Heta's 7.6BN Euro Black Hole

Austria's Financial Market Authority stepped in on Sunday to wind down "bad bank" Heta Asset Resolution (set up from Hypo Alpe Adria).

Reuters reports that an audit of Heta exposed a black hole of up to 7.6 billion euros which the government won't fill.

The finance ministry noted that creditors can be forced to contribute to the costs of winding down Heta - or "bailed in" - under new European legislation that Austria adopted this year so that taxpayers do not have to shoulder the entire burden.

The £259BN EU Black Hole

The European Court of Auditors has identified a £259BN black hole in the EU budget that will cost Britain £34BN over the next six years to fund.

Is there another way that this hole can be filled?

Yes, governments can decommit from spending programmes that they have already committed to.

However, in the Lah Lah Land of the EU that will never happen.

Like it or not we are screwed by our membership of the EU, and most likely screwed if we leave it.

The £60BN Banking Black Hole

The shareholder group PIRC has done a calculation that warns of a potential black hole in the accounts of British banks, relating to bad debts the banks may have to write off in coming years but have yet to subtract from profits, together with other items such as deferred bonuses not booked.

Amongst those with potential black holes are HSBC with £10.4BN of hidden losses, the Royal Bank of Scotland with £9.4BN and Barclays with £7.3BN.

PIRC applied old-style UK GAAP accounting rules, which applied for 100 years until 2005, to the figures released in the 2012 banks’ accounts.

Basel rules require banks to declare half the expected losses over a year. However, bad loans and expected losses do not appear in the banks’ accounts under International Financial Reporting Standards (IFRS).

The Telegraph reports that the Bank of England has suggested the total could amount to £60BN.

This needless to say means that those politicians who hope that banks will increase lending are pissing in the wind, as banks are scrambling to build up their balance sheets in preparation for the next self inflicted financial disaster (such as PPI mis-selling).

Greece's Euro30BN Blackhole

In February I noted that the Troika had have discovered that Greece needed an extra Euro15BN on top of the Euro130BN second bailout that it had yet to receive. In August I noted that the Troika's assessment was that there is a Euro14BN hole in Greece's finances for 2013/14.

A grand total of around Euro29BN in blackholes!

Now Süddeutsche reports that according to senior EU officials, Greece will require an additional two years and additional funding of Euro30BN in order to meet the conditions of its second bailout package. It is not clear as to whether this blackhole is the combination of the two blackholes I wrote about in February and August, or a new blackhole over and above those already highlighted.

Either way it is now unclear if/when Greece will receive its next tranche from the package. Seemingly any decision is being delayed until after the results of the US Presidential election, lest a financially destabilising event propels Romney into office.

The Pension Blackhole

At the start of Labour's term in office in 1997, Gordon Brown made a tax raid on pensions to the tune of around £5BN. He was warned at the time that the raid would precipitate problems within the pensions industry.

Brown is not a man to listen to the opinions of others, when they contradict his; as such he duly ignored the warning.

The country is now reaping the whirlwind of his folly as, coupled with the economic downturn and out of date actuarial tables, the pensions industry faces a crises of underfunding.

Research from PriceWaterhouseCoopers shows that 96% of all employers now think that defined benefit schemes are unsustainable, and 74% are considering halting all accruals for existing members.

This means that even those of us in the private sector who are already members of a defined pension scheme will find that "certainty" taken away from us.

The public sector (our beloved MPs included) still pampers itself in the delusion of fully funded defined benefit schemes, the funding of course made up by an ever increasing burden on the hapless taxpayer.

Brown made half hearted U turn yesterday by putting the brakes on plans for a 7% rise in taxpayer contributions to MPs' pensions, after pressure from the Conservatives and Liberal Democrats.

However, the reality is that the public sector schemes are not sustainable.

Those who delude themselves that they can continue to demand ever larger contributions from the taxpayer, to fund these schemes, will find that the taxpayers will not tolerate being milked in this manner any more.

Failure to address the gross disparity between private and public sector pensions will cause a state of semi "civil war" between the private and public sector, as taxpayer resentment of the public sector reaches boiling point and the public sector fights to protect what it sees as its rights.

Brown is most assuredly not the man to address this issue.