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July 17 2012

02mydafsoup-01
[...]

The reason I point this out is because many in Germany and at the ECB are saying the crisis is because the stability and growth pact wasn’t strict enough. (See here for the ECB’s version of this). The ruling CDU-led coalition in Germany is actively marketing an anti-SPD storyline on these lines in the run up to the general election that goes something like this:

"We in the CDU/CSU/FDP union were fiscally responsible. But once the SPD and the Greens took over, Germany lost its way, resulting in the watering down of the stability and growth pact. These unfortunate events are what led to the crisis we now have because without the SPD-Green government’s actions, deficit hurdle breaches would be non-starters."

This is pure propaganda. To my ears it sounds much like the Partido Popular propaganda in 2011 that conned Spaniards into giving them the largest ruling majority since 1982. Rajoy told Spaniards it was the socialists’ profligacy which created the mess. Once PP was in place, things would be different, all without the need to raise taxes or anything painful like that. We now see this was complete rubbish.

Moreover, in the German context, We know already that it was the Union-FDP government of Kohl – in which both present Chancellor Merkel and Finance Minister Schaeuble were prominent members – that allowed the debt hurdle weakening allowing Italy, Greece, Ireland, Portugal and Ireland into the euro zone to begin with. If the debt hurdle had been set at 60% without the "diminish sufficiently and approach the reference value" clause in the Maastricht Treaty in 1992, none of these countries would be in the eurozone: Not Italy, not Ireland, not Portugal, not Spain, not Greece and not Belgium. If none of these countries were members of the euro zone, their currencies would have devalued long ago as an adjustment for their lack of competitiveness after the financial crisis. They could have their central banks backstop debt, run deficits or whatever they wanted to do, much as Britain and the US have done. (See Spain is the perfect example of a country that never should have joined the euro zone")

[...]

link

— Chart of the Day: Germany in breach of Maastricht Treaty in 8 of 10 years since 2002 | creditwritedowns.com 2012-07-15
Reposted bykrekkpaket

November 11 2011

02mydafsoup-01

Trügerische Ruhe in Portugal | Telepolis 2011-11-11


Der Anführer der Nelkenrevolution 1974 schließt einen Militärputsch angesichts des harten Sparkurses nicht mehr aus

September 12 2011

02mydafsoup-01

[...]

Key agents in this drama were the bank technocracies, both national and international, and the European Commission. The vilains de la pièce are the democratically elected governments (regardless of their political inflection), who  passively transferred constitutionally relevant powers to such technocracies.

The ‘therapies’ based on fiscal austerity are the ultimate outcome of such a chain of decisions. It is said that they will stop speculative attacks. I argue that they will simply prepare fresh bases for new attacks, triggered this time by recession indicators and/or by the absence of relevant improvements in the debt/GNP ratios. There is only one way to frustrate such speculative attacks: rendering the ECB a lender of last resort for sovereign debt, as recently argued by P.De Grauwe, D.Gros, S.Micossi; that is, by restoring a pre-1980 institutional way of organising economic policy making. But the ECB resists such a suggestion, with the support of European governments.

As Susan George puts it bluntly: “The ECB is the obstacle to success, not the Euro per se. The ECB doesn’t lend to governments but to banks, at 1% or less, and then banks lend to governments ... The ECB unlike every other central bank doesn’t issue Eurobonds. So we have government by the banks and the ratings agencies”. And as for the polity abdication she adds: “Now the European Commission wants to examine all individual country budgets before their parliaments vote on them to make sure they meet certain standards. This is a blatant attack on democracy”.

This is a straightforward, though partial, answer to the question raised at the start of the debate on ‘The road to Europe’ by Rossana Rossanda, when she asks: Was starting from the monetary union the right strategy for building the political union of Europe? Mario Pianta has provided a further part of the answer by reconstructing, from a historical economic perspective, what has happened. What I want to explore further in this article is how this absurd process came about; that is, secured by which cultural distortions, wrong reasoning, and false popular beliefs.

[...]

The road to Europe: the eclipse of reason and democracy | openDemocracy - 2011-09-12
Reposted bydatenwolf datenwolf

September 06 2011

02mydafsoup-01
[...]

The state debt crisis became visible in the Dubai crisis in November 2009, but it has unfolded since 2010 in the European periphery. The huge imbalances within the Euro zone, which have been working well for the German export economy, are pushing the states of the periphery into bankruptcy. The 'Euro crisis', which returns in short intervals, is not a currency crisis – in comparison, the Euro is to date more stable than the Deutsche Mark used to be, in relation to the US Dollar the Euro is overrated, and it becomes increasingly important as a global reserve currency. The 'Euro crisis' is a crisis of the European banks, of political governance and of the EU itself. In particular, it is the structure of the EU itself which aggravates the crisis. It is not designed for a common European welfare and fiscal policy; the ECB independently decides about monetary policy, and is focused exclusively upon the stability of the Euro. Therefore the crisis has so far been managed by 'shadow governments in Brussels' and a 'state of permanent emergency to rescue the Euro'. The main burden is on the ECB, which rescued the banks by buying their junk assets. It bought the state bonds of the over-indebted states (for what it's worth breaking a cherished taboo by this), and at the same time putting pressure on these states to cut their public expenditure. But first of all, by its interest rate policies, the ECB tries to prevent workers from struggling and obtaining higher wages.

[...]
Wildcat.english – Movement in Spain – .... and all of a sudden everything became real - 2011-07-08

UBS Declares "The Euro Should Not Exist" In A Monster Report On The Odds Of An EU Breakup


Euro europe

This is going to get a lot of buzz...

UBS' Stephane Deo, Paul Donovan, and Larry Hatheway have released a monster report (posted over at ZeroHedge) examining the consequences of a Euro breakup, a once unlikely-seeming outcome that now grows more likely by the day.

The first line basically nails it:

The Euro should not exist (like this)
Under the current structure and with the current membership, the Euro does not work. Either the current structure will have to change, or the current membership will have to change.  

The report argues that basically the whole system, right from the start, was basically a lie:

Why consider break-up at all? Break-up occurs because the Euro does not work. Member states would be economically better off if they had never joined. European monetary union was generally mis-sold to the population of the Europe. In the 1990s the Euro was often characterised as an instance of foreign exchange rate integration – the Exchange Rate Mechanism without the crises. The advantages of no foreign exchange rate uncertainties or costs for trade and tourists were emphasised. Of course the exchange rate integration was probably the least of the consequences of the Euro. The most important consequence was the integration of monetary policy. The hint was in the name “European Monetary Union”. However, politicians sought to ignore that hint. A Euro that had been promoted on the idea of monetary union rather than exchange rate integration would have been far more difficult to sell to the electorate.

A monetary union is, economically speaking, a “good” idea if the membership constitutes an optimal currency area. This occurs under one of two conditions. Either the area is so homogenous that the component economies all move in the same direction at roughly the same speed, at the same time. Alternatively, the economies are sufficiently flexible that any differences in economic performance can be relatively swiftly corrected.

Ultimately, even at this dire moment, UBS still has a hard time seeing a breakup, calling some kind of fiscal union more likely. The major reason: It would just be too economically costly for anyone to depart.

The economic cost (part 1)
The cost of a weak country leaving the Euro is significant. Consequences include sovereign default, corporate default, collapse of the banking system and collapse of international trade. There is little prospect of devaluation offering much assistance. We estimate that a weak Euro country leaving the Euro would incur a cost of around EUR9,500 to EUR11,500 per person in the exiting country during the first year. That cost would then probably amount to EUR3,000 to EUR4,000 per person
per year over subsequent years. That equates to a range of 40% to 50% of GDP in
the first year.

The economic cost (part 2)
Were a stronger country such as Germany to leave the Euro, the consequences would include corporate default, recapitalisation of the banking system and collapse of international trade.  If Germany were to leave, we believe the cost to be around EUR6,000 to EUR8,000 for every German adult and child in the first year, and a range of EUR3,500 to EUR4,500 per person per year thereafter. That is the equivalent of 20% to 25% of GDP in the first year. In comparison, the cost of bailing out Greece, Ireland and Portugal entirely in the wake of the default of those countries would be a little over EUR1,000 per person, in a single hit.

Read more, including a discussion of breakup mechanics, at ZeroHedge >

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Reposted fromSigalonbandf Sigalonbandf

Eurokrise in Zahlen (II) – Krisengewinnler Neoliberalismus

Während die Welt unter dem Joch der Spekulation an den Finanzmärkten leidet, konnte Deutschland seine finanzpolitische Situation in den letzten beiden Jahren merklich verbessern. Beleg dafür sind die deutlich gesunkenen Zinsen für Staatsanleihen, von denen nicht nur Deutschland, sondern auch andere Länder profitieren, die in den Turbulenzen der Finanzkrise als sicherer Hafen gelten. Anstatt diesen positiven Effekt dazu zu nutzen, zumindest im eigenen Lande die Krisenfolgen zu mildern, nutzt Deutschland die Gunst der Stunde, um ganz Europa auf den neoliberalen Kurs deutscher Schule zu zwingen. Die Folgen dieser Politik sind verheerend – auch für Deutschland. Von Jens Berger

Krisengewinner deutschland

Wenn Politiker und Journalisten den Eindruck vermitteln wollen, dass die Folgen der Finanzkrise zu einem „fundamentalen Vertrauensverlust“ in den Staat geführt hätten, dann ist dies fundamentaler Unsinn. Wie etwa aus den Daten der OECD hervorgeht, hat die Finanzkrise entgegen allem Krisengerede dazu geführt, dass die Zinssätze und damit die Renditen für die Staatsanleihen der großen OECD-Staaten signifikant gesunken sind. Aktuell liegt der Zinssatz zehnjähriger Bundesanleihen erstmals unter 2,0% – die von den USA aufgelegten inflationsindexierten Staatsanleihen (TIPS) erzielen sogar negative Renditen. Die Anleger misstrauen den Staaten demnach nicht, sondern vertrauen ihnen so stark, dass sie ihnen ihr Geld zu einem Zinssatz leihen, der oft niedriger als die Inflationsrate liegt. Wenn irgendwo ein „fundamentaler Vertrauensverlust“ auszumachen ist, dann gilt er gegenüber den Banken, die sich noch nicht einmal selbst vertrauen und ihre liquiden Mittel lieber zum Einlagezinssatz von nur 0,75% bei der EZB parken, als sie anderen Banken zu einem höheren Zinssatz zu leihen.

Dass und warum einige Staaten, wie beispielsweise Italien oder Spanien, aufgrund einer grotesken Spekulationssituation nicht gleichfalls von diesem Vertrauensgewinn profitieren können, zeigten wir bereits im ersten Teil dieser Analyse.

Zinslast im Sinkflug

Bereits im Jahre 2002 entzogen die Ratingagenturen Moodys und Standard and Poors Japan das heißbegehrte AAA und ordneten die Bonität somit zwischen der Botswanas und der Estlands ein. Neun Jahre später kann sich Japan immer noch zu einem Zinssatz refinanzieren, der weltweit seinesgleichen sucht. Nach Herabstufung der Bonität stiegen die Zinsen für japanische Staatsanleihen nicht etwa an, sondern sanken auf das bis dato historische Minimum von 1,0%. Heute liegt der Zinssatz für japanische Staatsanleihen bei 0,9%. Japan zahlt für jeden Yen Schulden also weniger als ein Drittel dessen, was Frankreich für jeden geliehenen Euro zahlt. Damit relativiert sich auch die Auswirkung der im Verhältnis zu allen anderen vergleichbaren Ländern gigantischen japanischen Verschuldung auf den Haushalt der tokyoter Zentralregierung.

Zinssatz für 10jährige bundesanleihen

Auch Deutschland profitiert bei der Betrachtung der Zinslast von der Krise. Im Jahre 2007 betrug die Gesamtverschuldung des Bundes 962 Mrd. Euro. Dies entsprach 39,55% des Bruttoinlandsproduktes. Für die Zinslasten musste der Bundeshaushalt damals 38,8 Mrd. Euro bereitstellen – dies entspricht rechnerisch einem durchschnittlichen Zinssatz von 4,0% und einem Anteil von rund 1,7% gemessen am Bruttoinlandsprodukt.

Im Jahre 2010 betrug die Gesamtverschuldung des Bundes 1.110 Mrd. Euro. Dies entsprach 44,40% des Bruttoinlandsproduktes. Die Schulden sind sowohl absolut als auch relativ gestiegen, die Zinslast ist jedoch merklich gesunken. Für die Zinslasten musste der Bundeshaushalt im letzten Jahr nur noch 33,1 Mrd. Euro bereitstellen – dies entspricht einem durchschnittlichen Zinssatz von 2,98% und einem Anteil von rund 1,5% des Bruttoinlandsproduktes. Bei der letzten Auktion für Bundesanleihen [PDF - 20 KB] erzielten die 10jährigen Papiere sogar nur eine Rendite von 2,15%. Die Finanzkrise hat somit nicht nur zu einer nur geringfügig höheren Gesamtverschuldung, sondern sogar zu einer signifikanten Reduzierung der relativen und absoluten Kosten für die Verschuldung geführt.

Meinungsmache im Sinne der Schock-Strategie

Das populärere Vorurteil, nach dem Deutschland aufgrund der Schuldenproblematik keinen Spielraum, hätte um haushaltspolitisch gegen die massiven Folgen der Finanzkrise anzukämpfen, ist bei näherer Betrachtung nicht mehr haltbar. Doch statt mittels antizyklischer Finanz- und Wirtschaftspolitik die Krisenfolgen einzudämmen, die Binnennachfrage zu stärken und damit als stärkste europäische Volkswirtschaft die dringend benötigte Rolle einer Wachstumslokomotive zu übernehmen, verfolgt die deutsche Regierung eine prozyklische Sparpolitik und nutzt ihren gewonnen Einfluss darüber hinaus auch noch dazu, ihre neoliberale Schock-Strategie auf die gesamte Eurozone auszudehnen.

Wie leider kaum anders zu erwarten, klären die Medien nicht etwa über diesen offensichtlichen Widerspruch auf, sondern leisten der Regierung stattdessen propagandistische Schützenhilfe. Aus einer spekulationsbedingten Refinanzierungskrise einiger europäischer Staaten wird eine „Schuldenkrise“ gemacht. Jeder politische (und ökonomische) Gedanke, der der neoliberalen Schock-Strategie zuwider läuft, wird als „falsches Signal an die Märkte“ denunziert – gerade so, als seien die Spekulanten ein legitimer und legitimierter Schiedsrichter für volkswirtschaftliche Fragen. Anstatt Aufklärung zu betreiben, wird Meinungsmache betrieben.

Doch diese Strategie ist keinesfalls risikolos und zudem volkswirtschaftlich grotesk. Wer soll dem Vize-Export-Weltmeister Deutschland denn seine Waren abkaufen, wenn die gesamte industrialisierte Welt sich zu Tode spart? Schon heute lahmt die Wirtschaft vor allem deshalb, weil die Nachfrage aufgrund sinkender Reallöhne stagniert. Wie sollen Länder wie Griechenland, Spanien oder Portugal ihre Defizite abbauen, wenn Deutschland seine Überschüsse nicht verringern will? Wer soll überhaupt Defizite machen, wenn alle europäischen Staaten Überschüsse erzielen sollen? Die Überschüsse einiger Staaten müssen immer auch zwingend die Defizite anderer Staaten sein.

Es ist sehr wahrscheinlich, dass die deutsche Hegemonialpolitik nicht nur die europäische Währungsunion, sondern auch die europäische Integration und sogar den europäischen Gedanken an die Wand fahren wird. Wenn Angela Merkel denkt, ganz Europa und vielleicht sogar die ganze Welt würde sich von Deutschland einen selbstzerstörerischen Sparkurs aufzwingen lassen und dessen katastrophalen Auswirkungen folgenlos hinnehmen, dann könnte sie sehr bald von ihrem hohen Ross gestoßen werden. Sie sägt nicht nur der extrem exportlastigen deutschen Wirtschaft den Ast ab, sondern sie isoliert Deutschland auch politisch von seinen Nachbarn und zerstört das über Jahrzehnte mühselig aufgebaute Vertrauen in das europäische Einigungswerk. Wir wären wieder in den Zeiten vor 1914 angekommen und damit um hundert Jahre zurückgeworfen.

As Europe Closes, Top German Bank Chief Warns: Banking Situation Is "More Dramatic" Than In 2008


Right at 11:30 AM (ET) when Europe closed, an ominous headline came out.

RTRS-GERMAN DEVELOPMENT BANK KFW CHIEF SCHROEDER- SITUATION OF BANKING INDUSTRY IS "MUCH MORE DRAMATIC THAN IN 2008

We haven't seen more context yet. That's from FT Alphaville's Neil Hume.

Needless to say, the funding situation in Europe is very bad.

Along the same themes, earlier FT's Tracy Alloway published chart from Deutsche Bank, showing that through 2011, there's been no net new issuance of bank debt in Europe.

bank issuance

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Reposted fromSigalonbandf Sigalonbandf

Deutsche Bank CEO Just Gave A Terrifying Speech In Frankfurt (DB)


ackermann

Josef Ackermann just gave a terrifying speech about the fragility of the Euro banking sector right now.

We have translated the speech based on Handelsbatt's, the organizer of the event where Ackermann spoke, account of it.

At a conference in Frankfurt he said, "It is an open secret that numerous European banks would not survive having to revalue sovereign debt held on the banking book at market levels."

"In recent weeks, the distrust of the financial markets has spread to the banks because they are now suffering from the debt crisis in Europe and have a lot of exposure to, for example, Greek bonds."

"Since the financial crisis, some European banks have lost a third or more of their market capitalization," he said, according to Google Translate.

"Most institutions have a rating of "below the book value or at best."

There are three major stress factors crushing Euro banks right now, he says: the debt crisis, structural factors and financial regulation. With them together, it will be hard for the European banks to increase their revenues.

The implication is that not just Eurozone countries are buckling under the pressure of Greece's, France's, and Italy's debts, but banks are too. It sounds like a desperate call for a bailout. Now.

The situation looks dire. He says, "Many countries and households would have to reduce their debt. The mortgage business and consumer loans were [the few things] driving growth. In addition, there's the problem of shrinking populations in several European countries, which negatively affects the growth of credit markets."

"The costs of supporting weak member states, particularly from the German perspective, are less than the costs of disintegration."

"It is a dangerous illusion to believe that a country could do better should it reclaim the sovereignty it has delegated to the EU."

"All this reminds one of the autumn of 2008," said Ackermann. "We should resign ourselves to the fact that the 'new normality' is characterized by volatility and uncertainty."

Some hedge funds, like in 2007 and 2008, saw the enormity of the Eurozone debt crisis and began betting against Euro banks and other companies that have exposure to the crisis earlier this year. Their profits have already started to pay off.

As for the rest of the financial industry, things don't look good.

Here's what Ackermann sees: "Prospects for the financial sector overall... are rather limited." 

"We have a financial industry is still not really providing convincing answers to the questions about the meaningfulness of many modern financial products and trading in securities. The questions are getting louder and require new responses."

"The outlook for the future growth of revenues is limited by both the current situation and structurally."

"We must in my opinion, check all our work in all areas thoroughly again to ascertain whether we prioritize our genuine tasks as servants of the real economic needs."

But immediately, the Euro banking sector must prepare for what happens if solutions to the Eurozone crisis and corresponding Euro banking crisis remain unsupported or nonexistent. 

However recapitalization is not the answer. Ackermann duly shot down the measure suggested by IMF head Christine Lagarde at Jackson Hole.

He said recapitalizing the banks urgently, as Lagarde suggested, would be "counterproductive."

"A forced recapitalization would give the signal that politicians do not themselves believe in the measures" they are negotiating.

As a result, it could exacerbate the debt situation in individual countries. Also, faced with a threat of dilution (a result of recapitalization), private investments in banks would be even less likely.

Sounds like Ackermann just sounded the alarm. There is now a full-on Euro banking crisis.

The conference he's at continues tomorrow. It's entitled "Banks in Transition," and it's organized by the German business daily Handelsblatt.

Here's a couple of videos of him giving the speech. Warning: they are in German.

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Reposted fromSigalonbandf Sigalonbandf

September 03 2011

Why Lagarde is right: Bank recapitalisation is the best strategy

Harald Hau, 2 September 2011

The latest proposed solution to the Eurozone crisis is Eurobonds. This column argues that such a move would be politically poisonous and would shift the losses of the continent’s richest to the taxpayer. Instead, Europe’s policymakers should follow the strategy outlined by the new IMF chief Christine Lagarde. She calls for the recapitalisation of banks so that they can absorb the worst of the losses should Eurozone countries default.

Full Article: Why Lagarde is right: Bank recapitalisation is the best strategy


--------------------------------------------------

[...]

The May 2010 Greek policy was a mistake

It is increasingly clear that avoiding the default of Greece and the creation of the European Financial Stability Facility (EFSF) was a big policy mistake (see Wyplosz 2010 and 2011). Some bank economists and bond investors have done their best to manipulate public opinion and, surprisingly, many confused journalists have echoed the narrow self-interest of exposed capital-market investors. But now that the insolvency of larger countries like Spain or even Italy seems possible, the ECB doctrine of "no European sovereign default" becomes simply untenable.
European guarantees for Spanish or Italian public debt are just unacceptable to the French, German, or Dutch taxpayer because of the magnitude of the risk involved.
  • The Finns have already said their farewell to the Greece rescue plan and they cannot be blamed their good common sense.
  • When the full financial burden of EFSF guarantees falls upon the German taxpayer over the next three years, it will become evident that Chancellor Merkel has led her Christian democratic party down a road to political suicide.

[...]

Reposted from02myEcon-01 02myEcon-01

July 03 2011

June 12 2011

02mydafsoup-01
Play fullscreen
Should Greece repudiate its debt?
Language GR - Subtitles EN


youtube permalink
yt-account: kryfos0kosmo


11/06/2011 By George Irvin

With thout delving here into the intricacies of recent exchanges between the ECB and the German goverment, let me recommend the following (1 hour) video film to readers. Inter alia, it cites several precedents for debt repudiation. I think most will agree it raises some very relevant questions.

July 28 2010

February 16 2009

Failure to save East Europe will lead to worldwide meltdown - 2009-02-15 Telegraph.co.uk

The unfolding debt drama in Russia, Ukraine, and the EU states of Eastern Europe has reached acute danger point. - Austria's finance minister Josef Pröll made frantic efforts last week to put together a €150bn rescue for the ex-Soviet bloc. Well he might. His banks have lent €230bn to the region, equal to 70pc of Austria's GDP. "A failure rate of 10pc would lead to the collapse of the Austrian financial sector," reported Der Standard in Vienna. Unfortunately, that is about to happen.
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