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The European Crisis is now accelerating right as Germany becomes increasingly uninterested in funding bailouts
As noted in our recent article, “The Beginning of Dissent” a key issue for Europe this year is Angela Merkel’s re-election bid in Germany. Merkel has thus far managed to support Europe through verbal and monetary intervention without angering the German populace to the point of outright unrest. However, the political tide in Germany looks to be turning increasingly against both Merkel and the Euro.
In this election, there are three key concerns for German voters:
- The threat of inflation
- The German economy
- The cost of the EU bailouts
Having experienced the result of rampant debt monetization (Weimar) recently enough that it’s still in the public’s memory, the German people are mortified by the specter of inflation. With that in mind, we are already seeing signs that inflationary pressures area rising in Germany though the official date continues to lie about its presence.
Indeed we see inflationary pressures in the form of wage hikes…
Germany's regional public service workers will receive an above-inflation wage hike of 5.6 percent over two years, negotiators said on Saturday following marathon talks between employers and the Verdi trade union.
Verdi had sought a pay increase of 6.5 percent for the 765,000 workers.
Germany, which holds a federal election in September, is under pressure from other euro zone countries to grant higher wage increases to stimulate demand from Europe's largest economy for imports from the bloc's troubled debtor countries.
http://www.reuters.com/article/2013/03/09/germany-workers-pay-idUSB4N0AU00Y20130309
… as well as rising costs in the corporate sector:
Worlee-Chemie GmbH, a family-owned company that has produced resins in the city of Hamburg for almost a century, is trying to escape the spiraling cost of Germany's shift to renewable energy.
A 47 per cent increase on January 1 in the fees grid operators set
to fund wind and solar investments is driving the maker of paint ingredients to Turkey, where next month it will start making a new type of hardening agent at a factory near Istanbul…
Manufacturers aren't the only ones buckling under the additional costs. Retailers like Oliver Krumholz, who owns seven Intersport stores in western towns including Muelheim-Kaerlich and Andernach, are also hit.
Krumholz is refitting his biggest store with a control system to ensure that the heating, air-conditioning and ventilation aren't on at the same time. He's also buying carbon dioxide monitors to measure how many customers are in the store so the heating will shut down when it gets too stuffy.
And this is occurring at the precise time that the Germany economy is rolling over along with the rest of Europe:
Germany's industrial production stagnated in January as the contraction in manufacturing and energy output was offset by a recovery in the construction sector.
Industrial output remained flat in January from a month ago, when it rose by revised 0.6 percent, figures released by the Federal Ministry of Economics and Technology showed Friday. Output was forecast to grow by 0.4 percent.
Overall industrial production slipped by working-day adjusted 1.3 percent year-on-year, sharper than the 0.5 percent fall seen in the previous month. The rate of decrease slightly exceeded a 1.2 percent drop forecast by economists.
http://www.rttnews.com/2073289/german-industrial-production-stalls-in-january.aspx
The mainstream media is going bonkers over the improved investor confidence in Germany. Given investors’ lousy assumptions about the economy in general I don’t give this point much weight.
Rising costs… corporations moving aboard (cutting German jobs)… and a slowing economy… this doesn’t bode well for Merkel’s re-election bid… especially given that Germans are increasingly against the Euro bailouts she has supported:
A prominent group of anti-euro German economists and business leaders has formed a political party to challenge Germany's support for euro-zone bailouts, a move that could test the ruling center-right coalition's hold on conservative votes in the fall general election.
With just six months until the election, the new party, which calls itself Alternative for Germany, is unlikely to gain enough traction to win seats in Parliament, analysts say. Yet even if the party comes in below the 5% threshold needed to win representation, it could still attract enough conservative votes to prevent a return of the current coalition government, a combination of Angela Merkel's Christian Democrats, their Bavarian sister party, and the pro-business Free Democrats.
http://online.wsj.com/article/SB10001424127887323639604578366352468342468.html
The above issue is not some political ploy… a recent poll showed 26% of Germans would be willing to vote for the anti-Euro party if the German elections were held today. When you consider middle-aged Germans, the percentage against the Euro rises to 40%.
One in four Germans would be ready to vote in September's federal election for a party that wants to quit the euro, according to an opinion poll published on Monday that highlights German unease over the costs of the euro zone crisis.
Germany's mainstream parties remain solidly pro-euro despite grumbling over bailouts of countries such as Greece. A German taboo on nationalism, rooted in atonement for the crimes of the Nazi era, has helped to muffle eurosceptic voices.
But the poll conducted by TNS-Emnid for the weekly Focus magazine showed 26 percent of Germans would consider backing a party that wanted to take Germany out of the euro and as many as four in 10 Germans in the 40-49 age bracket would do so.
http://www.reuters.com/article/2013/03/11/us-germany-eurosceptics-idUSBRE92A07F20130311
This is a big reason why Germany pushed to confiscate Cyprus depositors’ funds during the Cyprus bailout talks: Angela Merkel has realized that her support of the Euro could cost her the election in September.
In plain terms, Germany appears to have finally hit its limit in terms of funding EU bailouts. We get confirmation from this based on the fact that Germany floated the idea of seizing depositors’ funds over such a small bailout (the Cyprus bailout would be €17, compared to €100 billion for Spain, and over €140 billion for Greece so far).
To recap the key point here is that European Crisis is now accelerating right as Germany becomes increasingly uninterested in funding additional bailouts.
Basic common sense dictates how this whole process will end (the Euro being broken up in some form or another), however the specifics of how this will play out as well as the timeline are impossible to predict based on the fact that you simply cannot predict the actions of desperate politicians and financial elites during times of Crisis.
If you’re an individual investor worried about what Europe’s Crisis really means for your portfolio, we’ve published a FREE Special Report outlining exactly that. It’s titled, What Europe Means For You and Your Savings.
In this report, we outline the risks Europe’s banking crisis holds not only for those in Europe, but for savers around the world. We also explain how this crisis will most likely unfold, including which areas are most at risk in the financial system. And we cap it off by listing multiple backdoor plays on Europe that investors can use to profit from Europe’s Crisis.
You can pick up a FREE copy here:
http://gainspainscapital.com/what-europes-collapse-means-for-your-savings/
Thank you for reading!
Graham Summers
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The bizarre Fukushima Green Politics of dumping nuclear power having just agreed an extended life for reactors with the utilities shows Merkel's opportunism at its worst.
It shows poor quality decision-making, impulsive actions without considering costs. Kohl gave the former GDR a huge dowry paid for by West German cities, businesses, workers and it has sucked purchasing power out of households into grand projects. The Euro is simply the flip side of that coin, the creation of a giant Ponzi Scheme across Europe.
The German fear of a Currency Reform as in 1949 when Savings were wiped out is why Kohl did the 1:1 Exchange rate in 1990, and many East Germans had blocked accounts in West Germany locked down by the Allies in 1949 to stop the Russians getting access to the funds.
Germans fear Schauble has signed them up to a) bailing out Banks b) loss of deposits when Banks go bust. Deutsche Bank is hardly rock solid, Dresdner Bank went bust and almost took Commerzbank under but for State subsidy. Deutsche Bank received a huge hidden subsidy in the form of Postbank.
Germans now know their Bonner Republic was the best Germany they were ever going to have, and now fear Merkel is more interested in power than Germany and that they are going the way of the GDR in terms of freedom and ability to influence events
Yeah, as the merry-go-round goes faster and faster in it's spin down the world economic drain, more and more are jumping off before she goes under. You can bet the Brics countries want to get off fast because of the latest theft of people monies in Cyprus showing the world what each will experience if you have your money electronically associated in any way, or in any place of storage, like a bank.
BRICS dumping euro amid simmering EU banking crisis:http://rt.com/business/eu-banking-crisis-imf-euro-brics-141/
Call it, one more nail in the coffin.
"based on the fact that you simply cannot predict the actions of desperate politicians and financial elites during times of Crisis."
Actually, you can predict almost exactly what they will do. It's the same things every time. Basically, they will tax or steal (since taxation is theft it's pretty much the same thing) everything they can just after they deny that they would ever do such a thing. See Cyprus.
They will pass an ever increasing series of laws making it more and more difficult to live unmolested by the government.
They will (or will try very hard) to confiscate all firearms.
They will look to start a war as a diversion from the ever increasing domestic problems.
It's the same old tired playbook...
UBER ALLES!!!!
A vast majority of germans are smiling as they know it is the teutonic boot stamping on the Cypriot face....for ever.
You nurse told you that between injections ?
"as Germany becomes increasingly uninterested in funding bailouts"I didn't bother to read the rest of the article as I'm sure if it's based on this presmise it's fucking garbage.
News flash to the author: When a peripheral bank gets bailed out where do you think the money goes?
Hint: There are two sides to every trade.
Hint 2: Where do you think the money came from that these Zombie banks borrowed?
Hint 3: Germany and the rest of the core you fucking idiot.
I have many more hints which you can download free @ www.goatse.info a $79 value
"Hint: There are two sides to every trade."
if germany loaned the money so people could buy their output then there arent two sides. there is only one side and germany is toast because they wont be paid back.
Of course you're absolutely correct. But the deliberately dumbed down sheeple don't understand this. So I'm going to side with the author when he says the the German sheeple are increasingly uninterested in funding bailouts.
Here's an example of the master plan of the elites working against them. I'd laugh if it wasn't so sad.
Boy,
Your Dad gets better looking every year.
Jobs, wealth, health and sanity all flee the countries with the most intrusive governments. There must be a lesson in there somewhere.
So they want no bailouts (ie. exports crash) no inflation (ie. no increase in internal consumption) and presumably no unemployment either (ie. a huge production surplus with nowhere to go).
Well, good luck with that silly Germans ...
In the end everything is gonna be alright, and if it doesn't,..well then it is Not the end!
Should not that read “The Beginning of Descent”?
Guess it works either way....
Graham evidently has sources in the highest echelons of the German Government and EU Politbureau.
Or he's just conjecturing to sell his newsletter.
Germany is just looking for a way out and doesn't have the nerve to tell everyone.
I agree. My understanding is that the German establishment views these guys as pretty ridiculous: http://en.wikipedia.org/wiki/Pirate_Party_Germany. they're not ridiculous to me...and if the business interests of Germany begin to push strongly for "anti Nazi levels of privacy protection" you'll see me heading for the exits faster than a Cowboy at a gay pride parade. we'll see of course...recessions are usually a good time to dwell on how few freedoms you really have left "after the growth phase" when you sold out all that stuff "for a few billion in balance sheet enhancements which turned out to be total b.s." rumor is Spain is already going this route but if an industrial economy like Germany's joins in a real human freedom march i think you'll see any exit from the Euro...while nasty...to be short lived. we shall see...
Interesting. Will Germany be then exchanging gold for oil and natural gas in the future? What is going to make the new fiat so special?
Apart from PM's I'm also saving some German euro notes. I think it's useful to have some fiat around both for everyday emergencies and for when SHTF happens. After all PM's won't initially be recognized as money and you need to survive an economic collapse from day 1, regarding that also stack up on enough food, water and other necessities so you can survive the early heady days. German euro's have a serial number beginning with an X. They will be the only ones you can cash in for Deutschmarks once Germany leaves the euro.
You definitely want to avoid the S, H, T, F, G, Y, M notes if you save euro notes (just remember SHTF GYM).
http://en.wikipedia.org/wiki/Euro_banknotes#Serial_number
LOL
Yeah, and while at it, dump those Californian dollar notes, too - the way they're broke, I wouldn't trust their dollars for shit, either...
There is no way out ... well at least no way out which doesn't involve wooden structures with oversized razor blades (either physical ones or metaphysical ones in the form of wage inflation and other forms of wealth redistribution).
Protecting the Euro, oddly enough.