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Bailout Rebellion Reawakens In Germany
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.
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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Nationalize cartel banks.
Correction: state-supported banks are the problem, not private banks. When private banks go bankrupt, they go bankrupt - their problem. When state-supported banks go bankrupt, they don't, because the state bails them out - our problem. And of course there's also the small matter that free banking (i.e. banking sans state-support) could never create these massive credit expansions (booms) and contractions (busts) that are the source of our banking problems in the first place.
The enemy is not banking per se, not even fractional reserve banking, but central banking and all the other various privilages granted to the banks by the state, of which bailouts are only the most visible example.
OK, so our point would seem to be that you can't bail out insolvent countries without bailing out the irresponsible lenders who are owed money, and many of those are banks. So what? How does that change the essential equation unless you oppose bailing out countries that have borrowed too much, in which case many on Zero Hedge would be with you. Germany opposses further bail outs. So by the same calculus they oppose further bank bail outs. Good for them, you should applaud that move since you are opposed to bank bailouts. Im just not sure i get your poimt since at the end of the day you agree with the author, but for different reasons.
Those different reasons make a huge difference though. The whole dominant narrative is upside down. Because they oppose bailouts only once THEIR banks and nation has been bailed out and everybody else is left holding the bag. Now the debtor nations have to be bailed out too, with haircuts and all, everyone accepting their share of responsibility. That's the one scenario.
If not, then the debtor nations have the right to stick it to Germany and leave the Eurozone while also wiping out debt. Take your pick. In the second scenario, see how fast Germany with the DM is going to be Europe's 'sick man' again within a decade.
So this is not a morality tale for little children where the 'irresponsible' periphery is 'blackmailing' the 'responsible' north, as official (classic creditor) wisdom tries to portray it and most Zone Hedge readers think about this whole saga. Both parties were irresponsible, both parties will have to pay the consequences. If Germany's financial interests think they can get away it, with everybody else left holding the bag, they are in for a very hard awakening. Spain and Italy are not small countries like Greece and Portugal, taking diktats and sacrificing their economies for German and French banks running amok for a decade.
Me, I prefer the dissolution of the Eurozone, the second scenario. Where the losses for Germany will incidentally also be magnitudes higher. At least then we might get a reform of the financial sector, since taxpayers everywhere will understand what really happened and will demand accountability. But that's a whole other discussion.
your first fallicy is equateing banks and germany or germans as the same thing. the benefit for these banks to be in germany is access to huge amounts of capital from the productive bussinesses and workers and protection from relatively prudent politicians and their political structure. This capital is true capital as it is real savings on deposit. This is where the scummy banks come in and leverage this capital off to anyone who can sign the line. Bankers are above the law and enjoy a status that is almost extraterritorial in that they aren't citizens of any country. For you to imply that these banks enjoy the same national identity as the german nation and its people is bullshit.
useful idiots indeed.
Read my final sentence again:
"Merkel is not looking after her citizens here and their children. She is looking after Frankfurt's banking interests."
This doen't change the fact that Merkel represents Germany in the world since she is the head of the elected German government. Get it now?
politicians are doing the bidding of their banksters is news?
isn't every politician in every Euro nation doing precisely that?
that's what the fuss/mess is all about. The biggest conflict of interest in every economy is the politicians need the bankers to issue their debt so they can keep on spending.
And the beginning of the End-Game is always when you've out-spent your national banks you start raising more debt from foreign banks (see Greece, Ireland, Spain et al)
that's where we are, cross-border contagion, States and banksters all in bed together with the orgy over, recriminations about to begin, every man and woman now looking out for themselves
The gravitational pull of a black hole makes no distinction between electrons, protons, neutrons or even photons. Once they cross the event horizon, they ain't coming back out!
The German people must feel like the defenders of the Alamo, with the whole world banging at their door, demanding surrender of their earned-by-working wealth. And their Davey Crocket, Angela, is just a politician, who gets regular phone calls from Santa Ana and his allies, offering enticing, easy-way-out deals.
Just think during the fall of the Roman Empire, the Germanic tribes banged on the doors of existing European Roman states, Gaul, Italy, Greece, and stole as much wealth as they could carry off.
I guess the chickens, so to say, are coming home to roost.
"with the whole world banging at their door, demanding surrender of their earned-by-working wealth"
(Not to say that the Romans earned their wealth honestly, after all Empires are about war and plunder.)
Yep, Carl. You nailed it. Got two down arrows from Mexicans "remembering" the Alamo.
Germans and Texans have lots in common it seems.
Germans and Texans have lots in common it seems.
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They steal a lot?
It's great to party on someone else's dime.
So..., things are pretty much normal in Europe, is what you're saying.
Bye Bye to the Eurozone Lie ( sang to American Pie )
A long long time ago
I can still remember how
The Euro used to make me smile
And I knew if I had a chance
That I could collect alot of cash
And maybe I would be happy for a while
But then I had to buy some silver
With every dollar I’d deliver
Bad news on the BBC TV Show
I could not take one more blow
I can’t remember if I cried
When I read about our financial suicide
But something touched me deep inside
The day the Euro died
So
(Chorus)
Bye, bye the Eurozone lie
Drove my fiat to the market but the market was dry
Them good old boys were trading hard on the buy
Merkle Singin’ this’ll be the day that you try
But This’ll be the day that it dies
Did you write the book of funds
And do you have faith in the IMF above?
If Merkle tells you to?
Now do you believe in precious metals so?
Can gold and silver save your soul?
And can you teach me how to spend real slow?
Well I know your in love with them
Cause I saw you hoarding PM
You etc. etc
This would go to number 1.
GTFO Simon Cowell.
Nice!