Commission lays out vision to complete euro

The EU executive is proposing a two-phase calendar to complete the architecture of the economic and monetary union. (Photo: Hannelore Foerster)

 

The European Commission presented on Wednesday (31 May) its proposal to “move forward” on eurozone integration with a treasury, a finance minister and several instruments to make the financial sector less vulnerable to crises.

The document, which is part of an ongoing reflection about the future of the EU, aims to “fill the gaps” in the single currency and to help the eurozone economies to converge.

“We cannot and should not wait for another crisis,” said commission vice president Valdis Dombrovskis, who admitted that “doubts remain about the full stability and safety of the system”. Continue reading

Greece ‘in a corner’ as Europe blocks payment

As oft stated here, Greece will not leave the union and it’s all leading back to Berlin, the world’s next superpower, who runs the show on the continent. Worst case scenario: There could be a compromise entailing a two tier currency system that allows regional states to retain their economic sovereignty to some degree — or at least they would think.

Such an idea already has backing from Angela Merkel and if the crisis deepens — because it’s not going to magically go away — look for ideas like these to gain even more traction and possibly become reality. ‘Eurobonds‘ were also another scenario.

For further info on a plausible two tier currency system, please see the following posts:

The new Great Game: Europe looks within for roots of renewal

European Commission Plans for Greater Integration

France Is Heading For The Biggest Economic Train Wreck In Europe

Is Germany Already Signaling The Complete (Economic) Collapse Of The European Union?

 

Greece’s last-ditch attempt to get desperately-needed funds from its euro zone neighbors failed on Wednesday, but the country appears eternally optimistic that a list of reforms — as yet to materialize — will unlock vital aid.

Greece appealed for the European Financial Stability Facility (EFSF) to return 1.2 billion euros ($1.32 billion) it said it had overpaid when it transferred bonds intended for bank recapitalization back to the fund this month, Reuters reported Wednesday.

However, euro zone officials ruled that Greece was not legally entitled to the money, the news wire said. Continue reading

“The ECB Has Lost Control” – Spiegel Asks If “Helicopter Money” Comes Next?

Just 2 short months ago we warned of the rising voice among the cognoscenti tilting their windmills towards the concept of “helicopter money,” as Deutsche bank noted, “perhaps there’s an increasing weariness that more QE globally whilst inevitable, is a blunt growth tool and that stopping it will be extremely difficult (let alone reversing it) without a positive growth shock.” Committing what Commerzbank calls “the ultimate sin” is now reaching the mainstream as Germany’s Der Spiegel notes it is becoming increasingly clear that Draghi and his fellow central bank leaders have exhausted all traditional means for combatting deflation; and many economists are demanding that the European Central Bank hand out money to consumers to stimulate the economy.

It seems perhaps tomorrow is… today… As Der Spiegel explains…

Fears that the euro zone is heading for deflation refuse to abate. Now, many economists are demanding that the European Central Bank hand out money to consumers to stimulate the economy. But would it work?

It sounds at first like a crazy thought experiment: One morning, every resident of the euro zone comes home to find a check in their mailbox worth over €500 euros ($597) and possibly as much as €3,000. A gift, just like that, sent by the European Central Bank (ECB) in Frankfurt. Continue reading

Three EU countries back Ukraine’s use of force

BRUSSELS – Lithuania, Luxembourg and Sweden have explicitly backed Ukraine’s right to use force against pro-Russian separatists.

Lithuania’s UN envoy, Raimonda Murmokaite, and her Luxembourg counterpart, Olivier Maes, made the statements at a snap UN Security Council (UNSC) meeting in New York on Sunday (13 April).

“When the existence of the state is put in danger, we support the right of Ukraine to defend itself in the face of external aggression and to tackle militant separatism and continuous provocations,” Murmokaite said. Continue reading

The Tragedy Of The Euro! What About Germany?

Brecht Arnaert writes: 2012 has been a year of great turmoil for the euro. But our economy is not the only thing that is in crisis. Our economic theory is too, and even more so: for decades macro-economic policy has been conducted within a Keynesian framework, and while no Keynesian economist has predicted this crisis, or even is able to explain it’s causes, we are still listening to them today to get out of the mess they brought us into. I would say that this is a problem of legitimacy.

I am telling this not only as an economist. I am a defender of liberty too. What is happening in Europe right now should not only worry economists, but every freedom-loving citizen. As we speak, measures are being taken to take away our liberties in a way that Hayek described so well in his “Road to serfdom”: each government intervention requires more government intervention, until no freedom is left anymore. Step by step our property rights are being eroded, and, not too far from here, in Brussels, a giant Moloch called the European Commission is centralizing powers with a speed that would have been unimaginable before the Treaty of Lisbon. Continue reading

Germany shocks EU with fiscal overlord demand

On the contrary, Germany is dividing and conquering the continent deeper as it sees fit — deeper than it likes to tell its own people.

There must be an EU “currency commissioner” with sweeping powers to strike down national budgets; a “large step towards fiscal union”; and yet another EU treaty.

Finance minister Wolfgang Schaeuble dropped his bombshell in talks with German journalists on a flight from Asia, and apparently had the blessing of Angela Merkel, the chancellor. “When I put forward such proposals, you can take it as a given that the chancellor agrees,” he said. Continue reading

Barroso: EU Needs New Treaty

While it’s true that further integration (and also the introduction of Eurobonds) will help stem the tide, it is not a permanent solution and is only kicking the proverbial can down the road. In addition, all roads continue to lead to Germany as the main benefactor of the crisis.

European Commission President Jose Manuel Barroso called for EU nations to sign a new treaty as he called for “greater unity” within EU, during his first major speech after the summer break, September 1.

His speech comes after reports that Germany has been quietly making the same proposal despite it being opposed by most EU nations.

Speaking at a convention of supreme court judges in The Hague, Barroso said that power at “the European level has yet to be consolidated to such a degree” that the EU can effectively solve its problems.

“We are experiencing a situation in which we need greater unity and coherence between our policies, as well as greater legislative harmonization,” he said. “And, to achieve all this, we need greater institutional integration.”

“The crisis has made it clear that we must not only complete the economic and monetary union, but also pursue greater economic integration and deeper political and democratic union with appropriate mechanisms of accountability,” he explained.

Barroso also brought up one of the great contradictions in this crisis. “We need more integration, and the corollary of more integration has to be more democracy,” he said. This is a common sentiment from Eurocrats. But more integration and more democracy are mutually exclusive: The people of Europe want less integration. To Barroso and his ilk, integration comes first; the people don’t get a say about that. The EU remains a fundamentally undemocratic project.

Some, probably many, will opt out of this integration. But Barosso is right, the crisis is forcing Europe to unify, which is exactly what Europe elites designed the crisis to do.

Full article: Barroso: EU Needs New Treaty (The Trumpet)

Investors Prepare for Euro Collapse

The markets are now in the early stage of panic transactions. In the end, people will see that Europe’s loss is Germany’s gain.

Banks, companies and investors are preparing themselves for a collapse of the euro. Cross-border bank lending is falling, asset managers are shunning Europe and money is flowing into German real estate and bonds. The euro remains stable against the dollar because America has debt problems too. But unlike the euro, the dollar’s structure isn’t in doubt.

Banks, investors and companies are bracing themselves for the possibility that the euro will break up — and are thus increasing the likelihood that precisely this will happen.

There is increasing anxiety, particularly because politicians have not managed to solve the problems. Despite all their efforts, the situation in Greece appears hopeless. Spain is in trouble and, to make matters worse, Germany’s Constitutional Court will decide in September whether the European Stability Mechanism (ESM) is even compatible with the German constitution.

There’s a growing sense of resentment in both lending and borrowing countries — and in the nations that could soon join their ranks. German politicians such as Bavarian Finance Minister Markus Söder of the conservative Christian Social Union (CSU) are openly calling for Greece to be thrown out of the euro zone. Meanwhile the the leader of Germany’s opposition center-left Social Democrats (SPD), Sigmar Gabriel, is urging the euro countries to share liability for the debts.

Banks are particularly worried. “Banks and companies are starting to finance their operations locally,” says Thomas Mayer who until recently was the chief economist at Deutsche Bank, which, along with other financial institutions, has been reducing its risks in crisis-ridden countries for months now. The flow of money across borders has dried up because the banks are afraid of suffering losses.

According to the ECB, cross-border lending among euro-zone banks is steadily declining, especially since the summer of 2011. In June, these interbank transactions reached their lowest level since the outbreak of the financial crisis in 2007.

The fear of a collapse is not limited to banks. Early last week, Shell startled the markets. “There’s been a shift in our willingness to take credit risk in Europe,” said CFO Simon Henry.

He said that the oil giant, which has cash reserves of over $17 billion (€13.8 billion), would rather invest this money in US government bonds or deposit it on US bank accounts than risk it in Europe. “Many companies are now taking the route that US money market funds already took a year ago: They are no longer so willing to park their reserves in European banks,” says Uwe Burkert, head of credit analysis at the Landesbank Baden-Württemberg, a publicly-owned regional bank based in the southern German state of Baden-Württemberg.

One person who has long expected the euro to break up is Philipp Vorndran, 50, chief strategist at Flossbach von Storch, a company that deals in asset management. Vorndran’s signature mustache may be somewhat out of step with the times, but his views aren’t. “On the financial markets, the euro experiment is increasingly viewed as a failure,” says the investment strategist, who once studied under euro architect Issing and now shares his skepticism. For the past three years, Vorndran has been preparing his clients for major changes in the composition of the monetary union.

They are now primarily investing their money in tangible assets such as real estate. The stock market rally of the past weeks can also be explained by this flight of capital into real assets. After a long decline in the number of private investors, the German Equities Institute (DAI) has registered a significant rise in the number of shareholders in Germany.

Particularly large amounts of money have recently flowed into German sovereign bonds, although with short maturity periods they now generate no interest whatsoever. “The low interest rates for German government bonds reflect the fear that the euro will break apart,” says interest-rate expert Burkert. Investors are searching for a safe haven. “At the same time, they are speculating that these bonds would gain value if the euro were actually to break apart.”

Indeed, investors are increasingly speculating directly against the euro. The amount of open financial betting against the common currency — known as short positioning — has rapidly risen over the past 12 months. When ECB President Mario Draghi said three weeks ago that there was no point in wagering against the euro, anti-euro warriors grew a bit more anxious.

Full article: Investors Prepare for Euro Collapse (Spiegel Online)

All or Nothing

Here is one article that hits the mark on what’s truly transpiring in Europe. The talk of Eurobonds also keeps popping up.

BERLIN (Own report) – Just days before the opening of the EU crisis summit at the end of the week, the German government is increasing its pressure on the crisis ridden Euro countries to surrender their national sovereignty. The German finance minister rudely rejected Italy’s demands to receive the badly needed help, without having to concede its sovereignty. Germany recently turned down similar Spanish efforts. The measures are part of a comprehensive program to consolidate German hegemony over the continent, under the motto of converting the “European integration” into a state-like Euro zone structure, based on the right of interference in national budgets of the economically weaker countries. Around the globe, the protest against Berlin’s austerity dictate is growing, because the German government’s power ploys are driving not only European crisis countries into impoverishment but are also threatening to critically damage the global economy. A failure of the German va-banque game could provoke even a serious setback for the German economy.

Disempowerment of the Periphery

The European integration plans, just recently imposed on the EU primarily by Berlin, sheds light on why the German government would risk its isolation. The realization of these plans would transform the Euro zone into a sort of state structure under German hegemony, shattering the very foundations of national sovereignty, at least, of the weaker Euro zone countries. According to these plans, within the future Euro zone state, the member countries will no longer be in a position to independently take out credit. All expenditures, not covered by autonomous revenue, must be requested from a central EU body. At EU level, this would “then be decided in common, which country will be allowed how much in new debts,” it was reported.[7] The “approval process” is to be supervised by representatives of the individual parliaments. In exchange, common European loans, the so-called Euro Bonds, will be issued – to finance the approved debts at the Euro zone level. Until now, Berlin has rejected the idea of Euro Bonds, because they would lead to increased interests for German state credits. The new considerations, being propagated by various media organs, correspond to proposals made public in late May by the German ECB presidium member, Jörg Asmussen. The US-American “Wall Street Journal” recently picked up this theme. It writes that the new European “steps toward integration” are part of a “shift” in German crisis policy. Berlin is sending “strong signals” that it would eventually be willing to “lift its objections to ideas such as common Euro-zone bonds” if other European governments were to “agree to transfer further powers to Europe.”[8] In the “NY Times” the economist Jacob Kirkegaard explains that “if German taxpayers are going to be liable for Italian debt, then they have to have some democratic say in how Italy runs its affairs and spends German money.”[9] Berlin is aware that a renunciation of the disastrous austerity policy is economically necessary, but wants to do so only under complete German control. By way of the bureaucracy in Brussels, the German government is seeking nothing less than the direct supervision of the crisis countries’ kernel of national sovereignty – their budget planning.

The Transfer Union

In fact, Berlin could use this means to consolidate its hegemony over Europe – imposed under the constraints of its economic pauperization strategy. Currently, Germany, due to its low budget deficits, would hardly be affected by these imposed limitations. It could use its enormously bloated current account surplus, accumulated over the past few years, to rehabilitate its own budget at the expense of the Euro zone. The extremely accelerated, highly aggressive export orientation of the Federal Republic of Germany was made possible by the introduction of the Euro, which removed the Euro countries’ possibility of devaluating their currency to defend their economies against German competition. The infamous German Hartz – IV labor laws, introduced by the Social Democrat/Green coalition government, was an exports-favoring intensification – sinking German wage levels, in comparison to those of other Euro countries. The German industry’s export offensive – which, since the introduction of the Euro, has accumulated a current account surplus of approx. 800 billion Euros within the Euro zone [10] – has decisively contributed to the debt crisis inside the Euro zone. The German export industry, profiting from the precarious low-wage sector, has accumulated the current account surplus. This naturally corresponds to the deficits, particularly in the southern Euro zone countries, some of which have entered a process of deindustrialization.

Full article: All or Nothing (German Foreign Policy)

Europe’s debtors must pawn their gold for Eurobond Redemption

The consolidation of power continues flowing back towards Germany as sovereign EU nations become indebted into slavery through economic extortion and subjugation. At this point, it’s hard not to say the Fourth Reich and the Holy Roman Empire are returning as even the German-Vatican connection is growing closer once again. Also see a previous post “Europe to Seize Greece’s Gold” for further information.

The German scheme — known as the European Redemption Pact — offers a form of “Eurobonds Lite” that can be squared with the German constitution and breaks the political logjam. It is a highly creative way out of the debt crisis, but is not a soft option for Italy, Spain, Portugal, and other states in trouble

In effect, Germany would share its credit card to slash debt costs for Italy, Spain and others. Yet it is the exact opposition of fiscal union. While eurobonds are a federalising catalyst, the fund would be temporary and self-extinguishing. “The fund is a return to the discipline of Maastricht with sovereign control over budgets,” said Dr Benjamin Weigert, the Council of Experts’s general-secretary.

The ingenious design gets around the German constitutional court, which ruled in September that the budgetary powers of the Bundestag cannot be alienated to any EU body under the Basic Law — the founding text of Germany’s vibrant post-War democracy.

Germany would have a lockhold over the fund, able to enforce discipline. Each state would have to pledge 20pc of their debt as collateral. “The assets could be taken from the country’s currency and gold reserves. The collateral nominated would only be used in the event that a country does not meet its payment obligations,” said the proposal.

Full article: Europe’s debtors must pawn their gold for Eurobond Redemption (The Telegraph)

Marc Faber: 100% Chance of Global Recession

Faber’s bearish market calls have been followed closely since 1987 when he warned his clients to cash out before Black Monday.

And in a live interview on CNBC’s Fast Money Halftime Report, Faber again warned that economies of the world may be on the brink of a serious slowdown.

Faber indicated that while investors remain focused on Greece and Europe – other issues, bigger issues are looming. And they’re more threatening.

“As an observer of markets – whenever everyone focuses on one thing – like Greece and Europe – maybe they miss issues that are far more important – such as a meaningful slowdown in India and China.”

“I think we could have a global recession either in Q4 or early 2013.” When asked what were the odds, Faber replied, “100%.”However, in the near term Faber also sees potential for a market rally.

Faber said the bullish catalyst would be Greece exiting the EU.

It’s worth noting that Faber is talking hypothetically; he does not think Greece exits the EU in the near future.

“What I think will happen is that Germany will show more flexibility and issue more euro bonds.”

Full article: Marc Faber: 100% Chance of Global Recession (CNBC)

France’s Hollande steps up eurobonds push

The case for the Eurobonds keeps coming back. Be on the lookout for this becoming an eventuality as China is looking to invest in the EU and continue its divestment from the USA. A likely opportunity for economic warfare, if you will.

French President Francois Hollande stepped up his push Thursday for the launch of eurobonds at a summit of EU leaders in Brussels.

Hollande said he wanted to see eurobonds “written into the agenda” of the European Union going forward, saying he saw jointly pooled eurozone debt not as a trigger for growth “but as a long-term perspective for integration” that would bolster the single euro currency.

Full article: France’s Hollande steps up eurobonds push (Breitbart)

China was top investor in Germany last year: agency

Germany is the economic heart of the EU and the Euro has been called the worlds second reserve currency by the IMF. It’s no secret that China is divesting from the US Dollar, T-Bonds and the like as it continues economic warfare. The EU is their alternative investment and it is increasing its holdings in both frequency and volume. China has also called for the creation of Eurobonds in the past which is likely a means to achieve the end of the US’ global economic hegemony.

Germany has the manufacturing, the technology and is the second highest holder of gold reserves in the world. It is also the most populated country, the most forward thinking and focused of all with a clear sense of destiny in Europe — and it’s becoming increasingly awash in cash from foreign investment. While most eyes are fixated on the rise of China in belief that it will be the next dominant world super power, people might be in for a shock as Germany could very well take that crown.

China was the top foreign investor in Germany in 2011, ahead of the United States, Switzerland and France, the government development agency Germany Trade & Invest said on Thursday.

China invested in 158 projects, while the US invested in 110, Switzerland in 91 and France in 53, GTAI said in a statement.

Full article: China was top investor in Germany last year: agency (Yahoo!)

China Considers Offering Aid in Europe’s Debt Crisis

HONG KONG — Prime Minister Wen Jiabao said Thursday that China was considering whether to work with the International Monetary Fund to play a greater role in financing Europe’s efforts to end a sovereign debt crisis, but he left it unclear whether China was willing to drop conditions that would make its help unappealing for European countries.

Mr. Wen, speaking at a press conference in Beijing after a meeting with Chancellor Angela Merkel of Germany on the first day of her three-day visit to China, said that officials were studying whether China should be “involving itself more” in Europe’s debt troubles through investments in the European Financial Stability Facility and the European Stability Mechanism. This could be done through the I.M.F., he said.

One idea under consideration by China in recent months is whether it could lend money to the I.M.F., which would then lend it to Europe. This would transfer the risk of a European default to the I.M.F.

Russia embraced this approach in December, but was willing to lend only $20 billion. China had $3.18 trillion in foreign exchange reserves at the end of December, dwarfing the reserves of every other country and potentially giving it the financial power to make a much bigger contribution.

Mrs. Merkel is the first of several European leaders scheduled to visit China this month, the latest in a series of signs that China’s huge foreign exchange reserves have begun to give it financial influence to rival Washington’s.

Full article: China Considers Offering Aid in Europe’s Debt Crisis (New York Times)

DAVOS:Euro-Zone Bonds A Way Out Of Crisis-Deutsche Bank’s De Weck

Look for it to eventually happen as EU leaders, Merkel in particular, continue calling for further integration as a solution to the EU crisis. This would likely play into China’s hands as it would be more than happy to divest from US bonds as it continues to wage economic war against the United States. It would be the final straw that would break the camel’s back as it would trigger a complete collapse of the United States.

DAVOS, Switzerland (Dow Jones)–A manager at Deutsche Bank AG (DB) said Wednesday that the introduction of euro-zone bonds are a way out of the debt crisis, once closer fiscal integration is achieved.

“Euro-zone bonds are a solution,” Pierre De Weck, who heads the bank’s private wealth management arm, said at the Davos world economic forum.

A painful adjustment process is necessary for the euro zone and it is unfortunate that Germany is opposed to the introduction of euro-zone bonds, he added.

Continue reading article: DAVOS:Euro-Zone Bonds A Way Out Of Crisis-Deutsche Bank’s De Weck (Wall Street Journal)