Italy tried to QUIT EURO five years ago and now faces WORSE situation, economist claims

FORMER Italian prime minister Silvio Berlusconi was holding secret talks to get his country out of the Eurozone FIVE YEARS AGO, according to a leading German economist.

Hans-Werner Sinn, former president of the German Ifo Institute for Economic Research, has painted a grim picture of the Italian economy and warned it faces a struggle to survive such a ‘catastrophic situation’.

He said Mr Berlusconi realised the Italian economy could not survive within the single currency back in the autumn of 2011 and saw no alternative to pulling out as quickly as possible.  Continue reading

ECB risks crippling political damage if Greece forced to default

If Greece is forced out of the euro in acrimonious circumstances – a 50/50 risk given the continued refusal of the creditor core to acknowledge their own guilt and strategic errors – the country will not only default on its EMU rescue packages, but also on its “Target2” liabilities to the European Central Bank.

In normal times, Target2 adjustments are routine and self-correcting. They occur automatically as money is shifted around the currency bloc. The US Federal Reserve has a similar internal system to square books across regions. They turn nuclear if monetary union breaks up.

A Greek default – unavoidable in a Grexit scenario – would crystallize these losses. The German people would discover instantly that a large sum of money committed without their knowledge and without a vote in the Bundestag had vanished.

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ECB paralysed by German court decision as deflation threatens

Last week’s ‘thunderbolt’ ruling on eurozone rescue policies by Germany’s top court marks a serious escalation of Europe’s governance crisis and may ultimately force Germany to withdraw from the euro, the country’s most influential magazine has warned.

A sweeping report by Der Spiegel said the court ruling amounts to a full-blown showdown between Germany and the European Central Bank over the methods to shore up southern Europe’s debt markets.

“It is nothing less than a final reckoning with the crisis-management strategy pursued by the ECB. The German justices insist that the German constitution sets limits on the ECB’s crisis strategy. In a worst-case scenario, the Court could forbid Berlin from contributing to efforts to save the euro or even force Germany to leave the currency zone entirely,” it said. Continue reading

Germany’s ascendancy over Europe will prove short-lived

Although the article has a point and the population is truly in decline, Germany should not be counted out. Germans have the know-how, a very modern infrastructure, are still the most industrious and forward thinking people with a vision that no other on the European continent has or can be compared to. It didn’t literally give its manufacturing base to the Chinese.

Germany has peaked. Its hegemony in Europe is a “power illusion”, a confluence of fleeting advantages soon to be overwhelmed by the delayed effect of error and the crush of historic forces.

If demography is destiny, it may be clear within five years that ageing Germany is going the way of Japan. Within 20 years it may equally be clear France and Britain are regaining their 19th century role as the two dominant powers of Europe, albeit a diminished prize. Continue reading