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Bailout Rebellion Reawakens In Germany

testosteronepit's picture




 

Wolf Richter   www.testosteronepit.com

Josef Ackermann, Deutsche Bank’s CEO until a couple of weeks ago, who knows a thing or two about skeletons hidden in the bank’s vast closets, said at the Atlantic Council that he is “grateful the US is pushing Europe to act faster.” Just like his US counterparts on Wall Street in 2008, he wanted massive taxpayer-funded bailouts of the banks and exhorted the Eurozone to complete the latest bailout fund, the ESM, quickly. Together with the existing EFSF, they would create a €1 trillion firewall—enough to bail out Spain and its banks, but not enough to do the same for Italy.

He pushed Chancellor Angela Merkel to permit banks to draw on these funds directly—though these funds were designed to bail out countries, not corporations. And the German parliament approved them on that basis. He had “no doubt” that the German people would support rescuing the Eurozone, he said, though he left unclear why he exempted, for example, the French or his own compatriots, the Swiss, who’re also suffering from the Eurozone’s woes [Read... Bracing for a Euro Crash: The Swiss Caught in a Vice]. And he was confident that “everything would be done to bail out the Eurozone.”

But the German people weren’t so sure about that—and started to demonstrate. So they were in the streets in Munich to express their opposition to what was being shoved down their throats. The demonstration was organized by Freie Wähler (Free Voters), an organization of voter groups with 19% of the seats in the Bavarian parliament. In addressing the crowd (video), their leader Hubert Aiwanger called for a “Europe of democracy” that would be “open to the world.” He was worried about the “future of our children,” a future where a “child, just after being born, is already liable for the bailout umbrella that great-aunt Merkel had signed.” Rousing applause.

“It’s on us to take our fate into our own hands so that we don’t learn by watching TV what was signed once again in Brussels,” he said. “These people believe they can turn this very big wheel, but they’re historically forgetful and don’t remember what they promised two or three years ago.”

Money that people put aside during a life of hard work would be “taken hostage by the policies of speculation,” he feared, and would “lose its value in a few years because now we calculate in trillions....” And he added, “we must create a future for our children and grandchildren where not every euro is already in hock.”

But President Obama, feeling Mitt Romney’s hot breath on his neck, didn’t care about German children. He cared about being reelected—and any effluent from the Eurozone quagmire oozing into the US economy over the next few months would impact his chances. So Friday, he exhorted Europeans to act, and as fast as possible. He had a whole laundry list of tasks for them. Most importantly: recapitalize the banks—that is, socialize their losses across borders. He sounded increasingly desperate. Earlier in the week, he’d had a private phone conversation with Merkel. Fruitless probably. But the one he’d had with British Prime Minister David Cameron led to a message targeted at Merkel and her government: come up with an “immediate plan” to solve the crisis and to reestablish the “confidence of the markets.”

And French President François Hollande was dealt a resounding defeat in Germany ... that went mostly unnoticed in Germany. But it was front and center in France. He and his country had been under the illusion that he could impose his campaign promises on Merkel’s government—after having antagonized them during the campaign by coddling up to the opposition SPD. So he pushed for Eurobonds and for more government deficit spending to create stimulus. Merkel vehemently brushed off his Eurobonds, though she left a door open for them way in the future, if the Eurozone ever became a political and fiscal union.

Then he tried to implement his campaign promise to renegotiate the fiscal union pact, a hastily drawn-up treaty to induce budgetary discipline into the 25 governments that signed it. Merkel’s grand oeuvre. Hollande wanted to include provisions for additional deficit spending, his “measures of growth,” and he’d block ratification if he had to. He even had the German opposition SPD and EU officials in his camp. But EU officials were just decoration. And Merkel made a side deal with the SPD; she’d support their pet project, a financial transaction tax, and they’d support the fiscal union pact. Hollande was left to twist in the wind.

Humiliation was the word used in the French media. Perhaps the French had thought that the election would change everything in Europe, but it changed nothing.

The German government hasn’t deviated from its principles yet, despite rumors to the contrary: cleanup of budget deficits and implementation of structural reforms in exchange for bailout billions. Growth would come through the private sector, increased competitiveness, and removal of barriers—not from government boondoggles. And her nod towards a political union appeased the federalists in Brussels, but the conditions she attached to it, including ceding sovereignty to Brussels, remain unpalatable everywhere (except in Brussels), thus eliminating any risk it would ever be accepted.

And in Greece, tourism, its second largest industry after the shipping industry, took another hit as tour-bus drivers went on strike; owners had demanded that they take a 50% pay cut on top of the 20% cut they already suffered! And Greece is the model for Spain and Italy. Read....  Everything is Getting Gummed up in Greece.

Here is an awesome and troubling video by a Greek photojournalist who captured the Greek revolt in 2011.... “Days of Decline.”

And a dark, thought-provoking video by the author of Currency Wars, James Rickards—particularly powerful in light of the euro crisis: Currency Wars – The Making of the next Global Crisis (video).

 

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Sun, 06/10/2012 - 13:14 | 2512288 newworldorder
newworldorder's picture

Check out Spiegel Online (International)  below.

http://www.spiegel.de/international/

German and European eyes are fixed on the Euro Football tournament till the end of June. Lots of things will be announced, but the Europeans are fixated on footbal and most are not paying attention. Given the American 4th of July holidays, nothing will happen (if then) till mid July.

Can kicking at its best. Whats not to like.

 

Sun, 06/10/2012 - 09:48 | 2511901 ejhickey
ejhickey's picture

the Germans will complain but in the end they will pay.

Sun, 06/10/2012 - 08:55 | 2511758 magpie
magpie's picture

It occured to me that Rajoy and Dr. Evil share a trait. Oh well, maybe the exchange rate is a bit off.

and to my favorite lurker: Sure looks like TPTB needs Obama no matter what the cost...fair play, sanity out of the window LOL And let me claim that yes, i did predict something like that to happen. And since you have taken to abusing the Good Book, i plead to you instead in Thor's name to stop thinking with your pussy once in a while.

And as an aside, yes i do enjoy reading those English papers, with all of the "Little Englanders" and Imperial Preference / Commonwealth types coming out of the woodwork these days.

 

Sat, 06/09/2012 - 23:04 | 2511492 etudiant
etudiant's picture

Germany has gone from 25% export dependency before the Soviet collapse to almost 50% today. Their prosperity is just as illusury as the Greek's was.

Deep down, I think the German politicians understand that they are in the same boat as the rest of Europe and that they have to make a go of it.

That does not prevent them from extracting their pound of flesh, but seen that it was Germany that spearheaded the Greek accession to the EU, one may indeed worry about their wisdom.

Sat, 06/09/2012 - 18:11 | 2511059 Silversinner
Silversinner's picture

My precious metal stack is always growing,

if not in price for sure in size!

10 full ouces dragon(silver)

10 1/2 ounces dragon(silver)

that's my way of showing

fuck you politicians and banksterscum,

get your dirty little fingers out of my pocket.

I do not care much wich country they come from,

I trust none.

Just wish I could buy some extra gold but it

has gotten quite expensive,glad I bought

years ago when it was affordable.

So glad I put all of my savings in gold and silver,

100%all in.No more promises to pay for me sir

I like to be paid in full,gold and silver please.

 

 

Sun, 06/10/2012 - 09:59 | 2511905 lakecity55
lakecity55's picture

Right on. Up arrow for you!

BIG coin show here in 2 weeks; I just hope it's still a buyer's market. Finding PMs I want has been difficult lately.

I have been glued to the KITCO charts every day. It sure has been volatile/manipulated (more than usual) lately.

Both shipments from my preferred dealers were slow.

It may be getting to the point where culls are the only thing left in the shop.

I have been collecting for over 40 years, so a lot of my attention is on the numismatic side vs. bullion.

At any rate, I'll have stuff to trade at the show.

As always,

"Keep Stackin!"

--LC55

Sun, 06/10/2012 - 04:24 | 2511734 uhb
uhb's picture

i dont think it is wise going all-in as long as you are not 100% sure you got the best hand..... maybe you should spread your money a little. i have my PM stack, too, but 100% ? i dont know...

Sun, 06/10/2012 - 10:12 | 2511915 lakecity55
lakecity55's picture

On Friday, I did go more paper into my preferred mining company.

As a retail guy, I'm only into miners and equities like RGR and SWHC.

Ammo and ordinance are good, too.

So far, my personal account is betterthan my 401(K), but a broker buddy says that is not hard to do, so I don't think I'm all that smart, just trying to learn here and use some common sense.

But, hey, if anyone has some Berkshire Hathaway they don't want, send it to me!

ZH is the best!

Sat, 06/09/2012 - 18:06 | 2511051 Sandmann
Sandmann's picture

How long will Europeans be as patient and docile as Americans ? America voters are so relaxed about owning 26% General Motors and funding Banker Bonuses that seeing Goldman Sachs favourite candidate Obama in 2008 being replaced by Mitt Romney as Goldman candidate in 2012 and Harvard Law being replaced by Harvard Business School does not upset the ever so tranquillised Americans. George Bush was Harvard Businsess and now Mitt Romnety...pretty soon Americans will e offering uyp their children for sacrifice to the Money God..........no wonder they are upset that Europeans have not bowed down and prayed to Goldman and JP Morgan.

Whichever President the Americans elect in nOvember will take his Oath to Serve The Bankers of The World

Sun, 06/10/2012 - 04:28 | 2511736 uhb
uhb's picture

i am sure that in 1983, Ronald Reagan was not a bankster puppet. He had a belief and he pushed it. it is so sick to see what the us political system - one of the first democracies - has become, i could vomit all over the POTUS

Sun, 06/10/2012 - 01:12 | 2511613 Questan1913
Questan1913's picture

Sandmann

Shhhhhhh,,,,,don't disturb them, they're watching American Idull. 

 'It doesn't matter that Goldman Sachs et al groomed, polished and then elected Barry Soetro in 2008, nor is it material that that same cabal of top ten political donors have now abandoned their current but stumbling puppet and are now the top 10 financiers of their other "insurance" candidate, the only other candidate in the race and new puppet wannabe.  Yes Harvard is the breeding ground for these scum, but hey, we're way too busy being entertained to notice and we  don't want to hear painful truths anyway. So scram bub.   As far as offering up our children, well yes that is true, but look how many of our children were saved on the altar of choice and will never suffer at all at the hands of the so called money gods.  And look,  we know that those Europeans are selfish; we have been hearing it over and over on TV, the magical fount that keeps us informed and involved Americans,  Those are legitamate debts originally proffered by altruistic European and American bankers to help  average people like us make ends meet.'

sarc/off

Sat, 06/09/2012 - 18:00 | 2511043 dcb
dcb's picture

Cultural hegemony is the philosophic and sociological theory, by the Marxist philosopher Antonio Gramsci, which proposes that a culturally diverse society can be dominated (ruled) by one social class, whose dominance is achieved by manipulating the societal culture (beliefs, explanations, perceptions, values, mores) so that its ruling-class worldview (Weltanschauung) is imposed as the societal norm, which every social class then perceives as a universally valid ideology that justifies the social, political, and economic status quo — as natural, inevitable, and beneficial for everyone, rather than as artificial social constructs that benefit only the ruling class.[1][2]

http://en.wikipedia.org/wiki/Cultural_hegemony

Sat, 06/09/2012 - 16:46 | 2510903 AgentOfNaturalS...
AgentOfNaturalSelection's picture

What goes up must come down.

 

When you have people writing laws that generate wealth for themselves, wealth will accumulate. It has to come from somewhere, and it comes from the bottom up to the top. It becomes unwieldy and cumbersome. Laws are too complex, financial "innovations" too complex, monetary entanglements too complex....entropic drag will yank it all down.

An economy is the result of net action of people, until you bring complex financial instruments into play. That only works in very esoteric ecosystems. Think that you could fractionally add animals to an equilibrium and throw it out of balance? What does 1/99th a deer look like to an insured-derivative wolf? Exactly.

Nature maintains equilibrium and cannot be tricked. Nature will always win.

Sun, 06/10/2012 - 06:15 | 2511773 AnAnonymous
AnAnonymous's picture

Nature maintains equilibrium and cannot be tricked. Nature will always win.
_____________________________

Nature is not at work: US citizenism is.

Sun, 06/10/2012 - 09:19 | 2511882 El
El's picture

Indeed. There is a reason we are referred to as sheep rather than as wolves.

Sat, 06/09/2012 - 15:41 | 2510779 Marco
Marco's picture

50% pay cut on top of a 20% pay cut ... and it's not enough for the Germans. How many here are really independent enough of debt to not have to default with that kind of drop of income? And how many of your friends and families? This is the reality of austerity without devaluation, non rural societies can't survive this ... fascism is the natural outcome.

I feel this is something the Austrians often forget ... whether economies can rebound quickly after sharp deflationary spirals is irrelevant if they have a significant chance of becoming fascist in between.

Greece needs austerity, but it also needs a way to restructure private debt along the way without causing huge disruption ...

Sun, 06/10/2012 - 09:33 | 2511889 ArkansasAngie
ArkansasAngie's picture

How many here are really independent enough of debt to not have to default with that kind of drop of income?

I am. 

And no ... you can't have my dad gum money to pay for your new car every two years.

Sun, 06/10/2012 - 11:41 | 2512083 Marco
Marco's picture

And how many of your friends and family?

Sat, 06/09/2012 - 19:26 | 2511149 Amagnonx
Amagnonx's picture

What has it got to do with the Germans?  This is being forced through by international bankers.  Greece certainly does not need austerity - no-one should have austerity - they should all default.  The money they owe was created out of thin air - nobody saved it, nobody worked for it - its a fiction - money run off on a photocopy machine.

 

What the greeks need is default, and lots of it.  The people should also keep their homes, as the banks only created money without any work to give in exchange - its fraud - global fraud - and people should just say 'Im not having it'.

 

What they also need is no income tax, no paying interest on fictional debt - and a revolution to over throw the scum who trapped them in the sick system.  Then they need to tell the world how its done.

Sat, 06/09/2012 - 21:24 | 2511346 Marco
Marco's picture

To go from trade deficit to trade balance always means a drop in consumption, there is no avoiding that ...

Sat, 06/09/2012 - 18:08 | 2511056 Sandmann
Sandmann's picture

fascism is the natural outcome.

 

So, what is so bad about Fascism ? It is simply a variant on current politics......has it been so wonderful the past 25 years ?

Sat, 06/09/2012 - 17:15 | 2510968 CrashisOptimistic
CrashisOptimistic's picture

"Greece needs austerity, but it also needs a way to restructure private debt along the way without causing huge disruption ..."

What world are you living in?  Where have you been since March?

There IS no remaining Greek private debt.  That is what the PSI was.  They already defaulted on it.

The only remaining debt is to the IMF, ECB and EU.

Sat, 06/09/2012 - 18:02 | 2511046 Marco
Marco's picture

Not government debt held by private owners, private debt ... aka mortgages.

Sat, 06/09/2012 - 16:05 | 2510826 Lucius Corneliu...
Lucius Cornelius Sulla's picture

Greece needs drachmas.  Stick it to the global banking cartel like Iceland did.  Bondholders need to be left holding the bag.  They assumed the risk.  Leave the public out of it!

Sat, 06/09/2012 - 18:56 | 2511119 hardcleareye
hardcleareye's picture

How about we leave the public out of it in the US also....  the bondholders should be left holding the bag globally, not the tax payers!

Sat, 06/09/2012 - 15:22 | 2510735 slewie the pi-rat
slewie the pi-rat's picture

where are the pirate wenches?

the topless pirate wenches who alone can win the day forGerman Liberty?

arrrghhhrrr?

 

 

 

Sun, 06/10/2012 - 11:30 | 2512056 CynicLaureate
CynicLaureate's picture

Found one for you: http://tinyurl.com/7z8kd2a

Not safe for work unless your work is awesome.

Sat, 06/09/2012 - 15:40 | 2510777 ebworthen
ebworthen's picture

I raise a mug of grog in honor of your request.

More topless pirate wenches!

Har!

Sat, 06/09/2012 - 19:15 | 2511139 hardcleareye
hardcleareye's picture

Hmmm seen a few "pirate wenches" in my day...  been there done that...  (I believe my bra is still stapled to the ceiling of a little bar called Foxy's at Jost Van Dyke in the BVI's from a New Years Eve from many years ago...)

However the thought of a "topless" Merkel or Hillary Clinton (true pirates, if I ever saw) is one I  do not relish........ I can imagine  it would be like envisioning G Soros in a speedo...  the stuff of bad weird dreams.......

Be very careful of what you wish for....  lol......

Sat, 06/09/2012 - 14:51 | 2510643 Pure Evil
Pure Evil's picture

 

 

"But President Obama, feeling Mitt Romney’s hot breath on his neck, didn’t care about German children. He cared about being reelected—and any effluent from the Eurozone quagmire oozing into the US economy over the next few months would impact his chances. So Friday, he exhorted Europeans to act, and as fast as possible."

 

So doofus still seems to think he was voted President of the World?

Sat, 06/09/2012 - 17:59 | 2511040 ThisIsBob
ThisIsBob's picture

Oh, give the poor guy a break. He doesn't have an effin clue - just reading the script.

Sat, 06/09/2012 - 14:31 | 2510573 John_Coltrane
John_Coltrane's picture

The two central issues of our time:

1)Too much debt, too little savings

2)Too little personal responsibility (in other words-don't worry its other people's money) which has given rise to the modern welfare/nanny state.

Until the majority in the EU (time frame=when pigs fly) has an attitude adjustment all hard working, productive people (like the Germans and the Swiss) are screwed.  But there's a difference, if the German bank capital is wiped out, they can rebuild it via savings and productivity, scientific and industrial capability etc. and have proved capable of this in the past.  The PIIGS, not so much.  The old ant and the grasshopper story writ large.

Sat, 06/09/2012 - 17:16 | 2510971 CrashisOptimistic
CrashisOptimistic's picture

There is only one.

Too little oil is coming out of the ground.  This is forever.

Sat, 06/09/2012 - 13:51 | 2510465 pashley1411
pashley1411's picture

Course O'bummer wants to have a job in 2013, and not join the ranks of unemployed.   He probably knows as well as anyone what the real unemployment rate is.   Merkel probably needs dramamine before taking his call.

Sat, 06/09/2012 - 19:36 | 2511160 Freddie
Freddie's picture

Hilarious that an idiot junked you.  ZH is still filled with liberal Democrat retards.

Sun, 06/10/2012 - 12:45 | 2512224 dogbreath
dogbreath's picture

there are red smarties in every box

Sat, 06/09/2012 - 14:56 | 2510646 Pure Evil
Pure Evil's picture

"Merkel probably needs dramamine before taking his call."

And an box of airline vomit bags afterwards.

Sat, 06/09/2012 - 13:37 | 2510412 Gringo Viejo
Gringo Viejo's picture

The French: Humiliation is their middle name.

Sat, 06/09/2012 - 13:57 | 2510485 falak pema
falak pema's picture

I thought it was chardonnay

Sat, 06/09/2012 - 13:37 | 2510411 W10321303
W10321303's picture

 

The Invisible Guiding Hand of the FREE Market, Please Mr. Easter Bunny save me from the BAD BAD regulators.


Trustee Sees Customers Trampled at MF Global


By


Published: June 8, 2012

Mr. Giddens cautioned that his report was by no means complete, and that he wasn’t in a position to draw conclusions about potential civil and criminal liability. But it seems clear that serious violations of law were committed, and the report will surely add to pressure on the Securities and Exchange Commission, the commodities commission and the Justice Department — the agencies investigating MF Global for potential enforcement and criminal proceedings.

That MF Global was an accident waiting to happen under the leadership of Jon Corzine, a former Goldman Sachs chief executive, United States senator and New Jersey governor, is evident from the structure of the firm. Merely describing lines of authority requires a chart that resembles a convoluted family tree.

Responsibility for accessing funds in segregated customer accounts and transferring them elsewhere rested with one employee, Edith O’Brien, an assistant treasurer in Chicago who reported to the firm’s treasurer in New York, who in turn reported to the chief financial officer, Henri Steenkamp. The treasury division’s main responsibility was meeting Mr. Corzine’s increasingly frantic demands for liquidity to support his high-risk and ultimately disastrous bet on the debt of shaky European nations.

Regulatory compliance — making sure that customer funds were safe — was the responsibility of the financial regulatory group, which reported to Christine Serwinski, the North American chief financial officer, who also reported to Mr. Steenkamp as well as an executive based in London. Ms. Serwinski was responsible for daily reports on segregated customer funds to the commodities commission and weekly reports to the S.E.C. Mr. Steenkamp, in turn, reported to Mr. Corzine.

It’s apparent from Mr. Giddens’s report that as MF Global’s financial woes deepened last summer and fall, protecting customer assets was among the least of Mr. Corzine’s priorities. Mr. Corzine testified to Congress that he never knowingly asked anyone to break the law, and nothing in the report explicitly contradicts that. At the same time, he made demands for cash that appear to have left employees no alternative but to divert customer assets.

None of this would have been possible if regulators actually required firms like MF Global to keep customer funds safe. Instead, the commodities commission allows firms to use an alternative method for calculating customer funds in foreign accounts that vastly understates what belongs to customers. Cash, for example, doesn’t count. The difference between what MF Global actually owed its customers and what it needed to segregate under the alternative method was calculated at the firm on a daily basis and often exceeded $1 billion. Although MF Global reported only the alternative calculation to regulators, it prepared its own segregation report every day that showed the true extent of its liabilities.

Sat, 06/09/2012 - 13:04 | 2510329 q99x2
q99x2's picture

Germany creates an army to blast the banksters. Barry Soetoro gives them the weapons to start the army in exchange for his hope of re-election. But then they say nein and go out and drink beer and eat bratwurst to talk over weapons designs for targeting Paraguay and other NWO elitist hideouts. They have lots of practical experience to draw on. Third times a charm.

Sat, 06/09/2012 - 12:58 | 2510310 mjk0259
mjk0259's picture

Come up with a plan? Don't they do that about every 10 days?

Sat, 06/09/2012 - 14:59 | 2510667 Pure Evil
Pure Evil's picture

Yep, and on the same frequency that they change their underware.

Sat, 06/09/2012 - 12:57 | 2510309 anonnn
anonnn's picture

" including ceding sovereignty to Brussels, remain unpalatable everywhere (except in Brussels),".. [4th paragraph from end]

...except in Brussels, Washington,DC, London, etc, where One World Government psychopaths salivate and drool on the delicious dream of having a Special Few rule planet Earth.

How better to accomplish this than to have a small number of Control Points [e.g. Brussels], each having only a few humans in-charge, who in turn can easily be either corrupted or disappeared/replaced.

A work in progress.

Sat, 06/09/2012 - 15:01 | 2510676 Things that go bump
Things that go bump's picture

I think this is inevitable unless we destroy the technology that makes it possible.  

Sat, 06/09/2012 - 12:53 | 2510303 The Age of Usef...
The Age of Useful Idiots's picture

 

Bollocks. A Bloomberg report which looked at Bank of International Settlements data revealed that German banks had lent more than 700 BILLION to the European periphery which they then offloaded on EUROPEAN TAXPAYERS within 2 years. That's why Merkozy insisted on kicking the can down the road and refusing to accept a haircut to Greece in the very beginning of the crisis. It warrants a long repost because the truth is that German and French banks gamed the system to their advantage and now European taxpayers everywhere are left holding the bag, all the while the politicians invented narratives that keep looking for scapegoats elsewhere, since we all know that banks do god's work and are not responsible for their investments, so better come up with something, anything, to conceal the fact that they needed a STEALTH bailout at taxpayers' expense everywhere. I'm sorry for all those who either buy the self-serving morality tale of the 'profligate' periphery or misinform deliberately, but here is the truth, and how it happened in all detail. Maybe Zero Hedge will run this story, because this is mindboggling and a true outrage.

**********

 

Hey, Germany: You Got a Bailout, Too

 

"In the millions of words written about Europe’s debt crisis, Germany is typically cast as the responsible adult and Greece as the profligate child. Prudent Germany, the narrative goes, is loath to bail out freeloading Greece, which borrowed more than it could afford and now must suffer the consequences.

Would it surprise you to know that Europe’s taxpayers have provided as much financial support to Germany as they have to Greece? An examination of European money flows and central-bank balance sheets suggests this is so.

Let’s begin with the observation that irresponsible borrowers can’t exist without irresponsible lenders. Germany’s banks were Greece’s enablers. Thanks partly to lax regulation, German banks built up precarious exposures to Europe’s peripheral countries in the years before the crisis. By December 2009, according to the Bank for International Settlements, German banks had amassed claims of $704 billion on Greece, Ireland, Italy, Portugal and Spain, much more than the German banks’ aggregate capital. In other words, they lent more than they could afford.

When the European Union and the European Central Bank stepped in to bail out the struggling countries, they made it possible for German banks to bring their money home. As a result, they bailed out Germany’s banks as well as the taxpayers who might otherwise have had to support those banks if the loans weren’t repaid. Unlike much of the aid provided to Greece, the support to Germany’s banks happened automatically, as a function of the currency union’s structure.

How It Worked

Here’s how it worked. When German banks pulled money out of Greece, the other national central banks of the euro area collectively offset the outflow with loans to the Greek central bank. These loans appeared on the balance sheet of the Bundesbank, Germany’s central bank, as claims on the rest of the euro area. This mechanism, designed to keep the currency area’s accounts in balance, made it easier for the German banks to exit their positions.

Now for the tricky part: As opposed to the claims of the private banks, the Bundesbank’s claims were only partly the responsibility of Germany. If Greece reneged on its debt, the losses would be shared among all euro-area countries, according to their shareholding in the ECB. Germany’s stake would be about 28 percent. In short, over the last couple of years, much of the risk sitting on German banks’ balance sheets shifted to the taxpayers of the entire currency union.

It’s hard to quantify exactly how much Germany has benefited from its European bailout. One indicator would be the amount German banks pulled out of other euro-area countries since the crisis began. According to the BIS, they yanked $353 billion from December 2009 to the end of 2011 (the latest data available). Another would be the increase in the Bundesbank’s claims on other euro-area central banks. That amounts to 466 billion euros ($590 billion) from December 2009 through April 2012, though it would also reflect non-German depositors moving their money into German banks.

By comparison, Greece has received a total of about 340 billion euros in official loans to recapitalize its banks, replace fleeing capital, restructure its debts and help its government make ends meet. Only about 15 billion euros of that has come directly from Germany. The rest is all from the ECB, the EU and the International Monetary Fund."

Better Prepared

Germany’s changing financial exposure has major implications for its role as a leader of Europe’s response to the crisis. Before Germany’s banks pulled back their funds, they stood to lose a ton of money if Greece left the euro. Now any losses will be shared with the taxpayers of the entire euro area -- particularly France, whose banks still have a lot of outstanding loans to Greece. Perhaps this is what some German officials mean when they say that the euro area is better prepared for a Greek exit.

Ultimately, though, the cost of letting Greece go would come home to Germany. If bank runs and market turmoil forced Portugal, Spain, Italy and others out of the euro area as well, the losses could wipe out much of the capital of German banks. Not to mention the longer-term damage the euro breakup would do to the exports that drive Germany’s economy, and the potential demise of a European project designed to prevent a repeat of the horrors of two world wars.

To prevent such an outcome, with or without Greece, Germany will have to do everything it has so far refused, and more. This would include allowing the ECB to stand behind the debt of sovereigns. The euro area also needs a mechanism that would transfer money to economically troubled countries just as automatically as the region’s payment system bailed out Germany -- an element economists have long said is crucial to making the euro area a workable currency union. As we have advocated, a joint unemployment insurance fund could be a first step toward such a fiscal union.

As German Chancellor Angela Merkel considers the next step in the euro crisis -- one that could help the euro area return to growth or, alternatively, risk the survival of the entire currency union -- she should keep in mind that her country is indebted to the euro system as much as Greece is.

http://www.bloomberg.com/news/2012-05-23/merkel-should-know-her-country-...

 *********

 Stop buying all the propaganda and face reality: The taxpayers everywhere are getting screwed to bailout the finance sector, first of all Germany's banks, and unless this kind of self-serving bs that guys like the author serve is not juxtaposed mercilessly to reality, it won't stop. Merkel is not looking after her citizens here and their children. She is looking after Frankfurt's banking interests.

Sat, 06/09/2012 - 14:42 | 2510614 walküre
walküre's picture

Bottom line.

Private banks are the problem.

Whatever it takes to get rid of the private banking cabal. Preferably without the spilling of any blood.

Sun, 06/10/2012 - 08:37 | 2511855 marathonman
marathonman's picture

Privately owned central banks are the problem.

Sun, 06/10/2012 - 08:50 | 2511865 Karl von Bahnhof
Karl von Bahnhof's picture

Private banks suported by private banks owned states, financed by sheeplish taxpyers of last resort is the problem.

Mon, 06/11/2012 - 08:00 | 2513868 Zero Govt
Zero Govt's picture

the monopoly on money is the problem rooted and grown in the monopoly on society: Govt

Stop Paying Your Taxes (ie. kill Govt) and the problems all resolve themselves as the free market rushes back in and purifies society with the cancer (Govt) gone

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