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

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

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

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

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

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

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

A bank­ing union, too, would be anoth­er stage.

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

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

...

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

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

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

...

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

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

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

Ger­man pub­lic oppo­si­tion to pro­pos­als to ease up on aus­ter­i­ty has been one of the most fre­quent­ly cit­ed rea­sons for Merkels unre­lent­ing oppo­si­tion such ideas. This does­n’t bode well:

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

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

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

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

...

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

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

...

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

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

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

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

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

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

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

...

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

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

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

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

...

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

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

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

There con­tin­ue to remain only two, long-term solu­tions to the euro prob­lems:

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

That’s it. No oth­er solu­tions.

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

@Bambi: Every cri­sis has a gold­en Shock Doc­trine lin­ing:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

...

.
‘Dras­tic Moves’

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

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

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

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

exact­ly as I fore­cast in “Ger­many’s FOUR Reichs”(2002)Merkel is dri­ven by Ger­man Elite

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

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

And here we go again! Spain gets a troi­ka:

Mar­ket eupho­ria over Span­ish bank bailout fiz­zles

By Sonya Dowsett and Gareth Jones

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

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

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

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

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

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

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

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

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

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

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

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

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

...

Bra­vo Angela, Bra­vo. *golf clap*:

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

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

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

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

...

Per­spec­tive. Not that it helps much in our post-per­spec­tive world, but it’s still kind of inter­est­ing.

**Pun alert!**

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

Spain bond yields at record as Fitch cuts 18 banks

June 12, 2012 11:25 AM ET

By DANIEL WOOLLS, HAROLD HECKLE

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

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

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

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

...

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

**The pun alert has been can­celled**

One of the mem­bers of the Bun­des­bank claims that the ECB has done its job to buy time for ail­ing gov­ern­ments:

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

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

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

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

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

Wor­ry for Italy Quick­ly Replaces Relief for Spain

By LIZ ALDERMAN and ELISABETTA POVOLEDO
Pub­lished: June 11, 2012

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

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

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

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

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

...

Calm­ly, slow­ly, the patient is fit­ted with their new attire. The patient is told it’s only tem­po­rary. Just a gen­er­a­tion or so. Sure, Dr. Merkel. Sure:

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

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

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

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

...

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

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

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

...

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

...

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

Ah, the ol’ bad cop/impon­der­ably bad cop rou­tine:

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

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

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

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

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

...

***spoil­er alert****

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

@Pterrafractyl and com­pa­ny–

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

Rather prophet­ic, no?

Best,

Dave Emory