Euro Zone Will Break Up, Bank Of Thailand Governor Prasarn Predicts

[webfact]

DEBT CRISIS

Euro zone will break up, Prasarn predicts

Achara Deboonme,

Vatchara Charoonsantikul

The Nation

Central bank chief believes strong economies will distance themselves from common currency

BANGKOK: -- Bank of Thailand Governor Prasarn Trairatvorakul envisions the eventual break-up of the euro zone.

Much depends on the euro economies' commitment to the handling of their structural problems and agreement to amend the Maastricht Treaty to embrace fiscal and labour integration, which are the kingpins of monetary integration.

The United States went through this crisis over 200 years ago when its currency, the dollar, was first conceived. To ensure that the dollar was the only currency in the country, the US needed fiscal integration of all states.

"The [euro] integration took off on the wrong foot, with only integration on the monetary issue and without integration in the fiscal and labour issues," he said last week.

While some European leaders are busy with getting pressure off the currency, soon they would have to deal with the more serious issues - over fiscal integration.

"The plane is in mid-air. Turning off the four engines now would lead to a hard landing [for the entire zone]. Now, the issue at hand is to ensure that the plane first lands safely. Then, the engines can be turned off one by one," he said.

His message is that when the time comes, strong economies would distance themselves from the single currency. Meanwhile, weaker economies like Greece are looking for an exit, as that would pave the way for devaluation of their own currencies and a boost to their competitiveness. That is the crucial part in spurring economic growth and reducing public debt.

That explains why European leaders and the International Monetary Fund last week approved the second bail-out package worth ¤130 billion (Bt5.3 trillion) to Greece. That would buy some time for Greece.

Still, risks persist, particularly for European financial institutions that hold Greek paper. Last week, they agreed to a 53.5-per-cent haircut for debts owed by Greece.

Prasarn showed concerns over the period that the banks can sustain the burden. Should they want to unload the burden to others, they would need to offer a steeper discount. Eventually, the discount could be as deep as 70 per cent. Though the measures would help lower Greece's public debt from 160 per cent of GDP now to 120 per cent in 2020, the question is how would Greece deal with the remaining public debt, as Europe is now in recession.

The European Commission last week projected the regional economy contracting 0.3 per cent this year.

In return for financial assistance, Greece is required to impose austerity measures, including a 22-per-cent cut in the minimum wage. While individuals' incomes are threatened, unemployment is expected to remain high.

At the symposium to mark the Government Pension Fund's 15th anniversary last Friday, Binay Chandgothia, managing director of Hong Kong-based Principal Global Group, said Europe has to deal with structural challenges, as several countries in the region are not competitive.

The currency risk would spread to other countries, as due to parity, uncompetitive countries are not supposed to be equalised with competitive countries.

Investors now need to focus more on the fundamentals of a particular country, not the entire region.

European leaders, "if pushed to the wall, would take actions for medium-term results". But later, they need to do more, particularly to get a cut in the primary budget, he said.

Surojit Ghosh, vice chairman of Hong Kong-based Credit Suisse, said it has been known for some time that Greece could not be compared to Germany, given that it is extremely rigged by fraud. Italy and Spain are also better off, given their trade surpluses. Still, if Greece defaults on its debt now, the contagion risks would increase.

John Masrland, fund manager of Schroders in Singapore, said a default now would hurt the banking industry and the bail-out package provides time for banks to get ready for tough times.

Lori Whiting, vice president of US-based Wellington Management, said that given the huge public debt in the region, which is over 150 per cent of GDP, it would take 10 years for deleveraging.

With the poor regional outlook, Prasarn now fears that Greece's problems may stretch to other euro-zone economies.

Prasarn, who lists the euro-zone crisis as the most important threat to the Thai economy, said Thailand is not immune to the crisis. But the degree would become more apparent after the elections in several countries in Europe, including France and Italy. Then, the political will on handling the crisis would become clear.

-- The Nation 2012-02-27

[laurentbkk]

Mr Prasarn keep your prediction for Thailand zone . The only point is he defending is the lower export to Europe as China is facing now , maybe its time for Europe to drop the facilities they have in terms of custom tariffs for countries under development such as Thailand.

[w11guy]

Mr Prasarn keep your prediction for Thailand zone . The only point is he defending is the lower export to Europe as China is facing now , maybe its time for Europe to drop the facilities they have in terms of custom tariffs for countries under development such as Thailand.

What he says is true. There is no way that the Eurozone will work. A single currency was tried in Europe before the first world war and it failed. This effort is also a complete mess. It is only being held together because Eurozone governments are stealing taxpayers money to prop it up. Single currencies don't work unless you have fiscal integration. You will never have that in Europe. Within the next 5 year more than half the countries will have left the Eurozone. This guy is only stating the obvious. Everyone knows it but no politicians in Europe will admit it. The Euro is a failed currency.

[givenall]

Euro zone will break up, Prasarn predicts

This is what nis fortune teller told me

[alant]

he is probably right given the evidence it seems clear the west would gain enormously from following the Thai model. Rule 1 look after number 1, all businesses must be majority owned by those from the zone, all property must be owned by those from the zone, all products from outside of the zone have large duties added.

when you have done that you can go about re writing the banking and fiscal practises so that bad assets can simply remain on the books without write off......

[exeter]

It was never completely thought through, countries were let in when they clearly did not comply and now someone has to pay the bill. The Euro will not be allowed to fail but some members may be jettisoned along the way. It will be a lot harder to take it apart than it was to construct it and its affects would be felt worldwide, the northern Europeans must rue the day they got talked into forming this little venture.

[Naam]

The Euro is a failed currency

i wish to live, with good health, as long as this failed currency

[Anon999]

He is mostly correct to say that by implementing one leg of the stool the whole thing may come tumbling down once it becomes unbalanced. Furthermore the US did not consist of different countries with different languages and cultures. There has never been full agreement even about the European Parliament as to meet French protests there had to be a second one built in Strasbourg. Therefore how will it be possible to agree all the major issues?

There is no way the the British Parliament will be prepared to act just as a clearing house for everything that Germany and France want and that is to run the whole of Europe for their benefit. As the UK has to hold a referendum on full membership, given that about 70% of voters are against it, the chances are remote at best.

They may well rescue Greece for the present, although that looks more like a temporary measure and in due course the Greek economy will implode.

Edited February 27, 2012 by Anon999

[belg]

haha, some thai guy will tell how a world economy will behave ... arrogant ?

[Pib]

Wondering if the BOT is reducing the number of Euros in Thailand's reserve account...seems a person wouldn't want to be left holding a piggy bank with a lot of bad/failed money in it. But what do you replace the Euros with? Dollars or Yen which have their own problem especially if looking at the sovereign debt levels of the U.S. and Japan. Maybe the BOT should just buy gold baht chains for its reserve account.

[BlackJack]

no no no

you've got it all wrong

if you're going to hold USA up as the holy grail then learn from them

simply print more money

there ya go

problem solved

[marquess]

No harm in putting your money in Gold, at least it is a finite commodity which has an intrinsic value, rather than then US Dollar which is simply fiat and is going to collapse at some point. The trouble with the Euro is that it is difficult to control your own economy and economic policy if you can't print your own money.

[lonewolf99]

Furthermore the US did not consist of different countries with different languages and cultures..............

How about English Scottish (Gaelic) Welsh Irish (Gaelic) Dutch French Swedish Polish Spanish Russian to name a few, and a wholeload of indigineous tribes from Africa (slaves) and don't forget the locals who were there first.

The French, English and Spanish were all fighting for possesion of the place...

Edited February 27, 2012 by lonewolf99

[blackthorn2005]

haha, some thai guy will tell how a world economy will behave ... arrogant ?

"The plane is in mid-air. Turning off the four engines now would lead to a hard landing [for the entire zone]. Now, the issue at hand is to ensure that the plane first lands safely. Then, the engines can be turned off one by one,". He should consider a career with Thai Airways, he is a crap banker!

[puipuitom]

The EU politicians came to this conclusion already some time ago,

They are only buying time, to prepare all for a "soft landing". For Greece the catastrophy will be a lot bigger as the Tom Yam crises in S.E. Asia in 1998. Maybe also Portugal has to leave, maybe even Spain, as in fact their main earning module was (building) houses for pensionarios. No real competatrive industry or agriculture. And tourism.. can be from everywhere.

For the other member states: All will be a LOT more careful to what and why they are spending tax money, less tax avoidance possible, pension age adapted to life / health expectation, and in 5-10 years this crises will be seen as a blessing is disguise.

Remind: a lot of fiscal and other measurements noiw can be put through, while a few years ago nobody could even dream of it.

In the same time, Burma will take over the Thai tourism, Vietnam and southern China the agricultural business, cheap industrial labour will be brought to Laos, Cambodia, Birma and Vietnam, high level industry to China, and the Thais.... will pray in temple.

[tinom]

Sure €uro will go bankrupt!

Question is when...

$ too is a sick fake money... cheap printed paper!

So what's left?

In Gold I trust!

[kruangfaifar]

haha, some thai guy will tell how a world economy will behave ... arrogant ?

Not nearly as arrogant as you questioning his qualifications to comment based on his nationality

[samran]

haha, some thai guy will tell how a world economy will behave ... arrogant ?

arrogant? No, qualified I would suspect. Unlike you. Unless your white skin makes your more qualified.

Dr Prasarn Trairatvorakul - BoT governor

Date of Birth: August 20, 1952

Education:

1974 — Bachelor of Engineering, First-class Honours, Chulalongkorn University, Bangkok

1976 — Master of Engineering in Industrial Engineering and Management, Asian Institute of Technology, Bangkok

1978 — Master in Business Administration, Harvard University, Massachusetts, USA

1981 — Doctor of Business Administration, Harvard University, Massachusetts, USA

Current Position:

2004 – present — President , Kasikornbank Plc

Work Experiences:

2005 — Chairman, K-Factoring Company Limited

2005 — Chairman, K-Leasing Company Limited

1999 – 2003 — Secretary-General, Securities and Exchange Commission of Thailand

1992 – 1999 — Deputy Secretary-General, Securities and Exchange Commission of Thailand

1983 – 1992 — Bank of Thailand

- Economist, Department of Economic Research

- Section Chief, Department of Bank Supervision and Examination

- Deputy Director, Department of Financial Institutions Supervision and

Examination

1981 – 1983 Research Fellow, International Food Policy Research Institute, Washington DC, USA

Current Social Positions:

2004 – present — Executive Director, Thai Bankers’ Association

1998 – present — Director, Thai Red Cross Society

2001 – present — Chairman, Thai Red Cross Society’s Eye Bank

1999 – present — Member, Steering Committees on Graduate Programs in Finance,

Chulalongkorn and Thammasat Universities

Other Previous Positions:

2002 – 2003 — Member of Economic Policy Working Group, Ministry of Finance

2001 – 2004 — Trustee, Thailand Development Research Institute (TDRI)

2001 – 2003 — Director and Chairman of Audit Committee, Thailand Asset Management

Corporation

2001 – 2004 — Advisor of the Financial Institutions Policy Board of the Bank of Thailand

2000 – 2003 — Director, State Enterprises Capital Policy Committee

1998 – 2000 — Director of the Financial Reform Advisory Committee, Ministry of Finance

1998 – 2004 — Member, the Law Reform Commission of the Council of State

[supaprik]

haha, some thai guy will tell how a world economy will behave ... arrogant ?

arrogant? No, qualified I would suspect. Unlike you. Unless your white skin makes your more qualified.

Dr Prasarn Trairatvorakul - BoT governor

Date of Birth: August 20, 1952

Education:

1974 — Bachelor of Engineering, First-class Honours, Chulalongkorn University, Bangkok

1976 — Master of Engineering in Industrial Engineering and Management, Asian Institute of Technology, Bangkok

1978 — Master in Business Administration, Harvard University, Massachusetts, USA

1981 — Doctor of Business Administration, Harvard University, Massachusetts, USA

Current Position:

2004 – present — President , Kasikornbank Plc

Work Experiences:

2005 — Chairman, K-Factoring Company Limited

2005 — Chairman, K-Leasing Company Limited

1999 – 2003 — Secretary-General, Securities and Exchange Commission of Thailand

1992 – 1999 — Deputy Secretary-General, Securities and Exchange Commission of Thailand

1983 – 1992 — Bank of Thailand

- Economist, Department of Economic Research

- Section Chief, Department of Bank Supervision and Examination

- Deputy Director, Department of Financial Institutions Supervision and

Examination

1981 – 1983 Research Fellow, International Food Policy Research Institute, Washington DC, USA

Current Social Positions:

2004 – present — Executive Director, Thai Bankers’ Association

1998 – present — Director, Thai Red Cross Society

2001 – present — Chairman, Thai Red Cross Society’s Eye Bank

1999 – present — Member, Steering Committees on Graduate Programs in Finance,

Chulalongkorn and Thammasat Universities

Other Previous Positions:

2002 – 2003 — Member of Economic Policy Working Group, Ministry of Finance

2001 – 2004 — Trustee, Thailand Development Research Institute (TDRI)

2001 – 2003 — Director and Chairman of Audit Committee, Thailand Asset Management

Corporation

2001 – 2004 — Advisor of the Financial Institutions Policy Board of the Bank of Thailand

2000 – 2003 — Director, State Enterprises Capital Policy Committee

1998 – 2000 — Director of the Financial Reform Advisory Committee, Ministry of Finance

1998 – 2004 — Member, the Law Reform Commission of the Council of State

Fairly qualified to speak I would suggest...( thanks for this post Samran ) interesting reading

Edited February 29, 2012 by supaprik

[hyperdimension]

Fairly qualified to speak

... and he'd obviously be more qualified to lead Thailand than the current bimbo fraud we have as Prime Minister.

[thenervoussurgeon]

Fairly qualified to speak

... and he'd obviously be more qualified to lead Thailand than the current bimbo fraud we have as Prime Minister.

Are you calling Shinawat Thaksin a bimbo fraud?