“… if the time bought is used to re-capitalise banks”

With what?

yes, tricky to ask people to invest money in bank equity, only to have it wiped out when assets are written off. Am I right in thinking the only way to do it is have the banks go bust first (so existing equity gets wiped out) and then recapitalize (so that’s what all those corporations can do with their swollen cash holdings).

Or is there some way for banks who would be bankrupted by bond defaults/haircuts to raise money in anticipation of that?

1 + 2,

A fair question – private sector seems unlikely – French/German/other European govts, SWFs, a new European body, even IMF/ECB. Someone!

“Or is there some way for banks who would be bankrupted by bond defaults/haircuts to raise money in anticipation of that?”

Sure, easy peasy.

Cut interest rates so that the banks can borrow cheaply while allowing them to push to the price at which they lend. This fattens profit margins and allows them to build up reserves of capital against the future losses.

If only someone had done this….oh, wait….

Hardly premature Duncan when most people were saying even before the stress tests were conducted that they were not rigorous enough. The market is pricing in 50% haircuts on Greek bonds and the stress test had 15%. FFS more banks passed this one than the last one which was a joke and had all the Irish banks passing. It has gone beyond wondering what they are up to and what is the endgame. The blatantly obvious conclusion is they are just incompetent.

The stress tests were defined some time ago, complaining after the fact is just silly.
There’s been panic over panic loaded on by people who should have known better, and they have a not-inconsiderable amount of the blame for where we are.

If the Euro collapses, it WILL take the free trade zone with it, you realise? This always seems to be missed amid the gloating of the EU-haters, who want “only a free trade zone”

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@ Leon,

No I didn’t realise that a Euro collapse would mean the end of the EU or the end of a free trade zone. Do you have an argument to support this theory?

If the Euro collapses, it WILL take the free trade zone with it, you realise?

There’s no particular reason why it should. It’s certainly not an automatic result.