German ‘bail-in’ plan for government bonds risks blowing up the euro

Quick reminder: “Bail-out” means the government bails the banks out, whereas “bail-in” means the citizens pick up the tab. Germany’s Fourth Reich is once again forcing its will upon the EU.

 

‘If I were a politician in Italy, I’d want my own currency as fast as possible: that is the only way to avoid going bankrupt,’ said German ‘Wise Man’

A new German plan to impose “haircuts” on holders of eurozone sovereign debt risks igniting an unstoppable European bond crisis and could force Italy and Spain to restore their own currencies, a top adviser to the German government has warned.

“It is the fastest way to break up the eurozone,” said Professor Peter Bofinger, one of the five “Wise Men” on the German Council of Economic Advisers.

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Dam breaks in Europe as deflation fears wash over ECB rhetoric

‘We are reaching the end game in Europe. If they don’t launch real QE soon, the consequences are too awful to contemplate,’ warns RBS

A key gauge of deflation risk in Europe is flashing red, dropping to record lows on fears of fresh recession and lack of decisive action by the European Central Bank.

The sudden lurch downwards came as Bank of America warned that France’s debt ratio could rocket to 120pc of GDP within five years, unless the EU authorities take radical steps to reflate the region’s economy. Italy’s debt could threaten 150pc even earlier.

The 5-year/5-year forward swap rate monitored closely by traders plummeted beneath 1.77pc on Friday morning as a global growth scare drove European stock markets to a 12-month low.

“This rate is the most important market signal on the planet right now. Everybody is watching the chart, and it has just gone off a cliff,” said Andrew Roberts, credit chief at RBS.

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