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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. . . .


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.

    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.


    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!

    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:

    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.


    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:


    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
    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:

    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
    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:


    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
    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.



    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

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