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Re: EUEUEUEUEU Germany must decide whether eurozone lives or dies

Posted by Olog-hai on Sun Nov 13 11:22:47 2011, in response to EUEUEUEUEU Olog, posted by RockParkMan on Sat Nov 12 14:58:17 2011.

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Germany must decide if it wants the eurozone to survive or perish

By Liam Halligan
9:30PM GMT 12 Nov 2011

European debt and equity markets ended a tumultuous week with a rally on Friday. So shares in the US and across the rest of the world rose too. But the threat of a "euroquake" — a systemic collapse that would make Lehman Brothers look tame — is by no means over. Far from it.

Europe's leaders don't know how to solve this crisis because they don't know what they want.

Should attempts be made to hold the eurozone together, with Greece staying in? Or should the threat to expel Athens be followed through, at the risk of causing further defections, with monetary union being reduced to a Franco-German rump?

This is an enormous question, which only Germany can answer. Until an answer is forthcoming, chaos will continue to ensue.

Amid fears the eurozone's debt fiasco will drag the global economy into a new recession, the US and UK are exerting huge pressure on the German Chancellor, Angela Merkel.

The Anglo-Saxon world wants Berlin to finance the expansion of the euro bailout fund — the so-called European Financial Stability Facility — from €440 billion (£376 billion) to €1 trillion.

With global markets on the brink of another meltdown, diplomatic niceties have gone. Merkel "seems intent on sitting around until we're living in Apocalypse Now," quipped a Downing Street spokesman, in a particularly ill-advised reference to Francis Ford Coppola's late-70s epic about the psychological horrors of the Vietnam War.

It isn't only the UK Government's movie parallels that are off-beam, though. Both Britain and the US are effectively urging Germany to authorize the European Central Bank to buy eurozone government bonds with abandon, not least those issued by members such as Italy, in the crosshairs of the bond market vigilantes.

Since the summer, the ECB has quietly consumed around €200 billion of government paper, in a bid to temper the borrowing costs of the eurozone's fiscal sinners.

But still, Italian yields soared way above 7 percent on 10-year money last week — levels which forced Greece, Ireland and Portugal to seek bail-outs.

The eurozone's third-largest economy, with €2.2 trillion of government debt, Italy isn't only "too big to fail", but maybe "too big to save". President Obama wants Berlin to be "decisive". David Cameron publicly says it's "difficult to understand" why the ECB isn't "doing more".

Jens Weidmann, head of Germany's Bundesbank and the ECB's dominant governor, retorts that any attempt to "leverage" the EFSF would be a "clear violation" of the institution's legal mandate, given that European treaties impose a clear "legal prohibition on monetary financing".

Amidst the semantics, the outside world wants Germany to sanction massive eurozone "quantitative easing", similar to that already carried out by the Bank of England and the US Federal Reserve. Yet Weidmann surely speaks for the vast majority of Germans when he cites fears of Weimar-style inflationary chaos, and the subsequent political disaster that ensued.

German Vice-Chancellor Philipp Roesler also points out that, if the ECB launched large-scale QE, using "virtually printed money" to clean-up the debts of Italy et al, "the impetus to create lasting stability and make reforms would disappear".

Cheered on by investors desperate for another QE sugar rush, the US and UK accuse Germany of being "intransigent" and "sanctimonious". That couldn't be further from the truth. The message from Berlin is correct, of course, even if no-one wants to hear it. Printing money doesn't work.

Having said that, Germany needs to make a decision. Either it throws caution to the wind, and does what the Anglo-Saxons want, unleashing QE to backstop Club Med debts in the name of "European unity". Or, far more sensibly and realistically, Germany finally accepts that the euro is an incoherent nonsense which, in its current form, is doing far more harm than good.

Taking this latter route would mean preparing for the ejection of Greece and Portugal and possibly other members too. It would also mean stabilizing Italy, so giving global markets some respite and allowing the world to catch its breadth, but on condition that Rome eventually goes its own way too. This really is the only genuinely sustainable outcome.

Rather than demanding that Berlin kicks the can down the road with a deeply controversial and ultimately counterproductive QE-based quick fix, the US, Britain and all the other shrill onlookers should be encouraging and facilitating the taking of a historic, traumatic, yet necessary decision by Germany to bow to the inevitable and scale the eurozone back.

The world, in short, should be building on the stand that Germany is taking, helping Europe to make the painful and difficult transition to a more stable situation — one involving a smaller, but ultimately more realistic eurozone, rather than accusing Merkel and her ministers of bad faith.

This ghastly eurozone time-bomb needs to be defused. Germany must take the decision to do that, but it can't then implement that decision alone.

One reason Italian bond yields fell late last week, to a still painful but more manageable 6.6 percent, was covert ECB secondary market intervention. The Italian Parliament also passed a new austerity package, clearing the way for the ludicrous Silvio Berlusconi — Il Cavaliere — finally to quit as prime minister.

There was further relief as Lucas Papademos was sworn into office in Greece, after days of political wrangling. The ECB and International Monetary Fund are now due to visit Athens this week and could authorize the release of another €8 billion in bailout funds.

Even amid the euphoria, though, fears were growing about Spain. The sovereign debts of the eurozone's fourth-largest economy look reasonable, at around 65 percent of GDP. While the Spanish banking sector is hiding some dodgy real estate exposure, much of its lending has been to Latin America businesses which are doing quite well. Modern Spain is a relatively well-run economy that has largely avoided the budgetary excesses of Italy and the fiscal mendacity of Greece.

Yet new data showing the Spanish economy slowed between July and September, an unsurprising development given what's been happening elsewhere in Europe, was enough to spark panic regarding the country's ability to meet its deficit-reduction targets.

The resulting surge in sovereign yields says less about Spain than it does about current market sentiment. Such sentiment isn't surprising, though, given the chaos and confusion which now passes for eurozone policymaking. Unless and until we get a big decision from Germany, solvent economies will continue to get sucked into the mire.

As French yields spiked alarmingly last week, Standard & Poor's apparently downgraded the country's top triple-A rating, a decision which was then reversed. Was this downgrade really an unfortunate "mistake", as was later claimed? Or did the French government bring almighty pressure to bear on the ratings agency, forcing them to retract?

Given the current diplomatic finger-pointing, and general lack of direction in the eurozone, such questions — previously unthinkable — are now being asked. Did the eurozone's political leaders come down on S&P like a ton of bricks? If so, the integrity of the entire Western financial system, such as it is, is now on the line.

"Hey soldier, do you know who's in command here?" asked US Army Special Operations Officer Captain Benjamin L. Willard. "Ain't you?" the spaced-out soldier replied, in one of the most memorable exchanges in Apocalypse Now.

The unavoidable truth is that Germany, practically the only large Western economy with genuine fiscal strength, is in command of the eurozone. Berlin needs to decide what it wants and make its move. And it needs to do so now.

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Re: EUEUEUEUEU Walther Funk plan alive in EUEUEU

Posted by Olog-hai on Sun Nov 13 11:35:16 2011, in response to Re: EUEUEUEUEU Germany must decide whether eurozone lives or dies, posted by Olog-hai on Sun Nov 13 11:22:47 2011.

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GERMANS PUSH EU TO THE BRINK

Sunday November 13,2011
By Neil Hamilton

The catastrophic EU plan for monetary union could almost be a case of déjà-vu.

For we have been here before. In 1941 to be exact.

Dr. Walther Funk, the Third Reich economics minister, started laying down plans for a postwar Europäische Wirtschafts Gemeinschaft, a European Economic Community, as most of Europe lay at Hitler’s feet.

This involved a common European currency, Harmonization of European Rates of Exchange, a European Agricultural Economic Order, a Common Labor Policy and The European Regional Principle.

Sound familiar?

The EU was created ostensibly as a means of stopping Germany dominating its neighbors—yet the EU has implemented large parts of the Funk Plan, even adopting the names of its institutions.

Weak European leaders are now routinely summoned to German Chancellor Angela Merkel’s presence to receive their orders on how to run their economies. Teams of EU officials are then dispatched to ensure compliance.

Sometimes, events are even more dramatic. Last week, the Greek and Italian PMs, Papandreou and Berlusconi, were forced to walk the plank, largely as a result of EU pressure from Germany. It’s easy to see who rules the roost.

In 1990, Mrs. Thatcher’s Trade & Industry Secretary, Nicholas Ridley, was sacked for describing the EU’s plans for monetary union as “a German racket to take over the whole of Europe”. It may not have been obvious to most at that time, but Ridley knew enough history and economics to foresee what was coming. Telling an inconvenient truth has ended many political careers and Tory Europhiles ended his. Just as, soon after, they ousted Mrs. Thatcher for standing up to Europe.

Germany has emerged as the industrial engine room of Europe and there are a number of reasons for that. First, following reunification in 1989 there has been massive internal investment in infrastructure and manufacturing works. This technology, in the hands of the hard-working, highly motivated German workforce, means exports are booming and their productivity has raced ahead of Mediterranean partners.

Germany has for many years cherished a long-held belief that it is destined to lead a United States of Europe. As ex-Chancellor Helmut Kohl once put it, unaware that reporters were in earshot: “The future will belong to the Germans… when we build the house of Europe.”

Former Finance Minister Theo Waigel less diplomatically said in 1997: “Germany, as the biggest and most powerful economic member state will be the leader [of Europe], whether you like it or not.”

Its current economic and trade dominance means that the euro is effectively undervalued for Germany and overvalued for Greece, Portugal, Italy and Spain—creating a permanent imbalance in commerce.

Similarly, in the eurozone, interest rates have to be the same regardless of variations in countries’ economic health.

The European Central Bank sets interest rates to avoid inflation in Germany. This is a policy with its heart in German history. In the Thirties, the Weimar Republic printed money to keep the economy afloat and stoked catastrophic inflation. However, the problem throughout southern Europe is the direct opposite and requires lower interest rates to get economies moving.

The euro has locked weak countries into high exchange and interest rates leading to endemic recession, unemployment and debt. By contrast, strong countries such as Germany enjoy massive trade surpluses and a buoyant economy with inflation kept in check.

Nations with a single currency have similar problems. Traditionally, the south of England has been prosperous while the north and Celtic fringe have struggled. In a nation-state such as the UK, this is partly ironed out by redistributing taxpayers’ money from richer to poorer areas.

This has also happened in Germany since reunification. In the past 20 years, its government has poured more than £1 trillion into the East. Their taxpayers grumble, but have put up with this colossal drain because the recipients are Germans engaged in rebuilding their nation.

They feel no such affinity with the Greeks and Italians. Hence, German public opinion has resolutely refused to countenance the scale of the bailout required to pay for a decade of Mediterranean profligacy.

Germany has taken the weak countries’ penny in the form of huge export surpluses, but its taxpayers refuse to hand over the compensating biscuit of tax transfers to alleviate the higher unemployment and economic decline caused by a German-run eurozone monetary policy. All this means the eurozone acts as a giant stirrup-pump, perversely siphoning wealth from the poor to the rich.

It seems things have turned out just as economist Dr. Funk intended. Europe is being run for Germany’s advantage. Compliance is ensured by the bureaucrats of Brussels, Frankfurt and the IMF, not forgetting Angela Merkel’s little helper Nicolas Sarkozy.

However, as the Germans refuse to bow to reality, it becomes increasingly obvious that this unbalanced system is teetering on the point of collapse. The danger now is that Europe’s peoples are rising against the political elite who have imprisoned them in an economic madhouse.

The austere measures that the newly bankrupted countries will have to impose will seem intolerable.

While some states, led by Germany, will continue to live high on the hog at the expense of poorer countries, many will feel fury and will take to the streets.

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Re: EUEUEUEUEU Germany must decide whether eurozone lives or dies

Posted by Kew Gardens Teleport on Sun Nov 13 14:49:49 2011, in response to Re: EUEUEUEUEU Germany must decide whether eurozone lives or dies, posted by Olog-hai on Sun Nov 13 11:22:47 2011.

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Re: EUEUEUEUEU Walther Funk plan alive in EUEUEU

Posted by Kew Gardens Teleport on Sun Nov 13 14:51:58 2011, in response to Re: EUEUEUEUEU Walther Funk plan alive in EUEUEU, posted by Olog-hai on Sun Nov 13 11:35:16 2011.

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Re: EUEUEUEUEU Putsch crushes national governments in EUEUEU

Posted by Olog-hai on Sun Nov 13 19:20:45 2011, in response to Re: EUEUEUEUEU Walther Funk plan alive in EUEUEU, posted by Kew Gardens Teleport on Sun Nov 13 14:51:58 2011.

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The great euro Putsch rolls on as two democracies fall

Europe’s scorched-earth policies have begun in earnest. The inherent flaws of monetary union have created a crisis of such gravity that EU leaders now feel authorized to topple two elected governments.

By Ambrose Evans-Pritchard, International Business Editor
7:30 pm GMT 13 Nov 2011

As I long feared, the flood of cheap credit into Southern Europe and the slow death of Club Med industry by currency asphyxiation have together created such a dangerous situation for world finance that informed opinion is willing to turn a blind eye to EU sovereign trespass. Some even applaud.

The Greeks were ordered to drop their referendum on measures that reduce their country to a sort of Manchukuo, with EU commissars “on the ground”, installed in each ministry, drawing up lists of state assets to be liquidated to pay foreign creditors.

Europe had the monetary and fiscal means to contain the EMU debt crisis long enough for Greeks to give or withhold their crucial assent to this ultimatum in December.

It chose — under German-Dutch pressure — not deploy those means. Instead it forced Greece to capitulate by cutting off an agreed loan payment.

In Italy, the European Central Bank has engineered the downfall of Silvio Berlusconi by playing the bond markets, switching purchases on and off to enforce compliance with its written dictates (“La Lettera”), and ultimately allowing 10-year yields to spike to 7.45 percent to drive him out.

Europe’s president Herman Van Rompuy swooped in to Rome to clinch the Putsch. “Italy needs reforms, not elections,” he said.

We are not that far from use of EU judicial coercion, and then EU police power, and ultimately EU “border troops” — for those old enough to remember Soviet methods of fraternal assistance.

Chancellor Angela Merkel tells us that peace in Europe can no longer be taken for granted, and she is right. Her own Gothic actions and her inflexible imposition of 1930s Gold Standard contraction and debt-deflation on Southern Europe is itself preparing the ground for Europe’s civil war (hopefully pacific), a rebellion by the South against the North.

Italy’s youth are turning. Watch the footage of students chanting “democracy” and brandishing their "95 Theses" of Wittenberg revolt as poet Van Rompuy tried to speak in Fiesole.

“No to Austerity,“ starts the Luther List: “Troika out of Greece”, “IMF and ECB out of Italy, Ireland, and Portugal”, it goes on.

“The EU has become ever less accountable to the people of Europe. The undemocratic structures have infiltrated the very structures of the Union,” they said.

Behold “the EU’s furious reaction to the Greek government’s effort to seek popular consent over the financial stranglehold imposed on the country. No longer are expressions of popular consent simply ignored, it is now impermissible to consult citizens.”

Let us agree that Greece’s Lucas Papademos and Italy’s Mario Monti are excellent men (Mr. Monti has been picked for the task by President Giorgio Napolitano, himself a former Stalinist who later switched his loyalties to the sublime Project).

But the two good men also represent the EU enforcement machine. Papademos was ECB vice-president. Monti was an EU commissioner for ten years.

Professor Monti enjoys great goodwill in Rome, but it is far from clear that he can put together a durable government able to implement Project demands.

Antonio di Pietro’s Party of Values has spurned a technocratic regime that lacks democratic legitimacy, saying Italy is “under EU tutelage”. La Lega Nord’s Umberto Bossi has denounced the stitch-up.

“The game is getting dangerous,” said Il Sole. Some suspect that the Berlusconi camp would not do too badly in snap elections, if allowed, campaigning against the “hated euro and EU bosses”. Is that why Brussels is now so afraid of Italy’s voters?

If Mr. Monti relies on the Left, how can he comply with EU orders to break the power of the trade unions and impose “Anglo-Saxon” wage-bargaining? A large bloc in parliament will die in a ditch to defend Article 18 of the labor code.

Labor minister Maurizio Sacconi warned last week that careless handling of this issue threatens to unleash another round of terrorism in Italy. It is only nine years since Marco Biagi was assassinated by the Red Brigades for threatening the sacred cows of the Sindicati.

No doubt Italy needs a blast of Thatcherism. The country has fallen down the World Bank rankings in ease of doing business from 74 (2009), to 76 (2010), to 80 (2011).

Its average economic growth rate has been 0.6 percent over the last decade. Productivity and per capita income have declined, and this before the demographic crunch hits with a vengeance.

The old age dependency ratio will reach 59 percent by mid-century, compared to 56 percent for Germany, 45 percent for France, and 38 percent for the UK, according to Commission data).

But those of us who wrote years ago that Italy’s sclerosis and inflation proclivities were going to cause a train wreck within the rigors of EMU were told by Europe’s authorities to curb our insolence.

In 2009 the European Commission praised Italy’s “spectacular job creation” and its “greater resilience to external shocks”. In 2008 in said Italy was making “good progress” on the Lisbon reform agenda. In 2007 it said Italy’s debt sustainability risk was “broadly in line” with France and Germany.

Italy’s four sets of pension reforms were held out as a shining example. Finance minister Giulio Tremonti was feted in Brussels, lauded for his iron discipline and primary budget surplus.

And now these same EU bodies tell us that Italy’s failure to grasp the nettle of reform and tackle its debts is so egregious that Europe must step in to overthrow an elected government.

Let us end this EU lie — propagated by Berlin’s uber-bully Wolfgang Schäuble — that Italy is suddenly guilty of economic crimes and debt debauchery.

What has changed is the industrial recession in Italy that began over the late summer and the likelihood of full-blown depression next year.

As you can see from this chart below, all three monetary aggregates in Italy have been collapsing for months, a lead indicator of Hell to come.



The ECB could have prevented this monetary implosion in Italy. Instead it tightened further, without a squeak of protest from the governor of the Banca d’Italia, then Mario Draghi.

Europe’s own policies of synchronized fiscal and monetary contraction are surely to blame for this sudden lurch downwards in Italy’s prospects.

We all agree that Italy’s economic model is unfit for the 21^st Century, but it was also unfit for EMU. The Schumpeterian shock was needed before Italy locked itself into the D-Mark forever.

It is too late now for Italy to claw back 40 percent in lost labor competitiveness against Germany within the constraints of monetary union. Any attempt to do so by grinding debt deflation will prove self-defeating for a country with a public debt stock of 120 percent of GDP.

Such a policy — already tested to destruction in Greece — will itself cause Italy’s debt dynamics to spiral out of control.

There is no possible way at this late stage to reconcile Italy’s needs for massive devaluation with Germany’s hard-money doctrines. One or the other must give.

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Re: EUEUEUEUEU Putsch crushes national governments in EUEUEU

Posted by RockParkMan on Sun Nov 13 19:34:45 2011, in response to Re: EUEUEUEUEU Putsch crushes national governments in EUEUEU, posted by Olog-hai on Sun Nov 13 19:20:45 2011.

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Re: EUEUEUEUEU doesn't learn from its own history

Posted by Olog-hai on Sun Nov 13 19:36:17 2011, in response to Re: EUEUEUEUEU Putsch crushes national governments in EUEUEU, posted by Olog-hai on Sun Nov 13 19:20:45 2011.

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There’s nothing new about this European folly

The governing class in Europe thinks it knows what is best — and once again, the people are being forced to accept it.

By Janet Daley
9:00PM GMT 12 Nov 2011

Have we learned nothing from the terrible century that finished just over a decade ago? Talk about generals fighting the last war: Europe seems determined to remain locked in the first flush of post-war peace, repeating over and over again, with ever more hysterical urgency, the formula that once seemed like a miraculous antidote to its own worst inclinations.

Even as the prescription — the permanent integration of those wicked old nation-states into one unified whole — proves damaging and dangerous, it cannot be abandoned, because it is, by now, the received definition of progressive thinking about the future.

But it is not about the future at all. Its remedies and pieties, as well as its anxieties and confusions, lie almost exclusively in the past. That is why it offers answers to questions, and solutions to problems, that are so discordant with life as it is actually lived. (So much so that elected governments must be displaced before its mechanisms can be put in place.) The plague of bellicose nationalism is no longer the preoccupying threat to modern European life, yet that is the demon which the EU is most dedicated to driving out. Germany’s fear of hyperinflation is out of touch with its present robust economic reality, yet that is what prevents the ECB from taking the obvious measures to save the Italian economy.

But the European project is an anachronism in a much more profound sense. Its institutions may have been developed as a consequence of (and an act of repentance for) the world wars, but its philosophical roots go back much further: this dream of a “modern” Europe is just the latest model of utopian ideology to leave wreckage in its path.

Its antecedents are the German and French systems of political theory which held that perfect methods of governing could be derived from first principles: that human behavior and social interaction could be predicted and controlled in ways that would maximize welfare and happiness. What you hear in the grandiose speeches of European leaders and the bumptious pronouncements of EU officials is precisely this: we have an ideal system which can guarantee infinite security and wellbeing, provided that everyone behaves in ways that are consistent with the rules of life as we describe them.

The great irony of the mess we are now in is that this concept of a totally rational, perfect society which must be imposed on actual people, each with his own distinct experience and perception of life, was the same delusion that wreaked havoc in Europe for generations. From one Terror to another, Robespierre to Stalin, the enforced experiments ran their course. And virtually every one required the “temporary” expunging of democracy.

Of all the disturbing aspects of the past few weeks, none has been more alarming than the frank contempt that has been expressed for public opinion and democratic accountability: the idea that these decisions are too important to be left to the people, with their inchoate resentments and their self-serving sentimentality. Somehow, while we were busy heading toward the progressive enlightened future, we ended up being forced to accept the most retrograde formula of the past. The governing class knows what is best, and the people must be made to accept it.

How did that happen? And what sort of tortuous logic made it seem acceptable? Answer: the economic imperatives that follow when the common-sense understanding of how people behave is abandoned in favor of ideological delusion. This was the 21^st-century version of the experiment. Allow countries that have traditions of corrupt, chaotic governance to enter the domain of free money (easy credit and low interest rates) and see if they automatically turn into well-ordered, responsible nations. Now we know: they don’t. So instead of Greece and Italy having dodgy currencies (to match their dodgy governments) that could be devalued whenever necessary, they were locked into one that was supposed to be invincible and could not be devalued.

But instead of their national temperaments being remodeled and their populations propelled into the glorious discovery of probity and sound borrowing habits, they continued to be themselves. And the Germans, for all their official commitment to the grand theory, continue to be themselves as well. They have their memories and their inherited fears of inflation and the debauching of their currency to contend with. So here we are at the same old impasse: human beings are not perfectly rational and they will not behave as the beautiful system dictates. (It seems bizarre, in this light, that it is Euroskeptics who are described as “ideologues”.)

Perhaps it is not so surprising that we have made this mistake yet again: it seems to be a feature of the European intellectual tradition. But it is outrageous to compound it by pretending that it is unprecedented. Once we accept that the EU is not a pragmatic project at all — not a practical proposition designed to meet specific, actual needs, but a metaphysical system which relies on the reinvention of human nature — then it becomes much easier to understand why it is coming so spectacularly adrift.

Meanwhile, in Britain, we fight over the old 20^th-century ideological ground, but there is no debate in any meaningful sense. There is an absurd argument going on about the evils of capitalism — only this time around, in the wake of Marxism’s inglorious collapse, there is not even a plausible alternative being proposed to replace it. So the attacks are nihilistic in the strict technical sense of the word, as well as being misguided.

However repugnant the present generation of capitalists may be, and however much personal disrepute they may incur, it is not capitalism that is about to destroy the prosperity of the populations of modern Europe. It is the folly of enforced uniformity — yet another dream of enlightened perfection — that will accomplish that.

What the architects of the dream, and even those of us who are caught in the backwash, will have to accept is that capitalism is probably incapable of producing enough wealth to cover the cost of limitless “social protection” programs as well as providing uniform levels of prosperity for all working and non-working citizens. Soon, we will have to make radical choices not just about the power of unelected officials, but between economic freedom and what those who run the EU call “social cohesion”. Or rather, they will have to make the choices. I doubt that we — or the peoples of Europe — will get any say in it at all.

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Re: EUEUEUEUEU doesn't learn from its own history

Posted by RockParkMan on Sun Nov 13 19:37:34 2011, in response to Re: EUEUEUEUEU doesn't learn from its own history, posted by Olog-hai on Sun Nov 13 19:36:17 2011.

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Re: EUEUEUEUEU must move towards closer political union, says Merkel

Posted by Olog-hai on Sun Nov 13 19:42:31 2011, in response to Re: EUEUEUEUEU doesn't learn from its own history, posted by Olog-hai on Sun Nov 13 19:36:17 2011.

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Merkel: EU Must Move Toward Closer Political Union

By Tony Czuczka and Brian Parkin – Nov 13, 2011 6:00 PM GMT-0500

German Chancellor Angela Merkel said it’s time to move toward closer political union in Europe to send a message to bondholders that euro-area leaders are serious about ending the sovereign debt crisis.

Speaking on the eve of her Christian Democratic Union party’s annual congress in the eastern German city of Leipzig, Merkel said that she wants to preserve the euro with all current 17 members. “But that requires a fundamental change in our whole policy,” she said.

“I believe this is important for those who buy government bonds: that we make it clear that we want more Europe step by step, that is that the European Union, and the euro area in particular, grows together,” Merkel said in an interview with ZDF television late yesterday. “Otherwise people won’t believe that we can really get a handle on the problems.”

Merkel will address her party at about 11 a.m. today after weeks of crisis fighting during which she raised the prospect of ejecting Greece from the euro and joined with French President Nicolas Sarkozy to call on Italy to hold to its budget pledges. After leadership changes in Italy and Greece, the chancellor is turning her attention to shaping the euro and EU’s future.

‘Sweeping Through’

“Big political changes are now sweeping through the eurozone, putting — at least for now — the many skeptical political observers to shame,” said Erik Nielsen, chief global economist at UniCredit SpA in London. “But will the market appreciate it?” he said. “I am not completely sure that it’ll get it quite yet.”

Bond yields in Italy soared to a euro-era record last week as political uncertainty in the euro region rocked financial markets globally. The euro rose from a one-month low of $1.3484 on Nov. 10 as Greece resolved a political impasse to close at $1.3750 on Nov. 11. The Stoxx Europe 600 index gained 2.4 percent, closing the week at the highest level in nine business days.

In her interview, Merkel said that the next step to bolster investor confidence means what was begun by the euro’s founders must be completed with “a fiscal union, and then turn it step by step into a political union.”

“That is the lesson of the crisis and this will still require a lot of effort,” she said.

December Summit

Euro leaders are due to meet in Brussels on Dec. 9, when they have asked EU President Herman van Rompuy to present them with a report on a “timeframe for the further strengthening of the eurozone” that should include “the question of possible treaty changes,” the German Finance Ministry said Nov. 9.

“Merkel wants far more centralized euro fiscal oversight so that something like Greece can never happen again,” Jan Techau, director of the Brussels-based European center of the Carnegie Endowment for International Peace, said by phone. That means euro governments will have to cede some sovereignty over budgets, he said. “There seems to be some kind of deal between Merkel and Sarkozy on this.”

Michael Meister, the CDU’s parliamentary finance spokesman, raised the prospect of joint euro-area bonds following on. “An integrated fiscal policy” in the euro region would mean “we can discuss the question of joint liability,” he said in an interview on Nov. 10. “The sequence of events is important.”

The euro crisis now entering its third year is the main theme occupying Germany’s ruling party as more than 1,000 delegates gather in Leipzig. The convention’s main motion is on the euro.

Solidarity, Encouragement

Euro members that get financial support must reduce debt and strengthen their economies, according to the draft text of the motion to be debated today. “Some countries will achieve this quickly, while others will need our solidarity and our encouragement for years,” it says.

The chancellor addresses the convention with domestic public opinion going her way. Merkel’s handling of the debt crisis is backed by 56 percent of Germans, up from 45 percent in early October, according to an FG Wahlen poll for ZDF television published Nov. 11. Merkel’s overall approval rating also rose. The Nov. 8-10 poll of 1,278 people has a margin of error of as much as 3 percentage points.

Merkel will use her speech to issue a “warning” that it’s necessary to do everything to move toward a “stability union,” the CDU’s Meister said. “We mustn’t just draft rules; we need to patrol them and enforce them,” he said. “We need more discipline.” Merkel will deliver that message “loud and clear.”

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Re: EUEUEUEUEU doesn't learn from its own history

Posted by SelkirkTMO on Sun Nov 13 20:57:44 2011, in response to Re: EUEUEUEUEU doesn't learn from its own history, posted by Olog-hai on Sun Nov 13 19:36:17 2011.

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Re: EUEUEUEUEU must move towards closer political union, says Merkel

Posted by SelkirkTMO on Sun Nov 13 21:10:11 2011, in response to Re: EUEUEUEUEU must move towards closer political union, says Merkel, posted by Olog-hai on Sun Nov 13 19:42:31 2011.

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HBD Explains it all (Re: EUEUEUEUEU Germany must decide whether eurozone lives or dies)

Posted by JayMan on Mon Nov 14 02:04:08 2011, in response to Re: EUEUEUEUEU Walther Funk plan alive in EUEUEU, posted by Olog-hai on Sun Nov 13 11:35:16 2011.

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Re: HBD Explains it all (Re: EUEUEUEUEU Germany must decide whether eurozone lives or dies)

Posted by SelkirkTMO on Mon Nov 14 02:12:39 2011, in response to HBD Explains it all (Re: EUEUEUEUEU Germany must decide whether eurozone lives or dies), posted by JayMan on Mon Nov 14 02:04:08 2011.

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Re: HBD Explains it all (Re: EUEUEUEUEU Germany must decide whether eurozone lives or dies)

Posted by JayMan on Mon Nov 14 02:20:35 2011, in response to Re: HBD Explains it all (Re: EUEUEUEUEU Germany must decide whether eurozone lives or dies), posted by SelkirkTMO on Mon Nov 14 02:12:39 2011.

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Re: HBD Explains it all (Re: EUEUEUEUEU Germany must decide whether eurozone lives or dies)

Posted by SelkirkTMO on Mon Nov 14 02:32:59 2011, in response to Re: HBD Explains it all (Re: EUEUEUEUEU Germany must decide whether eurozone lives or dies), posted by JayMan on Mon Nov 14 02:20:35 2011.

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Clarissa Explains it all (Re: EUEUEUEUEU Germany must decide whether eurozone lives or dies)

Posted by Osmosis Jones on Mon Nov 14 02:34:45 2011, in response to HBD Explains it all (Re: EUEUEUEUEU Germany must decide whether eurozone lives or dies), posted by JayMan on Mon Nov 14 02:04:08 2011.

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Re: HBD Explains it all (Re: EUEUEUEUEU Germany must decide whether eurozone lives or dies)

Posted by JayMan on Mon Nov 14 03:16:35 2011, in response to Re: HBD Explains it all (Re: EUEUEUEUEU Germany must decide whether eurozone lives or dies), posted by SelkirkTMO on Mon Nov 14 02:32:59 2011.

The Traditional/Secular-rational values dimension reflects the contrast between societies in which religion is very important and those in which it is not. A wide range of other orientations are closely linked with this dimension. Societies near the traditional pole emphasize the importance of parent-child ties and deference to authority, along with absolute standards and traditional family values, and reject divorce, abortion, euthanasia, and suicide. These societies have high levels of national pride, and a nationalistic outlook. Societies with secular-rational values have the opposite preferences on all of these topics.

The second major dimension of cross-cultural variation is linked with the transition from industrial society to post-industrial societies-which brings a polarization between Survival and Self-expression values. The unprecedented wealth that has accumulated in advanced societies during the past generation means that an increasing share of the population has grown up taking survival for granted. Thus, priorities have shifted from an overwhelming emphasis on economic and physical security toward an increasing emphasis on subjective well-being, self-expression and quality of life. Inglehart and Baker (2000) find evidence that orientations have shifted from Traditional toward Secular-rational values, in almost all industrial societies. But modernization, is not linear-when a society has completed industrialization and starts becoming a knowledge society, it moves in a new direction, from Survival values toward increasing emphasis on Self-expression values.

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Re: HBD Explains it all (Re: EUEUEUEUEU Germany must decide whether eurozone lives or dies)

Posted by SelkirkTMO on Mon Nov 14 03:37:41 2011, in response to Re: HBD Explains it all (Re: EUEUEUEUEU Germany must decide whether eurozone lives or dies), posted by JayMan on Mon Nov 14 03:16:35 2011.

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Re: EUEUEUEUEU Putsch crushes national governments in EUEUEU

Posted by Kew Gardens Teleport on Mon Nov 14 05:53:08 2011, in response to Re: EUEUEUEUEU Putsch crushes national governments in EUEUEU, posted by RockParkMan on Sun Nov 13 19:34:45 2011.

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Re: EUEUEUEUEU Crisis leads to technocracy rewriting rules in EUEUEUEUEUEU

Posted by Olog-hai on Mon Nov 14 23:13:46 2011, in response to HBD Explains it all (Re: EUEUEUEUEU Germany must decide whether eurozone lives or dies), posted by JayMan on Mon Nov 14 02:04:08 2011.

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Crisis Rewriting the Rules in Europe

November 10, 2011 | 0248 GMT

Events in Europe over the past 72 hours have been nothing short of extraordinary.

The International Monetary Fund, rather than asking the Russians and their $500 billion in currency reserves to help, has advised Moscow to protect itself from fallout from the European financial crisis. European government officials are no longer chastised by their peers when they publicly raise the need to eject Greece from the eurozone. European Commission officials are directly telling the Greeks and Italians what their governments should and should not look like. And in the United Kingdom there are requests that mainland Europeans finally choose someone to be in charge of everything.

If someone is going to be able to get ahead of the crisis, it is going to be the Germans — but they are working with a tool kit that isn’t even half full. They don’t want the European Central Bank (ECB) to continually support damaged states by directly purchasing sovereign debt — Berlin sees that as rewarding bad behavior. Germany’s citizens don’t support continued transfers of wealth to Southern European states. Berlin cannot force these states to implement austerity, since EU treaties guarantee their member states’ fiscal autonomy. Germany cannot even use public pressure to nudge Southern European governments to do what they think is the right thing: The public image of Germany as a bully is now so prevalent in Southern Europe that German statements often generate the opposite of their intent.

Efforts to enhance what tools there are have actually weakened existing options. During a late-October summit, eurozone leaders tried to expand the reach of Europe’s bailout fund, the European Financial Stability Facility (EFSF). The EFSF could originally access €440 billion of state guarantees, which the Facility uses to raise cash on private markets, funneling the money raised to states under bailout regimens. €440 billion might sound like a lot. Indeed, this sum is sufficient to fund the existing bailouts of Greece, Ireland and Portugal, with enough left over to make an honest effort to support Spain. Still, no one thinks the sum is sufficient to support a bailout of Italy. The October summits thus shifted the EFSF structure to guarantee returns on only 15-30 percent of investments (the details have not yet been finalized).

Instead of attracting more funds, this has disrupted external and private interest in the EFSF to the degree that the Facility — even using full guarantees — was barely able to raise 2 billion euros this week to fund its pre-existing commitments. Far from having the capacity to bail out Italy or even Spain, the EFSF right now is unlikely to be able to handle the smaller bailouts that have already been agreed to.

Yet those larger states are still in danger, most notably Italy. Rome has €1.9 trillion in outstanding government debt, about 120 percent of Gross Domestic Product — proportionally twice that of Spain’s. An Italian funding shortfall, absent a much enlarged EFSF, will lead almost immediately to an Italian default. The aftereffects make it impossible to see the eurozone surviving.

Germany’s plan

Yet as the European financial crisis deepens and spreads, we are seeing the rough outlines of a German plan that uses what tools are available. States that will not agree to austerity in good times are proving somewhat more pliable as they move closer to financial catastrophe. Germany has made considerable efforts to alter both Greece and Italy in recent days.

The Germans are nudging both the Greeks and the Italians toward forming national unity governments. If successfully installed, the German hope is that these governments will be able to achieve four things.

• Full implementation of EU-mandated austerity programs. The hope is that technocratic governments can force through policies that would be political suicide for a normal, elected government.
  
  
• Constitutional amendments that would lock the states into somehow balancing their budgets. Germany needs these states to generate budget surpluses so they can whittle down their debt loads and mitigate their exposure to financial markets.
  
  
• Approval of treaty changes that will allow European institutions far more intrusive access to national procedures; the goal of which is to allow the direct rewriting of budget procedures so that these states can never again engage in what the Germans see as fiscal irresponsibility.
  
  
• Finally, Germans hope all of these things can be achieved without triggering elections. Berlin fears that any election now would be perceived in both Greece and Italy as a referendum on Europe in general, or specifically on German-inspired austerity measures, and that public rejection of Europe or austerity would bring down the entire European edifice.

That’s the plan, but there are several problems.

First, these governments must be successfully formed. Italian Prime Minister Silvio Berlusconi refuses to say on what date he will step aside. In Greece the main political parties, while eager to find someone to take the political heat for imposing austerity programs, have so far been unable to find a temporary prime minister willing to thereby end their political career.

Second, the parliament of even a technocratic government is not excused from the requirement of voting on austerity, treaty and constitutional revision packages. National unity governments sound nice, but the broad scope of changes the Germans are demanding mean that politics will not be held completely at bay.

Third, the citizens must not rebel. Europe is in an agitated state; strikes and unrest are the orders of the day. Governments — even national unity governments — seen as caving to the Germans are going to be challenged by citizens who do not wish to submit to the rules of a foreign state. The appeal for Germany of technocratic governments is that for a time they can ignore the people’s voice. Yet this approach could radicalize the populace, making it feel powerless and disenfranchised from a political process it already sees as being dominated by disconnected elites.

Fourth, changes agreed to by an interim government will not necessarily be honored by subsequent, more politically charged governments. European officials are attempting to force Greek parties to sign documents committing them to never challenge the austerity programs. So far, such efforts have been firmly rebuffed.

Finally, all of this has to happen without the markets bolting and thereby triggering immediate funding crises. This is perhaps the most dangerous catch. Germany needs these states to feel the financial heat, but too much pressure could result in financial destruction.

In the past 24 hours, Greece has struggled with the first, third and fourth problems; Italy with the first and fifth. At the time of this writing, Italian debt is trading at about 7.3 percent, nearly a full percent higher than it was a day earlier and more than the Serbian or even Namibian equivalent — and only aggressive ECB intervention this afternoon prevented a financial catastrophe.

It’s a delicate dance: Applying sufficient pressure to induce sharp changes, while the ECB provides a financial drip feed. The margin for error is very slim.

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Re: EUEUEUEUEU Crush Germany into submission?

Posted by Olog-hai on Tue Nov 15 01:20:35 2011, in response to Re: EUEUEUEUEU Crisis leads to technocracy rewriting rules in EUEUEUEUEUEU, posted by Olog-hai on Mon Nov 14 23:13:46 2011.

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America and China must crush Germany into submission

By Ambrose Evans-Pritchard | Economics
Last updated: November 9^th, 2011

As we watch Italy's 10-year bond yields near 7.5 percent and threaten to detonate the explosive charge on €1.9 trillion of debt, it is time for the world to reimpose order.

You cannot allow the biggest bankruptcy in history to run its course — with calamitous domino implications — before all options have been exhausted.

One can only guess what is happening in the great global centers of power, but it would not surprise me if US President Barack Obama and China's Hu Jintao start to intervene very soon, in unison and with massive diplomatic force.

One can imagine joint telephone calls to Chancellor Angela Merkel more or less ordering her country to face up to the implications of the monetary union that Germany itself created and ran (badly).

Yes, this means mobilizing the full-firepower of the ECB — with a pledge to change EU Treaty law and the bank's mandate — and perhaps some form of quantum leap towards a fiscal and debt union.

Germany will of course try to say no. But it will pay a catastrophic diplomatic and political price, and will fail to save its economy anyway if it does so.

Having followed the German political scene closely for the last five months, it is clear to me that almost the entire German political establishment is out of its depth, ideological, sometimes smug, apt to view the EMU debt crisis as a Calvinist morality tale, and lacking in deep understanding of what it has got itself into.

One can understand German worries about money printing — and especially the loss of fiscal sovereignty and democratic control — but matters have already moved on. It is too late for that.

As for the EU authorities with their mad contractionary fiscal and monetary policies in an accelerating slump, they seem to have achieved little by toppling two elected governments in one week.

In Italy they have already made matters worse. I doubt that much will change with "technocratic governments" in either Greece and Italy, yet immense damage has been done to democratic accountability.

The EU Project has become both dangerous and insane.

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Re: EUEUEUEUEU Crush Germany into submission?

Posted by SelkirkTMO on Tue Nov 15 01:25:19 2011, in response to Re: EUEUEUEUEU Crush Germany into submission?, posted by Olog-hai on Tue Nov 15 01:20:35 2011.

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Re: EUEUEUEUEU Germany and Britain clash over future of EUEUEUEUEUEU

Posted by Olog-hai on Tue Nov 15 14:14:03 2011, in response to Re: EUEUEUEUEU Crisis leads to technocracy rewriting rules in EUEUEUEUEUEU, posted by Olog-hai on Mon Nov 14 23:13:46 2011.

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Germany, Britain clash over EU’s future

Thomas Penny, London
November 16, 2011

BRITISH Prime Minister David Cameron has rebuffed Germany’s call for political union in Europe, underlining the splits in the 27-nation bloc as it seeks to contains the eurozone’s sovereign debt crisis.

The crisis offers an opportunity for powers to “ebb back” from Europe to nation states, Mr. Cameron said in a speech in London. Hours earlier, German Chancellor Angela Merkel told her Christian Democratic Union party in Leipzig that it was time to push for closer political ties and tighter budget rules.

“We should look skeptically at grand plans and utopian visions; we’ve a right to ask what the European Union should and shouldn’t do,” Mr. Cameron said. Europe should be “outward-looking, with its eyes to the world, not gazing inwards” and should have “the flexibility of a network, not the rigidity of a bloc.”

Dr. Merkel’s drive for closer union and Mr. Cameron’s riposte set up a potential tussle between European leaders at a summit on December 9 that will discuss an overhaul of the EU’s guiding treaty to bolster the 17-nation euro, of which Britain is not a member.

Mr. Cameron, who is due in Berlin for talks with Dr. Merkel on Friday, has pledged to use any changes to EU rules to claw back powers from Brussels.

Evoking the 1989 democracy protests that began in Leipzig and led to the fall of the Berlin Wall, Dr. Merkel, in her most explicit prescription yet to tackle the crisis, said it must be seen as a “turning point” in shaping EU and euro policy.

“The task of our generation now is to complete the economic and currency union in Europe and, step by step, create a political union,” she said in a speech to more than 1000 CDU delegates. “It’s time for a breakthrough to a new Europe.”

The speech marked an escalation in her rhetoric as the debt crisis sent Italian and Spanish borrowing costs to euro-era records last week and shook French markets.

In contrast, Mr. Cameron said the fall of the Iron Curtain marked a turning away from the need for the EU to act as a tight alliance to keep peace in Europe after 1945 to the need for a loose union of democratic states working together.

The EU should be an alliance “that understands and values national identity and sees the diversity of Europe’s nations as source of strength”, he said. “Change brings opportunities: an opportunity to begin to refashion the EU so it better serves this nation’s interests and the interests of its other 26 nations too; an opportunity, in Britain’s case, for powers to ebb back instead of flow away.”

Dr. Merkel had renewed her warning that “if the euro fails, Europe fails” and said her mission was to save the “historic” EU project.

New Greek Prime Minister Lucas Papademos says he is determined to keep the country in the eurozone, but acknowledges it is set to miss its deficit reduction target this year. Mr. Papademos told MPs that Greece’s euro membership is “our only choice”. He spoke after conservative leader Antonis Samaras defied a EU demand to provide a written commitment to the new debt agreement — or else see rescue loans frozen.

A vote of confidence in Mr. Papademos’s new government will take place in parliament today.

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Re: EUEUEUEUEU Germany and Britain clash over future of EUEUEUEUEUEU

Posted by Fred G on Tue Nov 15 14:19:58 2011, in response to Re: EUEUEUEUEU Germany and Britain clash over future of EUEUEUEUEUEU, posted by Olog-hai on Tue Nov 15 14:14:03 2011.

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Re: EUEUEUEUEU More on the Frankfurt Group, i.e. the new Politburo/Hit Squad of EUEUEUEUEUEU

Posted by Olog-hai on Tue Nov 15 14:25:57 2011, in response to Re: EUEUEUEUEU Germany and Britain clash over future of EUEUEUEUEUEU, posted by Olog-hai on Tue Nov 15 14:14:03 2011.

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Europe’s hit squad

If you thought the EU couldn’t get any less democratic, meet the Frankfurt Group.

Fraser Nelson
12 November 2011

The Old Opera House in Frankfurt — once Germany’s most beautiful postwar ruin and now its most stunning recreation — has become a symbol of European rebirth. And it was here, last month, that Angela Merkel and Nicolas Sarkozy met the EU’s bureaucratic elite in what would, in another era, be described as a putsch. They had grown tired of eurozone summits, with leaders flying here and there but getting nowhere. A smaller group needed to be formed, who would wield power firmly but informally. That evening, as they gathered to hear Claudio Abbado conduct the Mozart Orchestra of Bologna, a new EU hit squad was born.

As Silvio Berlusconi has now found out, this so-called Frankfurt Group means business. Only a few months ago, it would have been unthinkable that the head of one European government would try to destabilise or depose another. Now, two EU leaders have fallen in a week. As Sarkozy knows from recent experience, to enforce regime change one need only give a helping hand to the rebels.

The group cannot be accused of being secretive. At the G20 summit in Cannes, its officials walked around with lapel badges saying “Groupe de Francfort (GdF)” and met four times. Britain was not included but the Foreign Office’s officials spoke as if they were in on the act. As one official put it: “We’re on our way to moving out Berlusconi.”

Such a statement may once have been seen as outrageous, but by last weekend it was undeniable that an operation to remove Berlusconi had begun. When Merkel and Sarkozy were asked if they had confidence in him, they rolled their eyes and gave each other wry smiles. The European Central Bank, which is also part of the Frankfurt Group, gave only minimal support to Italy — leaving the bond markets to do their worst to Berlusconi. The International Monetary Fund, whose new leader was also at the Opera house that night, made it clear that it would be sending its auditors to Rome on a regular basis to inspect the books. All this combined to send an unmistakable Old Europe message: we have ways of making you quit.

When that night in Frankfurt’s Alte Oper on 19 October was booked, no one was intending to form a new hit squad. The plan was to have just an ordinary taxpayer-funded extravaganza, a shindig to mark Jean-Claude Trichet’s retirement from the European Central Bank. Helmut Schmidt, the 92-year-old former chancellor of Germany who is now seen as a godfather of the European project, told the assembled dignitaries that “a crisis in the ability to act of the EU’s political bodies” was “a much bigger danger for the future of Europe than over-indebtedness”. It was time to get tough.

When Merkel spoke, she admitted frustration with European summits and their cumbersome democratic mechanics. “The EU’s ability to act and room for maneuvering has proven slow and complicated,” she complained. “If we want to seize the crisis as an opportunity, we must be prepared to act more quickly and even in unconventional ways.” Sarkozy arrived late, but just in time for the stitch-up of the decade.

Also in attendance was the new head of the ECB, Mario Draghi, an Italian with no love for Berlusconi. Then Christine Lagarde, the new (French) director of the International Monetary Fund, who is in charge of bailouts and can impose humiliating conditions (as she went on to do to Berlusconi). There was Jose Manuel Barroso, the increasingly thuggish European Commission president, and his economic sidekick Olli Rehn. The omnipresent Jean-Claude Juncker, Prime Minister of Luxembourg and head of the 17-nation eurozone group, was there with Herman Van Rompuy, who was elected EU president because he has no opinions on anything.

So the Frankfurt Group is, in effect, a merger between the EU hierarchy and German financial power: a kind of Brussels on the Rhine. It would not have been possible in the pre-crisis era when there were qualms about German might. Now the Germans are no longer apologetic. “The question of who could accept a German model has been settled by the market,” said a German government spokesman recently. “We are really only talking about the details and the extent of the measures, not about their nature.” This new, pugilistic tone is felt everywhere. Anonymous EU officials are now being quoted as saying things like: “Yes, wake up and smell the coffee. This is what you all signed up for.”

Poor old Mr Papandreou had provided target practice when he threatened to hold a referendum on the bailout. Only this summer, he had berated the EU for “indecisiveness and errors”. He found out just how decisive the slimmed-down Frankfurt Group could be when he was denied any bailout money, hastening his likely replacement with Lucas Papademos, a Frankfurt-trained former ECB official. Even Barroso had taken the remarkable step of destabilizing Papandreou by calling for a coalition, breaking both protocol and the pretense that the EU Commission respected the sovereignty of its member states.

Berlusconi was a harder target. He has dodged enemies for most of his 17 years in politics, from the opposition to the Italian vice squad. Furthermore, Italy is not really bust. Strip out the debt interest, and its national books would not just be in balance but have one of the greatest surpluses in the eurozone. Its prosperous north is one of the richest parts of the Continent, and would be far richer if there were a lira to devalue and help exporters. Its households are savers, with an astonishing €8.6 trillion squirrelled away. Government debt, at 100 percent of economic output, is high — but stable. Debt comes in many forms, and the average Italian owes half as much as the average Brit.

It is not at all clear who deemed Italy to be in crisis if the bond market charged above a supposedly fatal threshold of 7 percent on its government debt. But one answer might lie in a declaration which Merkel made last year: “We must re-establish the primacy of politics over the market.” Politicians have tried to do this, with little success, for generations. But it’s far easier now that the eurozone has created a giant apparatus whereby the strings of power can be pulled by a handful of people. The euro bailout fund, with its supposed €1 trillion of firepower, has just 15 staff. It might now be possible to wield immense power over a continent of nation states by assembling a few like-minded people in the back room of a Frankfurt opera house. And all in the name of European unity.

Democracy is viewed with caution — even distaste — by the Frankfurt Group, as are the markets. Juncker’s own views on pesky voters are famous since he phrased the problem of government thus: “We all know what to do, but we don’t know how to get re-elected once we have done it.”

We can now see a solution to the Juncker problem. You just enstool various leaders who were not properly elected in the first place and who won’t be seeking votes again. And have them do what you like.

But all this is, of course, fraught with danger. The idea of a prime minister chosen by foreign powerbrokers will be no more popular in Rome than it would be in Berlin. The idea of an ersatz politburo in Frankfurt will unnerve those EU members who lived under a real one in Moscow. Already, a third of Germans want out of the euro. That proportion will swell if Greece defaults within the euro, a trick that can only succeed with a massive compulsory foreign aid budget from Germany. Ireland’s finance minister is already speaking out against what he sees as a Franco-German coup, a democratically indefensible mutation of the European rulebook.

David Cameron will know that, as Merkel said at the opera, there is opportunity in every crisis. If France and Germany have no respect for the EU’s rules, then why should Britain? If the Prime Minister were to declare that certain EU directives were suspended in Britain for an emergency period while it returned to growth, then what would the EU do? Through its EU membership, Britain already sends more foreign aid to the continent — £9 billion a year — than it does to the third world. Is the lesson of the Frankfurt Opera House not that the EU’s main paymasters can do what they like? George Osborne’s welcome belligerence at Tuesday’s euro summit, where he flatly rejected a financial transactions tax, should be the start of a new negotiating stance.

The EU that the Lib Dems so revere is now vanishing before our eyes. In its place comes a far more unequal union, with bullying lenders and enfeebled debtors. This illiberal, deeply undemocratic phase in the EU’s development fits a historical trend. In their definitive history of financial crises, This Time Is Different — Eight Centuries of Financial Folly, Carmen Reinhart and Ken Rogoff show that almost all modern downturns go through a cycle: financial crisis, followed by sovereign debt crisis, followed by “financial repression”. The last phase is always unpopular, and usually means severe cuts or finding ways to raid people’s savings — enacted by an undemocratic hit squad. This is what Sarkozy and Merkel and their allies in the bailout industry have now become.

Except this time it is different. When an Argentinian government imposes “financial repression” on Argentinian people, it is unpopular enough, but tolerated. Should Germans impose such repression on thrifty Italian households, the political reaction may be incendiary.

Merkel and Sarkozy have both been fond of saying that they “will do everything necessary” to save the eurozone. Neither Berlusconi or Papandreou would now doubt them. But a situation where even British officials talk about helping regime change in Italy is not one that can — or should — last long. Berlusconi’s demise marks the EU now entering its endgame. When empires collapse, they can do so very suddenly. David Cameron had better be ready.

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Re: EUEUEUEUEU Germany demands that Britain contribute more to EUEUEUEUEUEU

Posted by Olog-hai on Tue Nov 15 15:19:26 2011, in response to Re: EUEUEUEUEU Crisis leads to technocracy rewriting rules in EUEUEUEUEUEU, posted by Olog-hai on Mon Nov 14 23:13:46 2011.

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11/15/2011
'Now Europe Is Speaking German'

Merkel Ally Demands that Britain 'Contribute' to EU Success

Many EU countries are unhappy about Germany's growing dominance in the euro crisis. Some in Chancellor Angela Merkel's party, however, seem unaware of such concerns. Volker Kauder, a senior member of the Christian Democrats, declared in no uncertain terms on Tuesday that Germany should be a model for Europe.

A senior member of Chancellor Angela Merkel's conservative Christian Democrats(CDU) said on Tuesday that Germany's budget restraint had become a model for other EU nations and accused Britain of being too focused on defending its own national interests in its dealings with Europe.

"Suddenly Europe is speaking German," Volker Kauder, who holds the powerful post of conservative parliamentary group leader, told the CDU's annual party conference in Leipzig, in a remark that may fuel fears in some countries that Germany is becoming too dominant in the euro crisis.

Kauder accused other eurozone member states of having only just now understood what Merkel has been claiming for a long time: that the euro crisis wasn't caused by financial market speculators, but by a lack of budget discipline.

'Not Being Prepared to Contribute'

Merkel had ensured that the whole of Europe now took this view, he said, adding that countries such as Spain and France had followed Germany's example by adopting measures similar to the "debt brake" that Germany had enshrined in its own constitution in 2009. Elements of the amendment began to take effect this year.

Turning to Britain, Kauder said the United Kingdom, as a member of the EU "also carries a responsibility for the success of Europe."

"Just looking for their own advantage and not being prepared to contribute — that cannot be the message we accept from the British," Kauder said, referring to Britain's opposition to the financial transaction tax that Germany has been lobbying for in order to raise revenue for future bank bailouts.

Kauder said he could understand that a country like Britain, which derives 30 percent of its economic output from the City of London financial center, was reluctant to impose such a tax. But he added that it was "nonsense" to tax the sale of a coffee machine and leave financial market transactions untaxed. If Britain continued to resist the tax, the 17-member eurozone would have to introduce it on its own, he said.

British Prime Minister David Cameron is scheduled to visit Berlin on Friday for a meeting with Merkel.

cro — with wire reports

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Re: EUEUEUEUEU was never about democracy, but technocracy

Posted by Olog-hai on Tue Nov 15 19:59:27 2011, in response to Re: EUEUEUEUEU Germany must decide whether eurozone lives or dies, posted by Olog-hai on Sun Nov 13 11:22:47 2011.

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The EU’s architects never meant it to be a democracy

The rise of a “technocracy” was always part of the plan for Europe.

By Christopher Booker
7:18PM GMT 12 Nov 2011

So, as headlines scream that vain bids to save the euro threaten us with “Armageddon”, the EU’s ruling elite has toppled two more elected prime ministers, to replace them with technocratic officials who can be trusted to do Brussels’ bidding.

The new Greek prime minister, Lucas Papademos, was the man who, as head of Greece’s central bank, fiddled the figures to enable Greece to get into the euro (against the rules) in the first place — before being rewarded with a senior post in the European Central Bank. He is no more democratically elected than Mario Monti, who will most likely be Italy’s new prime minister and had hurriedly to be made a “senator for life” to qualify him for the job. Monti’s main qualification is that, as a former senior EU Commissioner, he has long been a member of the Brussels elite himself.

One of the few pleasures of watching this self-inflicted shambles unfolding day by day has been to see the panjandrums of the Today program, James Naughtie and John Humphrys, at last beginning to ask whether the EU is a democratic institution. Had they studied the history of the object of their admiration, they might long ago have realised that the “European project” was never intended to be a democratic institution.

The idea first conceived back in the 1920s by two senior officials of the League of Nations — Jean Monnet and Arthur Salter, a British civil servant — was a United States of Europe, ruled by a government of unelected technocrats like themselves. Two things were anathema to them: nation states with the power of veto (which they had seen destroy the League of Nations) and any need to consult the wishes of the people in elections.

As Richard North and I showed in our book The Great Deception, this was the idea that Monnet put at the heart of the “project” from 1950 onwards, modelling his “government of Europe” on precisely the same four institutions that made up the League of Nations — a commission, a council of ministers, a parliament and a court. Thus, step by step over decades, Monnet’s technocratic dream has come to pass.

The events of last week were by no means the first time that an elected prime minister has been toppled by the Euro-elite. The most dramatic example, as we also showed in our book, was in 1990, when Mrs. Thatcher had emerged as the biggest obstacle to the next great leap forward in their slow-motion coup d’état, the Maastricht Treaty, creating the European Union and the single currency. Following her ambushing at a European Council in October 1990, when she was outnumbered eleven to one, the trap was sprung. An alliance between the European elite, led by Jacques Delors, and our own Tory Europhiles, led by Geoffrey Howe and Michael Heseltine, brought her down within weeks.

They had disposed of the greatest political obstacle to the onward march of their project just as ruthlessly as they were later to brush aside all those referendums expressing the objections of the French, the Dutch and the Irish to their Constitution. The one thing for which there has never been any place in their grand design is democracy. What a pity the Today program didn’t wake up to that years ago.

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Re: EUEUEUEUEU was never about democracy, but technocracy

Posted by RockParkMan on Tue Nov 15 20:14:19 2011, in response to Re: EUEUEUEUEU was never about democracy, but technocracy, posted by Olog-hai on Tue Nov 15 19:59:27 2011.

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Re: EUEUEUEUEU crunch time in EUEUEUEUEUEU

Posted by Olog-hai on Tue Nov 15 20:28:40 2011, in response to Re: EUEUEUEUEU was never about democracy, but technocracy, posted by Olog-hai on Tue Nov 15 19:59:27 2011.

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Germany faces crunch time over eurozone crisis

The markets clearly think the crisis is spreading to the core of eurozone, but the pfennig appears yet to drop in Berlin

Larry Elliott, economics editor
Tuesday 15 November 2011 16.33 EST

It is make-your-mind-up time for Angela Merkel. Not next year. Not even next month. But this week. The financial markets were ugly on Tuesday, flashing a loud and consistent message: the crisis in the eurozone is no longer confined to the weak Club Med countries but is spreading to the core.

Germany has to decide whether to drop its visceral opposition to the European Central Bank acting like a true lender of last resort, or face being blamed for the breakup of the single currency.

This is a tough call for Merkel, but what happened in the markets on Tuesday was significant. The loss of confidence in Greece, Italy, Spain and Portugal was old news. The new development was that investors were also increasingly wary of lending to those countries that would, along with Germany, form the nucleus of a hardcore euro in the event of a breakup.

Interest rates on Belgian, Austrian and French debt rose sharply. There was even pressure on Dutch bonds, traditionally seen as the second safest in the eurozone after German bunds. Bond dealers reported a full-scale run on French bonds.

By contrast, Switzerland — the safe haven of choice for nervous investors at present — sold six-month bonds at an interest rate of -0.3%. Investors, in other words, were paying the Swiss government for the privilege of being allowed to lend money to a country seen as rock solid. This is simply a posh way of hiding money under the mattress.

The financial markets understand just how critical the situation is, even if the pfennig has yet to drop in Berlin.

Dhaval Joshi, at BCA Research, delved into the world of physics to explain Europe's predicament. "Approaching a black hole, cosmologists define the event horizon as the point beyond which it is impossible to escape a guaranteed ultimate annihilation," Joshi said. "The fascinating thing is you can cross this point of no return without realizing that your doom is certain. So the question is: has the euro area unwittingly crossed its own event horizon? We believe not, although it is getting dangerously close."

Joshi sent this note out on Monday night. Twenty-four hours later, spaceship euro had been sucked even nearer to the edge of the abyss and now faces three interlocking problems. The first is that the financial markets are unconvinced that governments can sort out their public finances. The second is that nobody in Europe shows any sign of taking charge of the problem. Merkel is no Bismarck, Sarkozy no De Gaulle.

Finally, there is a problem of time. The markets operate at warp speed, European politics to the gentle rhythms of 19^th century diplomacy — ensuring that policy makers are always behind the bond traders.

So what happens now? A complete breakup, although more likely than six weeks ago, is still a remote possibility. If there is one thing likely to make Europe's political class move faster than a giant tortoise it is the prospect of wasting all the political capital invested in monetary union. Logically, therefore, there are only two options left. One is for Merkel, Sarkozy and the rest of the eight-strong Frankfurt Group to work up a Plan B, with a small number of countries joining Germany in a new northern euro and the rest of the current eurozone forming their own satellite zone. But Plan B is unlikely until things look even bleaker for the euro than they do today.

Alternatively, the ECB has to crank up the printing press to buy enormous quantities of Italian and Spanish bonds, throwing inflationary caution to the wind in the process. This is tough for Germany to swallow, in large part because of the memories of the 1923 hyperinflation.

Behind the scenes, it is said, Merkel is in favor of allowing the ECB to print money, but is not prepared to say so.

The Bundesbank, Germany's central bank, would certainly oppose anything that smacked of printing money. But that would be irrelevant if a majority of the 23 members of the ECB's governing council decided the emergency was so serious that there was no choice but to act to save monetary union from a collapse of confidence that might trigger bank failures on a massive scale and cause a global slump reminiscent of the 1930s. Such an eventuality looked scarily close on Tuesday night.

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Re: EUEUEUEUEU crunch time in EUEUEUEUEUEU

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Re: EUEUEUEUEU turning into Greater Germany

Posted by Olog-hai on Wed Nov 16 01:20:58 2011, in response to Re: EUEUEUEUEU More on the Frankfurt Group, i.e. the new Politburo/Hit Squad of EUEUEUEUEUEU, posted by Olog-hai on Tue Nov 15 14:25:57 2011.

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The founders of the EU were trying to prevent another German superstate. But that is precisely where we are heading

By Peter Mullen | Politics
Last updated: November 15^th, 2011

It is one thing for David Cameron to say, as he said at the Lord Mayor’s Banquet, that it is “in our interests” to remain in the EU. Would he, I wonder, say it was in our interests to be part of a greater Germany?

The way things are going, they might soon amount to the same thing. Angela Merkel declared last Monday that Europe is in its most dangerous predicament “since the Second World War”. The solution, as she said, is “more Europe, not less”.

In other words the ambitions of Germany are made plain: what is being envisaged in Mrs. Angela Merkel’s mind is a unified Europe, a superstate, in which the most powerful, and therefore dominating, nation would be Germany. The superstate was planned from the beginning by its prophets and founders — despite the lies told to us over the decades by such as Edward Heath, Neil Kinnock and Michael Heseltine. But the idea of this radical political innovation being controlled by Germany was certainly not foreseen by those patriarchal Eurocrats. Ironically, they have achieved exactly that which they tried so hard to prevent.

So, three times in recent history, Germany has come close to a achieving hegemony in Europe: in 1870 under Bismarck, in 1914 under the Kaiser and again in 1939 under Adolf Hitler. Is Angela Merkel about to achieve by financial and economic muscle what those men failed to achieve by force of arms?

When the Berlin Wall came down, I recall a conversation I had with the poet and former senior civil servant, C.H. Sisson. I asked him what he thought of the collapse of the Soviet Union and he replied, “Good news. But, when we’ve just got rid of something like that in the East, why are we building something very similar to it here in the West?”

And that is effectively what we have.

We were promised by the Eurocrats a continent-wide democratic defense against fascist dictatorship, but what we are heading for at great speed is precisely that dictatorship. And it looks very much like what went on in the Soviet bloc for decades: government not by elected politicians but by unelected commissars and technocrats. How else are we to understand the appointment to the premierships in both Greece and Italy of EU apparatchiks?

Meanwhile, over his dinner, Dave waffles about the need for political powers “to ebb back” to Britain from the EU — as if this would happen naturally like the tidal flow. But the central dogma of the EU is that powers once arrogated from the nation states of Europe must never be returned.

Once again Britain stands alone. We do not this time — or not yet, anyhow — need Spitfires: we need a referendum on our continued membership of this bureaucratic dictatorship.

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Re: EUEUEUEUEU Nigel Farage tells it like it is to EUEUEUEUEUEU technocrats

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Re: EUEUEUEUEU Mario Monti forms new Italian government with no politicians

Posted by Olog-hai on Wed Nov 16 18:24:55 2011, in response to EUEUEUEUEU Olog, posted by RockParkMan on Sat Nov 12 14:58:17 2011.

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Monti forms new Italian govt with no politicians

By COLLEEN BARRY and FRANCES D'EMILIO | AP – Wednesday November 16, 2011

ROME (AP) — Italian Premier Mario Monti formed a government of bankers, diplomats and business executives Wednesday, saying the absence of politicians in his Cabinet will spare political parties the "embarrassment" of taking the tough decisions needed to steer the country from financial disaster.

The 68-year-old former European Union competition commissioner and his Cabinet were sworn in at a solemn ceremony at the presidential palace that formally ended Silvio Berlusconi's 3½-year-old government and the media mogul's 17-year-long political dominance.

Monti faces his first major hurdle Thursday when he presents his legislative agenda to parliament and subjects his government to a confidence vote in the Senate. The vote in the lower Chamber of Deputies is expected Friday.

In another troubled European economy, Greek Prime Minister Lucas Papademos easily won a confidence vote Wednesday for his new government, formed last week with politicians from the Socialists, the rival conservatives and a small right-wing party. He won 255-38 in the 300-member parliament.

Papademos' government, which is only expected to be in power until elections in February, was created to push through a €130 billion ($177 billion) new debt deal and get vital bailout funds immediately to fend off a catastrophic default. He must also oversee the implementation of a raft of austerity measures already passed, including increased taxes and the suspension of about 30,000 civil servants on partial pay.

His government is also negotiating with banks about a plan to forgive half of Greece's massive debt.

In Rome, Monti refused to discuss what if any new austerity measures he might have in store to bring Italy out of its debt crisis, saying only that economic growth was a priority and that he would reveal details of his agenda in his parliament address Thursday.

He told reporters that he would serve as Italy's economy minister as well as its premier as he seeks "sacrifices" from across the political spectrum to solve the economy's woes and get it growing again.

Hopes for his new administration won Italy some respite in financial markets Wednesday, but the relief didn't last long. By afternoon, the yield or interest rate on 10-year Italian bonds was back dangerously near 7 percent — the threshold that eventually forced Greece, Ireland and Portugal to seek bailouts.

Up until summer, Italy had mostly avoided the European debt turmoil despite having a jaw-dropping debt of €1.9 trillion ($2.6 trillion), nearly 120 percent of its GDP. But after Berlusconi's frequent delays and backtracking on austerity measures, the markets lost faith that his government could fix Italy's economic issues.

Restoring confidence is crucial because, as the third-largest economy in the eurozone, Italy is too big for Europe to rescue. A debt default by Italy could break up the eurozone, a catastrophic event for the global economy.

Italy's economy is hampered by high wage costs, low productivity, fat government payrolls, excessive taxes, choking bureaucracy and low numbers of college graduates. But Monti says Italy can beat the crisis if its polarized citizenry can pull together.

"I hope that, governing well, we can make a contribution to the calming and the cohesion of the political forces," Monti told reporters.

Explaining why his Cabinet had no one from Italy's fractious political parties, Monti said he decided after talks with party leaders that "the non-presence of politicians in the government would help it more than create obstacles" because it would "remove a point of embarrassment" on the part of politicians.

He has also met with union leaders and business representatives.

German Chancellor Angel Merkel, who was critical of Berlusconi's efforts, sent her congratulations. Spokesman Steffen Seibert expressed her hope that Monti's government would carry out reforms "so that Italy can win back the trust of markets."

"She thinks very highly of him. He is an expert who knows the relations in Europe very well," he told reporters.

Monti's ministers include Corrado Passera, CEO of Italy's second-largest bank, Intesa Sanpaolo SpA, to head Economic Development and Infrastructure; Piero Gnudi, a longtime chairman of Enel utility company, as Tourism and Sport minister in a country heavily dependent on tourist revenues; and the current Italian ambassador to Washington, Giulio Terzi di Sant'Agata, to be foreign minister.

Monti said he put Passera in charge of two areas to ensure good coordination on projects that can boost economic growth.

A historian of the Catholic church with close ties to the Vatican, Andrea Riccardi, was named minister of international and domestic cooperation, a choice that seemed to reward pro-Vatican lawmakers.

Analysts gave Monti's selections top marks.

"I think the quality of the people is very high," said Roberto D'Alimonte, a political science professor at Rome's LUISS University. "All these people are very high-caliber, and highly respected, independent."

Yet still his choices raised some eyebrows.

"This government — ties to banks, to business, to the Vatican, to private universities, to the usual names — is the opposite of what this country needs," said Paolo Ferrero, leader of a tiny, far-left party.

In other choices, the new defense minister is Adm. Giampaolo Di Paola, currently NATO's top military officer. Three ministers are university professors, like Monti, and three are women, reflecting Monti's insistence that women hold more high-profile posts in government.

The Association of Magistrates — which had an antagonistic relationship with Berlusconi's government — welcomed the appointment of Paola Severino and pledged its support to improve the justice system.

The shift in power away from career politicians had caused bickering within Berlusconi's conservative People of Freedom Party, which eventually endorsed Monti. But Berlusconi's main coalition ally, the Northern League, is returning to the opposition during Monti's government.

The head of Italy's largest union group, Susanna Camusso, backed Monti but hoped he "won't put his priority on pensions."

Parliament last week voted to raise the retirement age as part of an austerity package to 67 by 2026 and 70 by 2050, but critics say those reforms are meaningless because they are so far in the future. The new reforms also call for the sale of state property, privatizing some services, and offering tax incentives to companies that hire young workers. But the measures contained no painful labor reforms.

Some Italians weren't so enthusiastic about an unelected government.

"When governments of technocrats are needed, it means democracy and politics are considered useless, so it's something negative that has to be for a limited period of time," said skeptic Giuseppe Drago on the streets of Rome.

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Re: EUEUEUEUEU Mario Monti forms new Italian government with no politicians

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Re: EUEUEUEUEU's debt putting US banks at risk (again)

Posted by Olog-hai on Thu Nov 17 13:38:36 2011, in response to EUEUEUEUEU Olog, posted by RockParkMan on Sat Nov 12 14:58:17 2011.

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U.S. Banks Face Contagion Risk From Europe Debt

By Dakin Campbell — Nov 17, 2011 7:30 AM GMT-0500

U.S. banks face a “serious risk” that their creditworthiness will deteriorate if Europe’s debt crisis deepens and spreads beyond the five most-troubled nations, Fitch Ratings said.

“Unless the eurozone debt crisis is resolved in a timely and orderly manner, the broad credit outlook for the U.S. banking industry could worsen,” the New York-based rating company said yesterday in a statement. Even as U.S. banks have “manageable” exposure to stressed European markets, “further contagion poses a serious risk,” Fitch said, without explaining what it meant by contagion.

The “exposures” of U.S. lenders to major European banks and the stressed nations of Greece, Ireland, Italy, Portugal and Spain, known as the GIIPS, are smaller than those to some of the continent’s larger countries, Fitch said.

The six biggest U.S. banks — JPMorgan Chase & Co. (JPM), Bank of America Corp. (BAC), Citigroup Inc. (C), Wells Fargo & Co. (WFC), Goldman Sachs Group Inc. and Morgan Stanley (MS) — had $50 billion in risk tied to the GIIPS on Sept. 30, Fitch said. So-called cross-border outstandings to France for all except Wells Fargo were $188 billion, including $114 billion to French banks. Risk to Britain and its banks was $225 billion and $51 billion, respectively.

Europe’s debt crisis has toppled four elected governments, with the last two, in Greece and Italy, falling last week. Italian bond yields remained at about 7 percent — the threshold that led Greece, Portugal and Ireland to seek bailouts — and shares of French banks, including BNP Paribas (BNP) SA and Societe Generale (GLE) SA, dropped amid concern they’ll need more capital.

Stocks Slump

U.S. stocks slumped yesterday after the Fitch report was released. The Standard & Poor’s 500 Index slid 1.7 percent and the 24-company KBW Bank Index declined 1.9 percent. U.S. index futures fell earlier today as Spanish and French borrowing costs rose.

The Fitch report is a worst-case scenario and is "oddly out of step" with the rating company’s previous reports, analysts at HSBC Holdings Plc said today. U.S. banks may even benefit as investors shift money to the U.S. from Europe, HSBC said.

Investor demand for the relative safety of Treasuries during the European debt crisis has sent the difference between U.S. short-term yields and bank rates surging to levels not seen in more than two years.

The gap between the London interbank offered rate and the overnight index swap, or what traders expect the Federal Reserve’s benchmark to be over the term of the contract, widened to 38 basis points today. It was the highest level since June 2009.

Swap Spreads

U.S. five-year swap spreads climbed to 45 basis points, the most since August 2009. Investors use swaps to exchange fixed and floating interest rates. The spread, the gap between the fixed component and the yield on similar-maturity Treasuries, is a measure of bank creditworthiness.

The TED spread, the difference between what lenders and the U.S. government pay to borrow for three months, widened to 47 basis points today, or 0.47 percentage point, the most since June 2010.

Yields have yet to reach the levels seen three years ago when credit markets froze and the U.S. economy was in a recession. The TED spread was as wide as 4.64 percentage points in October 2008.

Hedging Risk

While U.S. banks have hedged some of their risk with credit-default swaps, those may not be effective if voluntary debt forgiveness becomes “more prevalent” and the insurance provisions of the instruments aren’t triggered, Fitch said in the report. The top five U.S. banks had $22 billion in hedges tied to stressed markets, according to Fitch.

Disclosure practices also make it difficult to gauge U.S. banks’ risk, Fitch said. Firms including Goldman Sachs and JPMorgan don’t provide a full picture of potential losses and gains in the event of a European default, giving only net numbers or excluding some derivatives altogether.

Guarantees provided by U.S. lenders on government, bank and corporate debt in Greece, Italy, Ireland, Portugal and Spain rose by $80.7 billion to $518 billion in the first half of 2011, according to the Bank for International Settlements.

Also yesterday, Moody’s Investors Service downgraded the senior debt and deposit ratings of 10 German public-sector banks, citing its assumption that “there is now a lower likelihood” that the lenders would get external support.

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Re: EUEUEUEUEU Mario Monti declares "emergency"

Posted by Olog-hai on Thu Nov 17 13:48:40 2011, in response to Re: EUEUEUEUEU Mario Monti forms new Italian government with no politicians, posted by Olog-hai on Wed Nov 16 18:24:55 2011.

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New Italy PM pledges tough reform to face emergency

By James Mackenzie and Gavin Jones
Thu Nov 17, 2011 10:49am EST

ROME (Reuters) — Italy is facing a serious emergency, new Prime Minister Mario Monti said on Thursday, as he promised rigor and fairness in painful reforms to dig the country out of a financial crisis that threatens the entire eurozone.

Making his maiden speech before an evening confidence vote, Monti said the survival of the euro partly depended on Italy embarking on radical reforms in the next few weeks. The European Union is facing its most difficult challenge, he added.

"The government recognizes that it was formed to resolve a serious emergency in a constructive and united spirit. I would like to use the following expression: a government with a national commitment," he said.

"Only if we can avoid being seen as the weak link of Europe can we contribute to European reforms," said Monti, who was sworn in on Wednesday at head of a technocrat government after a rushed transition from discredited ex-premier Silvio Berlusconi.

Monti, who is rushing to end a collapse in market confidence that has pushed Rome's borrowing costs to critical levels, said he would consider more reforms after implementing pledges made to the EU but never passed by Berlusconi.

But he denied that the measures were imposed by Brussels.

The speech confirmed expectations that the respected former European Commissioner would waste no time in pushing through deep reforms of Italy's stagnant economy.

Monti said measures to vanquish a crisis that has put the eurozone's third economy at the center of its expanding debt crunch would focus equally on cutting Italy's huge public debt and boosting chronically poor growth.

He said the new government would target widespread tax evasion, sub-standard education and training and Italy's creaking welfare system as well as liberalizing the labor market in what are expected to be unpopular austerity measures.

In a 45-minute address, he said the key goals of his technocrat government would be to improve public services and help women and young people to get jobs.

Making clear what he would target, Monti said Italy had a higher average retirement age than in France and Germany and that chronic tax evasion must be fought.

He would also set out a schedule for the sale of public assets, while lower taxes on labor and output would be balanced by higher levies on consumption.

Italy's notoriously closed professions would be opened up in a major campaign to modernize the economy, he said.

In another shot at a notorious problem, Monti said the use of cash should be reduced to cut an underground economy that accounts for nearly 20 percent of GDP.

He further promised to reduce the cost of Italy's political system and cosseted politicians, which has caused increasing public outrage under Berlusconi's outgoing government.

Second Vote

Monti will see a second confidence vote in the lower house on Friday.

He was comforted in his daunting task on Thursday by an opinion poll that said an overwhelming majority of Italians supported him.

The poll taken by the respected Piepoli Institute for La Stampa newspaper said 73 percent of those asked believed his government would be capable of leading an extraordinary effort to fix Italy's problems. Even 60 percent of voters from the center-right, the grouping that backed the last government, said they had faith in Monti.

But there were early signals of the problems facing the new prime minister, who has taken the economy portfolio himself.

Berlusconi, after a few days of silence following his ignominious exit on Saturday, told deputies from his PDL party that the new unelected government was imposed on the country by President Giorgio Napolitano. He said it would last only as long as the PDL wanted, Italian news agencies reported.

Monti will need strong parliamentary support for radical reforms that have been promised by most of the parties, but could evaporate as the measures become more unpopular.

There was also opposition on the streets where thousands of people protested in several cities against what they called a "bankers' government." Protesters clashed with police in the business capital of Milan and in Turin.

With the eurozone debt crisis spreading wider by the day, Monti's policies are unlikely to be enough on their own to rebuild shattered market confidence.

But they will be vital to restoring credibility with international partners who had long lost patience with the repeatedly unfulfilled promises of Monti's flamboyant predecessor Berlusconi.

Italy's welfare system allows many to claim a pension before the standard retirement age of 65 and current labor market rules protect some workers but discourage job creation.

The uphill task Monti faces was underlined by the continued surge in Italian bond yields.

Yields on 10-year bonds were over 7 percent, near the levels that forced Greece and Ireland to seek an international bailout, but which would overwhelm the eurozone's current financial defenses if similar help was needed by Italy's much larger economy.

The appointment of Monti, a sober and reserved economist and tough negotiator with a decade of experience as European Commissioner, was greeted with palpable relief by foreign leaders exasperated by the scandal-plagued Berlusconi.

The growing threat that Italy's economy will slip into recession next year will make it increasingly difficult to keep control of its huge public debt, which amounts to 120 percent of gross domestic product.

(Additional reporting by Steve Scherer; Writing by Barry Moody; Editing by Mark Heinrich)

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Re: EUEUEUEUEU Germany must decide whether eurozone lives or dies

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Re: EUEUEUEUEU Mario Monti forms new Italian government with no politicians

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Re: EUEUEUEUEU Germany plots to derail British referendum on EUEUEUEUEUEU

Posted by Olog-hai on Thu Nov 17 20:48:03 2011, in response to EUEUEUEUEU Olog, posted by RockParkMan on Sat Nov 12 14:58:17 2011.

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Germany's secret plans to derail a British referendum on the EU

Germany has drawn up secret plans to prevent a British referendum on the overhaul of the European Union amid concerns it could derail the eurozone rescue package, leaked documents obtained by The Daily Telegraph disclose.

By Bruno Waterfield, in Brussels
10:02PM GMT 17 Nov 2011

Angela Merkel, the German chancellor, is today expected to tell David Cameron that Britain does not need a referendum on EU treaty changes, despite demands from senior Conservatives for more powers to be repatriated to Britain.

The leaked memo, written by the German foreign office, discloses radical plans for an intrusive new European body that will be able to take over the economies of beleaguered eurozone countries.

It discloses that the EU’s largest economy is also preparing for other European countries, which are too large to be bailed out, to default on their debts — effectively going bankrupt. It will prompt fears that German plans to deal with the eurozone crisis involve an erosion of national sovereignty that could pave the way for a European “super state” with its own tax and spending plans set in Brussels.

Britain would be relegated to a new outer group of EU members who are not in the single currency. Cameron will today travel to Brussels and Berlin for tense negotiations with Merkel amid growing disagreement between the leaders over how to deal with the eurozone.

The Prime Minister is increasingly exasperated that Germany refuses to provide more financial help for Italy and other struggling countries amid concerns that the crisis is having a “chilling effect” on the British economy. Merkel yesterday said she expected Cameron to “examine a stronger involvement with other countries” once the eurozone crisis had been resolved.

She said: “We’ve seen a sovereign debt crisis evolve in some states and particularly those in the eurozone find themselves in the international focus. It was right of David Cameron to concern himself with the UK’s debt issues when he became Prime Minister — that’s my firm conviction, and once the negative focus has moved away from Europe, he will examine a stronger involvement with other countries.”

The eurozone contagion is threatening to spread to Spain and France. Yesterday, the price of Spanish government borrowing reached the “brink” of crisis point.

The Spanish government sold 10-year bonds at a 6.975 percent yield — just below the seven per cent level which has triggered international assistance elsewhere.

Amid protests in Milan and Turin, Mario Monti, Italy’s unelected “technocrat” prime minister unveiled sweeping austerity reforms. Monti warned that a break-up of the single currency would take eurozone economies “back to the 1950s” in terms of wealth.

The six-page German foreign ministry paper sets out plans for the creation of a European Monetary Fund with a transfer of sovereignty away from member states.

The fund will have the power to take ailing countries into receivership and run their economies. Even more controversially, the document, entitled The future of the EU: required integration policy improvements for the creation of a Stability Union, declares that the treaty changes are a first stage “in which the EU will develop into a political union”. “The debate on the way towards a political union must begin as soon as the course toward stability union is charted,” it concludes.

The negotiating document also explicitly examines ways to limit treaty changes to speed up the reforms. It indicates that Merkel will tell Cameron to rule out a popular EU vote in Britain.

“Limiting the effect of the treaty changes to the eurozone states would make ratification easier, which would nevertheless be required by all EU member states (thereby less referenda could be necessary, which could also affect the UK),” read the paper.

Senior government officials confirmed that they had dropped a previous demand that EU powers should be “repatriated” to Britain in return for the treaty changes requested by Germany, a move that will anger Conservative MPs.

“I don’t think that anyone is seriously proposing going down that route,” a senior government source said.

Open Europe, a think tank, last night called for Cameron to demand something in return from Merkel for her “far-reaching plan”, which requires the unanimous consent of all 27 EU countries, giving Britain a veto.

“It would be the first step towards a vision of ‘political union’ that would have major consequences for the future of the entire EU, and therefore the UK’s place within it,” said Stephen Booth, the think tank’s research director.

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Re: EUEUEUEUEU Germany plots to derail British referendum on EUEUEUEUEUEU

Posted by B68 slow poke on Fri Nov 18 00:26:30 2011, in response to Re: EUEUEUEUEU Germany plots to derail British referendum on EUEUEUEUEUEU, posted by Olog-hai on Thu Nov 17 20:48:03 2011.

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Re: EUEUEUEUEU Germany plots to derail British referendum on EUEUEUEUEUEU

Posted by Olog-hai on Fri Nov 18 00:33:16 2011, in response to Re: EUEUEUEUEU Germany plots to derail British referendum on EUEUEUEUEUEU, posted by B68 slow poke on Fri Nov 18 00:26:30 2011.

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Re: EUEUEUEUEU Germany plots to derail British referendum on EUEUEUEUEUEU

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Re: EUEUEUEUEU Germany plots to derail British referendum on EUEUEUEUEUEU

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Re: EUEUEUEUEU Germany plots to derail British referendum on EUEUEUEUEUEU

Posted by B68 slow poke on Fri Nov 18 00:41:28 2011, in response to Re: EUEUEUEUEU Germany plots to derail British referendum on EUEUEUEUEUEU, posted by Olog-hai on Fri Nov 18 00:39:06 2011.

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Re: EUEUEUEUEU Germany plots to derail British referendum on EUEUEUEUEUEU

Posted by AlM on Fri Nov 18 08:42:24 2011, in response to Re: EUEUEUEUEU Germany plots to derail British referendum on EUEUEUEUEUEU, posted by Olog-hai on Thu Nov 17 20:48:03 2011.

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Re: EUEUEUEUEU Ireland's budget reviewed by *Bundestag* before Irish parliament sees it

Posted by Olog-hai on Fri Nov 18 18:11:26 2011, in response to EUEUEUEUEU Olog, posted by RockParkMan on Sat Nov 12 14:58:17 2011.

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Irish irate as Bundestag sees budget first

Published: 18 Nov 11 10:39 CET

The Irish and German governments became entangled in a spat on Thursday after details of the Irish budget were given to the German Bundestag, before being presented to the Irish parliament, the Dáil.

The sensitive plans, including a two-percent increase in the top value added tax (VAT) and a €100 household tax, were sent by the German finance ministry — along with a letter of intent from the Irish Finance Minister — to the Bundestag budgetary committee.

This provoked outrage in Ireland, and denials from Irish Prime Minister Enda Kenny that he had given the information to the Germans.

Irish opposition parties said if reports were true that the document was seen in the German parliament, it would represent a "staggering breach of faith" which suggested Germany was "now pulling the strings," the Irish Times daily newspaper reported.

"Let me confirm something to you, the cabinet have made no decision in regard to the budget. It is on December 6," Kenny said. "I'm not going to comment on speculative (reports) or comment about decisions that have not been taken by the government at all."

Kenny, who met with German Chancellor Angela Merkel on Wednesday, added he had "no idea" how the document ended up in the Bundestag.

But the Irish Times, which has seen the document, said giving the information to the Bundestag was in line with German guidelines for participation in the European Financial Stability Facility (EFSF) — the German budgetary committee has to approve proposals to increase income and reduce spending before each bailout tranche can be released.

“What’s happened is the federal government meeting its legal information to inform the Bundestag about the EFSF,” one committee member told the Irish Times. “This is widely known and seems unproblematic from our perspective. This is the day-to-day reality of a program country.”

In November 2010, Ireland was forced to seek an €85 billion rescue package from the EU and the International Monetary Fund to deal with massive debt and deficit problems.

"We need to know whether the Irish government has revealed the detail of its budget plans to the German budget committee," he added, according to the Irish Times.

Ireland's 2012 budget next month will involve €3.8 billion in spending cuts and tax hikes aimed at cutting the public deficit to 8.6 percent of Gross Domestic Product.

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Re: EUEUEUEUEU Ireland's budget reviewed by *Bundestag* before Irish parliament sees it

Posted by RockParkMan on Fri Nov 18 18:44:33 2011, in response to Re: EUEUEUEUEU Ireland's budget reviewed by *Bundestag* before Irish parliament sees it, posted by Olog-hai on Fri Nov 18 18:11:26 2011.

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Re: EUEUEUEUEU Ireland's budget reviewed by *Bundestag* before Irish parliament sees it

Posted by Olog-hai on Fri Nov 18 19:56:19 2011, in response to Re: EUEUEUEUEU Ireland's budget reviewed by *Bundestag* before Irish parliament sees it, posted by RockParkMan on Fri Nov 18 18:44:33 2011.

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Re: EUEUEUEUEU's financial disaster is heading towards the USA

Posted by Olog-hai on Sat Nov 19 02:20:22 2011, in response to Re: EUEUEUEUEU Ireland's budget reviewed by *Bundestag* before Irish parliament sees it, posted by Olog-hai on Fri Nov 18 19:56:19 2011.

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Europe’s Disaster Is Headed Our Way

Nov 14, 2011 12:00 AM EST

Can America withstand the death spiral of debt?

As an author who has just published a book on the crisis of Western civilization, I couldn’t really have asked for more: simultaneous crises in Athens and Rome, the cradles of the West’s law, languages, politics, and philosophy.

Yet most Americans are baffled by the ongoing economic pandemonium in the European Union. For them, places like Greece and Italy are primarily tourist destinations they’ll visit at most once. The finer points of Mediterranean politics leave them cold, except insofar as they’re funny. After all, who could resist the opera-buffa character of Silvio “Bunga-Bunga” Berlusconi?

But only a few weirdos really feel their pulses quicken when they hear news like: the new Greek prime minister is a former central banker called Papademos! Ever tried to explain to a New Yorker the finer points of Slovakian coalition politics? I have. He almost needed an adrenaline shot to come out of the coma.

So why should Americans care about any of this? The first reason is that, with American consumers still in the doldrums of deleveraging, the United States badly needs buoyant exports if its economy is to grow at anything other than a miserably low rate. And despite all the hype about trade with the Chinese, U.S. exports to the European Union are nearly three times larger than to China.

Until March, it seemed as if exports to Europe were on an upward trajectory. But the eurozone crisis has stopped that. Governments that ran up excessive debts have seen their borrowing costs explode. Unable to devalue their currencies, they’ve been forced to adopt austerity measures—cutting spending or hiking taxes—in a vain effort to reduce their deficits. The result has been Depression economics: shrinking economies and unemployment rates approaching 20 percent.

As a result, according to the new president of the European Central Bank, Mario Draghi, a “double dip” recession in Europe is now all but inevitable. And that’s lousy news for U.S. exporters targeting the EU market.

But there’s more. Europe’s problem is not just that governments are overborrowed. There are an unknown number of European banks that are effectively insolvent if their holdings of government bonds are “marked to market”—in other words, valued at their current rock-bottom market prices. In our interconnected financial world, it would be very odd indeed if no U.S. institutions were affected by this. Just as European institutions once loaded up on assets backed with subprime U.S. mortgages, so most big U.S. banks have at least some exposure to euro-zone bonds or banks. One institution—MF Global, run by former Goldman Sachs CEO Jon Corzine—just blew up because of its highly levered euro bets. Others are biting their fingernails because it is suddenly far from clear that the credit-default swaps they have bought as insurance against, say, a Greek default are worth the paper they are written on.

But the third reason Americans should care about Europe is more important even than the risk of a renewed financial crisis. It is the danger that what is happening in Europe today could ultimately happen here. Just a few months ago, almost nobody was worried about Italy’s vast debt, which amounts to 121 percent of GDP. Then suddenly panic set in, and Italy’s borrowing costs exploded from 3.5 percent to 7.5 percent.

Today the U.S. gross federal debt stands at around 100 percent of GDP. Four years ago it was 62 percent. By 2016 the International Monetary Fund forecasts it will be 115 percent. Economists who should know better insist that this is not a problem because, unlike Italy, the United States can print its own money at will. All that means is that the U.S. reserves the right to inflate or depreciate away its debt. If I were a foreign investor—and half the debt in public hands is held by foreigners—I would not find that terribly reassuring. At some point I might demand some compensation for that risk in the form of ... higher rates.

Athens, Rome, Washington ... The shortest route from imperial capital to tourist destination is precisely this death spiral of debt.

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