Impact of the Crisis

Experts and analysts always say China, but it’s the one you never see coming that hits the hardest. They likely do not account for the fact that China, although ‘rising’, is not trusted throughout the world and will likely have a limited role instead of a leading one on the world stage because of this.

On the other hand, Germany’s stranglehold on and ever-growing control of the EU (the world’s largest economy) is also not accounted for. Couple that with the misguided appearance of being 100% pacifist since the second World War, yet it’s the third largest arms exporter in the world, you can give the upper hand to Germany. It’s a highly overlooked and dismissed fact.

BERLIN (Own report) – The EU crisis is causing a serious weakening of the EU’s foreign policy, concluded a recent study published by the Institute for International and Security Affairs (SWP) in Berlin. Not only are the member states’ financial outlays for foreign and military activities clearly diminishing, due to leeway shrinkage caused by budget cuts, but “conflicts between member states have grown” around how to handle the crisis, according to the SWP. This has stifled “joint foreign policy initiatives.” The think tank points out that the enduring crisis and the hard-line German austerity dictate have damaged the prestige of the EU and, therefore, also severely tarnished its global “soft power.” Particularly damaging are the cuts in the military sector, even ranging up to 30 percent reductions in defense spending of the smaller and medium sized EU countries, jeopardizing their long term capability of participation in EU wars. The option of instrumentalizing a common EU foreign and military policy, to reinforce German clout and eventually promote it to world power status, had always been an important motive in Berlin for the buildup and development of the EU. Continue reading

WARNING: the EU Crisis is BACK and Will Be Worsening in the Coming Weeks

As the article hits out, the only thing propping up the European financial system are politicians — likely the same for the U.S., South American and Asian economies as well. This means they are the last line of defense, armed with nothing more than half-truths and artificial propping of the economies via central banks to keep the citizens nice, happy, calm and in the dark. If this is the case, it shouldn’t be long before a collapse comes. One could say a litmus test for the article would be to watch the reaction of the markets when another scandal breaks out among the said politicians, at home or abroad.

I want to issue a major warning to investors: the EU Crisis is going to get worse in the coming months.

I realize that most investors and analysts believe that the EU Crisis is over. Then think that because the S&P 500 is closing in on its all-time highs that things are fine in the system.
They are wrong.

The only item that held Europe together in 2012 was the credibility of EU politicians and ECB President Mario Draghi. Please note that nothing fundamental improved for the EU’s financial system: EU GDP has since re-entered a recession and EU unemployment has a hit a new record.

Indeed, the only reason things even looked better was because various Government engaged in massive interventions. In the case of Spain, this included raiding 90% of their social security fund to buy Spanish bonds so that yields would fall. Continue reading

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)