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

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Update on the EMU/Euro as Vehicle for Conquering Europe, World

Greeks protest­ing the EMU

COMMENT: We believe very strong­ly in what we are doing here. Nonethe­less, it gets (exple­tive delet­ed) frus­trat­ing at times. We sure wish more folks would take to heart what we do here.

We sure wish more of you would post links to this  mate­r­i­al on oth­er websites/chat groups.

One who clear­ly gets it is the vig­i­lant “Pter­rafractyl”, who alerts us to the two sto­ries below.

We have not­ed many times in the past that the Euro/EMU is the real­iza­tion of a Ger­man blue­print for con­quer­ing first Europe and then the world.

It is appar­ent from the Bloomberg News arti­cle below that, as far as Europe is con­cerned, “Mis­sion  Accom­plished.”

With Amer­i­can banks poten­tial­ly vul­ner­a­ble to a Euro­pean bank­ing cri­sis, we may see the U.S. econ­o­my brought down in time to see “ver­MIT­Tler” Rom­ney installed as U.S. Pres­i­dent. (Although such a bank­ing cri­sis would not be Oba­ma’s fault, the dam­age to the U.S. econ­o­my from fail­ing Euro­pean banks will inevitably be blamed on the incum­bent. This  elec­tion, already shap­ing up to be much clos­er than it should be, will be decid­ed by the econ­o­my.)

You can bet that the “Occu­py” move­ment, already man­i­fest­ing the agent-prova­ca­teur, street jack­ass char­ac­ter­is­tics that I fore­cast at its birth last fall, will help to heap the blame on Oba­ma. (“Occu­py Wall  Street,” like  Wik­iLeaks,  like the  “Arab Spring,” like Amer­i­cans Elect, like the Naderoids of 2000, are, basi­cal­ly far-right wing/Underground Reich/intelligence oper­a­tions dressed up to look like “pro­gres­sive” move­ments.)

“As Euro­pean Aus­ter­i­ty Ends, So Could the Euro” by Peter Boone and Simon John­son; bloomberg.com; 5/13/2012.

EXCERPT: The euro cur­rency is a mal­ady that con­demns at least a gen­er­a­tion of Greeks, Ital­ians, Spaniards, Por­tuguese and Irish to the eco­nomic infir­mary.

In these nations, unem­ploy­ment rates are now at their high­est lev­els in recent decades, and there are few prospects for recov­ery in sight. The econ­o­mists and politi­cians who cre­ated the sys­tem still pro­claim it can sur­vive. Their time would be bet­ter spent rec­og­niz­ing they made a bad mis­take and prepar­ing for an order­ly dis­man­tling of the euro before the dam­age spreads and fur­ther under­mines Euro­pean uni­ty.

The prob­lem isn’t just the region’s lack of com­pet­i­tive­ness or its bud­get deficits or the high stock of exist­ing gov­ern­ment debt, which the Inter­na­tional Mon­e­tary Fund now puts at 90 per­cent of the euro area’s gross domes­tic prod­uct (see Table 5 in this report). It is all of the above, com­pounded by five years of com­plete polit­i­cal denial.

For three years, cap­i­tal has been flee­ing Europe’s periph­ery for Ger­many. That country’s liq­uid banks, com­pet­i­tive labor mar­kets and sound fis­cal poli­cies have made it the ide­al loca­tion in Europe for invest­ment. The periphery’s illiq­uid banks are sharply con­tract­ing cred­it to the pro­duc­tive sec­tor, even as their gov­ern­ments are cut­ting back and polit­i­cal protests are mount­ing. Wages are too slow to adjust to dent these pow­er­ful forces: Ger­many looks ever more attrac­tive for investors, fur­ther exac­er­bat­ing the imbal­ances that brought us to this point.

“Euro­dammerung” by Paul Krug­man; The New York Times; 5/13/2012.

EXCERPT: Some of us have been talk­ing it over, and here’s what we think the end game looks like:
1. Greek euro exit, very pos­si­bly next month.

2. Huge with­drawals from Span­ish and Ital­ian banks, as depos­i­tors try to move their mon­ey to Ger­many.

3a. Maybe, just pos­si­bly, de fac­to con­trols, with banks for­bid­den to trans­fer deposits out of coun­try and lim­its on cash with­drawals.

3b. Alter­na­tive­ly, or maybe in tan­dem, huge draws on ECB cred­it to keep the banks from col­laps­ing.

4a. Ger­many has a choice. Accept huge indi­rect pub­lic claims on Italy and Spain, plus a dras­tic revi­sion of strat­e­gy — basi­cal­ly, to give Spain in par­tic­u­lar any hope you need both guar­an­tees on its debt to hold bor­row­ing costs down and a high­er euro­zone infla­tion tar­get to make rel­a­tive price adjust­ment pos­si­ble; or:

4b. End of the euro.

And we’re talk­ing about months, not years, for this to play out. [Just in time for the U.S. elections–D.E.]

Discussion

16 comments for “Update on the EMU/Euro as Vehicle for Conquering Europe, World”

  1. Der Speigel agrees: it’s time for Greece to go:

    Influ­en­tial Ger­man mag­a­zine calls for Greek exit from euro
    BERLIN | Sun May 13, 2012 9:59am EDT

    (Reuters) — “Acrop­o­lis, Adieu! Why Greece must leave the euro,” reads the front-page head­line of Ger­many’s most influ­en­tial mag­a­zine Der Spiegel, join­ing a cho­rus of voic­es in Europe’s pay­mas­ter coun­try sug­gest­ing an exit may now be the best option.

    In a sign Ger­many is com­ing to terms with a pos­si­ble Greek depar­ture, senior play­ers in both busi­ness and polit­i­cal com­mu­ni­ties said this week the euro zone could sur­vive with­out Greece because the bloc is now more resilient to shocks.

    But Der Spiegel, one of Ger­many’s most respect­ed news out­lets, went one step fur­ther, argu­ing a Greek exit was the only way for­wards now. Its front page depict­ed a splin­tered euro coin strewn across ancient Greek ruins at dusk.

    “Despite all the skep­ti­cism, our edi­tors have until now plead­ed for Athens to remain in the euro zone,” Der Spiegel wrote in its edi­to­r­i­al col­umn. “Since the par­lia­men­tary elec­tions at the begin­ning of May, Spiegel observers have changed their opin­ion.”

    ...

    Posted by Pterrafractyl | May 14, 2012, 9:06 pm
  2. I should also point out that despite the machi­na­tions of malcontents......I’ve par­tic­i­pat­ed in one of the biggest pro-Demo­c­rat forums in the coun­try for a lit­tle while now and it does seem that the major­i­ty of the OWS activists there at least there, are very much pro-Oba­ma and anti-Ron Paul, at least in the sense of ‘I’ll vote for the less­er of the two evils’, for lack of a bet­ter term.

    Posted by Steve L. | May 14, 2012, 11:05 pm
  3. And let’s not for­get the loom­ing threat of con­gress refus­ing to raise the debt lim­it and shut­ting down the gov­ern­ment this fall. John Boehn­er is about to give a speech at a Pete Peter­son Foun­da­tion event, and he appears to be plan­ning on a debt-lim­it gov­ern­ment shut­down show­down:

    TPMDC
    Boehn­er: We’ll Do Debt Lim­it Brinks­man­ship All Over Again
    Bri­an Beut­ler May 15, 2012, 10:40 AM

    Trea­sury Sec­re­tary Tim­o­thy Gei­th­n­er wants Con­gress to raise the debt lim­it again lat­er this year “with­out dra­ma, pain and dam­age.”

    House Speak­er John Boehn­er has oth­er ideas.

    In remarks at the 2012 Peter G. Peter­son Foun­da­tion, Boehn­er will erect the same require­ments for rais­ing the debt lim­it this com­ing win­ter that near­ly led the coun­try to default on its debt last August.

    “We shouldn’t dread the debt lim­it. We should wel­come it. It’s an action-forc­ing event in a town that has become infa­mous for inac­tion,” Boehn­er will say accord­ing to excerpts of pre­pared remarks pro­vid­ed by his office. “That night in New York City, I put forth the prin­ci­ple that we should not raise the debt ceil­ing with­out real spend­ing cuts and reforms that exceed the amount of the debt lim­it increase”. When the time comes, I will again insist on my sim­ple prin­ci­ple of cuts and reforms greater than the debt lim­it increase. This is the only avenue I see right now to force the elect­ed lead­er­ship of this coun­try to solve our struc­tur­al fis­cal imbal­ance. If that means we have to do a series of stop-gap mea­sures, so be it — but that’s not the ide­al. Let’s start solv­ing the prob­lem. We can make the bold cuts and reforms nec­es­sary to meet this prin­ci­ple, and we must.”

    ...

    As von Clause­witz puts it, war is pol­i­tics by oth­er means. It’s Eco­nom­ic war­fare

    Posted by Pterrafractyl | May 15, 2012, 8:57 am
  4. While I might not agree with Japan’s Prime Min­is­ter that the euro­zone cri­sis rep­re­sents the ‘biggest’ threat to Japan’s econ­o­my (Fukushi­ma Dai­ichi Reac­tor 4 has sure­ly secured that cov­et­ed title), it’s worth remem­ber­ing that the euro­zone cri­sis is heat­ing up at a time when Japan’s econ­o­my is still melt­ing down.

    Posted by Pterrafractyl | May 15, 2012, 8:26 pm
  5. With a new round of Greek elec­tions slat­ed for next month and talk of an offi­cial Greek exit from the euro­zone — the much feared ‘Grex­it’ — a run jog on the Greek banks is under­way. So this, of course, is a time when the ‘con­fi­dence’ of the ‘mar­ket’ in the ‘cred­i­bil­i­ty’ of the Greek finan­cial sys­tem and the larg­er euro­zone is going to be a large pre­mi­um if th ECB wants to avoid spook­ing the mar­kets even more. I’m not sure this is the ECB’s most con­fi­dence-induc­ing move:

    Bloomberg
    ECB Stops Loans to Some Greek Banks as Draghi Talks Exit
    By Jeff Black and Jana Randow on May 16, 2012

    The Euro­pean Cen­tral Bank said it will tem­porar­i­ly stop lend­ing to some Greek banks to lim­it its risk as Pres­i­dent Mario Draghi sig­naled the ECB won’t com­pro­mise on key prin­ci­ples to keep Greece in the euro area.

    The Frank­furt-based ECB said today it will push the respon­si­bil­i­ty for lend­ing to some Greek finan­cial insti­tu­tions onto the Greek cen­tral bank until they have suf­fi­cient­ly boost­ed their cap­i­tal. “Once the recap­i­tal­iza­tion process is final­ized, and we expect this to be final­ized soon, the banks will regain access to stan­dard Eurosys­tem refi­nanc­ing oper­a­tions,” the ECB said in an emailed state­ment.

    The move comes after Draghi acknowl­edged for the first time that Greece could leave the mon­e­tary union. While the bank’s “strong pref­er­ence” is that Greece stays in the 17-nation euro area, the ECB will con­tin­ue to pre­serve “the integri­ty of our bal­ance sheet,” he said in a speech in Frank­furt today.

    “A Greek exit was seen as an absur­di­ty up to now,” said Thomas Costerg, an econ­o­mist at Stan­dard Char­tered Bank in Lon­don. “It is grad­u­al­ly becom­ing the main sce­nario. The ECB is pri­or­i­tiz­ing its bal­ance sheet over mon­e­tary-union geog­ra­phy.”

    ...

    Posted by Pterrafractyl | May 16, 2012, 2:24 pm
  6. @Steven–

    You are mak­ing a seri­ous ide­o­log­i­cal mis­take.

    It is NOT about right and left.

    It is about right and wrong.

    Pol Pot, Stal­in and Mao con­sti­tute no accept­able alter­na­tive to the right.

    And as far as this coun­try goes, you con­tin­ue to make the fun­da­men­tal mis­take of fail­ing to under­stand that, in the US, the so-called “left” is run by the intel­li­gence com­mu­ni­ty and the far right.

    You don’t get an instant nation­al phe­nom­e­non like the “Occu­py” move­ment from a hand­ful of left­ies meet­ing in a god­damn apart­ment in NYC.

    What­ev­er “Moth­er Jones” says.

    As FDR said, “In pol­i­tics, noth­ing hap­pens by acci­dent.”

    You don’t get a phe­nom­e­non like “The Mus­lim Broth­er­hood Spring” aris­ing out of some damned shop­keep­er in Tunisia torch­ing him­self.

    You DO get some­thing like that from an intel­li­gence oper­a­tion begun under Bush and con­tin­ued under Oba­ma.

    As I have doc­u­ment­ed.

    You are too young to remem­ber Bush I, but just before leav­ing office, he invad­ed Soma­lia, set­ting the stage for “Black Hawk Down,” Al Qae­da, 9/11 etc.

    Cheers,

    D

    Posted by Dave Emory | May 16, 2012, 8:43 pm
  7. Thank you Dave for say­ing that. On my blog, I make it a duty to swing on “both sides of the plate”, to use a base­ball metaphor. Com­mu­nism or social­ism is anoth­er form of fas­cism but instead of being based on the pow­er of cor­po­ra­tions, it is on a very strong cen­tral state and marx­ist-lenin­ist ideas. So every­time I have an occa­sion to punch some­thing that is marxist,leninist, social­ist or com­mu­nist, total­i­tar­i­an in oth­er words, I don’t miss the shot.

    I agree with you that the Left in gen­er­al and the Occu­py move­ment is run by the intel­li­gence com­mu­ni­ty and the far right. We do have seri­ous “stu­dent protests” here in Mon­tre­al, besides our own “Occu­py Mon­tre­al” phe­nom­e­non, and the fin­ger­prints of the intel­li­gence com­mu­ni­ty are all over the place. One has to be blind not to see that, but unfor­tu­nate­ly, I seem to be among the few ones who do. I have tried to warn my fel­low cit­i­zens about it and I pro­duced two videos and an arti­cle. For those who read and/or under­stand French, that may inter­est you.

    Best.

    http://www.youtube.com/watch?v=GsW5zk8B6kU

    http://www.youtube.com/watch?v=tISuC9Ur2Io

    http://lys-dor.com/2012/04/29/loperation-de-destabilisation-du-quebec-deuxieme-chapitre-lascension-fulgurante-de-larchange-gabriel-nadeau-dubois/

    Posted by Claude | May 16, 2012, 10:36 pm
  8. The log­ic of fas­cism and our impe­ri­al­ist mon­ey sys­tem excludes any­thing like a per­ma­nent lim­it to pop­u­lar debt. The ongo­ing destruc­tion of any pos­si­bil­i­ty of democ­ra­cy demands that mil­i­tary spend­ing con­tin­u­al­ly increase as a per­cent­age of the whole while the pop­u­la­tion is increas­ing­ly impov­er­ished. If a debt lim­it were imposed it would only last as long as any rem­nant of social spend­ing still exist­ed. To keep it in place after that would lim­it mil­i­tary expen­di­tures and actu­al­ly begin to reduce the pub­lic oblig­a­tion through infla­tion. This sys­tem will reach no point of sta­bil­i­ty, even if the major­i­ty of healthy labor­ers are held to min­i­mum sub­sis­tence. It will either col­lapse com­plete­ly or morph into a new form. What­ev­er con­trol sys­tem of invol­un­tary servi­tude replaces it, these dis­cus­sions of pub­lic debt as any­thing but occult slav­ery will seem triv­ial.

    Posted by Dwight | May 17, 2012, 5:27 am
  9. As a case in point for the sys­temic and bot­tom­less avarice of the rul­ing class:

    http://www.latimes.com/news/opinion/commentary/la-oe-ehrenreich-stealing-from-the-poor-20120517,0,7201749.story

    The poster case for gov­ern­ment per­se­cu­tion of the down and out would have to be Edwina Nowl­in, a home­less Michi­gan woman who was jailed in 2009 for fail­ing to pay $104 a month to cov­er the room and board charges for her 16-year-old son’s incar­cer­a­tion. When she received a back pay­check, she thought it would allow her to pay for her son’s jail stay. Instead, it was con­fis­cat­ed and applied to the cost of her ongo­ing incar­cer­a­tion.

    The age of Arbeit Macht Frei is just begin­ning.

    Posted by Dwight | May 18, 2012, 4:02 am
  10. A moment of clar­i­ty from Bank of Eng­land pol­i­cy­mak­er Adam Posen:

    BoE’s Posen says may have to revise QE view
    LONDON | Fri May 18, 2012 4:06am EDT

    May 18 (Reuters) — Bank of Eng­land pol­i­cy­mak­er Adam Posen said in inter­view on Fri­day he may have been pre­ma­ture in drop­ping his call for addi­tion­al stim­u­lus last month, because the under­ly­ing econ­o­my may be weak­er than he thought ear­li­er this year.

    In an inter­view pub­lished by newsire MNSI, Posen also said he was not sure the UK had avoid­ed falling into a Japan-style down­turn.

    “I had been hope­ful in the last few months that after we did an addi­tion­al 125 bil­lion pounds (quan­ti­ta­tive eas­ing) that was get­ting close to enough. And now I am debat­ing whether ... I was pre­ma­ture to think that,” he was quot­ed as say­ing.

    ...

    Fol­lowed by a moment of bewil­der­ment from Bank of Eng­land pol­i­cy­mak­er Adam Posen:

    May 18, 2012, 10:07 AM
    WSJ
    Bank of England’s Posen Named to Lead Peter­son Insti­tute

    By Sudeep Red­dy

    The Peter­son Insti­tute for Inter­na­tion­al Eco­nom­ics on Fri­day named Adam Posen, an out­spo­ken pol­i­cy­mak­er at the Bank of Eng­land, as its new direc­tor.

    Posen, an Amer­i­can econ­o­mist and vocal pro­po­nent of aggres­sive cen­tral bank action to boost strug­gling economies, had served as the Wash­ing­ton think tank’s deputy direc­tor before his appoint­ment in Sep­tem­ber 2009 to a three-year term as an exter­nal mem­ber of the British cen­tral bank’s mon­e­tary pol­i­cy com­mit­tee. He has remained a senior fel­low at Peter­son. (The British gov­ern­ment allows for­eign­ers to serve as pol­i­cy­mak­ers.)

    Posen will suc­ceed Fred Berg­sten, who plans to con­tin­ue research at the think tank he found­ed three decades ago. The appoint­ment will take effect next Jan­u­ary.

    As one of nine offi­cials with a vote on British mon­e­tary pol­i­cy, Posen has been one of the world’s strongest advo­cates for more mon­e­tary eas­ing by the Bank of Eng­land and oth­er major cen­tral banks. In a speech last fall, he warned that “pol­i­cy defeatism” had spurred offi­cials in West­ern Europe, the U.S. and Japan to aban­don stim­u­la­tive poli­cies too ear­ly over the past cen­tu­ry.

    “Every time, this was due to undu­ly influ­en­tial voic­es claim­ing some com­bi­na­tion of the destruc­tive­ness of fur­ther pol­i­cy stim­u­lus, the inef­fec­tive­ness of fur­ther pol­i­cy stim­u­lus, or the polit­i­cal cor­rup­tion from fur­ther pol­i­cy stim­u­lus. Every time those voic­es were wrong on each and every count,” he said. “If we do not under­take the stim­u­la­tive pol­i­cy that the out­look calls for, then our economies and our peo­ple will suf­fer avoid­able and poten­tial­ly last­ing dam­age.”
    ...

    So the Bank of Eng­land’s biggest advo­cate for more stim­u­lus just got hired to lead the Pete “aus­ter­i­ty” Peter­son Insti­tute. That must have been one inter­est­ing job inter­view.

    Posted by Pterrafractyl | May 18, 2012, 8:36 am
  11. Caveat: I rec­og­nize & under­stand the source web­site is dubi­ous. How­ev­er, per­haps this sto­ry will be ver­i­fied & fol­lowed-up on else­where in the com­ing days. The strik­ing head­line does not get much devel­op­ment in the sto­ry itself, as per usu­al with the Dai­ly Mail.

    http://www.dailymail.co.uk/news/article-1251136/Spanish-intelligence-probe-debt-attacks-blamed-sabotaging-countrys-economy.html

    Span­ish intel­li­gence probe ‘debt attacks’ blamed for sab­o­tag­ing coun­try’s econ­o­my
    By MAIL FOREIGN SERVICE
    UPDATED: 10:58 EST, 15 Feb­ru­ary 2010

    Spain’s intel­li­gence ser­vices are inves­ti­gat­ing the role of investors and media in debt mar­ket tur­bu­lence over the last few weeks.

    The Nation­al Intel­li­gence Cen­tre (CNI) is look­ing into ‘spec­u­la­tive attacks’ on Spain fol­low­ing the Greek debt cri­sis, accord­ing to El Pais news­pa­per.

    ‘The (CNI’s) Eco­nom­ic Intel­li­gence divi­sion... is inves­ti­gat­ing whether investors’ attacks and the aggres­sive­ness of some Anglo-Sax­on media are dri­ven by mar­ket forces and chal­lenges fac­ing the Span­ish econ­o­my, or whether there is some­thing more behind this cam­paign,’ the news­pa­per added.

    The report comes days after Pub­lic Works Min­is­ter Jose Blan­co protest­ed ‘some­what murky manoeu­vres’ were behind finan­cial mar­ket pres­sure on Spain.

    ‘None of what is hap­pen­ing in the world, includ­ing the edi­to­ri­als of for­eign news­pa­pers, is coin­ci­den­tal or inno­cent,’ Blan­co said.

    Econ­o­mists have cast doubt on fore­casts that Spain’s econ­o­my will grow by some 3 per cent by 2012, on which the gov­ern­ment has based pre­dic­tions it will cut back on its gap­ing bud­get deficit.

    Some econ­o­mists have said Spain’s deficit could be more of a threat than Greece to the euro, the com­mon cur­ren­cy of 16 Euro­pean coun­tries.

    Spain’s deficit has soared to 11.4 per cent of its gross domes­tic prod­uct amid its deep­est reces­sion in decades, but the gov­ern­ment has pledged to cut the gap back to a euro­zone lim­it of 3 per cent by 2013 by cut­ting 50 bil­lion euros in spend­ing.

    Mar­kets doubt that Spain will be able to cut back dras­ti­cal­ly on spend­ing with unem­ploy­ment run­ning at 20 per cent and a big slice of the bud­get in the hands of fierce­ly inde­pen­dent region­al gov­ern­ments.

    Under­scor­ing those doubts, the pre­mi­um demand­ed by investors for buy­ing Span­ish rather than Ger­man gov­ern­ment bonds has risen in recent weeks and the cost of insur­ing Span­ish bonds against default by the gov­ern­ment has also risen.

    Mean­while, Euro zone finance min­is­ters will exert more pres­sure on Greece to imple­ment planned bud­get deficit cuts at a meet­ing on Mon­day, as they look to avoid hav­ing to deliv­er on a pledge of sup­port for Athens.

    They are not expect­ed to ask Greece for addi­tion­al fis­cal mea­sures until after a review of Athens’ sit­u­a­tion in March, although they may dis­cuss what extra steps Greece could be asked to take if it does not show progress, sources said.

    Euro­pean lead­ers told Greece on Thurs­day it must cut its bud­get deficit by 4 per­cent­age points this year, from 12.7 per cent of GDP, and bring it below the EU ceil­ing of 3 per cent by 2012, moves that Athens has said it will make.

    That mes­sage will be reit­er­at­ed by finance min­is­ters from the 16 coun­tries using the euro at a meet­ing on Mon­day.

    ‘For 2010, Greece already has com­mit­ments in place. Greece must sim­ply be pre­cise about what it is going to do (to get there),’ a senior EU source said last week.

    ‘(Any) addi­tion­al mea­sures are for 2011 and 2012.’
    EU lead­ers are hop­ing that pres­sure and a con­cert­ed effort by Greece will be enough to get on top of the coun­try’s deficit and debt prob­lems and assuage mar­kets.

    But they have said they are pre­pared to take ‘deter­mined and coor­di­nat­ed’ action to safe­guard finan­cial sta­bil­i­ty in the euro area if need­ed.

    That was designed to send a sig­nal to the bond and cur­ren­cy mar­kets — where Greek yields have come under intense pres­sure and the euro has weak­ened — that Greece will not be allowed to default on its debt and that the euro is not threat­ened.

    But lead­ers did not spec­i­fy what they would do to sup­port Greece if it came to it, a lack of detail that has left mar­kets with a rea­son to dis­count both Greece and the euro.

    In a state­ment after the EU lead­ers’ sum­mit last week, Euro­pean Cen­tral Bank Pres­i­dent Jean-Claude Trichet not­ed Athens’ com­mit­ment to do what­ev­er was nec­es­sary, ‘includ­ing adopt­ing addi­tion­al mea­sures’ to ensure its bud­get deficit cut tar­get was imple­ment­ed.

    The pre­mi­um investors demand to hold 10-year Greek gov­ern­ment bonds rather than bench­mark Ger­man Bunds rose to 302 basis points on Mon­day, from 275 bps late on Thurs­day, and the euro was trad­ing down at 1.3610 to the dol­lar.

    Con­cerned about how the mar­ket is exploit­ing Greece’s weak­ness, and by exten­sion that of the euro, euro zone finance min­is­ters could also dis­cuss mea­sures to restrict short-sell­ing of Greek debt via cred­it default swaps, one source said.

    While euro zone finance min­is­ters are agreed that the pri­ma­ry respon­si­bil­i­ty lies with Greece to get its fis­cal and eco­nom­ic house in order, Athens’ deter­mi­na­tion to act is being test­ed by unions, which don’t want to see spend­ing cuts.

    With unem­ploy­ment ris­ing in Greece and social unrest always just below the sur­face, deep bud­get cuts and high­er tax­es could put the Social­ist gov­ern­ment on a col­li­sion course with the peo­ple.

    ‘Greece must do what it must do. If they do that, there will be no need for spe­cif­ic mea­sures,’ one euro zone source involved in the prepa­ra­tions of Mon­day’s meet­ing said.

    ‘If they don’t do that, there will be a show of deter­mined and coor­di­nat­ed action, which is unspec­i­fied as yet,’ he said, hint­ing at the finan­cial sup­port mea­sures that could be tak­en.

    Such mea­sures will not be dis­cussed on Mon­day because it was too ear­ly, sev­er­al euro zone sources said. Greece was still able to bor­row mon­ey on the mar­ket and detail­ing res­cue steps now would send a sig­nal that the sit­u­a­tion was crit­i­cal already.

    ‘The min­is­ters are very reluc­tant to define any­thing ex-ante. When there is a prob­lem, they will sit down and ham­mer it out in 30 min­utes,’ a sec­ond euro zone source said.

    Eurogroup Chair­man Jean-Claude Junck­er told the Ger­man Sued­deutsche Zeitung news­pa­per in an inter­view on Sat­ur­day there were instru­ments avail­able for an inter­ven­tion that could be used when nec­es­sary, but he would not name any at this stage.

    On Mon­day and Tues­day, EU finance min­is­ters will endorse the Greek deficit cut­ting plan which has already been approved by the Euro­pean Com­mis­sion, the EU exec­u­tive arm.

    They will also step up the 27-nation bloc’s dis­ci­pli­nary bud­get pro­ce­dure against Athens to the last stage before sanc­tions. If Athens does not take the action rec­om­mend­ed by the min­is­ters to cut the deficit, the EU could fine it.

    ‘There will be more pres­sure on Greece to deliv­er rather than more work in prepar­ing the euro zone for a sce­nario that Greece fails to deliv­er,’ the first euro zone sourced said.

    Posted by R. Wilson | May 18, 2012, 11:31 am
  12. http://www.nytimes.com/2012/05/18/opinion/krugman-apocalypse-fairly-soon.html

    May 17, 2012
    Apoc­a­lypse Fair­ly Soon
    By PAUL KRUGMAN
    Sud­den­ly, it has become easy to see how the euro — that grand, flawed exper­i­ment in mon­e­tary union with­out polit­i­cal union — could come apart at the seams. We’re not talk­ing about a dis­tant prospect, either. Things could fall apart with stun­ning speed, in a mat­ter of months, not years. And the costs — both eco­nom­ic and, arguably even more impor­tant, polit­i­cal — could be huge.

    This doesn’t have to hap­pen; the euro (or at least most of it) could still be saved. But this will require that Euro­pean lead­ers, espe­cial­ly in Ger­many and at the Euro­pean Cen­tral Bank, start act­ing very dif­fer­ent­ly from the way they’ve act­ed these past few years. They need to stop mor­al­iz­ing and deal with real­i­ty; they need to stop tem­po­riz­ing and, for once, get ahead of the curve.

    I wish I could say that I was opti­mistic.

    The sto­ry so far: When the euro came into exis­tence, there was a great wave of opti­mism in Europe — and that, it turned out, was the worst thing that could have hap­pened. Mon­ey poured into Spain and oth­er nations, which were now seen as safe invest­ments; this flood of cap­i­tal fueled huge hous­ing bub­bles and huge trade deficits. Then, with the finan­cial cri­sis of 2008, the flood dried up, caus­ing severe slumps in the very nations that had boomed before.

    At that point, Europe’s lack of polit­i­cal union became a severe lia­bil­i­ty. Flori­da and Spain both had hous­ing bub­bles, but when Florida’s bub­ble burst, retirees could still count on get­ting their Social Secu­ri­ty and Medicare checks from Wash­ing­ton. Spain receives no com­pa­ra­ble sup­port. So the burst bub­ble turned into a fis­cal cri­sis, too.

    Europe’s answer has been aus­ter­i­ty: sav­age spend­ing cuts in an attempt to reas­sure bond mar­kets. Yet as any sen­si­ble econ­o­mist could have told you (and we did, we did), these cuts deep­ened the depres­sion in Europe’s trou­bled economies, which both fur­ther under­mined investor con­fi­dence and led to grow­ing polit­i­cal insta­bil­i­ty.

    And now comes the moment of truth.

    Greece is, for the moment, the focal point. Vot­ers who are under­stand­ably angry at poli­cies that have pro­duced 22 per­cent unem­ploy­ment — more than 50 per­cent among the young — turned on the par­ties enforc­ing those poli­cies. And because the entire Greek polit­i­cal estab­lish­ment was, in effect, bul­lied into endors­ing a doomed eco­nom­ic ortho­doxy, the result of vot­er revul­sion has been ris­ing pow­er for extrem­ists. Even if the polls are wrong and the gov­ern­ing coali­tion some­how ekes out a major­i­ty in the next round of vot­ing, this game is basi­cal­ly up: Greece won’t, can’t pur­sue the poli­cies that Ger­many and the Euro­pean Cen­tral Bank are demand­ing.

    So now what? Right now, Greece is expe­ri­enc­ing what’s being called a “bank jog” — a some­what slow-motion bank run, as more and more depos­i­tors pull out their cash in antic­i­pa­tion of a pos­si­ble Greek exit from the euro. Europe’s cen­tral bank is, in effect, financ­ing this bank run by lend­ing Greece the nec­es­sary euros; if and (prob­a­bly) when the cen­tral bank decides it can lend no more, Greece will be forced to aban­don the euro and issue its own cur­ren­cy again.

    This demon­stra­tion that the euro is, in fact, reversible would lead, in turn, to runs on Span­ish and Ital­ian banks. Once again the Euro­pean Cen­tral Bank would have to choose whether to pro­vide open-end­ed financ­ing; if it were to say no, the euro as a whole would blow up.

    Yet financ­ing isn’t enough. Italy and, in par­tic­u­lar, Spain must be offered hope — an eco­nom­ic envi­ron­ment in which they have some rea­son­able prospect of emerg­ing from aus­ter­i­ty and depres­sion. Real­is­ti­cal­ly, the only way to pro­vide such an envi­ron­ment would be for the cen­tral bank to drop its obses­sion with price sta­bil­i­ty, to accept and indeed encour­age sev­er­al years of 3 per­cent or 4 per­cent infla­tion in Europe (and more than that in Ger­many).

    Both the cen­tral bankers and the Ger­mans hate this idea, but it’s the only plau­si­ble way the euro might be saved. For the past two-and-a-half years, Euro­pean lead­ers have respond­ed to cri­sis with half-mea­sures that buy time, yet they have made no use of that time. Now time has run out.

    So will Europe final­ly rise to the occa­sion? Let’s hope so — and not just because a euro breakup would have neg­a­tive rip­ple effects through­out the world. For the biggest costs of Euro­pean pol­i­cy fail­ure would prob­a­bly be polit­i­cal.

    Think of it this way: Fail­ure of the euro would amount to a huge defeat for the broad­er Euro­pean project, the attempt to bring peace, pros­per­i­ty and democ­ra­cy to a con­ti­nent with a ter­ri­ble his­to­ry. It would also have much the same effect that the fail­ure of aus­ter­i­ty is hav­ing in Greece, dis­cred­it­ing the polit­i­cal main­stream and empow­er­ing extrem­ists.

    All of us, then, have a big stake in Euro­pean suc­cess — yet it’s up to the Euro­peans them­selves to deliv­er that suc­cess. The whole world is wait­ing to see whether they’re up to the task.

    Posted by R. Wilson | May 18, 2012, 12:01 pm
  13. Here’s a fas­ci­nat­ing exam­ple of the inher­ent sys­temic chal­lenges in mon­e­tary union: One of the more inter­est­ing quirks we’re now see­ing dur­ing this time of cri­sis is that inter­est rates with­in the euro­zone seem to move in oppo­site direc­tions, with inter­est spikes in place like Spain coin­cid­ing with record low inter­est rates in Ger­many. This bifur­ca­tion of the euro­zone economies is some­what iron­ice giv­en the stat­ed aim of the euro­zone to even­tu­al­ly homog­e­nize the con­ti­nent. And it sort of makes sense that we would see this kind of behavior...after all, if investors want to move their mon­ey out of trou­bled euro­zone econ­o­my, one of the best safe-havens around would be Ger­many since its cur­ren­cy is increas­ing­ly under­val­ued as the euro­zone cri­sis chugs along and Ger­many’s neigh­bors fall fur­ther and fur­ther into eco­nom­ic dis­pair. Plus, there’s no trans­ac­tion costs of con­vert­ing to a new cur­ren­cy. So this isn’t par­tic­u­lar­ly sur­pris­ing, but still inter­est­ing to watch since the world is sort of in unchart­ed ter­ri­to­ry with respect to large cur­ren­cy unions under­go­ing death spasms. And because it was a hous­ing bub­ble in places like Spain and Ire­land that real­ly led to the cri­sis in the first place (Greece real­ly is the only excep­tion) it’s some­what iron­ic that and sub­se­quent plunge in Ger­man inter­est rates is lead­ing to a new hous­ing bub­ble forming...in Ger­many. And that, of course, has the Bun­des­bank and ECB all on edge over infla­tion, lead­ing to calls for the ECB to raise inter­est rates. But, since that move by the ECB would send the euro­zone’s ail­ing economies back into a tail­spin (more so), the ECB is going to be forced to decide between a mild fever in the core or ampu­ta­tion of some limbs:

    05/03/2011
    Der Spiegel
    Risks of Eco­nom­ic Over­heat­ing Ger­man Boom Fuels Infla­tion Angst

    By Katrin Elger, Peter Müller and Chris­t­ian Reier­mann
    The Ger­man eco­nom­ic boom is fuelling infla­tion, and prices are expect­ed to keep ris­ing because of Europe’s one-size-fits-all mon­e­tary pol­i­cy. The Euro­pean Cen­tral Bank can’t raise inter­est rates aggres­sive­ly enough to curb Ger­man price pres­sures because that would hurt the weak­er euro-zone economies.

    In the last few days of his term, out­go­ing Bun­des­bank Pres­i­dent Axel Weber appeared extreme­ly sat­is­fied with how effec­tive­ly he had done his job. Look­ing back on sev­en years as head of the Ger­man cen­tral bank, he said, “we actu­al­ly achieved quite a lot.” Every­where Weber goes, peo­ple rave about Ger­many’s rapid eco­nom­ic recov­ery. In oth­er words, things could­n’t be bet­ter — that is, if it weren’t for a nag­ging prob­lem that threat­ens to over­shad­ow all the pos­i­tive news.

    Weber him­self describes it in banker-speak: “Along with the eco­nom­ic upswing, we see a dete­ri­o­ra­tion in the price out­look.” In plain Eng­lish: Prices are threat­en­ing to spi­ral out of con­trol, and infla­tion is rear­ing its ugly head again.

    The lat­est fig­ures are indeed unset­tling. Com­pared with the same month last year, con­sumer prices in Ger­many rose by 2.4 per­cent in April — the biggest increase since the out­break of the finan­cial cri­sis in 2008.

    This means that, for the fourth month in a row, the infla­tion rate in the euro zone’s largest econ­o­my has been above the thresh­old of what the Euro­pean Cen­tral Bank (ECB) con­sid­ers com­pat­i­ble with gen­er­al price sta­bil­i­ty, name­ly two per­cent.

    Weber, who shares the cen­tral bankers’ tra­di­tion­al aver­sion to infla­tion, already pre­dicts dif­fi­cult times ahead for the Ger­man econ­o­my: “We can­not rule out that over the com­ing months we may even see a three in front of the dec­i­mal point.”

    Oth­ers are even more pes­simistic: “We will have to get used to the fact that Ger­many will have infla­tion rates of between three and four per­cent in the com­ing years,” says Clemens Fuest, an econ­o­mist at Oxford Uni­ver­si­ty and a mem­ber of the Sci­en­tif­ic Advi­so­ry Board of the Ger­man Finance Min­istry. Olivi­er Blan­chard, the chief econ­o­mist at the Inter­na­tion­al Mon­e­tary Fund, has repeat­ed­ly told the Ger­mans that they will have to come to terms with an annu­al infla­tion rate of around four per­cent.

    ...

    Ooooo...3–4% infa­tion. That must sound awful to the 50% of the Span­ish youth that can’t find a job. Can we call it the Weimar­zone yet?

    Posted by Pterrafractyl | May 18, 2012, 1:48 pm
  14. Pun alert!

    ***

    I found this to be rather un-inter­est­ing:

    May 22, 2012, 9:58 a.m. ET
    WSJ
    Ger­many to Sell Inter­est-Free Bonds

    BY NEELABH CHATURVEDI AND EMESE BARTHA

    LON­DON-Ger­many will for the first time sell two-year bonds on Wednes­day that won’t make sched­uled inter­est rate pay­ments, a ring­ing endorse­ment of the safe appeal of Ger­man debt and a reflec­tion of increased mar­ket ner­vous­ness over the com­po­si­tion and direc­tion of the euro zone.

    The Ger­man fed­er­al gov­ern­ment Tues­day set a zero coupon on a new issue of two-year fed­er­al Trea­sury notes, or Schatz. Ger­many will auc­tion 5 bil­lion euros ($6.41 bil­lion) of the two-year note on Wednes­day.
    ...

    The pun alert has been can­celled.

    Posted by Pterrafractyl | May 22, 2012, 7:48 am
  15. Ha! ‘Ran­som’. Price­less.

    Well, on sec­ond thought it’s not exact­ly priceless...sometimes moments of amuse­ment come with a 19 bil­lion euro price tag.

    And then there’s the loss of nation­al dig­ni­ty when stunts like this are pulled and that loss is hard to put a price on.

    So yeah, on third thought I guess it is sort of price­less...

    Posted by Pterrafractyl | May 25, 2012, 8:38 am
  16. [...] Update on the EMU/Euro as Vehi­cle for Con­quer­ing Europe, World [...]

    Posted by Miscellaneous articles for – Articles divers pour 06-05-2012 | Lys-d'Or | June 5, 2012, 4:26 pm

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