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Collapse of the EU a “Realistic Scenario”

testosteronepit's picture




 

Wolf Richter   www.testosteronepit.com

“Over the past months, we experienced a worrisome trend towards re-nationalization and ‘summitization,’” said Martin Schulz, President of the European Parliament and member of the German opposition SPD, to a forum of the European Commission on Wednesday. His complaints went to the heart of democracy at the European level. Government leaders were becoming “more arrogant” and made decisions “behind closed doors, in violation of the community method.” They were attempting “to create a fiscal union outside the control of parliament, bypassing the EU Commission.” Calls for reintroduction of border controls within the Schengen area were “an extremely dangerous development” because “any attack on the freedom of movement is an attack on the foundation of the European Union.” And so, he said, the collapse of the EU was a “realistic scenario.”

Even at the highest levels, the can of worms has now been acknowledged as open—just as the rift that zigzags through the Eurozone has become deeper and wider: according to information the Süddeutsche Zeitung obtained, the ECB and a group of Eurozone countries are trying to make it possible for the permanent bailout fund, the ESM, to bail banks out directly. The countries remained unnamed but, given the nature of the topic, would have to include Spain.

Any such effort would violate the two fundamental principles of the ESM—that a country will get bailed out if, and really only if, it commits to the reforms necessary to make its economy competitive and to reduce its deficit; and that only countries will receive funds, regardless of what they do with them, and not banks. The goal was to alleviate the causes of the debt crisis—high deficits and uncompetitive economies. It was how German parliamentarians had been persuaded to vote for the bailout packages.

Nevertheless, a working group will determine over the next two weeks—lightning speed by EU standards where progress is measured in months and often years—how, not if, banks could receive bailout funds directly from the ESM. Cause for the rush: Spain.

Spanish banks have been ravaged by the implosion of a real-estate bubble that they themselves caused with their reckless lending practices. Now they needed an immediate injection of at least €50 billion, and much more later, as bad loans and collapsing real-estate values on their books would finally have to be dealt with.

Bailing out banks directly through the ESM would accomplish two things for the debt-sinner government: allow it to escape painful reforms and deficit reduction programs; and free it from having to bail out its own banks, highly unpopular when “austerity” is simultaneously being imposed on the citizens. This just happened in Greece where banks reported €28.2 billion in losses. 13% of GDP! But €25 billion in rescue funds had already been transferred to the government—to bail out the banks, not the Greeks themselves. Yet, it's almost over. Read.... “Drachma Clauses” For Greece’s Exit from the Eurozone.

Spain could have asked for bailout funds long ago, but it didn’t want to do that because, hampered by a mind-boggling unemployment problem, it didn’t want to subject itself to the painful reforms that had been imposed on Greece, Ireland, and Portugal. It would be much easier if the banks could get bailed out directly.

And it’s not just Spain. “Once Spain sits under the bailout umbrella, the markets will focus on Italy,” said an unnamed representative of one of the unnamed countries. And there aren’t enough means to bail out both. So keeping Spain from getting officially bailed out has now become one of the more bizarre strategies in solving the debt crisis.

Alas, Germany is categorically opposed to direct loans from the ESM to banks. Finance Minister Wolfgang Schäuble declared that he wouldn’t even discuss it. The treaties didn’t allow it, and that would remain so. Bundesbank President Jens Weidmann said that as long as Member States were responsible for oversight and regulation of their banks, they would also be responsible for bailing them out. “Liability and control must remain in balance,” he said. The Netherlands, Austria, and Finland also rejected it.

But Germany no longer controls the ECB. It is now run by Mario Draghi, an Italian, who appears to have a sympathetic ear for the plight of Spain and Italy. And so on Thursday, he pushed Germany to the sidelines once again and made similar noises by calling on politicians to create a new European fund charged with bailing out the banks. Vitor Constancio, Vice President of the BCE, and Portuguese, called for going as far as possible towards a pan-European solution to the crisis.

“The crisis is finished,” French President Sarkozy had said a few weeks ago. “There is no more risk that the euro will implode,” thanks to his leadership, he declared two days before the election last weekend. However, François Hollande, the socialist challenger and likely winner, has a prescription for fixing the very crisis Sarkozy declared finished. For how his ambitious plan might lead to an expedited break-up of the Eurozone, read.... Pushing the Euro to the Brink.

 

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Fri, 04/27/2012 - 04:44 | 2379456 falak pema
falak pema's picture

Bailing out banks using ESM would put the Eurozone at par with the USA and TARP/QE. That means first world decadence will be total. After Japan and USA, the EU becomes an OPEN shit hole that can't see right from wrong.

The one eyed lead the blind. An open invitation for China to take over the world.

Fri, 04/27/2012 - 07:03 | 2379552 AnAnonymous
AnAnonymous's picture

After Japan and USA, the EU becomes an OPEN shit hole that can't see right from wrong.

____________________________________

US citizen europeans will do as required by US citizenism.

And that's certainly exclude China from taking over the world.

China's weapons are too soft when it comes to international relations: diplomacy and trade relations. They advance their best interests thanks to that but it cant be compared with the actual results obtained by US citizens through coercion.

US citizens will build on coercion even more, both domestically and beyond their borders.

Fri, 04/27/2012 - 07:16 | 2379568 TheFourthStooge-ing
TheFourthStooge-ing's picture

.

China's weapons are too soft when it comes to international relations

That is due to loose stool. Increasing fiber in Chinese citizenism diet will make soft weapons more firm for blobbing up.

diplomacy and trade relations. They advance their best interests thanks to that but it cant be compared with the actual results obtained by US citizens through coercion.

Made me laugh hardly. Chinese citizenism blobbed up into Mongolia and Tibet by trade relations diplomacy? Waooo, some kind of party going on downthere.

 

Fri, 04/27/2012 - 07:21 | 2379577 AnAnonymous
AnAnonymous's picture

Again with comparing China low achievements with US citizen achievements?

That's giving the Chinese too much credit.

Mongolia? When was that?

Fri, 04/27/2012 - 07:36 | 2379598 TheFourthStooge-ing
TheFourthStooge-ing's picture

Chinese citizenism citizens knowing now in past that for long staying on Chinese citizenism roadsides would constipate severely their plan, their fantasy of blobbing
 up to the stars and beyond.

And being trapped on Chinese citizenism roadsides is like inventing most explosive moving of bowels ever, coupling it to the most expansive roadside system ever but
failing on providing system flushing, the only thing that could move excretion piles far enough to clear roadside being monsoon rains into Yellow River, now Brown Ri
ver, to get you out of citizenism stench wave.

Yep, totally right to mourn and hold nose at roadside frontier.

Grand Chinese citizenism fiasco.

That's giving the Chinese too much credit.

Mongolia? When was that?

In Chinese citizenism, the Chinese citizenism sector lives off the Tibetan sector, the Mongolians sector, and the Uighur sector.

Oh, being the way by here, Sun Yat-sen, contradictator and prophesy of Chinese citizenism economic algebraic coconutism, on a straight line of its conception admitting, there would roadways need of building with roadside expanse to enable relief of Chinese citizenism Sun Yat-sensational society profiting is.

Chinese citizenism world odor. And impossibility being now to flush roadside piles cannot, those excretion lovers upon unencumbered roadside seeking. Those clear roadsides of Nepal being resource sought ever more the now.

Who is going to place foot in roadside physical dung piles required the expansion maintaining Chinese citizenism shame?

 

Sat, 04/28/2012 - 11:54 | 2382275 akak
akak's picture

Tears of making-me-laughism flowing my face down like fried puppy feces depositing of roadside chinese citizenism citizen!

Sat, 04/28/2012 - 12:48 | 2382341 g
g's picture

Ha ha ha sic him fourth! I doubt he will shut up thought, I look forward to seeing fourth tear him up again in the future!

Fri, 04/27/2012 - 06:49 | 2379538 skipjack
skipjack's picture

Even if China wanted the world - they are in no better shape than anyone else.  And, Chinese citizens are more likely to riot than the US or EU bunch of debt slaves.  Just wait 'til their property bubble bursts a bit more...ver soon now.

Fri, 04/27/2012 - 06:40 | 2379530 GeneMarchbanks
GeneMarchbanks's picture

Only if you presume that that is their intention, world takeover. It ain't, at least not in our lifetime. The slow drip is driving many to erroneous conclusions, no appetite for the twists and turns. You should really pick up a good spy novel.

Fri, 04/27/2012 - 04:39 | 2379453 ebworthen
ebworthen's picture

A new fund, a new bailout, a new "plan".

The addict always needs another fix the day after next, always.

Fri, 04/27/2012 - 03:51 | 2379418 lasvegaspersona
lasvegaspersona's picture

I thought AA was getting his own 'ignore' button

Fri, 04/27/2012 - 07:00 | 2379546 AnAnonymous
AnAnonymous's picture

Reporting and predicting US citizeni next move is funny but useless.

Contrary to fantasy or propaganda, US citizenism will keep doing its own stuff with or without report about it.

Ignoring is rendered useless by then.

But maybe indeed, US citizens, while being transparent, would prefer not to be told of.

A possibility.

Fri, 04/27/2012 - 07:11 | 2379563 TheFourthStooge-ing
TheFourthStooge-ing's picture

.

Contrary to fantasy or propaganda, US citizenism will keep doing its own stuff with or without report about it.

Contrary to fantasy or propaganda, Chinese citizenism will keep doing its own roadside and public park crapping stuff with or without report about it.

Ignoring of number two ruler in sign is rendered useless by then:

http://pics.livejournal.com/hannahcharlene/pic/000b84sg

But maybe indeed, Chinese citizenism citizens, while being transparent, would prefer not to be smelled of.

Chinese citizenism world odor.

A possibility.

 

Fri, 04/27/2012 - 03:44 | 2379410 q99x2
q99x2's picture

The central banks have in a sense everyone's money. I say that because they have the ability to devalue everyones money to zero. That gives them the ability to buy their own bonds with other people's money. They don't need to sell the bonds of any country to anyone but can give the everyone's money directly to the bondholders. Currently I think the idea has been to make it look like banks are doing the buying but if things get worse they can do it directly. I think they will do it directly. The objective seems to be not so much as to make outsiders solvent but to take over the world through financial terrorism.

The US has lost the power to prosecute the Banksters. I think that it is the same in the EU.

They have declared war.

Fri, 04/27/2012 - 03:20 | 2379387 AnAnonymous
AnAnonymous's picture

It is funny how US citizens dance around words.

Here:
________________________________________________
“Over the past months, we experienced a worrisome trend towards re-nationalization and ‘summitization,’” said Martin Schulz, President of the European Parliament and member of the German opposition SPD, to a forum of the European Commission on Wednesday. His complaints went to the heart of democracy at the European level. Government leaders were becoming “more arrogant” and made decisions “behind closed doors, in violation of the community method.” They were attempting “to create a fiscal union outside the control of parliament, bypassing the EU Commission.” Calls for reintroduction of border controls within the Schengen area were “an extremely dangerous development” because “any attack on the freedom of movement is an attack on the foundation of the European Union.”
________________________________________________

The capacity of eluding and saying one thing and the opposite in the same breath.

So European nations are told to be renationalizing but a few lines later, it is told they are working on implementing a fiscal union.

All this contextualized by the will to increase border controls.

Here, certainly not nations that work at renationalizing, a fiscal union epitomizes the dilution of nationhood.

US citizenism has this quality to frame human nature in such a way unvariant behaviours prevail.

European nations are blobbing up: they will merge in order to retain their power.

Control over border is to make the social engineering of the European People as an emanation of indo -europeans easier.

Fri, 04/27/2012 - 07:04 | 2379557 TheFourthStooge-ing
TheFourthStooge-ing's picture

AnAnonymous said:

It is funny how US citizens dance around words.

Yes, it is funny, because Chinese citizenism has raised the dance around words to an art form with much elegance and precision.

The capacity of eluding and saying one thing and the opposite in the same breath.

Yes, in so doing you display very well your talents in the Chinese citizenism word dance.

 

Fri, 04/27/2012 - 07:19 | 2379575 AnAnonymous
AnAnonymous's picture

So weak.

Alas, not everything is symetrical.

Working from a general point of view is not symetrical to working from a singular point of view.

One comments on US citizens at large, another invents and requires one to be a Chinese and extrapolate from that to the whole Chinese people.

Isnt US citizen produced world unfair?

Fri, 04/27/2012 - 12:42 | 2380490 ebworthen
ebworthen's picture

Eh?

You sound like an Overlord, or a Mandarin at the least.

Fri, 04/27/2012 - 07:32 | 2379593 TheFourthStooge-ing
TheFourthStooge-ing's picture

Now the Chinese citizenism cultural background being irrational is to react to the atrophy in regard to harmful political invasion and rebellion and economy.

Because question that is the center to Chinese citizenism, whether or not those export violence, are possible to retain that coconut is.

The blob up of Chinese citizenism overtaking in rickshaws the Mongolian and Tibetan between, since the days of Zhou Enlai premier resource policy extraction being.

 

Sat, 04/28/2012 - 22:26 | 2383012 AnAnomalous
AnAnomalous's picture

You being decadent Westerners they, sad and mighty the laughter of my belly at the yous!

Inadmissable it is that you find the Chinese way as, knowing such as you are how Chinese are leaving you behind in the soil. 

As USA citizen roadcar racers are say, eat my powder!

USA like senile masturbating monkley at zoo, peoples doing laughing and mocking of it but it not reaching the realization.

Chinese citizens will soon have USA masturbating senile monkley in cage, all making laughter at him.

Rising Chinese star, sinking USA shiny-dome eagle.  So sad, for American US citizens.

Fri, 04/27/2012 - 04:42 | 2379455 ebworthen
ebworthen's picture

The politicians will talk of "union" until constituents put their heads in a noose.

Fri, 04/27/2012 - 06:56 | 2379541 AnAnonymous
AnAnonymous's picture

No.

The union is by popular will, the will of the European middle class.

Politicians simply push along US citizen middle class given direction.

The fiscal union is what will allow the european Ponzi to endure.

Middle class support that.

The border controls is to foster the generation of the European People.

US citizen politicians do represent the US citizen middle class will.

Fri, 04/27/2012 - 07:07 | 2379559 TheFourthStooge-ing
TheFourthStooge-ing's picture

.

US citizen politicians do represent the US citizen middle class will.

I see you are getting an early start to your weekend at the Peoples Liberation Opium Parlor wifi hotspot.

Very Chinese citizenish.

 

Fri, 04/27/2012 - 07:16 | 2379569 AnAnonymous
AnAnonymous's picture

If it means being able to see reality as it is...

The US citizen french election is going to be good one on that.

Reading the program of the third candidate, the one who capture the swinger voters, it reads propositions like gold standard, end of foreign wars and a few others that are very unlikely to be retaken by front candidates.

But it also includes stuff like bashing of a certain kind of migrants and the rest going with it.

Now, one could wonder where the popular will of the US citizen middle class is going to overlap.

Fri, 04/27/2012 - 12:41 | 2380488 ebworthen
ebworthen's picture

You don't know what you are talking about, though I hear conviction in your voice.

Fri, 04/27/2012 - 14:11 | 2380693 AnAnonymous
AnAnonymous's picture

How? The conviction you hear is probably in your own voice.

I dont expect you could point holes though.

Fri, 04/27/2012 - 14:38 | 2380759 TheFourthStooge-ing
TheFourthStooge-ing's picture

AnAnonymous said:

I dont expect you could point holes though.

Holes pointing always leads Chinese citizenism citizen to first denial at all costing.

Then followed up with flee like running dog and ignoration always.

Sometimes when shame of face losing is too much greater, the running dog fleeing comes the first.

Link the first: http://www.zerohedge.com/news/welfare-great-delusion?page=3#comment-2268804

US citizen nature is eternal. This is what it is stated. Never written that US citizenism is eternal.

Link the secondly: http://www.zerohedge.com/news/guest-post-four-signs-asia%E2%80%99s-rise-...

You yourself have said that, although the nature of US citizenism is eternal, US citizenism itself is not eternal.

________________________________________

Really? I wrote that? Fantasy.

What says now the Chinese citizenism citizen? More smoke of opium imbibement in tralalaland?

No response forthcoming. Chinese citizenism running dog has already the running commenced is.

 

Fri, 04/27/2012 - 14:46 | 2380782 AnAnonymous
AnAnonymous's picture

Made me laugh.

That is all? That is the hole that should lead to denial? Denial

I wrote that US citizen nature is eternal.

Never written anything about US citizenism being eternal or not.

Now if you want to link the two, it is your problem.

That is your own construction.
It is quite hard to deny something you have not said.

I wrote that US citizen nature is eternal.If you desire to make some inferments from that point to consequences on US citizenism, make it your point. Not mine.

But hey, that would mean you are not a US citizen, that you do not need fantasy/propaganda to mediate between you and reality.

Fri, 04/27/2012 - 15:18 | 2380887 TheFourthStooge-ing
TheFourthStooge-ing's picture

AnAnonymous said:

Made me laugh.

Only because of early head start beginning on weekend opium intoxication.

I wrote that US citizen nature is eternal.

Never written anything about US citizenism being eternal or not.

YES! Much thanking for proving exactly my point! When words of Chinese citizenism are said by non-Chinese citizenism citizen, same words of same meaning, You then Denial and claim as fantasy.

Fantasy? Living in tralalala land?

Or is this another classic example of the primary characteristic of Chinese citizenism? The trait of denial is primary to Chinese citizenism.

Read here for memory refreshment:

http://www.zerohedge.com/news/welfare-great-delusion?page=3#comment-2268804

Chinese citizenism speaking here:

US citizen nature is eternal. This is what it is stated.

Never written that US citizenism is eternal. On the contrary, US citizenism has always been connected to the environment conditions that gave it birth.

Oh, so when Chinese citizenism citizen says the words, all then is perfect in world. When non-Chinese citizenism citizen says the words, then must you condemn with strong vigor.

Read again your citizenism words:

On the contrary, US citizenism has always been connected to the environment conditions that gave it birth.

On the contrary to what? Only implication available to minds not opium impaired with the intoxication is contrary to "US citizenism is eternal".

That is your own construction.
It is quite hard to deny something you have not said.

I wrote that US citizen nature is eternal.If you desire to make some inferments from that point to consequences on US citizenism, make it your point. Not mine.

Funny how Chinese citizenism citizens love to play word games when exposure of their propaganda revealed now is. Contraryness to "is" must being "is not". Implied implication of your citizenism words is that US citizenism is not eternal. No other possibility. A thing is, or it is not.

Now will you have acknowledging this, or do you spread offuscation, condemnationism, denial, more denial, again denial, even more denial?

But hey, that would mean you are not a US citizen, that you do not need fantasy/propaganda to mediate between you and reality.

More Chinese citizenism propagandistic offuscation, evasion of truth, diversionary tacticals.

Instead of word games for you, I suggest mahjonng...

 

 

Fri, 04/27/2012 - 07:31 | 2379591 TheFourthStooge-ing
TheFourthStooge-ing's picture

.

If it means being able to see reality as it is...

Ah, ah, look to sign, number two rule, to see Chinese citizenism as it is...

http://pics.livejournal.com/hannahcharlene/pic/000b84sg

Now, one could wonder where the popular will of the Chinese citizenism middle class is going to overcrap.

 

Sat, 04/28/2012 - 22:43 | 2383048 AnAnomalous
AnAnomalous's picture

Subtleness of sublime Chinese citizenism being beyond your clumsy roundeye swinging penis bignose gripping, US American European US Citizen can only mock adn blumber about in face of proud Chinese conformity of culture and norms ruling.

Smack!, so say them.

Behind the silliness of you I see ugly face of American US warlordism and consumption making, who seeks to engulf all resources and world power for sake of roadcar culture of suburbs spreadingness and mall stripping.

Sat, 04/28/2012 - 22:47 | 2383059 akak
akak's picture

Oh my God, it's started to multiply!

Fri, 04/27/2012 - 02:49 | 2379366 tok1
tok1's picture

so if Spain left the ECB as they are now their deficit would be 5-6% of GDP (US is 10%)  their outstanding debt 70-80% of GDP (US 105%)  and their banks .. capital to assets is almost the same.. the only difference is FED buys 90% of long bonds and ECB dont buy spanish bond outright.. ie this is just a money transfer from EU to US...it seems obvious.. IMF US will provide no funding... US rating agencies down grade EU entites to very low ratings even though their data is better than US sitting close to AAA.... the Euro was a challange to the dollar and US ability to get 50% of its funding from foreigners and their crushing it ..   Spanish banks reporting this week their all profitabel  (Santandeer largerst 1.5 bill prfit with only small increase in deliquent loans)..

This is the reality..

Fri, 04/27/2012 - 02:27 | 2379354 Watson
Watson's picture

>>>
But Germany no longer controls the ECB.
<<<

True.

But Germany does have the option of leaving the EUR without leaving the EU:
1. Laws were passed to make this legally possible; and
2. Soffin was strengthened recently to put the practical tool in place.

And the return of the DEM will be very popular with German citizens.

Of course, removal of the German presence on the ECB means the ECB will lose all credibility as a serious central bank, so The Netherlands and Austria (at least) will want pull out as well.

And at that point you have a currency that really is politically controlled toilet-paper...

Fri, 04/27/2012 - 01:37 | 2379326 HarryM
HarryM's picture

Dump the Euro - keep the free trade agreements - I'm sure the blueprint has been written.

A little pain then the market will continue their rally

Fri, 04/27/2012 - 10:58 | 2380201 Zero Govt
Zero Govt's picture

"keep the free trade agreements"

Er, what are they worth? ..and do they work??

Business does not need a Govt to Govt agreement to trade between countries. Never has and never will. They're worthless as well as pointless

Fri, 04/27/2012 - 01:14 | 2379307 Ancaeus
Ancaeus's picture

Wolf,

My understanding is that Spain ran a surplus consistently until about 2008.  They only went into deficit because of reduced revenue due to the general downturn, and automatic increases in spending tied to their social safety net.  Both of these were directly caused by higher unemployment due to economic forces outside of Spain, and thus, beyond of their control.  Thus, I am puzzled by these statements of yours that suggest that Spain's spending was in deficit:

The goal was to alleviate the causes of the debt crisis—high deficits and uncompetitive economies.

Bailing out banks directly through the ESM would accomplish two things for the debt-sinner government:...

It seems to me that these phrases are both incorrect and gratuitous.  They are not needed to make your larger argument, and their unfortunate tone detracts from your post.

 

Fri, 04/27/2012 - 02:50 | 2379367 Nussi34
Nussi34's picture

You have to look at total debt (federal state, municipalm corporations, private). Spain accumulated lots of it due to cheap (implicit EuroBonds) interest rates.

The artificially cheap money lead to overinvestment (bubble) in the real estate/construction sector. Now the sector is dead and they have nothing else... OK, they can grow a few tomatos (with a lack of water)

 

Fri, 04/27/2012 - 05:57 | 2379327 Lednbrass
Lednbrass's picture

You are incorrect, they did not accumulate that in just a few years.

This only goes back to 2004, but it is clear that Spain ran deficits long before 2008. It got better during their property boom, but when the bubble popped- well, you can see what is  happening.

http://www.indexmundi.com/g/g.aspx?v=143&c=sp&l=en

Things seem to be worse than acknowledged:

http://www.zerohedge.com/news/fighting-spanish-windmills-or-how-spains-debtgdp-ratio-double-what-reported

Official Debt/GDP at 68.5 according to the Tylers, total debt considerably higher.

Fri, 04/27/2012 - 07:19 | 2379574 Dr. Sandi
Dr. Sandi's picture

Lying bastards lie in many languages.

Do NOT follow this link or you will be banned from the site!