment Bank (EIB), the European Central Bank (ECB) and the European Financial Stability Mechanism (EFSM) is £119bn, according to a new report by the management consultant Bob Lyddon, commissioned by the Bruges Group.
In total, the UK has a maximum possible loss of €149.2bn on current capital and in commitments to institutions involved in the financing of the EU and the euro. This does not include any exposure through the International Monetary Fund.
The think tank points out that the ECB is entitled to call upon the Bank of England for up to €50bn of the UK’s currency reserves. Meanwhile,  the EIB can call upon up to €35.7bn from the UK, should it lose money on the loans that it has made to governments and banks in vulnerable economies such as Greece, Portugal, Spain, Italy and Ireland. 
The UK currently has a €60bn liability to the EFSM, which could increase, depending on future defaults. There remains serious doubts about Greece’s continuing presence in the eurozone, due to its debt crisis.
The UK’s €1.9bn of paid-in capital to the EIB and a further €1.6bn to the ECBank (lodged to pay the UK’s share of its costs) are also at risk, the report claims.

and....

https://docs.google.com/viewer?a=v&q=cache:a8mcEwts2SMJ:www.parliament.uk/briefing-papers/SN05973.pdf+UK+liability+to+the+EFSM&hl=en&gl=us&pid=bl&srcid=ADGEEShWQtGeWC2ckln48OCdi3QfgQ4xsmbLw5CDzfP0ohWbo8-Zfdk7OkNHPHEDJ3i1aZwhBtCryyN52cimKrOCM4WUgCyTsiCpBAtZnwBGY4TZHaJjCD7J3lw_m-HMQ97k0JDZEllU&sig=AHIEtbQdTvvJqbnCQow1Z3K-b4V8oS2hYg&pli=1

Maximum liability for the UK in 2011 was  12.5 percent of 60 billion euros or 7.5 billion euros. The formula is based on the UK share of the EU budget  , so this would change from year to year - but the general idea carries....the UK is not responsible for 60 billion euros ....

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