EU Pulls Out Nuclear Option: Proposed 500 Billion Euro Bail Out Package Is Largest In History

From Le Monde:

Zone euro: l'Allemagne propose un plan d'aide de 500 milliards d'euros

AFP | 09.05.10 | 21h58
L'Allemagne a proposé dimanche soir la mise sur pied d'un vaste plan d'aide financier pouvant être utilisé pour les pays de la zone euro, d'un montant total de 500 milliards d'euros et impliquant le FMI, a indiqué à l'AFP une source diplomatique européenne. "L'Allemagne a mis sur la table une proposition totale de 500 milliards d'euros", a-t-elle indiqué. Elle comprendrait les 60 milliards d'euros de prêts octroyés par la Commission européenne, dont il était question ces derniers jours, ainsi que 440 milliards qu'apporteraient si nécessaire les pays de la zone euro et le Fonds monétaire international. Cette dernière enveloppe serait constituée "de prêts bilatéraux, de garanties pour des emprunts et de lignes de crédit du FMI", selon la même source. Il s'agirait par son ampleur, s'il fait l'objet d'un accord, d'un plan d'aide sans précédent dans l'histoire.

Translated:

Germany
proposed on Sunday evening the establishment of a comprehensive plan of
financial aid can be used for countries in the euro area, totaling 500
billion euros and involves the IMF, told AFP European diplomatic source. "Germany has put on the table a proposal of 500 billion euros," she said. It
would include 60 billion euros in loans from the European Commission,
he was in the last day, and 440 billion would accrue if necessary, the
euro zone countries and the International Monetary Fund. This envelope would be established "bilateral loans, collateral for loans and lines of credit from the IMF," the source said. It would be in scale, if the subject of an agreement, an assistance plan is unprecedented in history.

And once this money is exhausted which it will be, Europe will default as the playbook is TARP then immediate monetization, however without a reserve currency backstop. The EURUSD is spiking by 3 handles right now, however once traders realize that the ECB will commence printing money in earnest it will go straight down to parity.

For those who want to read the best perspective on the nuclear option, here is Evans-Pritchard's take on why this nuclear bomb will be a dud:

The EU is invoking the "exceptional circumstances" clause of Article
122 of the Lisbon Treaty, arguing that the euro is subject to an "organized
worldwide attack". This is a legal minefield. A group of professors has
already filed a case at Germany's Constitutional Court, claiming that the
Greek bail-out is illegal and that the EMU is degenerating into a zone of
monetary disorder.

The judges have denied an immediate injunction on aid to Greece, saying that
it would to be too "dangerous" to take such a step on limited
facts, but it has not yet decided whether to hear the case. The battle has
escalated in any case. The new EU rescue mechanism is to be permanent and no
longer just bilateral help, if Mr Sarkozy is right. The professors have been
given an open goal. One almost suspects that the Kanzleramt in Berlin is so
weary of this dispute that it has given up worrying about lawsuits. If the
judges block an EU debt union, be it on their heads.

Nor is this rescue fund any more than chemotherapy for the cancer eating away
at the foundations of monetary union. It is not a cure. The rot set it when
the South joined EMU before it was ready to cope with ultra-low interest
rates or match German wage-bargaining. The ECB made matters worse by gunning
M3 at an 11pc rate during the bubble. Club Med lurched from credit boom to
bust. It is now trapped in debt deflation at an over-valued exchange rate,
like Argentina with its dollar peg in 2001 until air force helicopters
rescued President De La Rua from the roof of the Rosada.

The answer to this -- if the objective is to save EMU -- is for Germany to
boost its growth and tolerate higher `relative' inflation. This would allow
the South to close the gap without tipping into a 1930s Fisherite death
spiral. Yet Europe will have none of it. The weekend deal demands yet more
belt-tightening from the South. Portugal is to shelve its public works
projects. Spain has pledged further cuts. As for Germany, it is preparing
fiscal tightening to comply with the new balanced budget amendment in its
Grundgesetz.

While each component makes sense in its own narrow terms, the EU policy as a
whole is madness for a currency union. Stephen Lewis from Monument
Securities says Europe's leaders have forgotten the lesson of the "Gold
Bloc" in the second phase of the Great Depression, when a reactionary
and over-proud Continent ground itself into slump by clinging to
deflationary totemism long after the circumstances had rendered this policy
suicidal. We all know how it ended.

h/t Nico

Comments

[doMiKY]

it looks like a worldwide shell game trying to find a currency strong enough to cover government debt.

[JonTurk]

EUR hit JP target of 12970 and instantly pulled back, fat finger luring in more shorts..

as sentiment has shifted to selling the rallies, seems like this scam has far more legs.. the real explosion should come above S&P 1300 then ground zero in 2012..

[chindit13]

More debt for the indebted.  More donuts and cheesecake for the obese.  More No. 4 for the junkies.  More blonde bimbos for Tiger.  More oil for the Gulf.  More altar boys for the priests.  More bonuses for the bankstas. 

And NO NO NO NO NO Fed audit.

It's all good.

[Pimp Juice]

"The Federal Reserve said it will restart its emergency currency-swap tool by providing as many dollars as needed to central banks in Europe, the U.K. and Switzerland." "as many dollars as needed" Are they fucking mad?

[CD]

Err... I guess you haven't been paying attention. The answer would be 'yes'. BTW, I know it's an old joke, but I love the display ads offering 1:100 levered FX trading accounts at DB and Citi, along with US Chamber of Commerce ads demanding the immediate beheading of the CFPA. Please take a few seconds to click on ALL of these.

[nathan1234]

I guess this is what a currency swap is:

The US Prints approx $500 Billion .

The ECB prints Euro400 billion.

They exchange with each other .

Each now has an asset for the printed money which will not be considered debt.

Now with this money they do the bailouts for the respective countries.

Theoretically this can be done till kingdom come.

End result is that then these currencies which are swapped on these lines are worse than toilet paper.

Ben really takes the cake. His only answer- PRINT PRINTAND PRINT PRINT.

This man is worse than 500 billion Jack the Rippers put together.

Fed Audit - as far as he is concerned will be over dead bodies- wonder whose!!

[JR]

Shadow Government Statistics says April unemployment is 22% [April Unemployment: 9.9% (U.3), 17.1% (U.6), 22.0% (SGS)].

Says John Williams in the subscribers report: Despite the (May 7th) happy employment report, the economy remains at the brink of an intensified or renewed downturn, and broad liquidity problems signal ongoing serious systemic risks…A down economy in 2010 will blow apart current projections for the federal deficit and Treasury funding needs, as well as any confidence in banking-system solvency…The systemic risks here are of such a scope as to be considered a threat to national security… Unusual government actions and event-driven data manipulations are possible in extraordinary circumstances…

http://www.shadowstats.com/

[Temporalist]

Since I posted this somewhere else..."Shake well."

For everyone's viewing pleasure, Daffy Duck doing his impression of the world economy:

http://www.strimoo.com/video/13544538/Show-Biz-Bugs-7-Dailymotion.html

[cocoablini]

Gold was slammed 13 bucks but it's on the rise again. I mean, providing infinite money is just another excuse to get back on the gold train. The fact that they need dollars to save that sorry currency should tell you they are not faring well.

a TRILLION bucks to squeeze a bunch of "speculators" and keep rates low. That's what it's come to! Can't wait when Italy faceplants...

We'll have a big opening blow up. I expect after a big rise, people will come back to reality and resell what they rebought in a month or so.

As for a short squeeze, it's not like there a ton of shorts on the stock market. they have been squoozen already. That's why the $%^&*( market fell 1000 points. Euro shorts, however...

[Fecklesslackey]

This is an absolutely great selling opportunity ... as soon as the 'buy the dippers' have invested all their cash, the market will collapse. There is no one on the sidelines that will see the 'great opportunities' in this market and Boomers are scared to death that they will lose everything in their IRA's. This market is fueled by QE only on low volume or in the dead of night. Happy days are not here again. 

[primefool]

Agree - EUR/USD at above 1.30 is a gift. Thank you . Thank you.

[chindit13]

As one who held a gold position for ten years, then sold during the last peak, I am seeing the error of my ways.  Market is back above where I liquidated, and acting surprisingly strong.  "Getting slammed" barely takes it to where it was last week, and recovery comes rather quickly.  There is an element out there---and I do not mean the traditional tin foil hatted gold bugs---who can see that this endless money creation and debt buildup cannot end any way but horribly.  Gold may or may not be the answer, but it is a better answer than any other on the table right now.  Thus the ever present bid just under the market.  It is becoming more than just "a trade".

People can scoff at the gold bugs all they want, but as a trader looking at just the "tape", gold is looking pretty good.  We are not too far away from that marginal dollar or euro or pound that makes all previously printed notes worthless.

Hats off to those who have stood their ground on gold.  So long as more debt for debt is the only solution the bozos in charge can proffer, gold is going to look okay.

[Tripps]

this is my last advice for people here..buy something..anything. stop being perma stupid bears

governments of the world will fight your bearish attitudes to the END. don't go to bed any nite 100% short or even 70% short unless you are completely stupid and naive at this point

[Tart]

"stop being perma stupid bears" How many posts did your smug face do last week?

[tim73]

It all depends now are those PIIGS able to make good on their austerity measures. If they are real serious about it and I believe they are by now than the speculator guns will be turned 180 degrees, pointing towards USA. Americans have just awful budget deficits from village all the way up to federal and debt levels skyhigh everywhere plus two ongoing wars plus messing with the economic data big time. Burning the candle with blowtorch...

[Mr Lennon Hendrix]

Webster Tarpley Predicts End of The EURO on Alex Jones Tv Sunday Edition 1/2:

http://www.youtube.com/watch?v=n8CX2mm_Pro

Webster Tarpley Predicts End of The EURO on Alex Jones Tv Sunday Edition 2/2:

http://www.youtube.com/watch?v=cGfXshMuSq4

[tim73]

I'd be quite rich man if I got a penny every time American or British predicts the demise of Euro. USA is in much worse situation because of military-industrial complex eating away most of the federal budget.

[Mr Lennon Hendrix]

I agree with you that the Doelarr is dead, however, with the re-opening of the SPIT SWAP lines, it appears that all currentseas will now fuse their fates.  All falls down.

[faustian bargain]

428 comments at 10:40pm (Pacific) Sunday evening. No, this won't be an average Monday.

[Fecklesslackey]

It looks like the Joker took over Gotham City ES at 1145 ... this will not be your Father's Monday

The FED themselves must be buying ... Metup to the Max

[williambanzai7]

EURO VOODOO CHILD:

http://williambanzai7.blogspot.com/2010/05/volatile-child.html

See you in the next bailout...don't be late!

[tim73]

I don't get it why people are so negative about this package. This is not like giving a blank check. There are quite clear rules to follow, group pressure among eurozone nations is immense (to follow those rules) and that same pressure provides the necessary backbone to politicians to make necessary cuts all around. Or face the dire consequences of becoming a pariah within eurozone (or being kicked out in the worst case). They are even talking about checking national budgets before approval of countries in trouble.

This is very different animal than Americans just throwing good money after bad to the Wall Street WITHOUT any meaningful changes or going after the bad boys. This is no "just give them more money and let's party again".

[Tart]

The Harry Wankers of the world are coming out.

[Mr Lennon Hendrix]

A little late for all of that.  Throw more paper on the fire, see if I care.

[nathan1234]

Where is the money comning from?

All of them are broke.

The swap is a print currency and exchange as assets.

They may as well as print the money on toilet paper

[chindit13]

"clear rules to follow"

Maastricht also had clear rules to follow.  Nobody, not even Germany, followed them.  Greece was merely the worst of the worst.

The challenged countries cannot pay off their debt as is;  adding more debt on top is not going to help.  During the best of times (the boom years) they could not run a tight ship nor a surplus.  You expect them to now?

Like all of these solutions so far (all are the same:  print money/more debt) all the world has succeeded in doing is turning a bank crisis into a sovereign crisis.  The can has been kicked as far as it can be kicked, though all these measures have only made the eventual collapse worse.

Enjoy the rally, just don't overstay your welcome.

[primefool]

The money comes from where it always has - the keyboard. This is not an issue. large Debt/GDP is not an issue. Debt never needs to be repaid - not an issue.

Here is the issue: Avoiding a pabolic rise in debt levels. Which in turn requires low interest rates. Which in turn requires creating confidence amongst investors to buy the debt - refinance old debt etc. Which in turn requires Credibility. Lose credibility and you turn into Zimbabwe overnight.

[Mr Lennon Hendrix]

We are at the back end of support, testing $1197.  I look for tomorrow to move to the upper support level of $1203.  Tight range, this means an up move would be quick, in my opinion.  I think we break the glass ceiling of $1226 by the end of the week, if not, next.

Speaking of "glass ceilings", have the women of America ever thought to form a union, and strike for fair wages?  Women are the larger portion of the workforce for the first time in history, so now would be as good a time as any to get what is yours.  Just sayin'.

[primefool]

Looks like the europeans have decided to imitate the US policy that has been such a resounding success(sarc)! So the ECB will do "credit easing" ( like the Fed). ie. Buy PIGS bonds and sell German bonds to sterilize. So german yields should go up. US Treasury yields are rocketing up. So the fire moves from the periphery to the center. Will the center hold?

[Mr Lennon Hendrix]

I wish our central bankers studied a REAL science instead of the dismal "Arts".  BS said it, "Central Banking is an art." So, BS, that makes you what?  An artist?  I would rather have a painter running monetary policy than BS at this point.

Crown Fire Modeling Experiments:

http://www.youtube.com/watch?v=FYup7cYKE3w

[primefool]

I see this as an unadultrated negative for the EUR - after the initial short-covering bounce is done in a day or two. Instead of surgically removing the unsustainable PIGS - they have decided to do a full embrace - come hell or highwater. ECB is getting in the game. Clearly negative for the EUR.

[youngandhealthy]

Monday morning and the Bund is sinking (like a stone)...surprised? not in a million....€ will never fail accept it...or you will be among the haunted "wolfpack"

http://screencast.com/t/NzllM2ZjOGQt

[subqtaneous]

"would you, Quintas , . . . would I?"

[primefool]

The europeans cannot import some pieces of the Paulson/Bernanke plan and leave out some critical elements. Ben did 1.5 trillio of monetization of mortgages. ECB will need to do a similar size for the PIGS. Will they ?

[Glen]

Dow futures up 309 points. Is this going to be the biggest Monday bot rally we've ever seen followed by a fat fingered collapse?

[Mr Lennon Hendrix]

Meh, I bet they get one hundred points or so.  If it did go to the moon, then what, they tell the sheeple, "See!  We should all print as much FIAT as we can!"  That would end well....and quickly.

This is the PPT propping up so as to sheer quietly....

I have noticed that the PPT plays the back end of the market "nicely".  They move the herd in a direction, and take out the back of the pack each time.  You know they saw that "trench" move coming on the 6th.  They buried bulls there, and then bought at the low, you know they were a large part of the rebound support.  BS is smart like a fox, but that is all.  He lacks foresight, and ingenuity.  BS' game is tired.  Not much time now.....

[primefool]

Tricky Trichet = Zero Cred. On Thursday he says they did'nt even talk about buying bonds , did not even consider the issue at all. On Sunday he is going open kimono!!

[Mr Lennon Hendrix]

I have said this before, but I would love to play poker with these guys!

[primefool]

Everybody knows that in the fiat world creating Trillions of new paper and shuffling paper around is no problem at all. This is no great accomplishment. The accomplishment is maintaining credibility. The bazzoka approach obviously has short term success - but perhaps the price is a loss of credibility - long term failure.

[AnAnonymous]

Likely but I cant help thinking that a minimum credibility will always exist.

People need credible places to live on. There will always be credible places. Credibility cannot run to zero.

Game is not to hit the bottom first.

[Boston Wealth]

Limit up!  Who knew?

I made the prediction of futures being limit up from Saturday evening before the news broke!

http://www.bostonwealth.net/2010/05/09/limit-up-who-knew/

[youngandhealthy]

Look at the Greece spread v.s. German.....my god... Im not trading CDSs but I wish I did.

[primefool]

Germany must be loving this action - govt bond yields soaring, Euro soaring.

[Miles Kendig]

Heck ya, look how much they got us to pay.  Crafty

[Miles Kendig]

Well, the total is now up to 962b $US.  Anyone wanna take up odds on the total reaching 2T within the month? 

http://www.bloomberg.com/apps/news?pid=20601087&sid=aQgMz3fbc9ic&pos=2

[Fecklesslackey]

Mostly IMF ... so US will pick up at least 20% ... we're doomed

[JonTurk]

ESM up 4,3% -- skynet online, major short squezee

fat finger my ass:)

[Flatchestynerdette]

so, inquiring minds would like to know - how long before the 600 billion euro package to stem off the wolf packs run OUT? Considering how much private equity has at its finger tips, if indeed a 'wolf pack' exists, then I would ponder if its worth attacking NOW and seeing how tight that package is (ie- how will the herd react if it is under attack - how many of the heard will peel off to get out of the take down range) or does the Wolf Pack bide its time?

Once would also have to take into consideration that Goldman Sachs will step in to protect the Obama admin and thus the wolf pack may think its just the euro herd that it can pick off the weaklings, but the herd does have its protectors also.

If anything, the wolf pack needs to strike sooner rather than later. Too much time will give the herd the ability to grow stronger in its dependence on its protector (the US Treasury - and reserve currency status - through dark pools orchestrated by GS). Exit question: is the US reserve currency the "real" target of the wolf pack and if it is, should the wolf pack strike the EU herd first, thus weakening the "protector" for later attack?

[Flatchestynerdette]

"all the risk from the banks are transferred to the taxpayer" - CNBC worlwide.

This is why banks are up big. They've been protected/insured by the country and the country is its people.

"this is a short term solution with a 2 year outlook....the governments don't want to have a double dip in the next 2-3 years"

ok. so then we go back to bubble on year 3 and drop like a stone in 2013? Funny that the wolf pack is going to take that long to take down the herd, or will it ride it up and then turn and make the kill?

[Fecklesslackey]

2nd Term only reason for 2013

[tip e. canoe]

looks like the Trilateral Commission was quite busy this weekend in their annual meeting

[JW n FL]

by JW n FL
on Sun, 05/09/2010 - 19:31
#340253

http://www.bloomberg.com/apps/news?pid=20601087&sid=aP2k8sq2WiRU&pos=1

The cages are being rattled in the main stream... the algos are busting to get loose... we may have a real event tomorrow... this week is going to be history made before our very own eyes...

• reply
• flag as junk (1) 

by JW n FL
on Mon, 05/10/2010 - 11:10
#341408

by JW n FL
on Sun, 05/09/2010 - 19:31
#340253

http://www.bloomberg.com/apps/news?pid=20601087&sid=aP2k8sq2WiRU&pos=1

The cages are being rattled in the main stream... the algos are busting to get loose... we may have a real event tomorrow... this week is going to be history made before our very own eyes...

As pontificated about... Junk the truth some more, junk the facts junk reality... your reality.. junk it, to infinity and beyond!!!

NYSE Invokes Rule 48 For This Morning's Opening, Anticipates Unprecedented Volatility

http://www.zerohedge.com/article/nyse-invokes-rule-48-mornings-opening-anticipates-unprecedented-volatility

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