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Merkel demands hand over of sovereignty before any other options considered

The once unthinkable is now an agenda item for a June 28-29 EU summit: A “fiscal compact” treaty that will create a new budget oversight agency with a proposed list of powers that seems to grow by the day. This includes the authority to “harmonize” labor laws, tax-policies, and social security systems. Not only the will this new “authority” have the power to veto and direct the budgets “priorities”, but Merkel is now calling for it to have the power to review national budgets before they’re drafted.

In other words, each eurozone member’s national government is to become a rubber stamp for “the authority”. Cartman would be proud. And what do the economically distressed eurozone members get in exchange for handing their sovereignty over to Berlin? Eurobonds that help pool the risks and lower the cost of borrowing, right? Nope, that’s still off the table. As per usual Eurobonds are sort of on the agenda. But these eurobonds are way less , umm, “fun” than the prior eurobond proposals.

For starters, the Bundesbank argues eurobonds already exist in the form of the implicit liability the ECB has if a member nation ever dumps the euro and leaves. It hails from the storied who-needs-brakes-I-have-an-airbag school of risk management. It’s a hell of a thing to watch not one but a whole collection of free societies openly embrace a system of planned disaster capitalism run by people that are obviously lunatics:

Eurozone bonds some way off, risk-sharing already reality

By Ana Nicolaci da Costa

LONDON | Mon May 28, 2012 11:41am EDT

(Reuters) – Germany keeps reaffirming its long-standing opposition to shared euro zone bonds but analysts say the region is already headed towards implicit mutual responsibility for national debts and Berlin will come under increasing pressure to succumb.

The region’s complex TARGET2 payments system, which hosts payment flows between euro zone member states, suggests there is already a good deal of risk-sharing implicit in regional structures, not to mention the exposure the European Central Bank has to peripheral debt.

That shared liability may fall short of the kind of joint risk-taking foreseen for a common bond, where one country is responsible for the non-payment of debt by another.

But analysts say the build up of imbalances in the system – as the ECB replaced private sector lending which dried up for peripheral countries – reflects the latest in a number of crisis-fighting steps that have increased regional integration.

Economists say the imbalances carry only become a problem when one or more countries leave the euro.

But if a member state does exit and its central bank is not able to honor its liabilities with the ECB, the cost could end up with the rest of national central banks.

The prospect of an euro exit is no longer so far fetched. The once unmentionable is now openly discussed by officials.

“If there are losses on these claims that the ECB has, these losses get distributed in the euro area as a whole, according to (national central banks’) capital shares at the ECB,” said Guntram Wolff, deputy director of Brussels-based Bruegel think-tank, which published the Blue Bond proposal outlining a possible structure for common debt issuance.

So in that sense it’s a euro bond but a special euro bond which … takes on a risk and distributes this risk in the entire euro system.

So ‘No’ to eurobonds – something that officials admit would help the weaker nations avoid being forced out the eurozone – because the ECB will pick up the tab if/when the weaker nations are forced out of the eurozone. Ok then.

Continuing with the article…


Berlin opposes the concept for fear it will end up paying for overspending in peripheries. Only when it sees the risks to the euro zone of not acting as greater than the domestic political cost of putting Germany ever more on the hook, is it likely to budge.

Chancellor Angela Merkel, who faces elections next year, showed no sign of dropping her objections at a summit of European Union leaders last week, but new French President Francois Hollande is an advocate.

Merkel insists euro zone bonds can only be discussed at the end of a long process towards fiscal integration. Even if she agreed, it would require the European Union treaty to be changed, a process that typically takes months or years, not weeks.

“It is unlikely, notably for legal reasons, that the ‘silver bullet solutions’ which investors would like to see, such as Eurobonds … can be easily envisaged in the timeframe relevant for the current financial turmoil,” said Deutsche Bank economist Gilles Moec. “Indeed, vocal opposition to Eurobonds is not weakening in Germany.”

But if a Greek euro exit materializes, which elections next month could hasten, contagion will spread and emergency crisis action of some sort will be needed. Many analysts see common bonds as the best way of solving the crisis.

The Bruegel institute in May 2010 published the Blue Bond proposal which foresees a pooling of a chunk of national debt into a senior blue bond with joint liability and anything beyond that issued as national, junior paper.

The idea is to secure a liquid pool of debt with low borrowing costs on the one hand, and keep incentives for fiscal discipline on the other.

“That’s the route that we may go down. And it may well be that the European Stability Mechanism (ESM) represents the first stage of that,” James Nixon, chief European economist at Societe Generale said.

The ESM is the euro zone’s permanent rescue fund which will take over responsibility for future bailouts in July.

At the end of the article it’s noted that the new European Stability Mechanism (ESM) that comes into effect in July – a permanent replacement to the existing ad hoc crisis response funds – is also seen as a possible stepping stone for a “Blue Bond”-like proposal, where some set percentage of national funding is covered by a eurobond and the rest is the sole liability of individual nation. That’s quite similar to another proposal that’s recently come out of the German Council of Economic Elders: The European Redemption Pact, where 40% of a nation’s debt is covered by jointly-issued eurobonds and the rest is the obligation of the nation. It’s being hailed as ‘ingenious’ because it would bypass a ruling last year by the German constitutional that prevents Germany from ever giving up its budget sovereignty, something the high court described as “fundamental” to self-determination. This reasonable declaration about the fundamental necessity for budget sovereignty was made in a court case centered on the legality of bailout funds for Germany’s neighbors. You know, the same neighbors that are getting loss of budget-sovereignty (and a bunch of other sovereignty) as part of the preconditions for their “bailouts”. You can’t make this stuff up:


Ruling in Greek Aid German Court Rejects Challenges to Euro Bailouts
dsl — with wires

Germany’s highest court has ruled that relief for Greece and the euro bailout program is constitutional. As expected, the judges are demanding a greater say for parliament in future decisions on providing aid to beleaguered euro-zone member states.

In a tensely anticipated judgement, the German Federal Constitutional Court moved on Wednesday morning to reject several legal complaints that had been filed against Germany’s participation in massive efforts to prop up the European common currency.

The court said that the billions in aid provided by Germany in capital and guarantees to highly indebted partner countries in the European Union to shore up the euro had been constitutional. At the same time, the court stipulated that the German federal parliament, the Bundestag, needs to be given a greater say in future bailout measures.

Presiding Judge Andreas Vosskuhle said the verdict “should not be misinterpreted as a constitutional blank check for further rescue packages.”

The judges ruled that aid package resolutions cannot be automatic and may not infringe on the decision-making rights of parliament. Aid packages have to be clearly defined, and members of parliament must be given the opportunity to review the aid and also stop it if needed, the ruling said. “The government is obligated in the cases of large expenditures to get the approval of the parliamentary budget committee,” Vosskuhle said. The court said that check and balance was needed to ensure parliament retained its sovereignty over the budget, which it described as a “fundamental element” of democratic self-determination.

Ok, so the German Council of Economic Elders (awesome name BTW) has a plan that creates a sort of hybrid 20-year eurobond. And this plan strongly supported bv the SPD AND Greens according to the following article. But the plan also somehow ensures that this new system – hastily created in a bizarrely rushed constitutional crisis following a bizarrely exacerbated economic crisis – doesn’t violate last November’s German high court ruling that no loss of budget sovereignty take place in any future bailouts. So how does it pull it off? Well, for starters, the proposed 40% joint bond issuance would come with strings attached. Golden Strings. More specifically, gold bullion equal to 20% of a “to-be-redeemed” nation’s debt is to be handed over as collateral. The Elders apparently want to assure the public not to worry about the gold. It will only be seized of there’s a problem with a country meeting it’s debt repayment obligations. This is the message being sent to nations that are currently having troubles paying their debts. It’s like they’re not even trying anymore:

The Telegraph
Europe’s debtors must pawn their gold for Eurobond Redemption
Southern Europe’s debtor states must pledge their gold reserves and national treasure as collateral under a €2.3 trillion stabilisation plan gaining momentum in Germany.

By Ambrose Evans-Pritchard, International business editor

5:22PM BST 29 May 2012

The German scheme — known as the European Redemption Pactoffers a form of “Eurobonds Lite” that can be squared with the German constitution and breaks the political logjam. It is a highly creative way out of the debt crisis, but is not a soft option for Italy, Spain, Portugal, and other states in trouble.

The plan is drafted by the German Council of Economic Experts and inspired by Alexander Hamilton’s Sinking Fund in the United States — created in 1790 to clean up the morass of debts left by the Revolutionary War. Flourishing Virginia was comparable to Germany today.

Chancellor Angela Merkel shot down the proposals last November as “completely impossible”, but Europe’s crisis has since festered, and her Christian Democrat party has since suffered crushing defeats in regional elections.

The Social Democrat opposition supports the idea. The Greens say they will block ratification of the EU Fiscal Compact in the German Bundesrat — or upper house — unless Mrs Merkel relents.

“The Redemption Pact cleverly combines the advantages of lower interest rates through joint European borrowing with a reduction of debt,” says Green leader Jürgen Trittin. “Joint liability would be limited in both time and scale.”

The plan splits the public debts of EMU states. Anything up to the Maastricht limit of 60pc of GDP would remain sovereign. Anything over 60pc would be transfered gradually into the redemption fund. This would be covered by joint bonds.

Italy would switch €958bn, Germany €578bn, France €498bn, and so forth. The total was €2.326 trillion as of November but is rising fast as Europe’s slump corrupts debt dynamics. The sinking fund would slowly retire debt over twenty years, using designated tithes akin to Germany’s “Solidarity Surcharge”.

Note that the “Solidarity Surcharge” that the Redemption pact is being compared to was a tax started in 1993 to finance the rebuilding of East Germany, including physical infrastructure projects. I’m not aware of a similar committment to rebuild the physical infrastructure of the “redeemed” eurozone members but I’m sure there’s some sense of solidarity tucked away in there. Somewhere.


The ingenious design gets around the German constitutional court, which ruled in September that the budgetary powers of the Bundestag cannot be alienated to any EU body under the Basic Law — the founding text of Germany’s vibrant post-War democracy.

The court warned that open-ended liabilities are unconstitutional. The Bundestag may not establish “permanent mechanisms which result in an assumption of liability for other states’ voluntary decisions, especially if they have consequences whose impact is difficult to calculate,” it ruled. Chief Justice Andreas Vosskuhle said that any major step towards EU fiscal union would require “a new constitution” and a referendum.

The fund implies a big sacrifice for Germany. Its interest costs on joint debt would be much higher than today’s safe-haven rate of 1.37pc on 10-year Bunds. Jefferies Fixed Income says it would cost 0.6pc of German GDP annually. The Council of Experts — or `Five Wise Men’ — argue that this would be modest compared to the growth adrenaline of rescusitating monetary union.

Yet it is not charity either. One official said a key motive is to relieve the European Central Bank of its duties as chief fire-fighter. “We have got to get the ECB out of the game of distributing money, and separate fiscal and monetary policy. Germany has only two votes on the ECB Council and has no way to control consolidation,” he said.
Golden Strings
Germany would have a lockhold over the fund, able to enforce discipline. Each state would have to pledge 20pc of their debt as collateral. “The assets could be taken from the country’s currency and gold reserves. The collateral nominated would only be used in the event that a country does not meet its payment obligations,” said the proposal.

This demand could enflame opinion in Italy and Portugal. Both states have kept their bullion, resisting the rush to sell by Britain and others. Italy has 2,451 tonnes of gold, valued at €98bn in March.

Alessandro di Carpegna Brivio, a gold expert at Camperio Sim in Milan, said Italy should treat such proposals with care. “Everything being done at a European level is in the interests of Germany and France, to save their banks. It is not in the interest of Italy,” he said.

Yes, the grand plan to save the eurozone is now a 20-year 1-strike-and-you’re-out rescue policy. Why only 1-strike? Well, in the event that it can’t “meet its payment obligations”, after that gold gets seized and the state assets are privatized it’s sort of hard to see what a country is supposed to do next (presumably it’s kicked out of the eurozone and turned into some international pariah or some other form of compassionate tough “love”). And this is the plan that the German Left is championing…it’s apparently been too generous for Merkel’s taste.

So what about the rest of the eurozone? Is there going to be any meaningful push back following France rejection of the great Merkozy in favor of socialist Francois Hollande? Will Hollande provide the much needed counterbalance to the seemingly unstoppable push towards a “fiscal union” that turns national parliaments into little national jokes and treats the immediate fiscal crisis like it’s golden firesale? Will there be any real pushback at all? Are you kidding?

Europe mulls major step towards “fiscal union”

By Noah Barkin and Daniel Flynn

BERLIN/PARIS | Sun Jun 3, 2012 1:45pm EDT

(Reuters) – When Jean-Claude Trichet called last June for the creation of a European finance ministry with power over national budgets, the idea seemed fanciful, a distant dream that would take years or even decades to realize, if it ever came to be.

One year later, with the euro zone’s debt crisis threatening to tear the bloc apart, Germany is pushing its partners for precisely the kind of giant leap forward in fiscal integration that the now-departed European Central Bank president had in mind.

After falling short with her “fiscal compact” on budget discipline, German Chancellor Angela Merkel is pressing for much more ambitious measures, including a central authority to manage euro area finances, and major new powers for the European Commission, European Parliament and European Court of Justice.

She is also seeking a coordinated European approach to reforming labor markets, social security systems and tax policies, German officials say.

Until states agree to these steps and the unprecedented loss of sovereignty they involve, the officials say Berlin will refuse to consider other initiatives like joint euro zone bonds or a “banking union” with cross-border deposit guarantees – steps Berlin says could only come in a second wave.

Ok, so we’ve gone from calls for a “fiscal union” that Merkel opposed a year ago to today’s calls by Merkel for a far more expansive fiscal union that appears to explicitly give Berlin sovereignty over its neighbors budgets, and agreement to this new vassal-state union is being called a prerequisite if Berlin is to consider any other options. Wow. An entire continent is getting scammed by the most overt and extreme form of political blackmail I think I’ve ever seen. Thanks Europe, I’m no longer quite as ashamed by my fellow Americans’ collective propensity for falling for jaw-droppingly blatant political cons. This is clearly a global phenomena.

Continuing with the article…


Spain, whose banking troubles have made it the latest target of financial markets, signalled over the weekend that it was on board with a key element of the plan.

Prime Minister Mariano Rajoy backed the creation of a new euro-wide fiscal authority of the kind Trichet sketched out in a speech in Aachen, Germany last year.

But other states, including the bloc’s second-biggest member France, have deep reservations about ceding so much sovereignty.

New President Francois Hollande rode to victory in a French election last month promising new steps to boost growth. At the EU summit later this month, he and other leaders were expected to gang up on Merkel, pressing her for new growth-enhancing measures.

But after a series of modest concessions from the German leader, a loose consensus on a growth strategy already appears to have been reached weeks before the leaders meet.

Now, the main focus of the summit seems likely to be on steps needed for a “fiscal union”, a debate which puts Hollande in a far more difficult position, even if people who know him well say his vision of Europe is much closer to the federalist German model than those of his Gaullist predecessors.

“It’s a big challenge for Hollande,” said a senior French official who declined to be named. “I think that he is ready for (closer fiscal integration) but I think the rest of the French political class – both on the left and right – is not.”

The hope in Berlin and other capitals is that if leaders can present a credible plan for moving towards a fiscal union, further contagion – even in the event of a Greek exit from the euro zone – can be limited, one senior central banker said.

But even if the Germans do win over the French and other sceptical countries like Finland and Austria, there are serious doubts about whether a 5-10 year plan for closer integration – weighed down by lengthy national debates over treaty change – will be enough to restore investor confidence now.

Ha! Yes, Hollande’s big challenge is convincing the rest of France’s elites to agree to sign away the nation’s budget, tax, and labor policies. Oh my have things gone awry over in the eurozone. And even if there IS a fiscal union put into place and the eurozone turns into some weird German vassal-state dominion, EVEN THAT might not be good enough for “the markets” to restore “investor confidence”. Wow, “the market” is apparently dominated by lunatics that want to see some sort of radical overhaul of the right to self-determination. That seems like one of the issues that Hollande is facing too.


14 comments for “Merkel demands hand over of sovereignty before any other options considered”

  1. And now we have Wolfgang Schaeuble reiterating the demands…fiscal union BEFORE eurobonds. And the first step in the creation of this union? Setting up a penalty system for governments that don’t meet their debt-reduction goals:

    Europe needs real fiscal union: Germany’s Schaeuble
    (AFP) – 06/05/2012

    FRANKFURT – Before Europe launches common bonds or so-called eurobonds, it must first establish a true fiscal union, German Finance Minister Wolfgang Schaeuble said in a newspaper interview Tuesday.

    “The government has always said that before we start talking about joint debt management, we need real fiscal union,” Schaeuble told the business daily Handelsblatt.

    The topic of eurobonds — pooling the debt of eurozone member states to drive down borrowing costs — has split the 17-nation bloc and was the main sticking point at an informal EU summit last month.

    Nevertheless, creating a fiscal union was a “medium-term project,” the finance minister insisted.

    A first step was the fiscal pact, agreed to by 25 of 27 European Union members and which is designed to shore up the turmoil-hit eurozone by penalising countries that fail to keep their deficits in check.

    A banking union, too, would be another stage.

    “We should take one step after another,” Schaeuble said.

    The path Europe has to take “is not an easy one and it won’t always be fair,” he warned.

    France is spearheading a drive for eurobonds, in effect pooling the debt of eurozone countries, in order to raise fresh debt funding.

    It and other eurozone states say eurobonds could fund desperately needed growth policies after years of austerity have pushed the economy into recession.

    But Germany is firmly opposed to such a move, arguing it takes away the pressure for reform in spendthrift countries and also undermines market discipline.

    “You know the fiscal pact is the beginning of the fiscal union and in the longer term you could imagine stricter oversight,” he added.

    “Such questions will certainly be discussed” at a forthcoming meeting of EU leaders in Brussels on June 28-29, the spokesman said.

    Great, so agenda for the June 28-29 meeting is to turn the eurozone into a giant bootcamp for wayward teens…the extra psycho kind of bootcamp for wayward teens.

    Posted by Pterrafractyl | June 5, 2012, 8:47 am
  2. German public opposition to proposals to ease up on austerity has been one of the most frequently cited reasons for Merkels unrelenting opposition such ideas. This doesn’t bode well:

    Nearly half of Germans want Greece to leave euro: poll
    BERLIN | Tue Jun 5, 2012 9:05am EDT

    (Reuters) – Nearly half of Germans want Greece to leave the euro zone and a third is very afraid that the country’s debt crisis could threaten the euro, a poll in Stern magazine showed on Tuesday,

    According to a survey of 1,001 Germans conducted by Forsa research institute, 49 percent of those polled want Greece to quit the single currency while 39 percent want it to stay.

    Nearly two thirds want German Chancellor Angela Merkel to keep insisting that Greece stick to agreed austerity measures despite growing criticism of this course in other euro zone countries such as France, the poll said.

    In Tuesday’s survey, nearly two thirds of Germans expressed a lack of understanding for those Greeks who want to vote for opponents of austerity measures.

    A third said they would have second thoughts about spending their holidays in Greece at the moment.

    And now in Spain, which is close to being frozen out of the bond markets over growing banking concerns, Prime Minister Rajoy is calling for fiscal and banking unions that basically hands the country over to Berlin. And what’s the alleged impetus for these calls for a closer union(union of unequals…it’s a VERY traditional marriage)? Well, there appears to be a growing sense in Spain’s bureaucracy that German policy makers are making matters much worse than necessary because of ongoing concerns over whether Germany is even interested in any long-term committment to the euro. If only Berlin had agreed to closer integration earlier this whole Spanich banking collapse could have been avoided, or so the thinkling goes. So Spain’s elites are concered that Berlin isn’t committed enough to them (sorry Spain, she’s just not that into you) so they’re pleading to become a vassal state in order to win back Berlin’s everlasting love. And, once Spain can convince “the market” that Berlin is really and truly committment to Spain, only then will true love warm the cold hearts of “the market” and let love reign supreme. Or, well, at least something is going to reign supreme…

    You have to give credit where credit is due..Spain is begging to be taken over and Germany is saying “no, the terms aren’t good enough”. Bravo, Angela. Bravo. Playing hard to get has never been so profitable:

    In Spain, Germany is villain, not savior
    By Frederick Kempe
    June 4, 2012

    MADRID – What brought me to Spain during the most threatening week of the country’s recent history was an invitation to speak about one of Europe’s darkest hours a half-century ago, pegged to the Spanish-language publication of my book Berlin 1961: Kennedy, Khrushchev, and the Most Dangerous Place on Earth.

    One of Spain’s most senior government officials was quick to make the connection between 1961, when Germany’s postwar division was deepened by the Berlin Wall, and the historic moment today, when a reunified Germany, acting from its most powerful European perch since the Third Reich, will determine whether the continent will be newly divided – this time along North-South lines, with Spain outside the euro. But more sharply, this official – who won’t speak for attribution as he must deal daily with German counterparts – believes Germany’s actions (and, more frequently inactions) have put the euro and the European Union project itself at risk.

    It is in that context, he said, that Spain has put forward an urgent plan for a European banking union, complete with a pan-European deposit guarantee fund and banking supervisor. The idea has now been endorsed by the European Commission, European Central Bank President Mario Draghi, Italy, Ireland and others. German Chancellor Angela Merkel has not followed suit. Spanish officials are lobbying hard for this idea because they believe it’s urgently needed, but also because they hope to force Germany’s hand in a manner that would move markets and reverse Spain’s downward spiral. So that his purpose couldn’t be missed, Spanish Prime Minister Mariano Rajoy over the weekend surprisingly called for centralized control of national budgets in the euro zone – teeing up a crucial auction of Spanish treasury bonds this Thursday.

    Yet Rajoy’s top economic advisers say that whatever they may do themselves, it is beyond them to remain in the euro if markets aren’t more convinced of Germany’s commitment. Although Rajoy’s government has reduced pension burdens, introduced labor market reforms, recapitalized banks, cut deficits and written debt limits into the constitution, markets continue to bet against Spain. Ten-year sovereign bond yields, at more than 6.5 percent, are 550 basis points higher than those in Germany and perilously close to the 7 percent levels at which Portugal, Ireland and Greece required bailouts.

    One conversation after another in Madrid underscored a growing Spanish resignation that their fate rests in German hands and an escalating frustration that German leaders have been too slow to recognize the economic stakes, the historic moment or what steps could most quickly save the euro project.

    Spanish experts list the many things German leaders could have embraced in past months that might have produced a different outcome: euro zone bonds, an expansion of funds available from the European Stability Mechanism (currently 500 billion euros) and the ability of banks to access them directly, a more expansive European monetary policy or a Europe-wide guarantee for the threatened banking system.

    The failure of the Germans to act with the urgency and scale other Europeans consider necessary has led markets to believe, along with more than a few Spaniards, that Germans themselves may no longer think the euro was such a good idea and that it may be time to cut their losses. That notion has been dramatically fed by the new publication of former Bundesbank director Thilo Sarrazin’s best-selling book, Europe Doesn’t Need the Euro.

    A survey in Germany’s Focus magazine last week, which got wide notice here in Spain, showed that while 45 percent of Germans agree with Chancellor Merkel’s view that a euro failure would lead to a broader European failure, nearly the same number, or 43 percent, embrace Sarrazin’s opposing thesis. (Twelve percent are undecided.) Indeed, a rumor is swirling around Madrid that the Germans are already secretly printing Deutschemarks. Although this has no apparent basis in fact, it does reflect the mood.

    Yet the Rajoy government now acts with full knowledge of the moment. If Spain leaves the euro, it would be a setback of historic dimensions. The country would overnight go from being an integral part of the world’s largest economic market – to again being a second-rate European player.

    Spaniards are convinced Germany would lose even more, in exports, in global position, and in the many unpredictable reverberations of the euro’s unraveling.

    Yet until they see a more convincing German response, Spanish officials brace for the worst even while lobbying Berlin and Brussels with the intensity of the damned.

    Posted by Pterrafractyl | June 5, 2012, 2:40 pm
  3. There continue to remain only two, long-term solutions to the euro problems:

    1. Each nation return to Monetary Sovereignty by readopting their sovereign currency
    2. Financial merger into a quasi “United States of Europe.”

    That’s it. No other solutions.

    But sadly, the twin goals of “trade simplification” and “euro stabilification” continue ever onward, while the people suffer from the ignorance of their leaders. With each gear, lever and pulley added to the Rube Goldberg euro machine, trade becomes more complicated and the euro less stable, and the euro nations plunge from recession toward depression.

    Posted by bambi | June 6, 2012, 2:05 pm
  4. @Bambi: Every crisis has a golden Shock Doctrine lining:

    Solution #3 is neither intranational nor intra-European but international.

    A world economic conflagration would be followed by (U.S.-German) attempts to coordinate a framework of international economic “regulations” combined with framework for unified currency market system, regulated by international board of corporate elite “trustees” from Germany & U.S. who have zero accountability & are un-elected.

    All the better if there’s an “International 9/11” with simultaneous “Al Qaeda” attacks not merely on New York & D.C. but also on Berlin, London, Jerusalem, Ankara, Mumbai, Oslo, Paris, Tokyo & Ottawa.

    Then, of course, you could also simultaneously organize an international framework of “international anti-terror regulations & travel security restrictions” with some new “emergency Free Trade de-regulations” thrown in.

    The Euro could “give way” to a new international “superdollar” (new “bubble”, anyone?) that is managed in Berlin & acquiesced to by a weak Democratic president who is #3 in popular votes but chosen president by default in a split House of Representatives’ “Election of 1824” scenario this November (November 9, to be exact).

    Look at the price of oil per barrel: It’s at prices not seen since 1999, but the price of gas does not follow.

    Likewise, it does not follow that there are only two scenarios for the fate of Europe, nor that engineered “plot twists” do not lie ahead (see July 4, 2012).

    But, of course, those plot twists are predictable, and anyone following the unavoidable facts that this website presents knows that (spoiler alert) Germany rises again, and U.S. fascists are only too happy to facilitate that, with a side dish of North American Operation Condor.

    Even Soros is ready to bend at the knee to the German Empire: http://www.latimes.com/business/money/la-fi-mo-soros-euro-20120604,0,5425788.story

    See what happens when you pass Taft-Hartley, create the CIA, and agree to cover-up a coup in Dallas?

    Posted by R. Wilson | June 6, 2012, 6:56 pm
  5. A lot of folks these days say Germany should just dump the euro and go back to the DM. The nice, stable DM. An international safe haven during times of distress. Of course, it’s worth repeating that one of the problems with being a nation that exudes strength and stability in the world is that it’s hard to exude much else in terms of real exports during a time of global crisis. Not only are your trading partners no longer buying as much, but your currency can get really expensive:

    SNB Foreign-Currency Holdings Hit Record on Intervention
    By Simone Meier – Jun 7, 2012 7:00 AM C

    The Swiss central bank’s foreign- currency reserves surged to a record in May as the euro region’s increasing turmoil forced policy makers to step up their defense of the franc floor.

    Currency holdings rose to 303.8 billion Swiss francs ($318 billion) from 237.6 billion francs in April, according to a statement published on the Swiss National Bank’s website today. Walter Meier, a spokesman at the SNB in Zurich, said a “large part” of the increase was due to currency purchases to defend the minimum exchange rate of 1.20 francs per euro.

    The central bank finds itself engulfed by the euro region’s worsening fiscal crisis after Spain’s banking woes and Greece’s inconclusive elections raised the specter of a break-up of the currency union. SNB President Thomas Jordan said last month that policy makers are “observing a considerable upward pressure on the franc” as investors shift into havens including the Swiss currency.

    “It’s quite a significant increase,” said Alessandro Bee, an economist at Bank Sarasin in Zurich. “The euro crisis is decisive — if there’s a further worsening, the SNB will be forced to remain active on markets.”

    ‘Drastic Moves’

    SNB policy makers imposed the currency ceiling in September after the franc reached near parity with the euro in the previous month, raising the threat of deflation. Jordan said in an interview with SonntagsZeitung published on May 27 that a government-led panel is weighing measures including capital controls to weaken the franc if the turmoil escalates.

    “We don’t expect further measures,” said Alexander Koch, an economist at UniCredit Group in Munich. “Drastic moves such as capital controls are certainly being discussed. But not least due to the negative impact this would have on Switzerland’s reputation as a financial center, we expect it to happen only in a Lehman-like crisis scenario.

    The currency holdings are calculated according to standards by the International Monetary Fund at the beginning of every month.

    Note at the end the talk of “drastic moves” like “currency controls” are being discussed (i.e. using laws that restrict the buying/selling/moving of a currency/currencies in order to manipulate a target currency’s relative value and/or prevent a “hot money” crisis). Currency controls are a pretty standard tool for a nation to implement, in theory. But one of the quirks of the age of allegedly unfettered free-trade and globalisation is that use of things like currency controls is considered impolite, to put it mildly (unless your application of currency controls is coupled to global free trade in such a way that the controls end up artificially suppressing the pay of blue collar workers around the world…then it’s largely cool). So, if Germany does indeed return to the DM, it’s going to be in a bit of a bind should Berlin ever decide that market based currency “interventions” (like the kind that is costing the Swiss so dearly) are too expensive. We’re in a “currency controls are anti-capitalist and generally really bad” kind of world and that’s a status quo that Germany’s export sector needs to maintain its export dominance. Markets have to remain “open for competition” globally when your the globe’s top exporter. It’s one of the catch-22’s of modern international economics that a top exporter will have to deal with increasing currency valuations because its economy is doing so well and that increased valuation harms exports. It’s just an inherent aspect of our economic system as it’s set up. And it seemed like Germany had found a rather brilliant loophole, in the form of the eurozone, that allowed it to suppress its currency AND guarantee exports AT THE SAME TIME by simply paying for the occasional inevitable eurozone bailout. That’s part of reason so many observers are utterly confounded at Berlin’s increasingly bizarre behavior that threatens to destroy one of the greatest economic gimmicks in history.

    Posted by Pterrafractyl | June 7, 2012, 10:05 am
  6. exactly as I forecast in “Germany’s FOUR Reichs”(2002)Merkel is driven by German Elite

    Posted by Harry Beckhough | June 8, 2012, 2:17 am
  7. @R.Wilson.. I like your phrase ‘engineered plot twists.’ I continue to be confounded at how artificial the entire global economic crisis really is. Real people by the billion are being harmed and the ongoing catalyst and excuse for death and disaster are … bookkeeping entries. The things people need to create prosperous and equitable societies are all still there but won’t be used. The formally informal, formerly covert power brokers of the world are taking formal power because of bookkeeping entries.

    Time to strip and line up for our showers? Not me.

    Posted by Dwight | June 8, 2012, 8:32 am
  8. And here we go again! Spain gets a troika:

    Market euphoria over Spanish bank bailout fizzles

    By Sonya Dowsett and Gareth Jones

    MADRID/BERLIN | Mon Jun 11, 2012 10:39am EDT

    (Reuters) – Financial market euphoria over a European bailout for Spain’s debt-stricken banks faded quickly on Monday as investors sounded the alarm over its impact on public debt and bondholders, and eyed the next risks in the euro zone’s debt crisis.

    EU and German officials said Spain faces supervision by international lenders after the deal to lend Madrid up to 100 billion euros ($125 billion), contradicting Prime Minister Mariano Rajoy who insisted the cash came without such strings.

    European stocks leapt to a four-week high, with investors scooping up battered financial shares. But Spanish and Italian bond yields rose sharply as doubts set in about the impact and terms of the deal, designed to avert a run on Spanish banks.

    Cyprus, which is deeply exposed to Greece, strongly hinted on Monday that it may apply for an international bailout before the end of this month, both for its banks and for the state. It would be the fifth member of the 17-nation euro area to require assistance since the debt crisis erupted in Greece in late 2009.

    The European Commission’s top economic official, Olli Rehn, told Reuters in an interview that the pre-emptive action to support Spain “is critical for calming down market turbulence in Europe and (ensuring) the proper functioning of the financial system in Spain”.

    Bondholders are worried that the rescue will weigh on Spain’s fast-rising public debt. They also fear that if the euro zone’s future permanent bailout fund, the European Stability Mechanism, is used for the rescue, they will be subordinate to official creditors and face losses in any debt restructuring.

    “The EU is selling this as a ‘great victory’, but when you look at the details, this is a loan, and we don’t know yet where the money will be coming from. At the end of the day, it will increase Spain’s debt-to-GDP ratio no matter what they say,” said Steen Jakobsen, chief economist at Saxo Bank in Copenhagen.

    Previous “bailout bounces” have been short-lived, often fizzling within a day or two as investors anticipate the next flare-up in the euro zone’s unresolved debt crisis.

    Greece’s general election next Sunday could rapidly sour market sentiment if radical leftists hostile to the austerity terms of Athens’ EU/IMF bailout outpoll the mainstream conservative and center-left parties that signed the deal, or the vote ends in another deadlock.

    Rajoy said on Sunday Madrid had scored a victory by securing aid from euro zone partners without having to submit to a full state rescue program, saying Spain’s rescue had “nothing to do” with the procedures imposed on Greece, Ireland and Portugal.

    But EU Competition Commissioner Joaquin Almunia and German Finance Minister Wolfgang Schaeuble said that as in those other bailouts, a “troika” of the International Monetary Fund, the European Commission and the European Central Bank would oversee the financial assistance.

    “Of course there will be conditions,” Almunia told Spain’s Cadena Ser radio. “Whoever gives money never gives it away for free.

    Bravo Angela, Bravo. *golf clap*:

    Italy Moves Into Debt-Crisis Crosshairs After Spain
    By Andrew Davis and Nadine Skoczylas – Jun 11, 2012 9:37 AM CT

    The 100 billion-euro ($126 billion) rescue for Spain’s banks moved Italy to the front line of Europe’s debt crisis as an initial rally in the country’s bonds fizzled on concern it may be the next to succumb.

    Italy’s 10-year bonds reversed early gains today in the first trading after the Spanish bailout and fell for a fourth day, sending the yield up 20 basis points to 5.98 percent.

    “The scrutiny of Italy is high and certainly will not dissipate after the deal with Spain,” Nicola Marinelli, who oversees $153 million at Glendevon King Asset Management in London, said in an interview. “This bailout does not mean that Italy will be under attack, but it means that investors will pay attention to every bit of information before deciding to buy or to sell Italian bonds.”

    Posted by Pterrafractyl | June 11, 2012, 7:14 am
  9. Perspective. Not that it helps much in our post-perspective world, but it’s still kind of interesting.

    Posted by Pterrafractyl | June 11, 2012, 11:01 pm
  10. **Pun alert!**

    A bailout? Not quite. A failout? That sounds more like it:

    Spain bond yields at record as Fitch cuts 18 banks

    June 12, 2012 11:25 AM ET


    MADRID (AP) – Spain’s benchmark borrowing rate hit its highest since the country joined the euro currency after Fitch credit ratings agency downgraded 18 domestic banks on Tuesday.

    Spain’s 10-year bond yield rose to hit 6.81 percent in late afternoon trading according to data provider FactSet, while stocks seesawed and began to dip just before markets closed, indicating that investors continued to find more questions than answers in Spain’s decision to seek help for its ailing bank sector.

    Spain agreed last weekend to take a European bailout for its banks, tapping into a €100 billion ($125 billion) euro area bailout fund, but investors are worried it will not solve the country’s problem as the government may have trouble paying the money back.

    Fitch said in a statement that its downgrade of the banks was a result of a previous downgrade of the Spanish sovereign debt on June 7. Fitch said it had conducted stress tests, both on the Spanish banking sector as a whole and on individual banks, updating results from tests done in 2011.

    So how does a banking bailout get immediately followed by banking downgrade over sovereign debt concerns? Well, one way is to ensure the bailout is really just a giant loan to a sector of the economy that has become a giant black hole and make the public pick up the tab. That’ll do the trick.

    **The pun alert has been cancelled**

    Posted by Pterrafractyl | June 12, 2012, 8:28 am
  11. One of the members of the Bundesbank claims that the ECB has done its job to buy time for ailing governments:

    Bundesbank’s Dombret Says ECB Has Done its Job to Solve Crisis
    By Jana Randow and Gabi Thesing – Jun 12, 2012 5:33 AM CT

    Bundesbank board member Andreas Dombret said the European Central Bank has done its job to buy time for governments to fix weaknesses in the euro’s foundations.

    “To those who ask what else the Eurosystem can do, I say that we have done our part, now it’s up to the political leaders to deliver on the fiscal and structural policy side and decide on governance issues,” Dombret said in an interview in London yesterday. “This is why it can’t be a short-term fix.”

    Well, that’s a relief that all that time was bought. Let’s see, that was 4 hours and 40 minutes of relief at a cost of $125 billion which comes out to a cost of $446,420,571.42 per minute of relief. Not, um, the best price could imagine but no one’s ever said “the market” doesn’t have expensive tastes.

    Also, Italy, considering the costs/per minute of “relief”, you might want to start your own rainy day “relief fund” in case any future relief becomes necessary. It probably won’t be necessary given the great job the eurozone elites did with the Spanish bailout. But, and I know this isn’t the best time, you might need to start filling that PIIGY Bank soon:

    Worry for Italy Quickly Replaces Relief for Spain

    Published: June 11, 2012

    VENICE – Concerns grew on Monday that Italy could be the next victim of Europe’s financial infection, leading nervous investors to sell Italian stocks and bonds and damping euphoria over a weekend deal to bail out Spain’s banks.

    Italian officials privately expressed concern that the 100 billion euros, or $125 billion, that Europe pledged to Spanish banks might not stop the troubles from spreading.

    Italy’s main stock index was Europe’s worst performer on Monday, a day when United States stocks were also dragged down and investors flocked yet again to the safe harbor of American and German government bonds. Even the Italian prime minister, Mario Monti, a European technocrat who came to office after the euro crisis forced out Silvio Berlusconi last November, has begun to acknowledge the dangers posed to his country’s 1.56-trillion-euro economy ($1.95 trillion).

    The main fear is that Italy cannot grow its way out of a recession fast enough to pay a mountainous national debt. Other concerns include the fact that Italy, with the third-largest euro zone economy after those of Germany and France, will have to shoulder a large portion of the bailout bill even as it grapples with its own sharp economic downturn.

    Because Italy does not have enough economic growth to generate the money itself, the government will probably have to borrow it at high interest rates, adding to an already heavy debt load.

    Posted by Pterrafractyl | June 12, 2012, 10:57 am
  12. Calmly, slowly, the patient is fitted with their new attire. The patient is told it’s only temporary. Just a generation or so. Sure, Dr. Merkel. Sure:

    Bloomberg News
    EU Nears Completion of Fiscal Straitjacket as Crisis Spreads
    By Jonathan Stearns on June 13, 2012

    The European Union moved closer to completing a framework for tougher controls on spending by euro- area governments in a German-led bid to prevent a repeat of the debt crisis that increasingly threatens the single currency.

    The European Parliament today voted to let the EU screen the budgets of nations earlier and monitor more closely countries such as Italy where rising borrowing costs threaten financial stability. The assembly also approved tighter EU fiscal surveillance of nations such as Greece, Ireland and Portugal after they exit rescue programs.

    The two pieces of draft legislation complement 2011 laws that granted the EU stronger powers to sanction spendthrift euro countries. The latest rules, which the EU’s national governments must still endorse, also follow a new European treaty aimed at limiting budget deficits.

    Draft Budgets
    The new package of more-intrusive EU fiscal surveillance of countries would let the European Commission examine their draft budgets before approval by national parliaments. Annual spending plans would have to be submitted to the Brussels-based commission, the EU’s regulatory arm, by Oct. 15 the previous year.

    In addition, the commission would gain the right to closer oversight of euro nations facing growing financial difficulties through “regular review missions.” Such a step would institutionalize an informal practice under which, for example, the EU last year dispatched experts to Rome to monitor Italian budget progress.

    Furthermore, euro-area countries emerging from aid programs would be subject to a new surveillance system under the draft legislation.

    Second Amendment
    A second amendment introduced by the 754-seat assembly would move euro-area governments in the direction of debt sharing by establishing a European redemption fund based on joint liability. Under this proposal, countries would transfer debt exceeding the EU’s threshold of 60 percent of gross domestic product into the fund, with this portion being paid back over 25 yearsas governments pursued budget consolidation and took steps to boost economic growth.

    Be patient good patient. When this is all over (in 25 years) you’ll be a new you. So just sit back, relax, and enjoy the treatment.

    Posted by Pterrafractyl | June 16, 2012, 8:04 pm
  13. Ah, the ol’ bad cop/imponderably bad cop routine:

    Merkel Sees No Leeway for Greece, Rejecting Signals of Softening
    By Tony Czuczka and Patrick Donahue – Jun 18, 2012 11:16 AM CT

    German Chancellor Angela Merkel said Greece shouldn’t be granted leeway on terms for its bailout, rejecting signals from her foreign minister that creditors may relent on austerity measures.

    The statements by Merkel today at the Group of 20 summit follows a victory in Greek elections for parties supporting the bailout. It clashes with indications made by euro-area finance ministers and German foreign-policy chief Guido Westerwelle, who said Europe could consider giving Greece more time.

    “The important thing is that the new government sticks with the commitments that have been made,” Merkel told reporters at the G-20 meeting in the Mexican resort of Los Cabos. “There can be no loosening on the reform steps.”

    Merkel, who has rejected a range of crisis-fighting policy options from jointly issued debt to stimulus funding, added a softening of demands on Greece to the list of measures Germany would reject.

    ***spoiler alert****

    I think I figured out the surprise twist at the end of the Great Eurozone Morality Play. It’s not about “austerity” or “productivity”. It’s about “discipline”. Let the pain be your guide along the path towards freedom from freedom. Learn how one pain can lesson another. Is not this simpler?

    Posted by Pterrafractyl | June 18, 2012, 2:46 pm
  14. @Pterrafractyl and company–

    “. . . . But the Red House Report is a bridge from a sunny present to a dark past. Joseph Goebbels, Hitler’s pro­pa­ganda chief, once said: ‘In 50 years’ time nobody will think of nation states.’ . . .”

    Rather prophetic, no?


    Dave Emory

    Posted by Dave Emory | April 14, 2013, 3:53 pm

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