This page has been archived and commenting is disabled.
The Countdown To The Break Up Of The Euro Has Officially Begun
The Countdown To The Break Up Of The Euro Has Officially Begun
Courtesy of Michael Snyder of Economic Collapse
The tremendous backlash against the austerity approach that Germany has been pushing. All over Europe, prominent politicians and incumbent political parties are being voted out. In fact, Nicolas Sarkozy has become the 11th leader of a European nation to be defeated in an election since 2008. We have seen governments fall in the Netherlands, the UK, Spain, Ireland, Italy, Portugal and Greece. Whenever they get a chance, the citizens of Europe are using the ballot box to send a message that they do not like what is going on.
It turns out that austerity is extremely unpopular. But if newly elected politicians all over Europe begin rejecting austerity, this puts Germany in a very difficult position. Should Germany be expected to indefinitely bail out all of the members of the eurozone that choose to live way beyond their means? If Germany pulled out of the euro tomorrow, the euro would absolutely collapse, bond yields for the rest of the eurozone would skyrocket to unprecedented heights, and without German bailout money troubled nations such as Greece would be headed directly for default. The rest of the eurozone is absolutely and completely dependent on Germany at this point. But as we have seen, much of the rest of the eurozone is sick and tired of taking orders from Germany and is rejecting austerity. A lot of politicians in Europe apparently believe that they should be able to run up gigantic amounts of debt indefinitely and that the Germans should be expected to always be there to bail them out whenever they need it. Will the Germans be willing to tolerate such a situation, or will they simply pick up their ball and go home at some point?
Over the past several years, German Chancellor Angela Merkel and French President Nicolas Sarkozy have made a formidable team. They worked together to push the eurozone on to the path of austerity, but now Sarkozy is out.
Francois Hollande, the new French president, has declared that the financial world is his "greatest enemy".
He may regret making that statement.
One of the primary reasons why Hollande was elected was because he clearly rejected the austerity approach favored by the Germans. Shortly after winning the election in France, he made the following statement....
"Europe is watching us, austerity can no longer be the only option"
Hollande says that he wants to "renegotiate" the fiscal pact that European leaders agreed to under the leadership of Merkel and Sarkozy.
But Merkel says that is not going to happen. The following Merkel quotes are from a recent CNBC article....
"We in Germany are of the opinion, and so am I personally, that the fiscal pact is not negotiable. It has been negotiated and has been signed by 25 countries," Merkel told a news conference.
"We are in the middle of a debate to which France, of course, under its new president will bring its own emphasis. But we are talking about two sides of the same coin — progress is only achievable via solid finances plus growth," she added.
So instead of being on the same page, Germany and France are now headed in opposite directions.
But if the French do not get their debt under control, they could be facing a huge crisis of their own very quickly. The following is from a recent articleby Ambrose Evans-Pritchard....
“They absolutely must cut public spending and control the debt,” said Marc Touati from Global Equities in Paris. “It will soon be clear that we are in deep recession. If they don’t act fast, interest rates will shoot up and we will have a catastrophe by September,” he said.
Without German help, France is not going to be able to handle its own financial problems - much less bail out the rest of Europe.
Germany is holding all of the cards, but much of the rest of the eurozone does not seem afraid to defy Germany at this point.
In Greece, anti-bailout parties scored huge gains in the recent election.
None of the political parties in Greece were able to reach 20 percent of the vote, and there is a tremendous amount of doubt about what comes next.
New Democracy (the "conservatives") won about 19 percent of the vote, but they have already announced that they have failed to form a new government.
So now it will be up to the second place finishers, the Syriza party (the radical left coalition), to try to form a new government.
Alexis Tsipras, the leader of the Syriza party, is very anti-austerity. He made the following statement the other night....
"The people of Europe can no longer be reconciled with the bailouts of barbarism."
But at this point, it seems very doubtful that Syriza will be able to form a new government either.
PASOK, the socialists that have been pushing through all of the recent austerity measures, only ended up with about 13 percent of the vote. In the 2009 election, PASOK got 44 percent of the vote. Obviously their support of the austerity measures cost them dearly.
So what happens if none of the parties are able to form a new government?
It means that new elections will be held.
Meanwhile, Greece must somehow approve more than 11 billion euros in additional budget cuts by the end of June in order to receive the next round of bailout money.
Greece is currently in its 6th year of economic contraction, and there is very little appetite for more austerity in Greece at this point.
Citibank analysts are saying that there is now a 50 to 75 percent chance that Greece is going to be forced to leave the euro....
Overall, the outcome of the Greek election shows that it will be very difficult to form a viable coalition and to implement the measures required in the MoU. Particularly, the identification of the 7% GDP of budget savings for 2013 and 2014 by the end of June looks very unlikely to us. As a consequence, in a first step, the Troika is likely to delay the disbursement of the next tranche of the programme. Note that for 2Q 2012, disbursements of €31.3bn from the bailout programme are scheduled. If Greece does not make progress, in a second step, the Troika is likely to stop the programme. If that happens, the Greek sovereign and its banking sector would run out of funding. As a consequence, we expect that Greece would be forced to leave the euro area. With the outcome of the election, to us the probability of a Greek exit is now larger than our previous estimate of 50%, and rises to between 50-75%. However, even after the elections in Greece, France and Germany, we regard the probability of a broad-based break up of the monetary union as very low. We continue to expect that in reaction to Greece leaving the euro area, more far-reaching measures from governments and the ECB would be put in place.
But if Greece rejects austerity that does not mean that it has to leave the eurozone.
There is no provision that allows for the other nations to kick them out.
Greece could say no to austerity and dare Germany and the rest of the eurozone to keep the bailout money from them.
If Greece defaulted, it would severely damage the euro and bond yields all over the eurozone would likely skyrocket - especially for troubled countries like Spain and Italy.
If Greece wanted to play hardball, they could simply choose to play a game of "chicken" with Germany and see what happens.
Would Germany and the rest of the eurozone be willing to risk a financial disaster just to teach Greece a lesson?
But Greece is not the only one that is in trouble.
As I wrote about recently, the Spanish economy is rapidly heading into an economic depression.
Now it has come out that the Spanish government is going to bail out a major Spanish bank. The following is from a recent Bloomberg article....
Rodrigo Rato stepped down as head of the Bankia group as a government bailout loomed after Spanish Prime Minister Mariano Rajoy retreated from a pledge to avoid using public money to save lenders.
Rato, a former International Monetary Fund managing director, proposed Jose Ignacio Goirigolzarri, ex-president and chief operating officer of Banco Bilbao Vizcaya Argentaria SA (BBVA), as Bankia executive chairman, he said in a statement today in Madrid. The government plans to inject funds into the lender by buying contingent-capital securities, said an Economy Ministry official who declined to be named as the plan isn’t public.
But this is just the beginning.
Major banks all over Europe are going to need to be bailed out, and countries such as Portugal, Italy and Spain are going to need huge amounts of financial assistance.
So does Germany want to keep rescuing the rest of the eurozone over and over again during the coming years? The cost of doing this would likely be astronomical. The following is from a recent New York Times article....
Bernard Connolly, a persistent critic of Europe, estimates it would cost Germany, as the main surplus-generating country in the euro area, about 7 percent of its annual gross domestic product over several years to transfer sufficient funds to bail out Europe’s debt-burdened countries, including France.
That amount, he has argued, would far surpass the huge reparations bill foisted upon Germany by the victorious powers after World War I, the final payment of which Germany made in 2010.
At some point, Germany may decide that enough is enough.
In fact, there have been persistent rumors that Germany has been very quietly preparing to leave the euro.
A while back, German Chancellor Angela Merkel’s Christian Democratic Union party approved a resolution that would allow a nation to leave the euro without leaving the European Union.
Many believed that this resolution was aimed at countries like Greece or Portugal, but the truth is that the resolution may have been setting the stage for an eventual German exit from the euro.
The following is an excerpt from that resolution....
"Should a member [of the euro zone] be unable or unwilling to permanently obey the rules connected to the common currency he will be able to voluntarily–according to the rules of the Lisbon Treaty for leaving the European Union–leave the euro zone without leaving the European Union. He would receive the same status as those member states that do not have the euro."
Most analysts will tell you that they think that it is inconceivable that Germany could leave the euro.
But stranger things have happened.
And Germany has made some very curious moves recently.
For example, Germany recently reinstated its Special Financial Market Stabilization Funds. Those funds could be utilized to bail out German banks in the event of a break up of the euro. The following is from a recent article by Graham Summers....
In short, Germany has given the SoFFIN:
- €400 billion to be used as guarantees for German banks.
- €80 billion to be used for the recapitalization of German banks
- Legislation that would permit German banks to dump their euro-zone government bonds if needed.
That is correct. Any German bank, if it so chooses, will have the option to dump its EU sovereign bonds into the SoFFIN during a Crisis.
In simple terms, Germany has put a €480 billion firewall around its banks. It can literally pull out of the Euro any time it wants to.
So has Germany been quietly preparing a plan "B" just in case the rest of the eurozone rejected the path of austerity?
Most people have assumed that it will be a nation such as Greece or Portugal that will leave the euro first, but in the end it just might be Germany.
And the "smart money" is definitely betting on something big happening.
Right now some of the largest hedge funds in the world are betting against the eurozone as a recent Daily Finance article described....
Some of the world's most prominent hedge fund managers are betting against the eurozone -- and not just the peripheral countries everyone knows are in trouble. They're taking positions against the core countries, economies that -- until now -- everyone has assumed were rock-solid.
Yes, the countdown to the break up of the euro has officially begun.
A great financial crisis is going to erupt in Europe, and it is going to shake the world to the core.
If you were frightened by what happened back in 2008, then you are going to be absolutely horrified by what is coming next.
»
- ilene's blog
- 22778 reads
- Printer-friendly version
- Send to friend
- advertisements -
Germany should just sit tight and refuse to contribute to any more bailouts for countries that cannot get their finances under control. The irresponsible countries will eventually be forced to quit the euro (good riddance!) , and what will be left is a smaller monetary union of responsible governments.
The only problem is that the ECB can make an end run around Germany by monetizing the debt of the irresponsible countries. In that case Germany would either be forced to accept a lot of inflation, or leave the euro.
Well or Merkel can apply Austerity before being throw out of the office.
All this talk is unecessary.
We know what is going to happen; end of the Euro, nationalization, and a world war.
And good riddance. And I bet Bernanke is happy. Bullish for the dollar!
good grief. talk about scare mongering. this article is just hot wind blown out by someone who is short euros.
Puhlease....countdown indeed! ha
When Greece leaves the Euro, will they adopt the Gyro? It could be used as money with no counterparty risk and the supply will never get too large because they will either be eaten or they'll spoil.
I may be onto something.
And combingin the gyro with the scope will allow them to "stabilize" their economy.
Yet again, no it hasn't.
this could take 5 more years. please...countdown? really?
greece is no countdown. and the dominoe theory doesn't specify a timeline. countries are large dominoes they do not knock each other over THAT quickly. just look at the past 3 years!
The euro may survive for 5 years, but it will likely be w/out the Germans.
Germans are tied of paying the freight---just as folks in the USA wouldn't want to endlessly funnel money to Mexico.
It ant over until the German fat lady sings.
The fat lady will be given the boot and they will elect a socialist, then they'll use stimulus and problem solve, inflation will arise if they're not as smart as BEN but who cares...
Wheeeeeeee!
A bunch of fucking pomp and bull shit.
The ECB is gonna print and like no tomorrow.
The big ? is what new title are they gonna tag it with?
I say they will be called "ECB UNITY BONDS".
Maybe something with (re-)construction in it?
Print until you puke!
if things are getting so bad in Europe why have the Portuguese 2 year dropped from over 20% to 8% or the Italian 10 year dropped from over 7% to 5.5%, and the Spanish 10 year has dropped from over 6.5% to under 6%??? All these PIS bonds have falling rates rising prices. Some one besides the ECB is buying for these type of moves to be happening. Are things really as bad as the doom mongers really say?
if things are getting so bad in Europe why have the Portuguese 2 year dropped from over 20% to 8%
Here, let me help you out.
i) LTRO - 3 year duration. Caps yields on bonds < 3 years duration.
ii) money is fungible.
Some one besides the ECB is buying for these type of moves to be happening.
Yes, his name is Ben, and the fucker will buy anything.
Yeah, sell it to Bennie, he'll buy anything.
If the BRICs and others are using fewer dollars and Europe can use all the dollars it can get then perhaps Europe is a good place for Ben to park a pile of dollars so that they don't end up being repatriated and pushing up inflation?
Yes, and if oil goes up it will soak up some of the USD offshore that was thinking about coming home.
The OPEC satraps can recycle it into USTs and keep the ponzi going.
The logical solution is for Germany to leave the Euro, let the economies collapse around them as they will anyway, establish the Deutsche Mark again and find new customers for its exports. You would devalue the Euro in the process, helping the remaining countries with their exports...a win win maybe.
Germany's already found all the customers for its exports it's able to find at the prices they're charging their fellow EU members for their products. Americans, for example, pay a lot less for a German car than the Greeks do. German manufacturing depends on high factory utilization and low wages paid to the workers.
If Germany leaves the EU and revalues the DMark higher in the process compared to the other EU countries, there will be no markets for German products and no jobs for Germans. The French and the Italians are quite able to make their own stuff without the Germans. Some of their stuff might not be quite as nice, but it'll work.
German workers should be paid as much as French workers including their pensions and vacations.
And remove the peg with the CHF.
I think that a seperation is needed before it leads to divorce. The idea of a more coherent Europe is a good one but the mechanics were not well thought out and stupid politicians spending like crazy made it worse. After a period, Europe will find ways to re-create the original concept. With better safeguards and hence better outcomes.
"Should Germany be expected to bailout anyone else in Europe?" Well, no more than anyone should expect a company to bailout it's customers OR expect a BAILOUT from the taxpayer (read-customers).
Same as it ever fucking was. Just stay ahead of the herd people.
moooooooooo..
"Should Germany be expected to indefinitely bail out all of the members of the eurozone that choose to live way beyond their means?"
hm
but basically this kibbutz called EU is a form or EU-Reich (with the kibbutz/kolhoz embeded) where Germany plays the role of China offering vendor financing to other kibbutz members...
hence and somehow if Germany put up all this mess to serve its masters it should also bear the consequences...
nope ?
And the Greek or French equivalent of BMW, BASF, Mercedes, and Siemens is? Productive societies control the game, just as did productive tribes in cavemen days. Self-sufficiency should be the goal of all countries, but that requires rejection of the social welfare state, and emphasis on the individual and individual responsiblity. Its always about survival of the fittest and most competent.
Six million, four hundred thousand and forty three... six million four hundred thousand and forty two...
OK, I'll check back with you later.
Assuming you're counting off every second, that's 74 days.
I thought you were of the opinion the Euro was here to stay. Now you're saying it's got a 10 week lifespan - what was it that changed your mind? I mean, was it like a single thing that tipped you over, or just the mass of evidence?
Do tell.
When you assume you're just making an ass out of u and me. Get it? Now look down your shirt and spell attic.
My opinion matters not dear friend, it's mere static kinda like this article.
Evidence? What am I a private dick to you? A scientist?
Judge Likstane stops this one in the first... GeneMarchblanks TKO'ed by BigJim
Smart money is large enough and smart enough to bet all fronts.
Usual US citizen business.
Of course the Aussies, Fins, Germans, Irish, Chinese, French, Russians, Lebanese et al would never do such a thing.
Only Americans.
Usual US citizen business.
That's the stuff!
Chinese Citizenism is derivative in nature.
More template posting courtesy of the PRC Ministry of Truth Internet Propagandizing Template.
Utter horseshit.
Do you two aways post together????? lol
Whaddayah expect?
They're married.
Nobody is holding the cards as suggested by the article.
It is non sense.
The current situation is that no European country (part of the EMU) or a combination of European countries can bail out another european country or a combination of European countries.
German can not bail France that can not bail out Germany. The combination of the two can not bail out Greece which can not bail out either Germany or France.
Etc...
You need to go back and reread the article... take your time, because "me thinks" you missed the main point!
By the way are you saying the article is "non sense" (sic) or your understanding?
Does the main point survive this:
_____________________________________________
Should Germany be expected to indefinitely bail out all of the members of the eurozone that choose to live way beyond their means? If Germany pulled out of the euro tomorrow, the euro would absolutely collapse, bond yields for the rest of the eurozone would skyrocket to unprecedented heights, and without German bailout money troubled nations such as Greece would be headed directly for default. The rest of the eurozone is absolutely and completely dependent on Germany at this point. But as we have seen, much of the rest of the eurozone is sick and tired of taking orders from Germany and is rejecting austerity.
__________________________________________________
Good Lord - not one mention of US citizens' citizen-citizenism!
What have you done with our AnAnonymous? Or are you filling in for him while he's on lunch or something?
Chinese Citizenism is often inconsistent in its thoughts.
yeah...what have they done with AnAnon?
He's clearly multiple people, posting under one name.
He just might be a "50-center."
http://blog.foreignpolicy.com/posts/2011/03/01/chinas_50_cents_party_tak...
The new financial system cannot emerge until the ashes of the current one have been swept away.
yeah any second now.....
(i +1'ed you)
tICK, tOCK, tICK, tOCK.
Exactly. There are a lot of sick nations in Europe and by forcing them to recuperate in the same bed and with the same medicine, you are simply risking a plague which will either be a total meltdown or complete border and financial transaction closures.