Spitfire List Web site and blog of anti-fascist researcher and radio personality Dave Emory.

News & Supplemental  

German Banks and the Eurozone Crisis

COMMENT: The Ger­man word for pow­er is “macht”–derived from “Machi­avel­lian.” One of the rel­a­tive­ly few Inter­net enti­ties cov­er­ing the behav­ior of the sup­pos­ed­ly “new” Ger­many is the Ger­many­Watch blogspot.

They fea­ture a post high­light­ing the aggres­sive, skill­ful­ly cyn­i­cal maneu­ver­ing of Ger­man finan­cial insti­tu­tions with regard to the Euro­zone cri­sis. Far from being the ide­al role mod­el for the rest of the con­ti­nen­t’s finan­cial enti­ties, Ger­man banks in fact pumped cap­i­tal into the bub­ble economies of the periph­er­al coun­tries, thus set­ting those coun­tries up for the col­lapse that threat­ens the glob­al econ­o­my.

(In that con­text, one should not lose sight of the fact that the major Ger­man banks oper­ate under the stew­ard­ship of the Bor­mann cap­i­tal net­work, as dis­cussed in FTR #232.)

Not only did they “do every­thing right” while every­one else “did every­thing wrong,” but Ger­man banks had enor­mous expo­sure to the burst­ing bub­ble of the periph­er­al Euro­pean economies.

Cit­ing an arti­cle from The Inde­pen­dent, this post takes stock of that fact.

With Ger­many push­ing for the afflict­ed nations to sur­ren­der polit­i­cal sov­er­eign­ty as a con­di­tion for Ger­man finan­cial assis­tance (ful­fill­ing the goal enun­ci­at­ed by Friedrich List in the 19th cen­tu­ry and put into action by the Third Reich in its above-ground phase), we see that Ger­man banks have been acces­sories or enablers for the loom­ing dis­as­ter.

A 2012 arti­cle by Mr. Chu in The Inde­pen­dent details how the Ger­man bailouts have actu­al­ly helped to assist Ger­man banks, illus­trat­ing “macht” or “Machi­avel­lian­ism” in action.

In this con­text, we should not lose sight of two con­sid­er­a­tions we’ve dis­cussed in the past.

One is the role of the mys­te­ri­ous Roland Arnall (“the John­ny Apple­seed of sub­prime”) in help­ing to pre­cip­i­tate the glob­al finan­cial col­lapse that burst the Euro­pean bub­bles, set­ting the stage for the cur­rent Ger­man pow­er play.

A refugee from Nazi occu­pied Europe, Arnall was alto­geth­er mys­te­ri­ous, mask­ing every­thing but his avowed Jew­ish­ness and sup­port for the Simon Weisen­thal Cen­ter. When ana­lyz­ing an indi­vid­ual who goes to great lengths to hide infor­ma­tion about him­self, those details he goes to great lengths to empha­size are significant–not for what they tell us about what he is, but for what they tell us about what he isn’t.

In FTR #690, we exam­ined the very real pos­si­bil­i­ty that Arnall was a “Bor­mann Jew.” What bet­ter cov­er for a Nazi finan­cial gam­bit than to have a Jew fronting for the oper­a­tion?

We should also remem­ber that the Under­ground Reich and its SS foot sol­diers had designed to exe­cute con­spir­a­cies on behalf of Ger­man car­tels in for­eign coun­tries.

Are Arnall and the Ger­man banks that set up the Euro­zone cri­sis, thus jeo­pradiz­ing the glob­al econ­o­my rep­re­sen­ta­tive of those con­spir­a­cies?

(New­er lis­ten­ers should make a point of down­load­ing, print­ing and read­ing Mar­tin Bor­mann: Nazi in Exile. Increas­ing­ly, the pro­grams and posts will be incom­pre­hen­si­ble with­out doing so.

“Ger­man Bank­ing Supe­ri­or­i­ty Is a Lie”; Ger­many Watch; 9/2/2011.

EXCERPT: . . . . And of course, the very claims of eco­nom­ic supe­ri­or­i­ty are a com­plete fab­ri­ca­tion. Ger­man lead­ers defined the prob­lem as an Anglo-Sax­on one, and blamed Amer­i­ca and Britain (all they have done is drop the claim that Anglo-Amer­i­can Cap­i­tal­ism is run by Jews. They still want to bring down Anglo-Amer­i­can cap­i­tal­ism).

As we have men­tioned before, accord­ing to the Bank for Inter­na­tion­al Set­tle­ments, Ger­many lent almost $1.5 tril­lion to Greece, Spain, Por­tu­gal, Ire­land, and Italy. Add to that heavy Ger­man involve­ment in the cred­it binge in Amer­i­can real estate, and it is clear that wher­ev­er par­ties were tak­ing place, Ger­man banks were sup­ply­ing the drinks.

Ger­man banks are two and a half times more lever­aged than their US bank­ing peers, accord­ing to the Inter­na­tion­al Mon­e­tary Fund.

Some of them have pulled out of the bank­ing stress-tests that the rest of Europe has had to under­take, because they did not want the results to go pub­lic.

The arti­cle [by Ben Chu of the Lon­don Inde­pen­dent] also says; “A poll of Ger­mans last month indi­cat­ed that 71 per cent of the pop­u­la­tion are either par­tial­ly or com­plete­ly in the dark about the tech­ni­cal rea­sons behind the sin­gle cur­ren­cy cri­sis.” . . . .

“Ben Chu: Ger­many Is not Bail­ing out Europe, It Is Res­cu­ing Itself” by Ben Chu; The Lon­don Inde­pen­dent; 7/5/2012.

EXCERPT: Poor Ger­many, forced to pro­vide mas­sive guar­an­tees for its prof­li­gate Euro­pean neigh­bours.

The Fed­er­al Repub­lic did every­thing right – push­ing its domes­tic labour costs down, keep­ing pub­lic bor­row­ing low. And its neigh­bours did every­thing wrong – let­ting wages spi­ral and run­ning up big pub­lic debt piles. But now pru­dent Ger­many is being forced to foot the entire bill.

And even with­out the addi­tion­al costs of bail­ing out Greece, Ire­land, Por­tu­gal, Spain and Cyprus, Berlin is fac­ing a cat­a­stroph­ic bill thanks to the Euro­pean Cen­tral Bank’s (ECB) pro­vi­sion of liq­uid­i­ty life sup­port for the euro­zone’s bank­ing sys­tem. The Bun­des­bank has racked up vast claims against oth­er cen­tral banks through the mon­e­tary clear­ing sys­tem known as “Tar­get 2”.

That’s the stan­dard nar­ra­tive from Ger­many. And it’s large­ly false. The guar­an­tees that Ger­many has extend­ed – and the huge liq­uid­i­ty oper­a­tions of the ECB – have indeed been used to assist the strug­gling nations of the euro­zone periph­ery. But they have also, as new research from Gold­man Sachs show, been used to bail out Ger­man banks. . . .

. . . .  Ger­man banks have been steadi­ly extri­cat­ing them­selves from their expo­sure to south­ern Europe since 2007, as Chart 3 shows. Ger­man banks’ gross cred­it claims against the nations of the euro­zone periph­ery have fall­en by 50 per cent, down to €300bn. They have been busi­ly off-load­ing euro­zone assets to reduce the risks to their bal­ance sheets.

And that has been tak­ing place as the ECB has been extend­ing its own bal­ance sheet by pro­vid­ing cheap lend­ing for banks across the con­ti­nent to pre­vent them from run­ning out of mon­ey. Here’s how that works:German banks have stopped lend­ing to euro­zone periph­ery banks. And those banks have been forced to fund them­selves, instead, by tap­ping the ECB for cash.

But the risks return. Euro­zone periph­ery nations are still run­ning trade deficits with Ger­many. Those deficits that were pre­vi­ous­ly financed by pri­vate Ger­man banks are now financed by the ECB. And thanks to the mechan­ics of the Euro­pean mon­e­tary sys­tem that has result­ed in the bal­loon­ing of the Bun­des­bank’s claims against oth­er euro­zone cen­tral banks.

“It is no coin­ci­dence that the increase in net for­eign assets on the Bun­des­bank’s bal­ance sheet rough­ly match­es the decline seen on banks’ bal­ance sheets,” said Dirk Schu­mach­er of Gold­man. “The Tar­get 2 imbal­ances … have main­ly replaced finan­cial risk that was pre­vi­ous­ly sit­ting on pri­vate-sec­tor bal­ance sheets.”

What this means is that the ECB and euro­zone gov­ern­ments, as well as bail­ing out oth­er mem­bers states, have qui­et­ly been res­cu­ing Ger­man banks and, by exten­sion, Ger­man savers. With­out these emer­gency oper­a­tions, the euro­zone would have bro­ken up, Ger­man banks would have gone bust and the sav­ings of many ordi­nary Ger­mans might have been wiped out. More like­ly the Ger­man tax­pay­er would have had been forced to bail out those banks.

So, as the Ger­man peo­ple dis­trib­ute blame for the sit­u­a­tion in which they find them­selves, they should not ignore their own bankers. If those insti­tu­tions had not made these invest­ments and financed the cur­rent account deficits of Ger­many’s neigh­bours for so many years, their coun­try would not be on the hook for hun­dreds of bil­lions of euros of bad debts.

Yet this is some­thing Ger­man politi­cians refuse to acknowl­edge. . . .

Discussion

15 comments for “German Banks and the Eurozone Crisis”

  1. Thanks for the men­tion Dave.

    Some­thing we sug­gest all of your site vis­i­tors read, is Sara Moore’s new book.

    Com­bined with your work on the Bor­mann net­work, her expo­sure of his­tor­i­cal Ger­man eco­nom­ic move­ments ties every­thing togeth­er.
    Sara is an eco­nom­ic his­to­ri­an, and very nice per­son too.
    http://www.howhitlercametopower.com

    We believe our only chance of solv­ing the Ger­man dom­i­na­tion issue before they wreak more war hav­oc on the world, is con­cen­trat­ing on their main pow­er. BERTELSMANN.

    We have a big post com­ing soon on Ber­tels­mann, and its pret­ty shock­ing.

    Ber­tels­mann is the number1 dri­ver of Ger­man impe­r­i­al for­eign pol­i­cy.
    Their con­trol and influ­ence of pub­lish­ing and media is pre­vent­ing demo­c­ra­t­ic nations from learn­ing the truth of the last cen­tu­ry. By pre­vent­ing large scale pub­lish­ing of books like Sara Moore’s, they are pulling the blind­fold over entire nations.

    One thing we will be talk­ing about is the Lis­bon Constitution/Treaty.
    When the Lis­bon Con­sti­tu­tion failed to gain YES votes around Europe, it was the BERTELSMANN FOUNDATION which re-wrote and sug­gest­ed the lie of the Lis­bon Treaty. Ber­tels­mann has a HUGE influ­ence in the pol­i­tics of the EU. In fact they even have their own MEP, Elmar Brok. He is an employ­ee of Ber­tels­mann, and is Chair­man of the Euro­pean Par­lia­ment Com­mit­tee on For­eign Affairs!!

    Ber­tels­mann, by hav­ing built a large print­er in Liv­er­pool, have under­cut oth­er print­ers in the UK. By doing this, they have picked up 10 year print­ing con­tracts for major British news­pa­pers and mag­a­zines, inc The Times and the FT! You can be pret­ty sure noth­ing will be print­ed in Brit media against Ber­tels­mann.

    Their huge influ­ence over Euro­pean media allows their pro­pa­gan­da press releas­es to be print­ed unchal­lenged — even by the BBC. Back­ward report­ing over islamists empow­ered by the ‘spring’? Ber­tels­mann.

    Pro­pa­gan­da about Ger­man fis­cal supe­ri­or­i­ty and the need for Ger­man lead­er­ship in Europe? Ber­tels­mann.

    Rewrit­ing of his­to­ry in Pol­ish school books? Ber­tels­mann.

    EU/German pro­pa­gan­da in major Euro­pean TV shows? Ber­tels­mann.

    Anti-Amer­i­can sen­ti­ment in EUro­pean media, inc the spread­ing of pro­pa­gan­da about lack of WMD in the Gulf? Ber­tels­mann.

    Run­ning of 5 British CITY/DISTRICT COUNCILS, WITH RESPONSIBILITY TO ENFORCE LAWS, AND THE RIGHT UNDER THE R.I.P.A ACT TO SPY ON AND INVESTIGATE BRITISH CITIZENS, USING BRITISH CRIMINAL RECORDS, CCTV, BRITISH COURTS, etc? BERTELSMANN!

    If we don’t expose that Octo­pus, it will be impos­si­ble to pre­vent Ger­many from hav­ing com­plete admin­is­tra­tive con­trol over Britain.

    Get Ber­tels­mann out of the way, and then remove Siemens’ influ­ence, and we might stand a chance.

    Posted by GW | August 2, 2012, 5:51 am
  2. @GW–Do a search for Ber­tels­mann on this site. I did a mas­sive series on Ger­man cor­po­rate con­trol over Amer­i­can media in the late ’90’s and ear­ly part of the new cen­tu­ry.

    The pub­lish­er for the SS dur­ing the war, Ber­tels­mann is real­iz­ing the goal of the Under­ground Reich as set forth in “Ser­pen­t’s Walk.”

    It is indeed impor­tant.

    Thanks for your work.

    Dave Emory

    Posted by Dave Emory | August 2, 2012, 6:54 pm
  3. What a sur­prise: In response to the grow­ing con­sen­sus with­in the euro­zone that the ECB needs to engage in emer­gency bond buy­ing, Berlin politi­cians are call­ing for an over­haul of the ECB’s gov­ern­ing board the shrinks to board from 23 to 9 mem­bers and gives the largest coun­tries per­ma­nent sta­tus on the 9‑person coun­cil. The rest of the rab­ble get to share the remain­ing non-per­ma­nent seats. Vas­sal state tech­noc­ra­cy here we come!

    WSJ
    August 5, 2012, 11:40 a.m. ET
    Write to Christo­pher Law­ton at christopher.lawton@dowjones.com

    Ger­man Offi­cials Push For More ECB Con­trol

    Ger­man politi­cians and for­mer Euro­pean Cen­tral Bank offi­cials sharply crit­i­cized the ECB over the week­end and pushed for Ger­many, as the largest con­trib­u­tor to the euro zone res­cue effort, to have more con­trol in the cen­tral bank’s mat­ters, after Pres­i­dent Mario Draghi sig­naled that the cen­tral bank could soon start pur­chas­ing gov­ern­ment bonds.

    “The new sit­u­a­tion that Ger­many pro­vides a grow­ing share of the euro res­cue, but has only one vote just like any oth­er coun­try no longer fits,” Her­bert Reul, a Ger­man politi­cian and chair­man of the Chris­t­ian Demo­c­ra­t­ic Union and Chris­t­ian Social Union group with­in the Euro­pean Par­lia­ment, told Ger­man mag­a­zine Focus on Sun­day.

    On Thurs­day, Mr. Draghi indi­cat­ed that the Euro­pean Cen­tral Bank may soon step in to buy gov­ern­ment bonds on the open mar­ket and con­sid­er oth­er uncon­ven­tion­al mea­sures to low­er the high bor­row­ing costs of finan­cial­ly stressed euro-zone economies.

    The Deutsche Bun­des­bank, Ger­many’s cen­tral bank, has adamant­ly opposed the ECB’s gov­ern­ment bond pur­chas­es for more than two years, argu­ing they dis­cour­age gov­ern­ments from imple­ment­ing much-need­ed reforms.

    ...

    While Ger­many holds 27.1% of the cap­i­tal of the cen­tral bank, Exec­u­tive Board Mem­ber Joerg Asmussen is the only oth­er Ger­man on the 23-mem­ber gov­ern­ing coun­cil after Mr. Wei­d­mann, who has just one vote.

    In an inter­view with Focus mag­a­zine, For­eign Min­is­ter Gui­do West­er­welle said the prob­lem is that “the eco­nom­ic and demo­graph­ic weight in some com­mit­tees and sit­u­a­tions is not rep­re­sent­ed accord­ing­ly.”

    To strength­en the weight of the Bun­des­bank, Mr. Stark sug­gest­ed to Focus mag­a­zine that the ECB remake its board, which today includes 23 mem­bers, to a nine-mem­ber board set up, where big mem­ber states such as Ger­many would receive a per­ma­nent seat and the oth­er states would share the remain­ing seats.

    That would require changes to both the Maas­tricht Treaty and the ECB’s statutes, he not­ed.

    Posted by Pterrafractyl | August 5, 2012, 4:34 pm
  4. Proverbs 22:7
    “The rich ruleth over the poor; And the bor­row­er is slave to the lender.”

    Posted by GK | August 13, 2012, 12:23 am
  5. True to form, Rajoy gives the Span­ish pub­lic anoth­er kick in the gut:

    Bloomberg
    Spain Deficit Pain Bites Con­sumers as Rajoy Steps Up Cuts
    By Ange­line Benoit — Aug 27, 2012 10:26 AM CT

    Span­ish Prime Min­is­ter Mar­i­ano Rajoy’s aus­ter­i­ty dri­ve will inten­si­fy this week as a sales-tax increas tight­ens the squeeze on con­sumers whose spend­ing is already plum­met­ing.

    The move to raise the val­ue-added tax on Sept. 1 will fol­low a flur­ry of data show­ing pres­sure build­ing on house­hold finances in the euro area’s fourth-biggest econ­o­my, home to a third of its unem­ployed. A report today showed mort­gages fell 25.2 per­cent from a year ago in June after a 30.5 per­cent drop in May. Mean­while, the Health Min­istry today said spend­ing on pre­scrip­tion drugs fell 23.9 per­cent from a year ago in July, the steep­est drop since the series start­ed in 1999, after the gov­ern­ment last month increased the share patients pay for phar­ma­ceu­ti­cals.

    A break­down of sec­ond-quar­ter gross domes­tic prod­uct is due tomor­row and infla­tion on Aug. 30. Retail and cur­rent-account data are due Aug. 31 as well as pub­lic finance fig­ures.

    The data will illus­trate the extent of Rajoy’s chal­lenge as he tries to curb the euro region’s third-largest bud­get deficit and con­sid­ers whether to seek fur­ther inter­na­tion­al aid. Con­sumers have already endured a reces­sion last­ing three quar­ters as a pre­lude to his tax increase due this week and an annu­al cut in pub­lic wages for the month of Decem­ber.
    ‘Dra­mat­ic’ Weak­en­ing

    “I expect a fair­ly dra­mat­ic weak­en­ing of GDP in the third and fourth quar­ters and fur­ther ahead as all com­po­nents of domes­tic demand fall,” Ebrahim Rah­bari, a Lon­don-based Cit­i­group Inc. econ­o­mist, said by tele­phone. “Fis­cal tight­en­ing will hurt sub­stan­tial­ly in Spain, and most of its effects are still to come.”

    Rajoy last month aban­doned his fore­cast for a return to growth in 2013 as he unveiled spend­ing cuts and tax increas­es through 2014 that will triple his planned aus­ter­i­ty effort to a total of 15 per­cent of annu­al gross domes­tic prod­uct. New mea­sures start­ing in Sep­tem­ber will add 102 bil­lion euros to the 48 bil­lion-euro adjust­ment ini­tial­ly planned for this year, which began tak­ing effect in the sec­ond quar­ter.

    ...

    “The Greek exam­ple shows there is a risk of a down­ward spi­ral that can leave the econ­o­my stuck in a depres­sion,” said Chris­t­ian Schulz, an econ­o­mist at Beren­berg Bank in Lon­don.

    GDP data tomor­row may show how con­sumer spend­ing already suf­fered dur­ing the sec­ond quar­ter. The report from the nation­al sta­tis­tics insti­tute, INE, fol­lows a July 30 esti­mate show­ing Spain’s reces­sion wors­ened with a 0.4 per­cent con­trac­tion. The gov­ern­ment fore­casts domes­tic demand will fall 4 per­cent this year, more than twice last year’s drop. July retail sta­tis­tics is expect­ed to sig­nal the weak­ness in house­hold finances on Aug. 31, after a 5.2 per­cent annu­al decline in June.

    Tax Increase

    Adding to pres­sure on con­sumers is the VAT increase, the sec­ond since 2010, which will raise the levy to 21 per­cent from 18 per­cent. It’s the first item to take effect as part of Rajoy’s fourth bud­get-tight­en­ing exer­cise in eight months. Along with a one-month wage cut for civ­il ser­vants and a reduc­tion in job­less pay, it will account for most of the extra mea­sures he has sought to curb the deficit this year.

    High­er sales tax risks “exac­er­bat­ing” the slump in domes­tic con­sump­tion and spark­ing a spi­ral in which prices feed wages, said Lon­don-based econ­o­mist Andrew Ben­i­to at Gold­man Sachs Group Inc., a for­mer Bank of Eng­land spe­cial­ist on con­sumer spend­ing.

    Con­sumer-price gains are already accel­er­at­ing. The infla­tion rate rose to 2.2 per­cent in July because of high­er costs of drugs and increas­es in local tax­es, and prob­a­bly reached an eight-month high of 2.3 per­cent this month, accord­ing to the medi­an fore­cast of 10 econ­o­mists in a Bloomberg News sur­vey.

    ...

    Great, on top of it all, there’s also infla­tion pick­ing up, due, in part, to high­er drug costs even though spend­ing on pre­scrip­tion drugs fell 23% annu­al­ly. I guess that means the Bun­des­bank gets to lec­ture Spain about the risk of debt addic­tion:

    UPDATE 2‑Bundesbank chief says ECB bond buy­ing “like a drug”

    Sun Aug 26, 2012 8:21am EDT

    * Ger­man cen­tral bank con­cerned at ECB’s chang­ing role

    * Says bond pro­pos­al looks like print­ing cash to fund govts

    * Inter­view pub­lished ahead of Sept. 6 ECB meet­ing

    By Paul Car­rel

    FRANKFURT, Aug 26 (Reuters) — The head of Ger­many’s Bun­des­bank stepped up his oppo­si­tion to the Euro­pean Cen­tral Bank’s lat­est moves to bat­tle the euro zone’s debt cri­sis on Sun­day, say­ing that plans to buy bonds risked becom­ing a drug on which gov­ern­ments would get hooked.

    In the lat­est sign of a deep­en­ing rift with­in the ECB that has wor­ried finan­cial mar­kets, Jens Wei­d­mann warned in an inter­view in week­ly Der Spiegel that the buy­ing pro­gramme verged on the taboo for the bank of out­right financ­ing of gov­ern­ments.

    He also hint­ed he was not alone at the ECB in his con­cern over the pro­gramme — in con­trast to indi­ca­tions by the bank’s Pres­i­dent Mario Draghi that Wei­d­mann had been iso­lat­ed in express­ing reser­va­tions.

    The ECB is being forced to take a greater role in fight­ing the cri­sis while gov­ern­ments nego­ti­ate legal and polit­i­cal hur­dles to coor­di­nat­ing a longer-term response, but the Bun­des­bank wants to lim­it the scope of cen­tral bank action.

    Draghi is expect­ed to detail the bond-buy­ing plan after a Sept. 6 meet­ing of the bank’s 23-mem­ber Gov­ern­ing Coun­cil.

    “Such a pol­i­cy is for me close to state financ­ing via the print­ing press,” Wei­d­mann told the week­ly mag­a­zine. “In democ­ra­cies, it is par­lia­ments and not cen­tral banks that should decide on such a com­pre­hen­sive pool­ing of risks.”

    Financ­ing gov­ern­ments has long been a line in the sand for the ECB. Wei­d­man­n’s pre­de­ces­sor as Bun­des­bank chief, Axel Weber, quit last year in protest at the ECB’s exist­ing, but now dor­mant, bond-buy­ing scheme — the Secu­ri­ties Mar­kets Pro­gramme (SMP).

    “We should not under­es­ti­mate the risk that cen­tral bank financ­ing can become addic­tive like a drug,” Wei­d­mann said.

    The Bun­des­bank retains sub­stan­tial influ­ence with­in Ger­many and on finan­cial mar­kets due to its infla­tion-fight­ing cre­den­tials but, as just one of 17 con­stituents at the ECB, it is unlike­ly it could scup­per Draghi’s plan.

    Pol­i­cy­mak­ers are pos­tur­ing over the pro­gramme ahead of their Sept. 6 meet­ing, at which mar­kets will be look­ing for the cen­tral bank to spell out more details of the plan.

    Cen­tral bank sources told Reuters on Fri­day that the ECB is con­sid­er­ing set­ting yield band tar­gets under the new bond-buy­ing pro­gramme to allow it to keep its strat­e­gy shield­ed and avoid spec­u­la­tors try­ing to cash in.

    Wei­d­mann said set­ting such yield band tar­gets was a “sen­si­tive notion” but reject­ed sug­ges­tions that he was iso­lat­ed on the ECB Gov­ern­ing Coun­cil in hav­ing such reser­va­tions.

    “I hard­ly believe that I am the only one to get stom­ach ache over this,” he said.

    ECB DISPUTE

    Der Spiegel also report­ed that there was a dis­pute with­in the ECB over the form of the pro­gramme, with offi­cials from coun­tries like Spain and Italy push­ing for unlim­it­ed ECB inter­ven­tion in sec­ondary bond mar­kets.

    ECB offi­cials from north­ern euro zone coun­tries only want the cen­tral bank to inter­vene in a “short, but ener­getic” way when bond yields “explode” upwards, the mag­a­zine said.

    ...

    You have to love the method of cen­tral bank­ing on dis­play: we promise to do noth­ing to pre­vent a cri­sis in the bond sec­tor unless bond yields “explode”, at which point we will do “some­thing”, but only for a short peri­od of time: The “just in time, just bare­ly enough” method of cen­tral bank­ing psy­cho­log­i­cal war­fare. I can’t say that’s it’s been an effec­tive pol­i­cy thus far but it’s cer­tain­ly inter­est­ing to watch.

    Posted by Pterrafractyl | August 27, 2012, 12:36 pm
  6. Hi, long time lis­ten­er.
    this is my first time post­ing a com­ment here.

    I fig­ured you all might be inter­est­ed in this blog post. It essen­tial­ly sum­ma­rizes the gen­er­al ill will between the Ger­man gov. and the Greek peo­ple. I took notice because it clear­ly is in line w/ Mr. Emory’s research. Excuse the imper­fec­tions. Eng­lish is not the writer’s 1st lan­guage. I hope this is help­ful:

    http://farosradio.gr/el/faros-news/item/2320-germany-against-russia-in-greek-battlespace.html

    Posted by diogenes | September 19, 2012, 12:16 am
  7. In case we need­ed a time­ly reminder of the fact that Spain’s hous­ing bub­ble bank­ing cri­sis was facil­i­tat­ed with the full aware­ness of big Ger­man lenders, here we go:

    Updat­ed Sep­tem­ber 24, 2012, 8:15 p.m. ET
    WSJ
    State of Europe’s Banks: Safe and Stressed
    Ger­many’s Lenders Find For­tunes Tied To Span­ish Peers

    FRANKFURT—As Europe races to restore con­fi­dence in Spain’s finances and the euro, Ger­many has anoth­er rea­son for urgency in resolv­ing the cri­sis: the health of its own banks.

    Ger­man lenders have the high­est expo­sure in Europe to Spain, at $139.9 bil­lion, of which $45.9 bil­lion alone is expo­sure to banks, accord­ing to the Bank for Inter­na­tion­al Set­tle­ments.

    Euro­pean coun­tries agreed to extend to Spain a €100 bil­lion ($130 bil­lion) aid pack­age for its ail­ing banks this sum­mer, but con­cern is grow­ing that Spain might need a more com­pre­hen­sive res­cue pack­age to shore up its pub­lic finances. A key test of Madrid’s finan­cial sys­tem will come on Fri­day, when the coun­try unveils results of the lat­est “stress tests” of its banks, a process that will deter­mine how much new cap­i­tal they need.

    Ger­man banks have large­ly hedged or dis­posed of their hold­ings of Span­ish gov­ern­ment debt, but they remain heav­i­ly invest­ed in Span­ish finan­cial insti­tu­tions, com­mer­cial real estate and in oth­er busi­ness­es hit by the cri­sis.

    Con­cerns that Span­ish assets would be severe­ly impaired if the coun­try’s cri­sis wors­ens con­tributed to Moody’s Investors Ser­vice’s recent deci­sion to change its out­look on Ger­many to “neg­a­tive” from “sta­ble.” Moody’s, in its analy­sis, high­light­ed the vul­ner­a­bil­i­ty of Ger­many’s bank­ing sec­tor to a wors­en­ing euro cri­sis and warned that those risks could cost the coun­try its prized triple‑A cred­it rat­ing.

    “The Ger­man banks’ siz­able expo­sures to the most stressed euro-area coun­tries, par­tic­u­lar­ly to Italy and Spain, togeth­er with their lim­it­ed loss-absorp­tion capac­i­ty and struc­tural­ly weak earn­ings, make them vul­ner­a­ble to a fur­ther deep­en­ing of the cri­sis,” Moody’s wrote.

    One of the biggest expo­sures Ger­man banks have to Spain is through cov­ered bonds, long a favorite fundrais­ing tool of Span­ish banks. Such bonds are backed by col­lat­er­al, usu­al­ly res­i­den­tial mort­gages, and are gen­er­al­ly con­sid­ered low risk because if a bank defaults on the loan, the cred­i­tor receives the col­lat­er­al. In Spain’s case, how­ev­er, the steep decline in the real-estate mar­ket means that the col­lat­er­al would be worth less, like­ly leav­ing the lender with a loss.

    Ger­many’s trou­bled pub­lic-sec­tor lenders, known as Lan­des­banks, are par­tic­u­lar­ly exposed to Span­ish cov­ered bonds and senior bank notes, accord­ing to ana­lysts.

    Lan­des­bank Baden-Würt­tem­berg, known as LBBW, had a total expo­sure to Spain of €5.2 bil­lion in June, with near­ly a quar­ter of that in expo­sure to finan­cial insti­tu­tions. Bay­ernLB report­ed an expo­sure of €4.9 bil­lion at year-end, and NordLB had an expo­sure of €3.6 bil­lion.

    Bay­ernLB said it reduced its expo­sure to the Span­ish bank­ing sec­tor by near­ly €1 bil­lion in the first half to €1.7 bil­lion, in part through large repay­ments. A spokesman for NordLB said the bank is work­ing to decrease its expo­sure to Spain. Spokes­men from the banks declined to com­ment fur­ther.

    Lan­des­banks rushed in and invest­ed heav­i­ly in Euro­pean bonds issued by var­i­ous coun­tries and banks—along with mort­gage-backed secu­ri­ties and oth­er risky assets—in the ear­ly 2000s as their access to extreme­ly cheap fund­ing through state guar­an­tees was phased out by the Euro­pean Union.

    Dur­ing that same peri­od, the vol­ume of out­stand­ing jum­bo cov­ered bonds from Spain, known as cedu­las, increased dras­ti­cal­ly, more than dou­bling from €61 bil­lion in 2003 to €155 bil­lion in 2005, accord­ing to data from the Euro­pean Cov­ered Bond Coun­cil.

    ...

    Posted by Pterrafractyl | September 27, 2012, 8:08 am
  8. How inspi­ra­tional:

    Bloomberg
    Merkel Emu­lates Kohl Ger­man Uni­ty Turn­ing Euro Cri­sis Into Votes
    By Tony Czucz­ka and Leon Man­gasar­i­an — Oct 3, 2012 3:00 AM CT

    Three days before East and West Ger­many reunit­ed in 1990, Angela Merkel made an acquain­tance that was to put her on the path to pow­er.

    An East Ger­man sci­en­tist pro­pelled into pol­i­tics by the fall of the Berlin Wall and the com­mu­nist regime’s col­lapse, Merkel wan­gled an audi­ence with Hel­mut Kohl at a par­ty event in Ham­burg. With­in four months, Kohl had rid­den Ger­man reuni­fi­ca­tion to a land­slide third elec­tion vic­to­ry and Merkel secured a post in his Cab­i­net.

    Just as Kohl knew what Ger­mans on both sides of the bor­der want­ed when they unit­ed 22 years ago today, Merkel is tuned in to vot­ers who balk at pay­ing the price of the unit­ed Europe Kohl brought about. While her peers in France, Italy and Spain have been removed in the three years since the debt cri­sis emerged in Greece, Merkel’s abil­i­ty to chan­nel domes­tic pub­lic opin­ion paired with a still-expand­ing econ­o­my led polling com­pa­ny For­sa to con­clude that she looks unbeat­able before 2013 elec­tions.

    “The cri­sis makes peo­ple ral­ly behind Merkel,” Gerd Languth, a his­to­ri­an and pro­fes­sor of pol­i­tics at the Uni­ver­si­ty of Bonn whose 2005 biog­ra­phy of the chan­cel­lor doc­u­ments her meet­ing with Kohl, said by phone. “Peo­ple see her as being on top of the issues and the only one who can solve the prob­lems.”

    ...

    Steinbrueck’s Chal­lenge

    Merkel’s edge over three oppo­si­tion lead­ers is now so wide in a For­sa poll that she “appears unbeat­able” a year from the elec­tion, Stern mag­a­zine said Sept. 19. Peer Stein­brueck, Merkel’s first-term finance min­is­ter who was nom­i­nat­ed on Oct. 1 as her main chal­lenger, trails her approval rat­ing by 22 per­cent­age points. She is Germany’s most pop­u­lar politi­cian and her approval rat­ing is hov­er­ing near the high­est since Novem­ber 2009, a sep­a­rate FG Wahlen poll released Sept. 28 showed.

    The chan­cel­lor hasn’t offered her polit­i­cal foes much space to land blows as she preach­es bud­get cuts for the euro area, refus­es to under­write the region’s debt with Ger­man eco­nom­ic might and bare­ly acknowl­edges anti-aus­ter­i­ty protests from Greece to Spain. Instead she tells weak­er euro coun­tries there’s no pros­per­i­ty with­out pain.

    “We remain true to our phi­los­o­phy of no help with­out some­thing in return,” she said in Brus­sels in June. That fol­lowed an all-night Euro­pean Union sum­mit at which Merkel fend­ed off pres­sure from Italy and Spain for direct bank bailouts and gov­ern­ment-backed buy­ing of sov­er­eign bonds.

    ...

    These are real­ly just a minor quib­bles with Angela regard­ing her phi­los­o­phy of only offer­ing help in exchange for some­thing else: that might actu­al­ly be clos­er to ‘barter’ than ‘help’. Of course, the ‘thing’ the helper might be ask­ing for could sim­ply be that the indi­vid­ual help them­selves. But when this phi­los­o­phy’s pre­scribed form of self-improve­ment comes in the form of the recip­i­ent active­ly destroy­ing their future skills and eco­nom­ic capac­i­ty and there’s no seri­ous rea­son to believe this kind of ‘help’ will actu­al­ly be help­ful, it’s also kind of a shit­ty phi­los­o­phy.

    Posted by Pterrafractyl | October 3, 2012, 8:28 am
  9. In case you were ever curi­ous about what a bad actor try­ing to emote reverse Stock­holm Syn­drome might look like, Angela just gave us an idea.

    Posted by Pterrafractyl | October 9, 2012, 1:47 pm
  10. Moody’s just warned on the con­tin­ued weak­ness in the Ger­man bank­ing sec­tor. It turns out that all those real estate loans to Spain and Italy are still threat­en­ing to dec­i­mate the Ger­man bank­ing sec­tor should those banks incur any major “unfore­seen” loss­es. It’s not new news, but it’s still extreme­ly rel­e­vant:

    NY Times
    Moody’s Warns of Weak­ness in Ger­man Bank­ing Sec­tor
    By JACK EWING
    Pub­lished: Octo­ber 19, 2012

    FRANKFURT — The debt rat­ings agency Moody’s Investors Ser­vice pro­vid­ed a reminder Fri­day that the vaunt­ed Ger­man econ­o­my has a major weak­ness: its bank­ing sys­tem.

    In a report, Moody’s warned that Ger­man banks suf­fer from mea­ger prof­its, ris­ing risk and insuf­fi­cient reserves to absorb loss­es. The rat­ing agency reaf­firmed the neg­a­tive out­look it has assigned to Ger­man banks since 2008.

    The poor state of Ger­man banks seems sur­pris­ing con­sid­er­ing that the country’s econ­o­my has held up fair­ly well to the euro zone cri­sis. In addi­tion, Ger­man banks ben­e­fit from the country’s sta­tus as a haven from the tur­moil and are able to bor­row mon­ey at much low­er rates than coun­ter­parts in oth­er Euro­pean coun­tries. There is no real estate bub­ble and house­holds are not over-indebt­ed.

    Ger­man banks did, how­ev­er, invest heav­i­ly in coun­tries like Spain and Italy before the cri­sis, because they could earn more prof­its there than at home. Four years after the finan­cial cri­sis began, they remain exposed to prob­lems in those coun­tries, Moody’s said.

    In addi­tion, Moody’s said, Ger­many still has too many banks in rela­tion to the size of the coun­try. The over­sup­ply push­es down lend­ing rates and prof­its.

    “Intense com­pe­ti­tion and low inter­est rates are caus­ing mar­gin pres­sure that will like­ly fur­ther erode already-weak bank rev­enues and prof­its,” Moody’s said in a state­ment ear­ly Fri­day.

    The com­bi­na­tion of low prof­its and high lever­age “will make it dif­fi­cult for many Ger­man banks to cope with major (unfore­seen) loss­es,” Moody’s said.

    The report comes after Euro­pean lead­ers meet­ing in Brus­sels until ear­ly Fri­day agreed on leg­is­la­tion that will con­cen­trate bank­ing super­vi­sion at the Euro­pean Cen­tral Bank, a mea­sure aimed at pre­vent­ing nation­al reg­u­la­tors from favor­ing their own banks. Weak reg­u­la­tion is blamed on prob­lems in Span­ish banks. But the lead­ers were vague on when the new reg­u­la­to­ry regime will take shape, appar­ent­ly in def­er­ence to Ger­man polit­i­cal sen­si­tiv­i­ties.

    Ger­man lead­ers have resist­ed giv­ing up super­vi­so­ry con­trol of small­er and mid-sized banks, which are often owned by states or munic­i­pal­i­ties and are a for­mi­da­ble lob­by in Berlin.

    ...

    This report once again reminds us all that the euro­zone cri­sis was NOT at all due to a hous­ing bub­ble fueled by Ger­man banks that explod­ed in a high­ly fore­see­able man­ner that lenders should have been ful­ly aware of when mak­ing the loans. Instead, it was was pri­mar­i­ly due to over­ly pro­tec­tive labor laws. Yeah, that’s the tick­et.

    Posted by Pterrafractyl | October 19, 2012, 9:27 am
  11. The Bun­des­bank called, it wants its gold back:

    Jan. 15, 2013, 10:40 a.m. EST
    Ger­many wants its gold back; plat­inum pops
    Feb­ru­ary gold ris­es $11, helped in part by ris­ing Japan infla­tion out­look

    By Bar­bara Kollmey­er and Sarah Turn­er, Mar­ket­Watch

    MADRID (Mar­ket­Watch) — Good­bye, Big Apple. Adieu, Paris. It seems the Bun­des­bank could final­ly be ready to bow to some long­stand­ing pub­lic pres­sure and bring its for­eign gold reserves home.

    Germany’s Han­deslblatt news­pa­per claimed Mon­day night that the Bun­des­bank has devel­oped a new strat­e­gy that involves few­er gold bars flung afar. It seems the orig­i­nal rea­son for hold­ing its gold at the New York Fed­er­al Reserve and oth­er cen­tral banks — in places for decades as a mea­sure of secu­ri­ty — no longer holds up. The cen­tral bank’s press office said a news con­fer­ence is planned for Wednes­day morn­ing, and the top­ic will be gold reserves.

    The rela­tion­ship between a cen­tral bank and its gold are close­ly watched by gold investors, since cen­tral banks hold so much of the world’s gold. Feb­ru­ary gold GCG3 +0.90% rose $10.20, or 0.6%, to $1,680 an ounce on Tues­day, helped in part by stronger gold inter­est in Japan and expec­ta­tions of a ris­ing infla­tion out­look from the Bank of Japan. Gold has tra­di­tion­al­ly been used as a hedge against infla­tion, so signs of high­er infla­tion tend to work in the metal’s favor.

    ...

    Thorsten Polleit, Frank­furt-based chief econ­o­mist at Degus­sa, a pre­cious-met­als firm, said the pub­lic has been long demand­ing an audit of the Ger­man gold reserves and repa­tri­a­tion of those reserves. Some fuel was thrown on that fire in the last year by the finan­cial cri­sis.

    “Peo­ple have got­ten a sense of how bad things could become and gold is the ulti­mate means of pay­ment. The euro won’t last for­ev­er, [and] gold, for var­i­ous rea­sons, is the anchor,” said Polleit.

    Polleit said that the Bun­des­bank hasn’t had those world­wide reserves audit­ed down to the last bar for decades, maybe nev­er, much to the unhap­pi­ness of the gen­er­al pub­lic. So in a sense, it may be a bit of a mys­tery just what is in the vaults of the New York Fed­er­al Reserve, which holds a 45% chunk of Germany’s gold reserves. The Bank of Eng­land and the Bank of France hold 13% and 11% each. The Bun­des­bank itself holds 31% of those reserves.

    By coun­try, Ger­many has the largest gold hold­ings behind the U.S.

    “In recent years it’s been quite pop­u­lar to swap gold stocks for hold­ing gov­ern­ment bonds. ... There’s no exact data but some fear gold could have been lent out. It might still be there in phys­i­cal terms but its kind of hard to decide who is the actu­al own­er,” said Polleit. He said the Bun­des­bank has said some bars might have been checked, but not the total stock. Read what the Bun­des­bank had to say about audit­ing last Octo­ber

    He said the Bun­des­bank has always tried to play this whole gold reserves issue down, but now they may be either poised to move more reserves out of for­eign coun­tries, or come com­plete­ly clean about all of those reserves.

    Still, Polleit isn’t expect­ing some “aha” moment from the Bun­des­bank to have any effect on phys­i­cal prices. He expects gold will hit $2,070 an ounce this year on the view that gov­ern­ments are print­ing ever great amounts of mon­ey.

    Zero­Hedge finan­cial blog took a grim view of any move by the Bun­des­bank to take its gold out of New York. Such a deci­sion would be a sign that trust between cen­tral banks is now end­ing.

    While it’s “one thing for a ‘crazy, lunatic’ dic­ta­tor such as Hugo Chavez to pull his gold out of the Bank of Eng­land, it is some­thing entire­ly dif­fer­ent, and far less dis­mis­si­ble, when the bank with the sec­ond most offi­cial gold reserves in the world pro­ceeds to for­mal­ly pull some of its gold from the bank with the most,” said Zero­Hedge. Read arti­cle on Zero­Hedge

    ...

    Note that Pim­co’s Bill Gross is also push­ing the idea that the cen­tral banks are los­ing trust with each oth­er. And this does­n’t appear to be a poten­tial divi­sion between, say, the Bun­des­bank an the Fed­er­al Reserve or Bank of Japan...it includes the Bank of France, Ger­many’s long-stand­ing key part­ner in the euro­zone! This is cer­tain­ly a curi­ous move giv­en the recent PR push of the idea that the euro­zone cri­sis is over.

    Posted by Pterrafractyl | January 15, 2013, 10:09 am
  12. Here is the under­state­ment of the year:

    http://www.businessweek.com/news/2013–06-09/shady-bank-funded-nazis-pushed-euro-has-no-oversight-books

    Shady Bank Fund­ed Nazis, Pushed Euro, Has No Over­sight: Books
    By Daniel Akst

    If you think the Bank for Inter­na­tion­al Set­tle­ments is just a col­or­less inter­me­di­ary, Adam LeBor’s new book will dis­abuse you of that notion.

    “Tow­er of Basel: The Shad­owy His­to­ry of the Secret Bank That Runs the World” is a full-blown attack on the insti­tu­tion, which is based in Switzer­land but answers, in the author’s view, to prac­ti­cal­ly no one.

    LeBor details the appalling role of the BIS in fund­ing the pre­da­tions of Nazi Ger­many, a well-known blot on its record. Then he indicts the bank for its part in the rise of tech­no­crat­ic post­war Europe, in par­tic­u­lar as mid­wife to the dis­as­trous euro. LeBor wants the place shut down, or at least opened up.

    He makes a decent case, but only decent. Found­ed in 1930 by two leg­endary cen­tral bankers — Britain’s Mon­tagu Nor­man and Germany’s Hjal­mar Schacht — the BIS was sup­posed to admin­is­ter World War I repa­ra­tions from Ger­many. But as Keynes and oth­ers had argued, the impo­si­tion of such crush­ing repa­ra­tions was a ter­ri­ble idea, and not long after the bank was estab­lished Ger­many wrig­gled out of them.

    Yet the BIS lived on, sus­tained by a found­ing agree­ment that gives it an extra­or­di­nary degree of auton­o­my, a safe haven in Switzer­land and a rev­enue stream from trans­ac­tion fees. Besides, it was use­ful — as a facil­i­ta­tor of inter­na­tion­al trans­ac­tions and a locus of coop­er­a­tion among cen­tral bankers. It was espe­cial­ly use­ful to the Nazis.

    Nazi Gold
    Though head­ed by an Amer­i­can dur­ing World War II, the BIS adhered to a priest­ly neu­tral­i­ty, inter­pret­ing its man­date in the most tech­ni­cal pos­si­ble fash­ion in order to con­tin­ue deal­ing with all sides in the con­flict. Unfor­tu­nate­ly, this put the insti­tu­tion square­ly in the posi­tion of abet­ting Nazi ter­ror.

    The BIS accept­ed plun­dered gold and made it pos­si­ble for Ger­many to acquire des­per­ate­ly need­ed war materiel. It even per­mit­ted Ger­many, once it had invad­ed Czecho­slo­va­kia, to con­fis­cate that nation’s gold reserves.

    Tarred by its scan­dalous role in the war, the BIS was tar­get­ed after­ward for dis­so­lu­tion by ene­mies in Wash­ing­ton and else­where. But it man­aged to beat back these efforts and eke out a role for itself in the post­war world — first as the finan­cial mech­a­nism for Amer­i­can efforts to rebuild Europe, and then for the accel­er­at­ing project of Euro­pean uni­fi­ca­tion.

    Mod­ern Europe
    The lat­ter, cul­mi­nat­ing in the euro, is cause for fur­ther damna­tion by the author, for whom the trans-nation­al vision of a mod­ern Europe ruled by man­darins in Brus­sels and Basel isn’t so dif­fer­ent from the Nazi vision of a uni­fied con­ti­nent equal­ly unruf­fled by obstreper­ous vot­ers.

    Owned and oper­at­ed by the world’s cen­tral banks, the BIS today is both their banker and their refuge, a place where cen­tral bankers meet every oth­er month to dine real­ly well and schmooze in con­fi­dence that no one will learn what was said. The BIS also per­forms valu­able research on inter­na­tion­al finance.

    Is this real­ly so bad? LeBor thinks so, com­plain­ing that “BIS is an opaque, elit­ist and anti-demo­c­ra­t­ic insti­tu­tion, out of step with the 21st cen­tu­ry.”

    Maybe. But his case against the BIS, whose role is wild­ly exag­ger­at­ed in the book’s sub­ti­tle, would be a lot stronger if he spent any time at all explain­ing what it does. That would make it eas­i­er to judge whether these tasks are impor­tant, or could be tak­en on eas­i­ly by oth­ers.

    Unfor­tu­nate­ly LeBor describes the bank’s func­tions in only the most cur­so­ry terms. The BIS is secre­tive, no argu­ment there. But sure­ly the gen­er­al nature of its lend­ing can be described, as well as the source of its cap­i­tal and prof­its. The lat­ter amount­ed to more than $1 bil­lion tax-free in 2011-12 alone.

    Resis­tant to erad­i­ca­tion, the BIS can per­haps be reformed, and here the author has some sen­si­ble sug­ges­tions, includ­ing greater trans­paren­cy and direct­ing a sig­nif­i­cant chunk of prof­its toward phil­an­thropy. After all that’s come before, you’d think the occu­pants of the tow­er of Basel (the bank’s groovy round head­quar­ters) would be on their best behav­ior.

    “Tow­er of Basel” is pub­lished by Pub­li­cAf­fairs (336 pages, $28.99). To buy this book in North Amer­i­ca, click here.

    (Daniel Akst writes for Muse, the arts and leisure sec­tion of Bloomberg News. The opin­ions expressed are his own.)

    Muse high­lights include John Mar­i­ani on wine and Philip Boroff on the­ater.

    To con­tact the writer on the sto­ry: Daniel Akst in New York at danielakst@gmail.com.

    To con­tact the edi­tor respon­si­ble for this sto­ry: Manuela Hoel­ter­hoff in New York at mhoelterhoff@bloomberg.net.

    Posted by Swamp | June 10, 2013, 9:22 am
  13. http://www.presseurop.eu/en/content/news-brief/3953321-leading-exporter-running-out-steam

    Lead­ing exporter run­ning out of steam
    9 July 2013
    Presseu­rop
    Die Welt

    “Exports are col­laps­ing,” head­lines Ger­many dai­ly Die Welt com­ment­ing on the lat­est fig­ures released by the Fed­er­al Office of Sta­tis­tics show­ing that in May 2013 exports fell to their low­est lev­el in three-and-a-half years, post­ing a 2.4 per cent drop com­pared with April 2013, and shrink­ing 4.8 per cent com­pared with May 2012.

    This decline is explained by the “dis­ar­ray of glob­al mar­kets,” says Die Welt –

    [On the one hand,] the inter­nal Euro­pean mar­ket, the major out­let for Ger­man exports, remains weak and [on the oth­er hand] coun­tries such as Chi­na are not com­pen­sat­ing for this trend.

    Busi­ness with the Euro­zone, hard hit by the debt cri­sis, is par­tic­u­lar­ly bad. Exports to the Euro­zone plum­met­ed by 9.6 per cent between May 2012 and May 2013, the paper notes.

    Giv­en that leg­isla­tive elec­tions are sched­uled for Sep­tem­ber, Die Welt urges polit­i­cal par­ties to keep in mind that –

    For a long time, the Ger­man econ­o­my defied the shrink­ing inter­na­tion­al eco­nom­ic con­text. But now that the econ­o­my is reviv­ing else­where, the eco­nom­ic sit­u­a­tion is regress­ing in a wor­ri­some man­ner in our coun­try. [...] This does not mean that the Ger­man econ­o­my will inevitably go into cri­sis. [...] But the boom is over and it is high time for politi­cians to take note of this. [...] Income tax reform, as pro­posed by the oppo­si­tion, comes at a bad time [...] and the re-estab­lish­ment of a tax on wealth rep­re­sents the great­est brake imag­in­able for small and medi­um-sized firms.

    Posted by Vanfield | July 15, 2013, 10:32 pm
  14. @Vanfield: Yes, exports are col­laps­ing, but imports are col­laps­ing even more so there’s a grow­ing net trade sur­plus. All it took to achieve this was the destruc­tion of domes­tic demand across the con­ti­nent. So, accord­ing to euro­zone log­ic, it’s all good:

    Euro zone imports fall steeply in May, prices rise in June

    By Mar­tin San­ta

    BRUSSELS | Tue Jul 16, 2013 5:38am EDT

    (Reuters) — The euro zone’s trade sur­plus widened in May from a year ear­li­er, dri­ven main­ly by falling imports rather than export growth, the EU’s sta­tis­tics office Euro­stat said on Tues­day.

    Euro­stat also con­firmed June annu­al infla­tion at 1.6 per­cent, pushed upward by volatile ener­gy and food prices, from 1.4 per­cent in May.

    The trade sur­plus for the 17 coun­tries using the euro, unad­just­ed for sea­son­al swings, rose to 15.2 bil­lion euros ($19.8 bil­lion) in May, from a revised 14.1 bil­lion euro sur­plus in April.

    Over­all exports were flat on the year in May, with imports decreas­ing by 6 per­cent.

    The malaise in imports under­scores the euro zone’s strug­gle to revive domes­tic demand that is ham­pered by record unem­ploy­ment, reluc­tance among con­sumers to spend and com­pa­nies that are strug­gling to access cred­it and invest.

    Imports fell in the bloc’s four largest economies, with Ger­many report­ing a 1 per­cent drop, France declin­ing by 2 per­cent, Spain down 4 per­cent and Italy slid­ing 6 per­cent.

    Trade with Chi­na fell on the year in May, on a non-sea­son­al­ly adjust­ed basis, while exports to the Unit­ed States increased by 2 per­cent, with imports down by 7 per­cent.

    Infla­tion, mean­while, remains below the Euro­pean Cen­tral Bank’s tar­get of close to but below 2 per­cent.

    The ECB left its key inter­est rate at a record low in July and broke a taboo nev­er to pre-com­mit on rates, say­ing it would leave mon­e­tary pol­i­cy loose for an extend­ed peri­od of time to help an expect­ed recov­ery lat­er this year.

    The ECB sees exports, low inter­est rates around the world and less volatil­i­ty on finan­cial mar­kets as help­ing the euro zone leave behind its longest reces­sion since the cre­ation of the sin­gle cur­ren­cy in 1999.

    Posted by Pterrafractyl | July 16, 2013, 1:14 pm
  15. Here’s an inter­est­ing arti­cle on some of the bailout pack­ages that have helped keep Ger­many’s pub­licly-owned Lan­des­banks afloat dur­ing the cri­sis years:

    Nav­i­gat­ing the finan­cial labyrinth of Ger­many’s Lan­des­banken

    By Lau­ra Noo­nan

    HAMBURG | Tue Sep 17, 2013 1:13am EDT

    (Reuters) — To the casu­al observ­er, the Lan­des­banken’s results for the first half of this year might sug­gest Ger­many’s pub­licly-owned region­al banks are in rude finan­cial health.

    But the head­line num­bers belie a more com­plex real­i­ty.

    Four of the five major Lan­des­banken boast­ed improve­ments in prof­its for the first half of 2013, some­times quite dra­mat­ic, like the 400 per­cent increase in pre-tax prof­its at Ham­burg and Kiel based ship­ping lender HSH Nord­bank.

    As a group, their ‘tier one cap­i­tal ratios’ — a mea­sure of how much high qual­i­ty cap­i­tal they have to weath­er future loss­es — came in slight­ly ahead of Europe’s thir­ty largest banks by mar­ket cap­i­tal­i­sa­tion.

    Both mea­sures are open to par­tic­u­lar quirks in the Lan­des­banken world.

    Take HSH — Chris­t­ian van Beek, of rat­ings agency Fitch, points out that the bank can actu­al­ly obtain com­pen­sa­tion as some loans that were expect­ed not to be repaid are sold off at a loss or a write down is agreed.

    This is because, a pro­vi­sion for a bad loan comes off HSH’s prof­it and loss account, but once the loss on cer­tain loans is actu­al­ly crys­tallised, HSH can claim against a 10 bil­lion euros state-spon­sored asset guar­an­tee scheme.

    “Net income/loss is cur­rent­ly not a good indi­ca­tor for the bank’s progress in estab­lish­ing a viable busi­ness mod­el,” said van Beek, who instead focus­es on the bank’s new busi­ness gen­er­a­tion.

    On the cap­i­tal front, while Euro­pean banks are tap­ping their share­hold­ers for more sup­port, some Lan­des­banken will be tread­ing the oppo­site path as they wean them­selves off state aid.

    ...

    A more per­ti­nent mea­sure for sec­tor-watch­ers is prof­it mar­gin.

    Annu­alised return on equi­ty ranges great­ly across the Lan­des­banken, from 10.3 per­cent at Bay­ern LB to 2.5 per­cent at Nord LB for the first half of 2013, to aver­age 6.12 per­cent across the group.

    Europe’s 30 biggest banks had an annu­alised aver­age return on equi­ty of 8 per­cent, accord­ing to an analy­sis by Reuters of the largest banks as ranked by mar­ket cap­i­tal­i­sa­tion.

    “Will Lan­des­banken ever make very strong Euro­pean com­pet­i­tive bank­ing? — The answer is no, the bank­ing struc­ture does not allow high mar­ket share, big pen­e­tra­tion or earn­ings pow­er,” a senior Lan­des­banken banker told Reuters.

    While senior Lan­desank offi­cials might be pre­dict­ing that the Lan­des­banks will nev­er become com­pet­i­tive in the Euro­pean bank­ing sec­tor, it’s worth recall­ing that they actu­al­ly were quite aggres­sive play­ers from 2001–2008, espe­cial­ly in the “asset-backed com­mer­cial paper” (ABCP) mar­ket:

    The Lan­des­banken: Inside Ger­many’s tril­lion euro bank­ing blind spot

    By Lau­ra Noo­nan

    HAMBURG | Tue Sep 17, 2013 8:05am EDT

    (Reuters) — Many Ger­mans feel that who­ev­er wins Sun­day’s elec­tion, they should not fund any more bailouts of fel­low Euro­pean coun­tries, whose errant banks are a par­tic­u­lar bug­bear for Berlin.

    But a cor­ner­stone of Ger­many’s own bank­ing sys­tem, which has already received state bailouts, is fac­ing fresh chal­lenges, increas­ing the need for reforms which will be very hard for any new gov­ern­ment to deliv­er.

    Found­ed in the 19th cen­tu­ry to pro­mote region­al devel­op­ment, the pub­licly-owned Lan­des­banken play a hal­lowed role as low cost lenders to local projects and the ‘Mit­tel­stand’, the small and mid­sized firms cen­tral to the euro­zone’s most resilient econ­o­my.

    With com­bined assets of a tril­lion euros, they account for 12 per­cent of the coun­try’s total bank­ing assets, and 3 per­cent of Europe’s as mea­sured by the Euro­pean Cen­tral Bank (ECB).

    The euro­zone’s steps towards bank­ing union have trig­gered the tough­est stress tests banks have ever faced and new glob­al reg­u­la­tions impose high­er cap­i­tal demands par­tic­u­lar­ly dif­fi­cult for low-mar­gin banks like the Lan­des­banken to achieve.

    At the same time, their core busi­ness is threat­ened by increas­ing com­pe­ti­tion from inter­na­tion­al banks like France’s BNP Paribas, which want a big­ger part of the action in Europe’s eco­nom­ic pow­er­house.

    Experts from the Organ­i­sa­tion for Eco­nom­ic Coop­er­a­tion and Devel­op­ment (OECD), rat­ings agen­cies and Ger­man acad­e­mia say the best Lan­des­banken solu­tion is restruc­tur­ing to leave as few as two play­ers with well-defined busi­ness­es.

    The prospect appears remote, under­min­ing Berlin’s rep­u­ta­tion as the dri­ver of Euro­pean bank­ing reform.

    None of the five main Lan­des­banken — Hanover’s Nord LB, Munich’s Bay­ern LB, Stuttgart’s LBBW, Ham­burg and Kiel based HSH Nord­bank and Frank­furt’s Hela­ba — said they thought indus­try con­sol­i­da­tion like­ly when asked by Reuters for this arti­cle.

    ...

    “CIVIL SERVICE” CULTURE

    Long-beset by the prob­lems of polit­i­cal­ly moti­vat­ed lenders, and cul­ti­vat­ing a work cul­ture sev­er­al employ­ees describe as “civ­il ser­vice like” with a clear-out at 5 p.m., Lan­des­banken did not begin to build seri­ous prob­lems until 2001.

    The trig­ger, sev­er­al experts say, was a sur­prise agree­ment between Ger­many and Brus­sels to end a sov­er­eign guar­an­tee on bonds sold by Lan­des­banken by 2005. The Lan­des­banken’s response was to sell as much debt as they could before the cur­tain fell.

    They piled into inter­na­tion­al lend­ing and high-yield­ing bonds, spon­sor­ing 8.4 per­cent of the glob­al sup­ply of asset backed com­mer­cial paper (ABCP) by 2006, accord­ing to a major 2012 study on Lan­des­banken by four Ger­man aca­d­e­mics.

    The Lan­des­banken expan­sion end­ed in bailout. In 2008, Ger­man states began the first of five bailouts totalling 70 bil­lion euros, includ­ing the res­cue of and even­tu­al shut­ting of West­LB, which lost heav­i­ly on bets on the U.S. sub­prime mar­ket.

    Oth­ers stayed afloat, avoid­ing deep restruc­tur­ing.

    ...

    It’s impor­tant to recall that the asset-backed com­mer­cial paper mar­ket (i.e. short-term and medi­um term loans to busi­ness that are typ­i­cal­ly rolled-over indef­i­nite­ly) was instru­men­tal in fuel­ing the glob­aly hous­ing bub­ble. So if, as described above, the Lan­des­banks were behind 8.4% of the glob­al sup­ply of asset-backed com­mer­cial paper in 2008, it’s should­n’t be sur­pris­ing that a num­ber of Lan­des­banks required such big bailouts in recent years because the asset-backed com­mer­cial paper mar­ket was pret­ty impor­tant in fuel­ing the glob­al cred­it-bub­ble. This was espe­cial­ly true in the US hous­ing mar­kets where the Lan­des­banks were very active.

    It’s also impor­tant to recall that, bailouts aside, it could have been a lot worse for the Lan­des­banks. A LOT.

    Posted by Pterrafractyl | September 19, 2013, 11:02 pm

Post a comment