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Complete Statement By Euroheads And IIF Press Releases On European Bailout

Tyler Durden's picture


For those who may have missed the official statement by the Euroheads and the two official IIF press releases, here they are again. The irony is that far all the pomp, circumstance, and posturing, nobody has any idea how to implement this massive bailout package. And furthermore, if the EURUSD can only ramp to sub 1.44 on this Bazooka plan, the EUR is in very deep trouble.


Complete Statement

IIF 1:


IIF 2:


And Golum's personal announcement:


Golum Statement


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Thu, 07/21/2011 - 15:47 | 1478414 MiguelitoRaton
MiguelitoRaton's picture

so they are solving a structural problem with a response suitable only for a liquidity problem...this will end well...not

Thu, 07/21/2011 - 15:50 | 1478429 TruthInSunshine
TruthInSunshine's picture

California caught a hint of the success of the Euro Summit that took a few hours to "fix the economy and solve all sovereign debt/derivative/banking crises," and they are not sitting still.

Hence, California has a bridge to sell to you:

07-21 15:33: California Treasurer seeking bids for USD 5bln in bridge loans due to Federal turmoil
Thu, 07/21/2011 - 15:48 | 1478420 Cognitive Dissonance
Cognitive Dissonance's picture

Excuse me, but I seem to be in the wrong room. Is this where they announce the non default default?

Thu, 07/21/2011 - 15:55 | 1478456 TruthInSunshine
TruthInSunshine's picture

This is the non default partial default, but not really, okay, maybe sort of room.

Is that the room you were looking for?

Thu, 07/21/2011 - 16:02 | 1478481 Cognitive Dissonance
Cognitive Dissonance's picture

Yes. No. Maybe. You know something? At this point, does it really matter? 

Actually I'm now looking for the Blue Velvet Room. Any suggestions? I'm snorting whatever Dennis Hopper is snorting.

Thu, 07/21/2011 - 16:22 | 1478563 FinalCollapse
FinalCollapse's picture

CD - you are entering the wrong room. It is the print room. The door is slamming on you. If you are naked, please watch your body parts.


Thu, 07/21/2011 - 15:57 | 1478462 Cdad
Cdad's picture

That's a "transitory default" Cog...which is the funniest thing I have heard these market puppets say yet.

Thu, 07/21/2011 - 16:05 | 1478491 Cognitive Dissonance
Cognitive Dissonance's picture

How much is that doggy in the window? The one with the (non) defaulted Greek bonds.

How much is that doggy in the window? I do hope those (non) defaulted Greek bonds are for sale.

Thu, 07/21/2011 - 16:13 | 1478525 Cdad
Cdad's picture

Pattie Page?  And you called me old, brother Cog.  I suspect your colon has not only swallowed your liver, but also your pancreas and your spleen.  You better teach that thing to speak soon, or your muse is going to need to learn sign language.

Thu, 07/21/2011 - 16:19 | 1478541 Cognitive Dissonance
Cognitive Dissonance's picture

We need to teach the younger generations (which means everyone at our age) what real class looks like. :)

And I don't worry about my internal organs anymore. They have all sort of congealed into a Jello like substance and don't bother me much except for the gas.

Thu, 07/21/2011 - 15:58 | 1478469 Doña K
Doña K's picture

Nice presentation to show that you are in control. Sorry! But people can sniff what's real and what's not.

Let the periphery go. You have lost  control and you know it. It's going to explode in your face.

Thu, 07/21/2011 - 16:07 | 1478503 Cognitive Dissonance
Cognitive Dissonance's picture

Yes but.....

The time value of non defaults means that a non default today is worth more than a non default in the future.

Thu, 07/21/2011 - 16:08 | 1478508 dead hobo
dead hobo's picture

long time reader - occasional poster

I just read this thing. It reads like a declaration of Hopium sprinkled with "we're Serious!!! I really mean it!!!!" The EU must be desperate as this looks like a bluff of an impending threat of a Hail Mary pass, suckers with money please line up over here to finance this turkey stench. Stocktards are lining up for this???

Thu, 07/21/2011 - 16:12 | 1478522 Cognitive Dissonance
Cognitive Dissonance's picture

It's a Travshamockery.

It's a papered over excuse to paper over the problem until the toilet paper dissolves. But whatever you do, don't rinse because they will dissolve the toilet paper too quickly.

Then repeat.

Everyone knows what's going on. And everyone has agreed to play their part in the Travshamockery because it extends the pin ball game play.

Thu, 07/21/2011 - 16:19 | 1478555 dead hobo
dead hobo's picture

But if the ECB doesn't print as required then the countries are financing deadbeats who won't even say thank you. the TARP analogy is inaccurate unless France, Germany and the rest vote to gift the Greeks. Some idiot hedge fund might use OPM, but even that is doubtful. Where's the money coming from? The Fed? DOA with a flourish.

Thu, 07/21/2011 - 16:38 | 1478619 FinalCollapse
FinalCollapse's picture

CD - this European restroom has run out of the toilet paper, but the shit is coming. Now the fun part begins...

Thu, 07/21/2011 - 16:19 | 1478553 Lord Welligton
Lord Welligton's picture

Your in the wrong room.

The FED bought all the Euro strippers.

Thu, 07/21/2011 - 16:21 | 1478559 Cognitive Dissonance
Cognitive Dissonance's picture

That's the problem with bidding against the Fed. They don't have an upper limit. 

Thu, 07/21/2011 - 15:52 | 1478422 Contra_Man
Contra_Man's picture

Introducing your new credit ratings level: Sustainable Default (SD)

Thu, 07/21/2011 - 16:02 | 1478484 PeeTee
PeeTee's picture

You make my day.

Thu, 07/21/2011 - 16:51 | 1478669 hedgeless_horseman
hedgeless_horseman's picture

Thank goodness they haven't been slapped with Sustainable Transitory Default (STD). 

Go Long PCN (Penicillin) just in case.

Thu, 07/21/2011 - 18:03 | 1478864 EvlTheCat
EvlTheCat's picture


Thu, 07/21/2011 - 15:50 | 1478427 Cheesy Bastard
Cheesy Bastard's picture

It's easy to implement.  Get a helicopter, a whole lot of euros, a shovel...

Thu, 07/21/2011 - 15:51 | 1478434 km4
km4's picture

The ponzi global elites say

let's make transitory sovereign defaults the new black

let's Greece it first
then do Spain, Italy, Portugal, Ireland, UK

Thu, 07/21/2011 - 15:52 | 1478439 Cdad
Cdad's picture

 the EUR is in very deep trouble.

Yep yep...look for dislocations in the AH.  She looks topped out to me.

Thu, 07/21/2011 - 15:56 | 1478449 TruthInSunshine
TruthInSunshine's picture

But, but...the EUR can't get into deep trouble, because then the USD would rise on a relative basis, and that would cause stocks to plunge...


...Hey! They're working on a way to have both the EUR & USD plunge in synchronization!

We're saved!

Thu, 07/21/2011 - 15:58 | 1478468 Cdad
Cdad's picture

The US is fixed...the US is not fixed...the US is fixed...

Thu, 07/21/2011 - 16:09 | 1478511 espirit
espirit's picture

Truth - Your last statement may be right on the real money. 

Thu, 07/21/2011 - 15:52 | 1478441 hugovanderbubble
hugovanderbubble's picture



Till 1.10

Thu, 07/21/2011 - 15:54 | 1478451 Mae Kadoodie
Mae Kadoodie's picture

My doctor just confirmed I have a non-malignant malignant cancer.  Should I continue to pay my mortgage?

Thu, 07/21/2011 - 16:02 | 1478479 Cheesy Bastard
Cheesy Bastard's picture

Yes, but pay for it with illegal legal tender.

Thu, 07/21/2011 - 15:56 | 1478453 carbonmutant
carbonmutant's picture

What we have here is a shortage of credibility

"Non standard weaponry"...?? -Trichet

A Bazooka by any other name...

Thu, 07/21/2011 - 16:05 | 1478496 Neezer
Neezer's picture

I thought they banned shorts on credibility!

Thu, 07/21/2011 - 15:56 | 1478460 zebra
zebra's picture

so who is gonna pay the bill? just name it.

Thu, 07/21/2011 - 15:59 | 1478472 LawsofPhysics
LawsofPhysics's picture

BRICs?  They will get the American assets and labor cheaper later.

Thu, 07/21/2011 - 15:58 | 1478466 LawsofPhysics
LawsofPhysics's picture

Dear ZH,


Please help, my paper is going worthless and I don't have enough physical.  How does one short the EURO with the american paper they have left?  If possible, please provide specific instructions using free software for trading.

Thanks in advance,


P.S. 10% of the take will be donated to ZH (just like all the those ES spread basket cases we bet on earlier).

Thu, 07/21/2011 - 16:10 | 1478513 unky
unky's picture

buy EURUSD put options, but first learn about options trading otherwise it could ruin you (financially)

Thu, 07/21/2011 - 16:19 | 1478554 LawsofPhysics
LawsofPhysics's picture

Are these contracts generally cheaper than outtight shorting?

Thu, 07/21/2011 - 15:58 | 1478467 Internet Tough Guy
Internet Tough Guy's picture

The euro isn't in any trouble at all, as you will realize as the dollar hyperinflates.

FOA, 1998:
"Basically, this is the direction the Euro group is taking us. This concept was born with little regard for the economic health of Europe. In the future, any countries money or economy can totally fail and the world currency operation will continue. What is being built is a new currency system, built on a world market price for gold.


Thu, 07/21/2011 - 16:06 | 1478498 LawsofPhysics
LawsofPhysics's picture

Yes, lots of upside in silver and gold.  Especially once the U.S. capitulates and raises the debt ceiling.

Thu, 07/21/2011 - 16:07 | 1478502 tmosley
tmosley's picture

Sorry, you don't know what you are talking about.  The Euro is a fiat currency, one that will now be printed without restraint.

This time won't be any different.  It can happen here, and there, and anywhere else.

Gold will be fine, but the Euro is NOT gold backed, as you claimed earlier.  In fact, that is an out and out lie.  I DARE you to prove otherwise.

Thu, 07/21/2011 - 16:14 | 1478516 Internet Tough Guy
Internet Tough Guy's picture

You dare me to do what exactly? Go in any european bank with euros and buy gold. The euro is not gold backed, but it is exchangable into gold. Do you understand why the ECB marks its gold to market? When you understand that you will understand why the euro will not fail. It doesn't matter if it is devalued, all fiat is made to be devalued. The euro will continue to function as tranactional currency. That is all it is designed to do. You are a sheep who ate too much propaganda.

ANOTHER: Your question of Euro gold backing? The Euro will not be backed or fixed in gold. It will be the first "modern currency" to hold true "exchange reserves" in gold. It is important to understand that "exchange reserves" of gold are much more powerful a tool for currency defense than gold backing!


Thu, 07/21/2011 - 16:23 | 1478564 LawsofPhysics
LawsofPhysics's picture

Seems like an accounting gimmick since you admit that it will take more EUROs in the future to buy the same amount of gold.  All fiats doing this, why not simply hold your own gold then and be your own central bank? 

Thu, 07/21/2011 - 16:35 | 1478579 Internet Tough Guy
Internet Tough Guy's picture

Holding gold is good, but transacting is easier in fiat. Yes, euros devalue against gold, but not against all real goods. Euros have credibility of covertability to gold. Can the dollar do that? Or will value run from dollars into any real good? Dollar will hyperinflate.


China knows this is no gimmick. As euro devalues against gold what happens to ECB balance sheet gold?

Thu, 07/21/2011 - 16:39 | 1478624 LawsofPhysics
LawsofPhysics's picture

Conversely, I will have no problem converting my gold to EUROs or whatever the "fiat du jour" is. I have lived in Europe, bullshit the EURO doesn't depreciate against real goods.  Real goods are all priced in one thing - the cost of the energy to produce and deliver them.  The dollar may inflate faster than the EURO but don't bullshit me.

Thu, 07/21/2011 - 16:48 | 1478637 Internet Tough Guy
Internet Tough Guy's picture

I never said would not depreciate, fiat is made to depreciate; but will not hyperinflate against real goods. All that value will run into gold. You can save in gold (wealth reserve) and transact in fiat. Best of both worlds? I ask again, as euro depreciates what happens to gold on ECB balance sheet? Does the euro maintain credibility? Now what about the dollar? Where will value go?


You cannot break the euro be printing it because euro does not have to store value, only transact. The dollar cannot survive the same thing, dollar has to store value too!

Thu, 07/21/2011 - 17:03 | 1478702 LawsofPhysics
LawsofPhysics's picture

In regard to your last statement "As euro devalues against gold what happens to ECB balance sheet gold?"

The answer is; the SAME thing that happens to all the gold on MY balance sheet and the balance sheets of the Federal Reserve banks, the treasury, and the primary dealers.  What is your fucking point?  A circular argument leading right back to the golden rule - he who has the gold, has purchasing power.

Thu, 07/21/2011 - 17:11 | 1478718 Internet Tough Guy
Internet Tough Guy's picture

LOL. Really? I didn't know the us marked gold to market, I thought it was still valued at $42 per ounce. Can I convert my dollars to gold at the fed window too? I am done with you, stupid sheep. Just keep waiting for the euro to fail.

Thu, 07/21/2011 - 17:24 | 1478764 LawsofPhysics
LawsofPhysics's picture

I have no problem converting gold to fiat of any flavor.  Troll away idot.

Thu, 07/21/2011 - 17:27 | 1478775 Ghordius
Ghordius's picture

He is making the difference between the short term transactional currency and the long term store of value. Days and weeks vs years.

Thu, 07/21/2011 - 17:35 | 1478799 LawsofPhysics
LawsofPhysics's picture

Yes, so perhaps he should decide just how long he wants to hang around and whether or not he would choose to leave any value to his children.  I want to, perhaps this is selfish.

Thu, 07/21/2011 - 16:48 | 1478654 espirit
espirit's picture

How about a Treasury Euro Dollar, or TEURD for short?

Thu, 07/21/2011 - 17:19 | 1478738 Ghordius
Ghordius's picture

Well explained.
If it holds...yes.
Heard the big boyz are already betting on an lower EURUSD by year end...

Everybody above, your comments about the non-defaultnessnes are the best I've read since a very long time.

Thu, 07/21/2011 - 17:22 | 1478751 Internet Tough Guy
Internet Tough Guy's picture

Thanks, glad someone can understand.

Thu, 07/21/2011 - 17:31 | 1478787 LawsofPhysics
LawsofPhysics's picture

Understands what?  That everyone needs to hold more than one kind of fiat in their portfolio.  Don't be bitter just because you do not have any physical gold.  I am sure you can trade your paper in for gold, just like the religious right could actually wear a condom and have sex for fun instead of simple to have another mouth to feed.

Thu, 07/21/2011 - 18:08 | 1478871 Ghordius
Ghordius's picture

Someone that is quoting FOFOA? He holds, I'm sure! :-)

Thu, 07/21/2011 - 18:19 | 1478900 LawsofPhysics
LawsofPhysics's picture

So why does he argue with someone else holding gold and dealing in several fiats, including the EURO? 

Thu, 07/21/2011 - 16:12 | 1478521 American Dreams
American Dreams's picture

ITG, who does that quote belong to?  Just wonderin'


know your enemy

Thu, 07/21/2011 - 15:58 | 1478471 apberusdisvet
apberusdisvet's picture

Hmmm.  Gold buying bitches are destroying the shorts day after day after day.  So much for manipulating propaganda.

Thu, 07/21/2011 - 16:00 | 1478476 Eireann go Brach
Eireann go Brach's picture

Plugging the hole in the Euro is going to be as horrible as the intern that has to stuff gerbils up Barney Franks fat arse!

Thu, 07/21/2011 - 17:34 | 1478794 Ghordius
Ghordius's picture

Are you calling some EU countries ....holes?

Thu, 07/21/2011 - 16:02 | 1478485 Neezer
Neezer's picture

hmmm... This tastes somewhat, but not entirely, unlike default.

Thu, 07/21/2011 - 17:01 | 1478694 hedgeless_horseman
hedgeless_horseman's picture

You need to pair it with some cheap Spanish whine to get the full flavor.

Thu, 07/21/2011 - 17:37 | 1478802 Ghordius
Ghordius's picture

In Colbert's truthiness mode: Defaultinaiable = deniable default...

Thu, 07/21/2011 - 16:02 | 1478486 rockraider3
rockraider3's picture

Is this soap opera coming to intermission?  That's a shame.  I was hoping that the TrueFinns or someone would throw a wrench in this at some point so we could see some fireworks.

Thu, 07/21/2011 - 16:04 | 1478492 youngman
youngman's picture

Pretty much what this means is THERE IS NO MORE DEBT......they will just buy for it..hide it..whatever...but it is no more.....the question now is...who is going to buy any new debt.....????

Thu, 07/21/2011 - 16:32 | 1478598 Lord Welligton
Lord Welligton's picture

the question now is...who is going to buy any new debt.....????

Nail and head youngman.

If the existing debt, not just the Greek, is massaged into oblivion who is going to step up and buy anything new?

Answer. No one.

It will be issued by fiat and Insurance and Pension funds will be force fed.

They will of course have compliant accounting regulators who will say that they can Mark to Infinity.

Thu, 07/21/2011 - 18:37 | 1478934 FinalCollapse
FinalCollapse's picture

Bailing out another country maybe illegal in EU, but bailing out your own banks is OK. So they will ask their banks to buy the Greek shit, and the goverments will back up their banks.

They learnt something from Americans.

Thu, 07/21/2011 - 19:17 | 1479012 Lord Welligton
Lord Welligton's picture


Use the banks as a conduit to buy the State debt.

Then the banks and State become one.


The State/Bank controls everything.

Bye Bye free enterprise.

Hello windmills.

Thu, 07/21/2011 - 16:15 | 1478494 caerus
caerus's picture

first sign of trouble...they misspelled "intention"

"intension" - 1.  the state or quality of being intense, intensity 2.  the act of becoming intense, or more intense; intensification









Thu, 07/21/2011 - 16:06 | 1478499 Silverhog
Silverhog's picture

improve the Greek debt sustainability, LOL, got to hand it to them, this is pretty funny shit.

Thu, 07/21/2011 - 16:09 | 1478509 svc101
svc101's picture

Massive disconnect here. So what drove the market today?

Thu, 07/21/2011 - 17:07 | 1478557 caerus
caerus's picture


Thu, 07/21/2011 - 16:51 | 1478668 cosmictrainwreck
cosmictrainwreck's picture

yes...desperation... they were scared shitless they might miss out on that last 1/10,000 cent x 10 million trades. Fuckin' pigs.

Cramer's a clown, but I hope he's right about at least ONE thing: his famous "pigs get slaughtered"


Thu, 07/21/2011 - 16:10 | 1478514 gangland
gangland's picture

Why the EMU is dead.

"...The Third Way made a virtue out of the necessity to adapt classical social democracy to global market conditions, conjoining high finance with commodified forms of welfare provision.

When the US system on which it was modelled collapsed, "modern" social democracy in Europe was in no state to offer an alternative.

Europe's export-oriented social market economies were developed under the permissive structures of the Bretton Woods system, which resulted in a segmented set of national financial systems.

Banking ensured long term relations between financial and productive capital, which in turn ensured growth via technological change, corporatist bargaining, and high social wage growth, flanked by full employment macroeconomic policies.

The collapse of the Bretton Woods system and the growth of the global financial market – which started in the currency markets but increasingly extended into other areas, first via the bond market – increasingly strained the national systems.

This became clear in the capital flights from France during the first years of Mitterand's presidency.

Europe’s second integrationist project resulted from Mitterrand’s decisive U-turn from national Keynesianism to market integrationin the early 1980s and was effectively launched by the 1983 realignment of the European Monetary System (EMS) and the Fontainebleau Summit of 1984.

In other countries, too, the aftermath of the collapse of Bretton Woods had corrosive effects.

As the Palme/Carlsson administrations in Sweden experienced in the 1980s, Scandinavia was not exempt.

Mitterand's U-turn is only the most famous of the strategic accommodations made by social democratic governments to global finance, in which they sought to subordinate institutions and policies in their jurisdictions to the exigencies of global finance.

The appeal of the Third Way in the 1990s was that it made a virtue out of such accommodations.

Perceived necessity was engendered with positive vision through the embrace of the efficient market hypothesis and pragmatic monetarism.

This became all the more urgent in the 1990s, when the social democratic parties returning to office did so in a European Union that had just implemented a Single Market based on the negative-integrative principle of mutual recognition, and which was in the midst of completing the European Monetary Union (EMU).

Financial markets were by no means exempt from this, but were rather at the centre of it all, a fact confirmed by the pivotal position of the Financial Services Action Plan (FSAP) in the Lisbon Agenda.

The FSAP was connected to welfare policy through pension reforms, where pay-as-you-go was increasingly abandoned in favour of actuarian schemes.

Outside the UK, Swedish social democracy has gone the furthest in this regard.

Rather than merely hollowing out existing pay-as-you-go schemes through parametric fiscal austerity, and encouraging private pension savings as an auxiliary, the core of the Swedish pensions system after the 1999 reform contains decisive actuarian elements.

Given the pivotal position of the City of London in global finance, it is no coincidence that the epicentre of ideas connected to the Third Way would reside in Britain, the country that most plausibly could develop an export-oriented niche strategy based on financial services.

Yet it is exactly this system that was thrown into crisis as a result of the contagion effects starting in the subprime mortgage market in the United States.

The EMU is firmly subordinated to the minimalist hegemony that has characterised the ‘strategic coordination’ of US policy since the end of the Bretton Woods era.

Consequently, the aspirations of the European ‘power bloc’ of dominant socio-economic interests and socio-political elites to build a monetary union to promote competitiveness, regional autonomy, and sustained growth is self-limiting, given the neo-liberal underpinnings of the system as it has developed since the Maastricht Treaty.

This is because the neo-liberal project is inherently connected to a transnational financial and monetary order which displaces economic and social contradictions from the United States to other parts of the world, including Europe.

The financial crisis has demonstrated the fallacy entailed in understanding the success of Clintonomics (high growth rates and low unemployment) as residing in the "supply side" of the economy and in an optimal clearing of markets, including labour, money and financial markets.

A more plausible explanation, which also is more consistent with the persistence of the "twin deficits", is to be found on the "demand side" of the economy and in the manner in which the United States successfully managed to maintain its hegemonic position in the transnational monetary and financial system after the collapse of Bretton Woods in 1971.

Contrary to what was predicted at the time, US monetary hegemony survived the end of Bretton Woods. The American Dollar remained pre-eminent as the reserve and vehicle currency of the global financial system, and by abandoning the peg of the dollar to gold, the US actually gained rather than lost policy autonomy in the emergent flexible exchange rate system.

Since US banks could accumulate liabilities in the key currency at zero-exchange risk, they augmented their competitive advantage in transnational financial affairs, which resulted in Wall Street becoming, more than ever before, the epicenter of "global" finance.

This, in turn, consolidated the capacity of the US to shape the preferences of borrowers and lenders worldwide, imbuing the US with structural power.

The US became the only state in an international system characterised by flexible exchange rates that could pursue expansionary macroeconomic policies on a consistent basis without the need of internal adjustment.

Viewed from the more analytically precise concept of the "Dollar-Wall Street Regime", rather than the amorphous concept of "globalisation", it becomes evident that expansionary demand-side economics remains as relevant as ever.

The difference is that after the 1980s it became the exclusive privilege of the US to pursue such policies. It is this that explains the higher rates of growth and employment in the US compared to Europe.

It should also be pointed out that, in many respects, this system is characterised by lack of globalisation, in the sense that the US can defend a mercantilist "exorbitant privilege" by refusing international debate about an international reserve currency.

As Leonard Seabrooke has put it, it is a system based on "national activism and international passivity".

Hence, in the course of the three decades preceding the current financial crisis, the US demonstrated an impressive capacity to convert debt into sustainable capital accumulation and growth. This capacity rested on three factors.

The first is the seignorage privilege that made it possible to finance huge current account deficits through the differential return of US investments abroad compared to foreign investments in the US.

The second factor was the capacity to convert debt to corporate investments via highly capitalised securities markets, which in turn depended on its institutional complementarity with the market-based US system of corporate governance.

The third factor pertains to another institutional complementarity associated with America's residual welfare state, namely the manner in which the US system of retail finance connected production with final consumption through consumer debt.

In contrast to the post-war "Fordist" period, when wage increases were tied to growth, deregulated and numerically flexible labour markets meant that consumption could no longer be stimulated directly through the wage relation.

Instead, consumer debt, backed by the collateral of pension savings and increased value of mortgaged properties, provided the impetus.

This was a cornerstone to Clinton's welfare policy, which sought to extend private loans and home ownership to broader segments of the population through the sub-prime market.

The privatisation of the New Deal housing institutions Freddy Mac and Fanny Mae, making them dominant interlocutors between the mortgage market and securities market, were cornerstones in that policy.

The Third Way of European social democracy was based on the premise that it was possible to copy the American model.

However, since the essence of its dynamism was not based, as thought, on the liberal supply-side principle of optimal market clearing, but rather on a mercantilist principle of debt-finance demand expansion, this was not the case. In contrast, European social democracy locked itself into a self-limiting institutional architecture resulting from the EMU and the Lisbon Agenda.

Contrary to the stance of the US Treasury and the Federal Reserve, the European Central Bank and EU national governments have pursued highly restrictive macroeconomic policies.

This is in part a question of deliberate action. However, another reason for the creation of the EMU was Europe's structurally subordinate position vis-à-vis the US. As Benjamin Cohen has argued, the Euro suffers from an "anti-growth bias".

European bond markets are fragmented. There is no European equivalent to the US Treasury Bill.

Furthermore fragmentation and lack of depth of these and other capital markets in the Eurozone means that the cost of doing business in euros remains high compared to the US. Further, Cohen points to the "persistent inertia" in monetary behaviour, which in many respects is another way of pointing to the dominance of US denominated actors in financial sectors.

This also means that the Euro is unlikely to enjoy the seignorage privileges in world financial markets that the US enjoys.

If the Euro were to challenge the dollar, it would seriously undermine one of the central pillars behind its success.

In some ways, this is the same as saying that, if Europe is to compete with the US, it needs deeper and more integrated markets. In short, the FSAP has not gone far enough.

The problem with this argument is that it does not appreciate the extent to which financial integration has been corrosive of Europe's national systems of innovation and modes of corporate governance, especially those upon which social democratic politics of productivity has been based.

Availability of external sources of finance in highly securitised markets depends on high asset-yield ratios and an inflation of share values.

But this in turn requires a hollowing-out of corporate "own resources", such as research and development capacity, upon which high value added competitiveness in the long run is based – the forte of the European Social Model.

This is in marked contrast to the transmission mechanism between global finance and corporate governance that characterised the US model.

A similar lack of institutional incomplementarity characterises the relationship between global finance and consumption. In contrast to the US situation, the retrenchment of European welfare systems has had a dampening tendency on demand growth, which is further exacerbated when market reforms are pursued in a context of macroeconomic austerity.

True, growth has been uneven, and at different times small export-oriented economies have done reasonably well and provided the material foundations for social democratic tenures of government in certain conjunctures (e.g. the Netherlands in the early 1990s and Sweden in the early 2000s).

But these have been expressions of competitive austerity, where balance of payment surpluses have been based on containing domestic demand, hence cutting market outlets for the surplus production of others.

This hardly constitutes the basis of a coherent social democratic vision for Europe, and such a vision has also increasingly given way to national parochialisms.

The spat between Peer Steinbruck and Gordon Brown about "crass Keynesianism" at the height of the financial crisis at the end of 2008 was a rather unedifying expression of this, in marked contrast to the joint Blair-Schröder Paper a decade earlier.

If the tendencies towards a social democratic alliance in the late 1990s have eroded at a European level, the same is also the case within countries.

Stagnating output and productivity growth does not constitute a propitious terrain for sustaining the composite social alliances that mass parties must sustain, and for which the Third Way sought to provide a formula.

All the while the Schröder government in Germany committed itself to the Third Way formula, it struggled to maintain support among its traditional working class voters and employees working in the public sector, and eventually collapsed.

Similar problems can be observed elsewhere. The failure to sustain such alliances in the wake of decades of stagnation and austerity has generated a crisis of representation, which has provided fertile ground for other parties, Trotskyites in France, the Left Party in Germany, but more often than not for extreme rightwing parties.

Hence, when the American model entered into a deep crisis as a result of its internal contradictions, European social democracy was in no state to offer an alternative.

When it proved impossible to bridge the pent-up overproduction of the world economy through the extension of ever more risky forms of debt to the American working poor, the speculative bubble eventually burst.

Far from Europe being delinked from the US through macroeconomic prudence and microeconomic efficiency (following years of flexibility-reforms), export orientation and financial subordination ensured that the crisis quickly spread to Europe.

Given the extent to which European social democracy had put its money on US-style neoliberalism despite depending on an entirely different social base, it is not surprising that it is one of the primary political casualties of the crisis.

The tragedy is that in a situation where the radical right is on the advance, Europe truly needs an agent capable of pursuing the Bad Godesberg formula in pursuit of a politics of "no authority without democracy"."

mixed excerpt mostly from ryner eurozine:

Thu, 07/21/2011 - 16:15 | 1478530 espirit
espirit's picture

Whew, that's long winded. Hope you're not offended that I didn't read... any.

Thu, 07/21/2011 - 17:22 | 1478752 CrashisOptimistic
CrashisOptimistic's picture

No one will read a single word of anything that long.

Sat, 07/23/2011 - 19:28 | 1478839 gangland
gangland's picture

"...Long ago, European kings borrowed from the Doge of Venice or Florentine merchants or Genoese bankers.

They were under no obligation to repay these loans and sometimes neglected to do so, a neat way of settling public debt.

Many years later, the young Soviet regime announced that it would not be held accountable for money the tsars had borrowed and squandered, so generations of French savers suddenly found they had worthless Russian loans in their attics.

But there were more subtle ways of getting out of debt. In the UK, debt declined from 216% of gross domestic product in 1945 to 138% in 1955, and in the US it fell from 116% of GDP to 66%. Without any austerity plan.

Of course, the surge in post-war economic development automatically reduced the proportion of debt in national wealth. But that was not all. States repaid a nominal sum at the time, reduced each year by the level of inflation.

If a loan subscribed at 5% annual interest is repaid in currency that is depreciating at the rate of 10% a year, the real interest rate becomes negative to the benefit of the debtor.

Between 1945 and 1980, the real interest rate in most western countries was negative almost every year. As a result, as The Economist remarked: “Savers deposited money in banks, which lent to governments at interest rates below the level of inflation”.

Debt was cut without much trouble. In the US, negative real interest rates were worth the equivalent of 6.3% of GDP per year to the Treasury, from 1945 to 1955.

Why did savers allow themselves to be cheated? They had no choice. Capital controls and the nationalisation of the banks meant that they had to lend to the state, and that is how it got its funds.

Wealthy individuals did not have the option to invest on spec in Brazilian stock index-linked to changes in the price of soybeans over the next three years.

There was a flight of capital, suitcases of gold ingots leaving France for Switzerland the day before devaluation or an election in which the left might win. However, this was illegal.

Up to the 1980s, index-linked wage rises (sliding scales) protected most workers against the consequences of inflation, and controls on free movement of capital had forced investors to put up with negative real interest rates.

After the Reagan/Thatcher years, the opposite applied.

Sliding wage scales disappeared almost everywhere: in France, the economist Alain Cotta called this major decision, in 1982, “[Jacques] Delors’ gift [to employers]”.

Between 1981 and 2007, inflation was destroyed and real interest rates were almost always positive.

Profiting from the liberalisation of capital movements, “savers” (this does not mean old age pensioners with a post office account in Lisbon or carpenters in Salonika) make states compete for funds and, as Mitterrand said, “make money in their sleep”.

Moving from sliding wage scales and negative real interest rates to a reduction in the purchasing power of labour and a meteoric increase in returns on capital completely upsets the social balance."

The European ideal will not gain from being associated with a bailiff who seizes islands, beaches, national companies and public services and sells them to private investors.

Since 1919 and the Treaty of Versailles, everyone knows that such public humiliation can unleash destructive nationalism – and all the more so as provocations increase.

The next ECB governor, Mario Draghi, who – like his predecessor – will issue strict orders in Athens, was vice chairman and managing director of Goldman Sachs when the bank was helping the conservative government in Greece to cook the books.

 But indignation is powerless without some understanding of the mechanisms that caused it.

We know the alternatives – reject the monetarist, deflationist policies that deepen the crisis, cancel part of the debt if not all of it, take over the banks, get finance under control, reverse globalisation and recover the hundreds of billions of euros the state has lost by tax cuts that favour the wealthy (?70bn in France in the past ten years, more than $1 trillion in the US, especially for the top 1% of income earners).

And knowledge of these alternatives has been shared by people who know at least as much about economics as Trichet, but do not serve the same interests.

This is not a technical and financial debate but a political and social battle.

Of course, the economic liberals will claim that what progressives demand is impossible.

But what have they achieved, apart from creating a situation that is unbearable?

Perhaps it is time to remember how Jean-Paul Sartre summed up Paul Nizan’s advice to people who bottle up their aggression: “Do not be ashamed to ask for the moon: we need it".

Thu, 07/21/2011 - 16:26 | 1478576 the not so migh...
the not so mighty maximiza's picture

is their a cliff notes version?

Thu, 07/21/2011 - 17:13 | 1478721 caerus
caerus's picture

you type fast

Thu, 07/21/2011 - 18:02 | 1478860 Contra_Man
Contra_Man's picture


Maybe its GLEN, ...Beck Ol' Buddy..., Is that you? 

Thu, 07/21/2011 - 17:45 | 1478826 Ghordius
Ghordius's picture

Short answer:
freedom of the individual, transparent governance of sovereigns.

Why wrap all those words around the obfuscation of the above in favor of corruption?

Thu, 07/21/2011 - 16:12 | 1478520 MethodMan
MethodMan's picture

A final remark. When European leaders say that we will do "everything what is required"to save the eurozone, it is very simple: We mean it

Funny, because for starters, that will involve German and French troops in Greece.


Thu, 07/21/2011 - 17:47 | 1478833 Ghordius
Ghordius's picture

Won't work, too many goats. Been attempted before.

Thu, 07/21/2011 - 16:12 | 1478523 saarislan
saarislan's picture

So Finlands PM Katainen has been saying constantly the last week that they would not budge on 300bn in collateral to be put up by the greek state for any new loans. The first draft that was leaked earlier said:

"This will be accompanied by a mechanism which ensures appropriate incentives to implement the programme, including through collateral arrangements where appropriate."

Now even this is gone, fail. Here I was hoping to collectivly own some nice Islands...

Thu, 07/21/2011 - 16:15 | 1478526 Atomizer
Atomizer's picture


The Commission has just adopted the proposal for the transposition of the Basel III agreement on bank capital requirements. Once again, with this, Europe will be the first mover.

Global systemically important banks: Assessment methodology and the additional loss absorbency requirement .

Thu, 07/21/2011 - 16:15 | 1478531 unky
unky's picture

next week is options expiry (on tuesday), so for the big banks who sold the options i guess it would be perfect for them if gold could stay at about 1550. Thats because they make the least loss from the long options they sold at 1500 and from the short options they sold at 1600.

and for that too happen (gold price needs to drop by 40 more dollars) there can not be problems in europe (at least temporarily everything has to be fine).

Thu, 07/21/2011 - 16:17 | 1478538 slewie the pi-rat
slewie the pi-rat's picture

the puppets are now unan-i-mouse: anything too big to fail is TOO FUKING BIG TO FAIL, so just deal w/ it and shuddup. 

that is all.
love and kisses,


Thu, 07/21/2011 - 16:18 | 1478548 espirit
espirit's picture

Print on two continents in 3...2...1...

Surprised it took this long for EURUSSA to make this decision.

Thu, 07/21/2011 - 16:18 | 1478551 Jim in MN
Jim in MN's picture

A bazooka isn't a good thing if you get it pointed backwards.

Thu, 07/21/2011 - 16:24 | 1478568 johny2
johny2's picture

Which rating agency is going to call this a default first? 

Thu, 07/21/2011 - 16:26 | 1478574 carbonmutant
carbonmutant's picture

If the Greeks can feed at the EFSF trough what is the incentive for them to go the the commercial markets in the future. Why shouldn't they use the low interest to play the markets the way the US banks have?

Thu, 07/21/2011 - 16:29 | 1478589 carbonmutant
carbonmutant's picture

Lagarde is dodging the question of Debt Sustainability Analysis. It's not shown any improvement with this deal.

Thu, 07/21/2011 - 16:54 | 1478672 midnight
midnight's picture

"And furthermore, if the EURUSD can only ramp to sub 1.44 on this Bazooka plan, the EUR is in very deep trouble."


Opinions are like assholes. Everybody has one and they all may stink.


I have another opinion. Since this plan amounts to "selective default" and triggers CDS, US/UK will be forced to pay and be brought into this mess. So who's fucked now, courtesy of Germany?


btw ZH, since you have ADMITTED you're clueless about Europe, why don't you save your GLP grade moran DOOM to yourself ?

Thu, 07/21/2011 - 17:00 | 1478693 Mike2756
Mike2756's picture

Doesn't the GM case apply here? If enough accept it, no default.

Thu, 07/21/2011 - 17:03 | 1478704 slewie the pi-rat
slewie the pi-rat's picture

tyler has asked me to reply, as he has his hands full and wishes to continue drinking, also.

EURUDS is a currency pair.  EUR is a currency.  and, you misspelled moron.

Thu, 07/21/2011 - 17:59 | 1478853 slewie the pi-rat
slewie the pi-rat's picture

make that EURUSD  L0L

Thu, 07/21/2011 - 18:23 | 1478909 EvlTheCat
EvlTheCat's picture

LOL +3.1415926535897932384626433832795028841971693993751058209749445

Thu, 07/21/2011 - 18:35 | 1478930 caerus
caerus's picture

I'll see your 3.1415926535897932384626433832795028841971693993751058209749445

and raise you

Thu, 07/21/2011 - 22:01 | 1479455 midnight
midnight's picture

Let's try this again.

"""And furthermore, if the EURUSD can only ramp to sub 1.44 on this Bazooka plan, the EUR is in very deep trouble."""

Do you realize that it is the article that mentions EUR and EURUSD? Either way, I honestly would like to know FACTS that PROVE why is the EUR in very deep trouble.

Moran is a GLP "inside joke".

Thu, 07/21/2011 - 17:06 | 1478713 Jim in MN
Jim in MN's picture

The EUR can be in deep trouble while the US/UK banks are brought in via their exposure.  Just because the US/UK are fucked doesn't mean that Europe isn't.

But the French and Germans are the most fucked.  I think the general opinion here at ZH is that they are fucked regardless of the endless talking and obfuscation, and it would be best to get on with it and simply negotiate the haircuts.  Just like Timmy G should have done with AIG, when he whited out the % haircut line on the STANDARD FORM and wrote "PAR" in an act of criminal treason.

So we know all about being fucked here in the USA.  Maybe Europe should grow up and admit it is, instead of making it worse.

Thu, 07/21/2011 - 17:22 | 1478750 Jim in MN
Jim in MN's picture

21% loss at an assumed 9% discount rate?  What about at a 0.1% discount rate (i.e. actual opportunity cost)? 

If the haircut isn't deep enough, it won't work.  That's the whole point.  Greece needs more like 50% haircuts.  At market rates for financial institutions.

But it does potentially start the ball rolling, which after years(!) of bullshit is something.

Thu, 07/21/2011 - 17:25 | 1478769 Mike2756
Mike2756's picture


Thu, 07/21/2011 - 17:29 | 1478780 Mike2756
Mike2756's picture

My other question was about commodities and i think i got the answer:


No relief from higher oil if they continue to print.


Thu, 07/21/2011 - 17:01 | 1478697 PulauHantu29
PulauHantu29's picture

Liquify, Baby, Liquify!

Ben's huffing and puffing blew gold to $1,600 an ounce and silver to $50....lets see if the EuroFires can beat him.

Thu, 07/21/2011 - 17:15 | 1478723 Piranhanoia
Piranhanoia's picture

The more they talk, the harder the landing. It could have been lunar lander, then lander without jets, then lunar lander on earth, then lunar lander on earth without jets, now its sundive. Hotblack?  You finished that year dead yet?  How do you stop this thing? Jane, how do you stop this crazy thing?

Thu, 07/21/2011 - 17:18 | 1478737 ouchtouch
ouchtouch's picture

I wonder if they asked the German Constitutional Court for its opinion of this mess?

Thu, 07/21/2011 - 17:30 | 1478784 johny2
johny2's picture

It looks like a very good attempt to defuse Euro debt crises. 

Thu, 07/21/2011 - 17:31 | 1478786 Phillips Capital
Phillips Capital's picture



A while back, you linked me to a great document on Minsky, when i asked you when you would consider selling your silver. If you read this, please re-link me. I cannot find the same article. Meanwhile, I'll keep googling. Thanks

Thu, 07/21/2011 - 17:32 | 1478788 Highrev
Highrev's picture

And furthermore, if the EURUSD can only ramp to sub 1.44 on this Bazooka plan, the EUR is in very deep trouble.

It's the USD that's in deep trouble. Or haven't you seen the JPY, CAD, CHF, AUD, and NZD lately?

And back at the ranch, the very USD that is, we've got a lower trendline break on a multi-week symmetrical triangle continuation pattern . . .

Thu, 07/21/2011 - 17:33 | 1478791 Joebloinvestor
Joebloinvestor's picture

Talk about kicking the can down the road.

I wonder how they came up with that 30 year maturity.

Probably the # of years on average it will take for the EU jokers who put this nonsense together to be dead and gone, so they can't be lynched.


Their graves can still be descrated though.

Thu, 07/21/2011 - 17:40 | 1478792 Problem Is
Problem Is's picture

"Complete Statement By Euroheads And IIF Press Releases On European Bailout"

Is a "Eurohead" like Eraserhead??

Thu, 07/21/2011 - 17:41 | 1478812 The Count
The Count's picture


Gotta love Van Rompuystilzchen & the Gringots.


Thu, 07/21/2011 - 17:47 | 1478829 Lord Welligton
Lord Welligton's picture


Just a thought.

The establishment of EU Ratings Agencies (there won't be just one) will in effect result in "soft capital controls".

If you don't accept the ratings. You don't do business in Europe.

Thu, 07/21/2011 - 18:41 | 1478894 UpShotKnotHoleGrable
UpShotKnotHoleGrable's picture

"15. We agree that reliance on external credit ratings in the EU regulatory framework should be reduced"

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