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The European Political Games Have Hit the Point of No Return

Phoenix Capital Research's picture




 

 

European politics have hit the point of no return.

 

As I’ve noted in previous articles, politics, not economics, rule Europe. What I mean by this is that most major decisions in Europe are determined by political agendas that ignore economic and financial realities.

 

This is at the core of the “welfare state” mentality that permeates Europe as a whole. The EU in general is comprised of an aging population that is more concerned about receiving the pensions/ health benefits/ social payouts that were promised to them by the system than anything else.

 

As a result of this, EU voters, who determine EU elections, don’t take action until what has promised to them comes under threat.

 

For this reason, EU political leaders will maintain their agendas regardless of whether said agendas go against financial or economic realities (or common sense for that matter) until these agendas begin to have real negative consequences for their political careers.

 

A perfect example of this paradigm in action is German Chancellor Angela Merkel who was relatively “pro-bailout” until German voters began to thrash her political party in Germany’s state elections (March 2011). She then altered her strategy to one of offering to provide bailout funds to Greece and others but only if these EU members met fiscal demands that were so onerous that the likelihood of them accepting the deal was little to none.

 

As a result of this decision to start playing “hardball,” Merkel’s political approval ratings shot to their highest levels since her 2009 re-election. At the same time, she was able to maintain her agenda of extending Germany’s control over Europe from a fiscal perspective (another plus in the eyes of German voters) without abandoning Germany’s allegiance to the Euro which would only turn the rest of the EU against Germany.

 

Again, politics, not economics, determine policy in the EU.

 

With that in mind, Nicolas Sarkozy is about to be defeated by a hard-core socialist François Hollande.

 

A few facts about Hollande:

 

  1. He just proposed raising tax rates on high-income earners from 41% to 75%.
  2. He wants to lower the retirement age to 60.
  3. He completely goes against the recent new EU fiscal requirements Merkel just convinced 17 EU members to agree to and has promised to try and renegotiate them to be looser.

 

Put another way, Germany’s campaign for austerity in the EU is about to lose its biggest ally. How exactly this will play out is unclear, but it will not be conducive to the Euro lasting in its current form much longer: aside from the fact that the EU banking system is on the verge of collapse and Spain (a country too large to bailout) has now stepped to the center stage of the EU crisis, Germany is finding itself increasingly alone in its moves to rein in the ECB’s monetary profligacy.

 

As you all know, I believe that if push comes to shove, Germany will leave the Euro rather than face inflation. On that note, inflation is rearing its head in Germany, and both front-runners in the French election are now firmly in the “inflate or die” monetary camp. This also does not bode well for the EU.

 

Make no mistake, the EU is in a collapse already. Remember, all collapses follow the same pattern: 

1) the initial drop
2) the re-test/ attempt to reclaim upwards momentum
3) the roll-over/ REAL fireworks

The most money is made during #3. Right now we've finished #1 and are now ending #2.  When #3 hits (likely after the French elections), is when the REAL Fireworks will begin (assuming Spain’s collapse allows things to hold up that long).

 

So if you’re not already taking steps to prepare for the coming collapse, you need to do so now. I recently published a report showing investors how to prepare for this. It’s called How to Play the Collapse of the European Banking System and it explains exactly how the coming Crisis will unfold as well as which investment (both direct and backdoor) you can make to profit from it.

 

This report is 100% FREE. You can pick up a copy today at: http://www.gainspainscapital.com

 

Good Investing!

 

Graham Summers

 

PS. We also feature numerous other reports ALL devoted to helping you protect yourself, your portfolio, and your loved ones from the Second Round of the Great Crisis. Whether it’s a US Debt Default, runaway inflation, or even food shortages and bank holidays, our reports cover how to get through these situations safely and profitably.

 

And ALL of this is available for FREE under the OUR FREE REPORTS tab at: http://www.gainspainscapital.com

 

 

 

 

 

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Sat, 04/21/2012 - 17:26 | 2364035 Zero Govt
Zero Govt's picture

Haven't we been here before, twice this week already?

..what is it, 3rd time lucky???

this is like King World News, the same apocolyptic script read over and over and over again with a "but i can save you.. and make you rich" punchline

 

Sat, 04/21/2012 - 14:46 | 2363850 QuietCorday
QuietCorday's picture

I think there are other forces at play that should not be discounted.

I travel a lot around Europe and I am hideously nosey. :oD One thing I found a lot about five years ago (before the crisis became obvious) was the sheer number of Italian, Greek or Spanish parents whose twenty/thirty something children were living, working or studying in Britain or Germany.

When you ask more, you get the same responses "there is nothing for them in Italy/Greece/Spain." When you investigate further, the major problem is that these countries are sewn up by huge amounts of regulatory capture that prevents young entrepreneurship, and are priced beyond any kind of low rent-high art/high risk venture. For example, you can't start an alternate media site in Italy because all journalists have to be state-licensed, and there are rules about how many junior reporters you can have per senior reporter per editor etc. 

These young people that have been priced, regulated and taxed out of their home countries are the next major adult voting block in Europe; the only problem being that living in another EU state means they do not vote in their own country's general elections. But from what I can see ... there is a huge mass of nomadic European people between 25 and 45 who, at some point, will want to make their voices heard. Put it this way, I even know Swedes who will not live in Sweden because it is so repressive.

Fundamentally, "welfare statism" in Europe does not have total and consistent support across all socio-economic groups and age categories. What we have in Europe is a bunch of social democrats mostly over 40, usually over 50, whose generational ideology is the welfare state -- mostly because it is only they that really benefitted from it in their lives and it helps them gains the votes from the welfare-addicted class. But outside of that, particularly in Britain, it is becoming very obvious that if you are under 40 and you work, the "welfare state" just does not exist for you, but the state expects you to pay for it and will expect you to work to pay for it until you are 70.

I suspect we are going to see the destruction of the soixante-huit political, social and economic ideologies in the next decade, somewhat like the collapse of the old guard post-1919. The thinking in Europe is out-of-date, is ruining people's lives, and preventing people from using their talents, skills and abilities -- the welfare state system has become anti-human and anti-meritocratic in Europe.

To my mind, the state must contract and on a vast scale. Otherwise, the people of Europe are going to end up mere serfs for a political elite and their minions.

Sun, 04/22/2012 - 03:42 | 2364418 Ghordius
Ghordius's picture

+1 "there is a huge mass of nomadic European people between 25 and 45 who, at some point, will want to make their voices heard"

A new generation of new europeans, capable of bridging systems and customs and giving new breath to what is good about the european dream.

They are making their voices heard already - not much in English, though...

Sat, 04/21/2012 - 14:38 | 2363842 Joebloinvestor
Joebloinvestor's picture

The French will get the politician they deserve.

I wonder who they will blame for their misery next.

Sat, 04/21/2012 - 17:53 | 2364041 Zero Govt
Zero Govt's picture

who will the French blame?

in preferential order:

i. the Germans (uber-paranoid about their industrious neighbour)

ii. immigrents (every society needs its omega wolf)

iii. the Americans (always a 'winner' that one)

iv. the Brits (not being in the Euro or ECB)

v. capitalism and free markets/trade (it's not like yuu wanna compete)

Sat, 04/21/2012 - 14:30 | 2363828 Azannoth
Azannoth's picture

"He wants to lower the retirement age to 60." Hahahahahahahahahahahh GL with that!

Sat, 04/21/2012 - 14:23 | 2363816 W10321303
W10321303's picture

Equality, Fraternity, ....can we say financial transactions tax, boys and girls?.....'The Invisible Guiding Hand' Folks only believe in elections when it will produce a MORON like Bush or a Parasitic Anti-Capitalist like Romney

Sat, 04/21/2012 - 13:51 | 2363776 Sudden Debt
Sudden Debt's picture

I was reading this article while watching a episode of spartacus. It's kind of fitting :)
The debt slaves will rather take it from the haves than to lose it all.

Sat, 04/21/2012 - 13:49 | 2363764 Cast Iron Skillet
Cast Iron Skillet's picture

Just an anecdote - here in Germany, they just passed a law that will give stay-at-home mothers a handout. The logic is that working mothers are supported through state-funded child care centers, so stay-at-home mothers should get something, too.

I actually tried convincing wife to have another kid or two, so I could go on (paid) parental leave until I qualify for early retirement. She sort of just rolled her eyes ... probably she was thinking about our 4 adult children ... and, to be honest, I didn't really try too hard to convince her - I sort of enjoy having the kids finally out of the house.

Sat, 04/21/2012 - 13:33 | 2363748 lakecity55
lakecity55's picture

Ironic; The Frenchies may end up crashing the Euro with another "use other people's money" socialist.

Sat, 04/21/2012 - 14:54 | 2363860 verum quod lies
verum quod lies's picture

According to Intrade, the latest odds on Hollande to win the presidency are just north of 84%. The true irony isn’t the French voting to go more than all-in on the welfare/debt state (that’s just a reflex), no, the true irony is anyone thinking it will matter at this stage. After all, we all know the solution to too much Bordeaux is another bottle, and the French are no exception. I mean how can Barry Soetoro be the favorite (currently about 60%) when we all know where that ship sails to? In the end these things aren’t so ironic as inevitable.

 

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