Europe: the Break-Up is About to Begin

Phoenix Capital Research's picture

The EU’s
days of “kick the can down the road” are rapidly coming to an end.


While most
commentators talk about the EU and its bailout fund as though these are
independent entities, the reality is that the EU bailout story was always about
whether Germany could foot the bill for the more bankrupt EU members.


For 18
months, German politicians were able to walk the line of supporting the EU
without pissing off the German populace too much. However, starting in the last
few months this balancing act has come to an end. Angela Merkel’s party has
been getting destroyed in the elections.


We’re now starting
to see German officials pulling back from the notion of more bailouts for
Greece. When it comes to political suicide vs. ideology, politicians look out
for themselves. And German politicians are realizing that with nearly 60% of
their country wanting out of the Euro, continuing to throw money at the EU’s
less solvent members means a guaranteed exit from public office.


In other
words, the EU, in its current form, is at the beginning of the end. Consider
the implications of Germany saying “no” to more bailouts.


A “no” from
Germany means the largest, most solvent country in the EU is no longer willing
to back up less solvent members. This in turns means the beginning of the end
for the “bailouts will fix everything” mantra that has dominated the world
since 2007-2008. It also means that any future EU member that comes looking for
handouts is no longer guaranteed assistance.


In other
words, the great EU experiment will be coming to an end.

Whether the EU will break into separate
alliances or if they’ll simply do away with the whole thing altogether remains
to be seen. But the cracks that have been forming in Spain, Portugal, Italy,
Ireland and Greece will eventually manifest into a full break in the EU in some


And stocks
are completely unaware of this. As I’ve noted hundreds of times before, stocks
are the last to “get it.”


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skepticCarl's picture

This article was a boring rehash of the PIIGS predicament, complete with the "kick the can" cliche. The only good thing was the lack of "game over", "fed is in a box", "pushing on a string" and "beggar thy neighbor" nonsense that has been the staple of econ bloggers for the past ten or twelve years.

falak pema's picture

Euro bashing is a knee jerk that makes certain Americans feel more comfortable about their own USD. As long as there is ONE guy out there who is in worse shape than us it makes life worth living...the race to the bottom is such a value takes my breath away...I need jungle Popeye and greenies!

Smokey1's picture

This guy has some legitimate thoughts regarding the unstable nature of the world's economies, but damn, his articles are increasingly a transparent attempt at selling shit or signing up members to his own site.

Fiat2Zero's picture

It's a paid ad. There's a few. The obviousness is OK as at least he is upfront (a title with "advertising" would work also).

Stuck on Zero's picture

The EU, multicultural diversity, unlimited immigration, political correctness, bailouts, globalism, global warming, perversion, anti-religion, anti-family, and nanny-state socialism is all coming from the illuminati and being forced on an increasingly angry populace.  What has kept it going is the mutual support of world governments.  What will destroy it is debt collapse.

gratefultraveller's picture

Just a personal observation on street level: Since Oct. 2009 I have been drawing 1000 Euro cash per month for my mother here in Germany from the cash dispenser in our local co-op bank (small town with 4600 inhabitants).

In the beginning there used to be 65% german 50 Euro bank notes (recognizable by an "X" in front of the serial number). That ratio has since steadily dropped to 20%, with the share of the italian notes (they start with an "S") increasing from 15% to 35-40%.

I do this to make sure we get rid of the notes of the fiscally "bad" countries first, in order to not be stuck with them should the currency union fall apart.

Are these countries printing like hell, or are other people tucking away the "good" notes "just in case" as well?

Fiat2Zero's picture

Gresham's Law - yes, everyone is hoarding the superior money.

Raging Debate's picture

I don't think America will form a militia army and open fire either Anoly. I like to consider Russia as our future model. 

 Government won't bother coming for the guns or work for guns programs either. People's wages matter. A question people would have to ask themselves is "Turn in my gun or starve? How about use my gun to become a black market entrepeneur?"  

The U.S government's apex has come and in decline.

More people will check out and become self-sufficient but not entirely, working thirty hour weeks. Been out lately? I have. What I see is people pretending to be paid a living wage and pretending to work. It's happening like in Russia already.

 Sure, one can still work 60 hours a week and become a rising star but now that individual has to worry about the IRS and many, many agencies using individual proxies to steal any increase made to fund the dying state. Like in Russia, each strata of the society has its own rackets. Right now mostly governments have rackets. That will change. Like Russia, the killings between government and the people will be from those that step into each others rackets.

 Individuals will care for elderly family members. During the GD, 23% of families reported doubling up. The ratio will be a tad bit higher this time. While doubling up creates friction during adjustment, it does bring the family unit closer together. Another example of pain being a catalyst of true change. I don't celebrate this fact, I just recognize it.

 The United States government will become a new Republic as the extremeties stop supporting the core slowly but surely just like Russia. 

 Discontinuing to pay taxes will mean the same as always, jail. Even after the country rebrands. If an individual is that disgusted with the U.S. then leave and I am not saying this in a nasty way. There are 2nd and 3rd world countries where the taxes are low and scenery just as nice if not nicer. If government is going to waste tax dollars on security in other countrie protecting revenue streams then when you consider safety for tax dollars one may as well live in a 3rd world country. Its not as if they don't have basic necessities anymore like 50 years ago like running water, sewrage or medical.

 I am going to stay but keep my options open and watch what happens in 2013 when the Federal Reserves 100 year charter expires. That will dictate the severity of the brand name change America will go through, highlighting the physical risk factors. Since I am of Slavic decent living like a Russia isn't so bad. Lot's of moonshine and morally casual woman. Look at the 60-70 year old bankers that are billionaires with vast power. Down to raping women. Being a local black market trader will be a lot more fun but it pisses me off that my America got close to fair market capitalism but sodomized itself and sold its own people out as traitors do.

In such a develolving society not much future to plan for old age but the booze, women and drugs mean you don't live nearly as long anyway. You see, there is a silver lining in every cloud.

 May God bless all of you be you American, Russian, Arabian, Jew or Asian. After this awful turmoil, we will reorganize the globe in the 4D management paradigm and the security of its foundation will be more stable than this 3D, triangulating, devil worshipping Pharoah paradigm. How barbaric and devolved...

Highrev's picture

Bailing out Greece is all about bailing out German and French banks.

Someone needs to clue Summers in.


TooBearish's picture

Bullshit - the EURO is not going to break up and default will only come about if shots are fired.  The banksters will not take the hit - now move along and stop trying to sell shitty "analysis"

BeerGoggles's picture

Graham Summers still needs to explain why he went long oil at 110. Possibly the worst call in history.

falak pema's picture

As I have always felt and said, we are seeing before our very eyes the wind down of western civilization; on both sides of the pond. Awesome how China is destined to emerge as beacon of 21st century. The irony of it! All this in a span of thirty years! 


Well, this time they didn't need Genghis Khan! Just their own "blood, sweat and tears".

The only lesson from past history to meditate is that the Mongol empire only lasted a century or so...!

FunkyOldGeezer's picture

It's going be some party in the USA with 500 million guns in private hands. When half your civil population has wiped itself out, how strong is the uSA (deliberate small u)going to be then?

Confuchius's picture

You might learn something by reading up on the various wars of empires in Afghanistan. The Afghan people always win. No matter how many trillions of (pounds sterling / dollars) and hundreds of thousands of mercenaries are arrayed against them by whatever criminal "empire du jour" is hell bent on stealing the Afghan's poppy harvest. Exotic war toys and infinite conscripts are no match for a determined indigent mass of armed and committed residents who are really pissed off. (and have more than a few tricks of their own).

css1971's picture

See EU vs Euro.

Not the same thing.


archibald tuttle's picture

Sadly, this is probably not what is going to happen. Merkel is always playing tough, but in the end she is always paying. She has no political principles whatsoever. I mean, she used to be secretary for agitation and propaganda in the FDJ, the youth organisation of the socialist unity party of eastern germany. 

And the fun thing is that every single major political party in germany is even worse. The social democrats are in favor of issuing "eurobonds", and merkel often gets criticized by the media for not being forthcoming enough. Currently the greens are surging in the polls while the christian democrats are being destroyed. The logical conclusion for somebody as spineless as merkel is to try to out-green the greens.

There is not a single established political party representing fiscal conservatives. The only hope would be a new party, but whenever a new party is being created it is immediately denounced as nazis by the media and the political establishment. The problem is that this works with the electorate. It seems that german voters would rather work until they drop dead to pay for the greek than being called a nazi. 

I think this will go on for some more years. It's almost like the versailles treaty, except we did not have to start and lose a war this time. I guess that is what they mean when they say that the european union prevents wars...

Confuchius's picture

Smoke & mirrors. Any "ECB lending" goes to a country which can never repay. But! It doesn't matter at all as the ECB "bailout" was never intended for any entity except the bankrupt european (German) banks. The "lending" is the usual bankster lies and smoke. Follow the funds.

css1971's picture

The FDP should be the party leading the position closest to  classical liberalism. However they appear, like most politicians to be nothing more than whores.

archibald tuttle's picture

The FDP have completely destroyed the public perception of what constitutes liberalism. They are basically the party of crony capitalism. There are various arcane laws in germany that prevent employment. For example there are various trade regulations going back to the middle ages.

Just one of many examples: Pharmacists have a really sweet deal. They have a monopoly on selling pharmaceuticals, since normal shops and drugstores are not allowed to sell them. So in the little town of 20000 I live in there are five pharmacies. They all have the same high prices, and they are all open from 9-12h and from 14-18:30h. The supposed reason for the monopoly is that pharmacists are so qualified that they will prevent you from getting wrong medicine. But in my experience this is simply not the case. Once they tried to sell me homeopathic medicine, for christs sake! Is the FDP opposed to the pharmacy monopoly? Of course not. In fact, pharmacists are a major voting block for the FDP. 

There are still some real classical liberals in the FDP. And they are doing some good work. For example the FDP has prevented an internet censorship infrastructure to prevent "child pornography" for now. But the party has been dominated by slimy whores that do everything to stay in power for as long as I can remember. So when you tell an average german about liberalism, he thinks of the FDP and has to hold back vomit.

ZeroPower's picture

Spent a year in France and, that pharma story rings very true in the French part of the world as well o.0

GFORCE's picture

Another doctor doom, profiting from the spread of fear.

Fat Ass's picture

My Gosh, what an intelligent and considered article - packed with detail and specifics. You won't get any handwaving and generalities here. Wow, when I want real actual information I know where to come.

James T. Kirk's picture

+1 - since when does ZH run ads?

taraxias's picture


Germany doesn't bail out Greece and the German, along with the rest of the EU, banking system collapses. Even bought and paid for politicians understand that.

What they are trying to figure out now is a way of stripping the Greek people of their assets without causing violent riots and blood in the streets.

Last Sunday's 500,000 strong demonstration in Athens and 14 straight days of protests gave them pause and something to think about.

Look for them now to make some concessions, lower VAT, slow down firing civil servants, pay cuts and the like to make the "memorandum" acceptable to the Greek people. Getting the assets is still the primary goal, Greece will sooner rather than later default wether more austerity is enforced or not.

Will the Greek people fall for it? That's the 100 billion euro question.


taraxias's picture

I'm shocked, shocked I tell you.

Google translate:

The makers directed the following changes:

 According to reliable information "newscode" tax-free threshold of € 12,000 will not be reduced as announced at the beginning.

 Not going to get a new tax on heating oil, nor to make registration fee increase.

 It is not the objective to increase property values??.

 It will not increase the VAT to 23% in food.

 The issue of redundancy is postponed to a later date.

 You will not engage in extreme forms of privatization of some SOEs.

• We will try Mr. Papandreou last time to find a formula for consensuswith Mr. Samaras.

LookingWithAmazement's picture

The politicians wait until all the banksters have their bonds out of the PIIGS and then let Greece/Ireland/Portugal go bankrupt. Banksters saved, taxpayers screwed. Nothing new.

richard in norway's picture

on that note, where do i pick up my survivals kit. please please tell me again, i really want to be prepared

ebworthen's picture

You're in Norway?

You'll be fine.

Jerky, water, beans, rice, heat source, and a shortwave radio.

DollarMenu's picture

Another round of bio-engineered e-coli will be called for to try to bring Germany to the table with open wallets.

New American Revolution's picture

This is just like 1930 & '31 when the pound sterling phony gold standard hit the wall.    Then it was Austria going BK, and then the Reichsbank went and France had to follow.   While England assured everyone else to keep taking the Pound as gold it wasn't too long before Monte Norman had reniged on the whole deal and England abandoned their phony gold standard leaving America with the bag,.... just like today,... or more accurately, tomorrow as in very soon.

The result then was the winding down of world trade for quite a few reasons cummulating in the deterioration of the pound sterling phony gold standard which today, is the dollar.    This will eventually force America into a gold standard and its an odds on favorite that they'll try a phony gold standard but I don't think we'll let them.

You see, the New American Revolution is right around the corner and we're taking it all back.   America, our Freedom, and our Lives.

anony's picture

What revolution occurred in 1931?  Despite soup kitchens, bread lines, 30% unemployment?

This country has Doubled in size since then.  You really think you can get a million or more people to take up arms, sacrifice their lives for the notional value of liberty?


I don't.


jeff montanye's picture

no revolution occurred in 1931 perhaps in part because the changes wrought by fdr in 1932 and following were of sufficient breadth and depth to reduce the despair and anger below that point.  it is conceivable that in an inverted but strangely similar way ron paul could act the same way, reversing some of the most heinous aspects of the american empire.  that of course is the best case scenario.

ibjamming's picture

But we can't do what FDR did...we SHOULD have done that already with the QE money...public work creates good jobs and you actually end up with something in the end.  But now it's too late...we're already too deep in debt.  We already provide free housing, food, medical care, and money...what more can we give to people?  The problem we face now is the ENDING of all these freebies.

Let the inner city riot...let them rot...they're a big part of the problem.

ALL the states had the right to secede...Lincoln took that right away.

cranky-old-geezer's picture

You see, the New American Revolution is right around the corner and we're taking it all back.   America, our Freedom, and our Lives.

Not gonna happen.

Dream on fool.

Transformer's picture

It will indeed be interesting.  Almost 500 million guns in private hands in America.  We keep waiting for something to happen, like the recent TSA bill that got squashed in the Texas legislature.  Something like this needs to pass.  Jones went down there and protested, and he acts like it's a big victory that lots of people turned out, but there's still no bill in Texas to stop the TSA.   Rick Perry is on his way to Bilderberg, to get approved as the 2012 candidate, so nothing is really likely to happen in Texas.  Jones should have carried on and not let the ball get dropped.

The $64 question is what does it take for normal gun toting Americans to get pissed enough to shoot back?  I'm anti-violence myself, but, what does it take?  When I was in college, in the late 60's, a couple red neck deputies, in my southern state, set up a road block after a big holiday weekend and started pulling kids with long hair, on their way back to school, out of their cars.  The deputies gave them a buzz cut and sent them on their way.  A couple of the kids didn't like it, and went back home, got a shotgun, and came back and shot the deputies.  True story.

Now that would be analogous to what the TSA is doing today, but nobody does shit about it.

Let's kinda do a poll here of ZH folks.  Do you think Americans will ever fight back?  And if so, what provocation does it take?

escargot's picture

The sheeple won't do a friggin thing unless a) their TVs don't work, b) they go to the gas station and there's either no gas or extremely expensive gas, or c) they go to the supermarket and there's no food.  It'll probably take all three of these and perhaps more to occur simultaneously.  Most Americans are so dumbed down and preoccupied with trifle nonsense that even if they began marching in the streets all the gubmint would have to do would be to place a huge TV screen in front of the mob and flip on either Dancing With The Stars or a football game and everyone would lay down their arms at once.

JohnG's picture

Hunger.  Four years and counting I've beleived it.  That's what it will take to wake sheeple.

DosZap's picture


their is a simple way for the TSA crap to stop.

If 50% +of the states do what Texas did, TSA dissapears.Or, at least gets it's act together.

The devastation to the airlines,(lack of flights) would FORCE the .Gub, to change tactics.

Of course the ciizens would have to comply with state mandates.

IOW, take your shit(TSA) and shove it.

cranky-old-geezer's picture

Better way:  Vote with your dollars, stop flying.

Airlines have thin margins, especially with recently rising fuel costs.  If 30% of flyers stopped flying it would bankrupt them all, forcing a showdown between TSA goonism and the airline industry.

ebworthen's picture

What did it take for the U.S. civil war to start?

This time it will take the collapse of the food processing/delivery system, probably starting in the inner cities if/when entitlements and social programs are cut but extending to rural communities and people who are sick of getting raped by the oligarchy in a different way.  So many factors, but it doesn't take much to get a mob and anarchy rolling under different and seemingly unrelated banners.

anony's picture

Which states, lately, have seceded??

Until that happens, secession, by several states, you can forget about it.


blindfaith's picture

Texas is the only state that by declaration/agreement to join the union can also leave the union.

But what is THIS article?  Is this some 'click thru" ?  This is promotional for just another know-it-all....."


you NEED To download my FREE report devoted to showing in painstaking detail how to make SERIOUS money from a stock market collapse."


Excuse me! what?

DosZap's picture



Civil War ended that option for all states.

Texas CAN however divide itself into FIVE separate states.

Which,would serve little purpose, until all the Left Wingers moves here, and start screwing it up like they have in Colorado.

Urban Redneck's picture

4/5 succession- 4 new States 1 old state.  The 1/5 being a couple square blocks of Texarkana.  New states must be admitted to the Union.

theprofromdover's picture

Will Americans ever fight back?

Eventually, maybe in 20 years I fear.

As long as you have a one-party system, comprising law, banks, government and giant corporations -and worst of all an awe-struck, sycophantic media- only token dissent will be tolerated.

Do you see any sign of that changing?

If the dollar tanks, all that will mean is USA becomes insular again and ignores foreign imports. They'll keep printing the dollars, and raiding your pension.

They want all your money and all your sweat; they also want your envy. So don't be surprised when the media starts its 'you too can be a success in troubled times' blitz. It isn't a conspiracy theory (the 'they' is mostly us) they still want you to have hope.

Who is going to recover the offshore tax dollars? Who is going to reduce the defense spending? Who is going to tame the healthcare vampires? Who is going to clean out the courts of the wretched, grovelling officials?

You have a choice if you won't take it anymore. Teach the Army dissent, get fanatical religion, or withhold all your own taxes.

With Option No. 3, most of us can still lounge in our LazyBoy-3000's and have an impact.




Dr. Engali's picture

I for one don't think they will ever fight back until they are hungry. But before that time comes the "rugged American" will have given up their guns all for "safeties sake". I watch and am totally amazed at what Americans put up with all in order to be protected (ahem ... Controlled) from those nasty terrorist. No, the people won't rise up because they have become soft and scared. They will continue to take what is being dished to them and more.