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A Line Of Demarcation Through The Eurozone Is Taking Shape

testosteronepit's picture




 

Wolf Richter   www.testosteronepit.com   www.amazon.com/author/wolfrichter

Everyone learned a lesson from the “bail-in” of the Cypriot banks: Russian account holders who’d laundered and stored their money on the sunny island; bank bondholders who’d thought they’d always get bailed out; Cypriot politicians whose names showed up on lists of loans that had been extended by the Bank of Cyprus and Laiki Bank but were then forgiven and written off. Even brand-new Finance Minister Michael Sarris who got axed because he’d been chairman of Laiki when this was going on. His lesson: when a cesspool of corruption blows up, no one is safe. And German politicians learned a lesson too: that it worked!

“With the Cyprus aid package, it was proven that countries like Germany, the Netherlands, and Finland, if they stick together, are able to push for a strict stability course,” Hans Michelbach told the Handelsblatt. The chairman of the finance committee in the German Parliament and member of the CSU, Chancellor Angela Merkel’s coalition partner, called for deeper collaboration of the triple-A countries in the Eurozone “to strengthen the confidence of citizens and investors in the common currency.”

There are still five in that euro triple-A club: Germany, Austria, the Netherlands, Finland, and Luxembourg. “It would be good if we could also convince Luxembourg to participate more strongly in this stability collaboration,” he said. It would be in the best interest of Luxembourg as major financial center, he added. A reference to Luxembourg’s precarious status, as Cyprus had learned, of being a tiny country with banks so large that it can't bail them out by itself.

To protect the euro, the alliance of the triple-A countries must be united firmly against large euro countries like Italy and France, he said. “Strong signals of stability would be of great importance for the Eurozone,” particularly now, given the “unclear situation” in Italy, renewed doubts about Greece, and the failure of the French government in its stability policies.

Exactly what French President François Hollande needs: the euro triple-A club breathing down his neck. He's already in trouble at home. To reverse the slide, he got on state-owned France 2 TV last Thursday to speak to the French people so that they could see how his sincerity, wisdom, and economic policies would stop the country from sinking ever deeper into a quagmire.

And a quagmire it is: double-digit unemployment, a Purchasing Managers Index just above Greece’s, new vehicle sales that plunged almost 15% so far this year, a budget deficit that refuses to be brought under control.... He has tweaked some policy measures here and there. And he dug up a new version of the 75% income-tax bracket that had been squashed by the Constitutional Court. But Jérôme Cahuzac, the Budget Minister who’d tried to get the first version through the system, went up in flames over allegations of tax fraud and “tax fraud laundering.”

Now the people have had it. After the TV appearance, his approval rating, ten months into his term, plummeted another 6 points to 31%, a low that scandal-plagued Nicolas Sarkozy took four years to reach. And only 27% approved of his economic policies. “The French simply don’t want austerity,” lamented an unnamed government insider.

France was suffering the consequences of the “socialist experiments” of its government and was becoming less and less competitive, explained Michelbach. He emphasized that France would remain an important partner of Germany. He wasn’t kidding: France buys 10% of Germany’s exports and is crucial to the German economy. But if France didn’t change course, he said, that could become a “serious problem” for the Eurozone.

As opposed to the mere hiccups of Cyprus or Greece. More banks and more countries will require bailouts—Slovenia, Spain, Italy, and Malta are on the list. And no one wants to see France on that list. Even Italy is too large to get bailed out by other countries—though it’s rich enough to bail itself out, à la Cyprus [A “Politically Explosive” Secret: Italians Are Over Twice As Wealthy As Germans].

But in Germany, a revolt against these save-the-euro bailouts has been brewing for a while. With elections in September, it’s taking on volume and voices, and the structure of a political party, the Alternative for Germany, not unpalatable radicals but the educated bourgeoisie, and they want to stop the bailouts and dump the euro.

The government is feeling the heat. No one can afford to lose votes. Michelbach’s triple-A club, a line of demarcation in the Eurozone, is one of the reactions. Merkel might benefit from it in the elections. The other four countries might find if appealing, though it will be of dubious appeal in the rest of the Eurozone. But if efforts fail to fix the Eurozone’s problems—and the Eurozone lumbering that way—a tightly knit triple-A club could weather the storm together, more stable and more unified than the Eurozone ever was. And Michelbach had just floated a version of that idea.

Every country in the Eurozone has its own collection of big fat lies that politicians and Eurocrats have served up in order to make the euro and the subsequent bailouts or austerity measures less unappetizing. Here are some from the German point of view.... Ten Big Fat Lies To Keep The Euro Dream Alive

 

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Thu, 04/04/2013 - 08:25 | 3407380 q99x2
q99x2's picture

Save the Eurozone. Kick Goldman Sachs out and repudiate all debt.

Thu, 04/04/2013 - 04:44 | 3407120 ebworthen
ebworthen's picture

France will hang on until the bitter end.

Germany will leave the Euro before they save France or the Euro.

Wed, 04/03/2013 - 20:14 | 3406223 StarTedStackin'
StarTedStackin''s picture

How does the collapse and reformation of the Euro affect PMs? Logic dictates PM's plummet at/by USD EU parity......

 

, although "logic" seems far removed for modern day economics.

 

What makes things different this time? Nothing else to buy?

Wed, 04/03/2013 - 17:33 | 3405607 steve from virginia
steve from virginia's picture

 

 

@Pit:

 

"And a quagmire it is: double-digit unemployment, a Purchasing Managers Index just above Greece’s, new vehicle sales that plunged almost 15% so far this year, a budget deficit that refuses to be brought under control... "

 

Europe is being de-carred the hard way, by the bankrupting of countries. Cars are unproductive, they are simply cost sinks, they must be supported by loans and now the loans cannot be repaid, new loans cannot be obtained. Good grief! 

 

"Now the people have had it. After the TV appearance, his approval rating, ten months into his term, plummeted another 6 points to 31%, a low that scandal-plagued Nicolas Sarkozy took four years to reach. And only 27% approved of his economic policies. “The French simply don’t want austerity,” lamented an unnamed government insider."

 

Like the stupid French have a choice. They either accept austerity and make the best of it or they can endure the hammer-blows from energy deflation. Believe it or not the world does not yet even have net fuel shortages! Watch and see what happens when there are shortages!

 

"France was suffering the consequences of the “socialist experiments” of its government and was becoming less and less competitive, explained Michelbach. He emphasized that France would remain an important partner of Germany. He wasn’t kidding: France buys 10% of Germany’s exports and is crucial to the German economy. But if France didn’t change course, he said, that could become a “serious problem” for the Eurozone."

 

Waah! Germany can't sell its crappy cars. Why? One country is as bankrupt as the others. Point a finger of blame ... at mercantile Germany who profited at the expense of the other European countries ... for a little while. Germany is as dependent upon external credit as Greece. Given a year or so Germany will become ... like Greece in a bunch of other unpleasant ways.

 

There is nothing the Europeans can do to escape their self-created trap ... except conserve energy.

 

 

Thu, 04/04/2013 - 07:25 | 3407262 Non Passaran
Non Passaran's picture

> Believe it or not the world does not yet even have net fuel shortages

There's no such thing as shortages, there's only artificially low or state controlled prices.
People spend too much energy. It's easy to save 20% by being a bit more mindful of one's habits. But why bother when fuel is so cheap. People will start saving once they have to.

Thu, 04/04/2013 - 09:17 | 3407528 De minimus
De minimus's picture

The only fly in your ointment is that if you do economize and successfully reduce your consumption and thereby your costs, they simply raise the price and the end result is, that you are paying more for less anyway.

There are too many people supporting and facilitating advantage by law and regulation and thereby controlling competition and free markets. Your only option is to remove their control of your wallet by removing their control of you and thinking outside the box, relying upon yourself and other like minded people. Of course TPTB won't like this because they ultimately lose in this scenario.

You see these people want what you have and control of you as well and instead of being masked gunmen, they use government and "law" to obtain them. They have great smiles and wonderful personalities which you vote for because your news media cause you to like them, or rather "teach" you to like them. Good dog!

Wed, 04/03/2013 - 23:39 | 3406785 Freddie
Freddie's picture

At least the French run honest polls. Hollande is hated.  Meanwhile - everyone loves the islamic usurper TOTUS because American TV and Hollywood say so.  Drooling idiots watch TV and Hollywood's shit. .

Wed, 04/03/2013 - 16:34 | 3405282 kaiserhoff
kaiserhoff's picture

We'll see what worked shortly,

with the South in a Depression, and money leaving Europe at light speed.

Wed, 04/03/2013 - 16:13 | 3405116 orez65
orez65's picture

Europe's contribution to the world:
1. Colonialism
2. Racism
3. Communism
4. Nazism
5. World War I
6. World War 2
7. The Euro
Fuck these people!!!
Except for French cuisine!
And bull fights!
And Italian cars!
And cod prepared in the Portuguese tradition!
And the Greek islands!
And the French nukes!
And the Portugal coast!
And Picasso paintings!

Wed, 04/03/2013 - 23:24 | 3406754 Freddie
Freddie's picture

How many of those bad things were due to the tribe Europeon bankster families?  Investing in misery and mass murder in Europe for at least 600 years.

Wed, 04/03/2013 - 21:35 | 3406458 thisandthat
thisandthat's picture

'Merica (fuck yeah!) - we contributed that too

Infighting due to artificial borders all over Africa and the Middle East

Brazilian beaches (and biatchez, too!)

Btw, fuck French cuisine. French traditions are long gone - it's now nothing more than just a full blown tourist processing industry - elsewhere is (still) much better.

Wed, 04/03/2013 - 17:57 | 3405715 Flying Tiger Comics
Flying Tiger Comics's picture

The world circus will always need surrender monkeys.

 

Wed, 04/03/2013 - 16:30 | 3405253 Bastiat
Bastiat's picture

. . . And the classical music.

Wed, 04/03/2013 - 16:03 | 3405037 Mototard at Large
Mototard at Large's picture

Methinks there is a new linen of demarcation being built.  But it is between the saver/makers and the taxer/takers.    What we are seeing in Cyprus and Spain is unnerving for many people – especially savers.  The government, the Banks and supra-national organizations are creating new policies that say they can take your savings  http://tinyurl.com/d9d74qf

Wed, 04/03/2013 - 15:05 | 3404678 MaxThrust
MaxThrust's picture

I thought the "N" stood for New. I guess the souther countries could call their euro "The Beuro" the "B"  for Banana

Wed, 04/03/2013 - 14:55 | 3404620 Lordflin
Lordflin's picture

Ponzi scheme breaking down across the globe... time for a major distraction...

Wed, 04/03/2013 - 16:16 | 3405142 Lucius Corneliu...
Lucius Cornelius Sulla's picture

Kim Jung Un -- Gangnam Style

Wed, 04/03/2013 - 14:31 | 3404482 Taterboy
Taterboy's picture

How do you say "Gimmethat" in French

Wed, 04/03/2013 - 15:44 | 3404867 angel_of_joy
angel_of_joy's picture

Je veux mon fric !

Wed, 04/03/2013 - 15:43 | 3404862 web bot
web bot's picture

Donne-moi don ca.

Wed, 04/03/2013 - 14:23 | 3404416 rustymason
rustymason's picture

"Plummeted" six whole points?

Wed, 04/03/2013 - 15:18 | 3404717 Ckierst1
Ckierst1's picture

I suppose that 16% has more presence for those who can't do the math mentally.

Wed, 04/03/2013 - 14:18 | 3404392 adonisdemilo
adonisdemilo's picture

@cycle

The sooner the ECB horses are turned into spaghetti bolognaise or lasagne and the ECB men, and women, given proper jobs as waiters/waitresses the better off everybody will be 

Wed, 04/03/2013 - 15:32 | 3404801 Not Too Important
Not Too Important's picture

"The sooner the ECB horses are turned into spaghetti bolognaise or lasagne and the ECB men, and women, given proper jobs as waiters/waitresses the better off everybody will be "

Like this?

McDonald's want ad demands bachelor's degree, two years experience for cashier

http://washingtonexaminer.com/mcdonalds-want-ad-demands-bachelors-degree...

Wed, 04/03/2013 - 14:43 | 3404553 Cycle
Cycle's picture

Hmm, maybe that's where al the horsemeat in the food supply is coming from.

Wed, 04/03/2013 - 14:23 | 3404321 Kiss My Iceland...
Kiss My Icelandic Ass's picture

"German politicians learned a lesson too: that it worked!

I think it's a bit early to say it worked ...

Thu, 04/04/2013 - 10:34 | 3407851 NoDebt
NoDebt's picture

More like "they got away with it". 

Wed, 04/03/2013 - 21:19 | 3406400 thisandthat
thisandthat's picture

It's now or never - once it goes bust, you won't be able to say it any more...

Wed, 04/03/2013 - 14:43 | 3404557 Matt
Matt's picture

Mission: Accomplished.

Wed, 04/03/2013 - 14:03 | 3404310 Racer
Racer's picture

Strengthen the confidence of people? well if the people haven't pulled their money out of the banks by now then they are truly stupid and deserve their money to be stolen from them, because it will be.

Wed, 04/03/2013 - 13:59 | 3404287 bank guy in Brussels
bank guy in Brussels's picture

Testicle Pit is wrong above in a couple places, for example when he writes:

« ... There are still five in that euro triple-A club: Germany, Austria, the Netherlands, Finland, and Luxembourg. »

Austria is not in the AAA club, Austria lost its AAA rating a while back. It is still considered part of the 'north' due to the fact that it still benefits from an overall economic 'Anschluß' as a Germanic - Northern country, and will likely be kept in the 'northern' euro after the Mediterranean countries leave.

Testicle Pit is also wrong in claiming re the Cyprus confiscation « that it worked ». It is only that the full explosion of the consequences are slightly delayed ... but KA-BOOM for Germany and the rest of the EU.

Wed, 04/03/2013 - 20:44 | 3406299 mendigo
mendigo's picture

Yeah I was somewhat baffled to read that it "worked" for anyone.
The European financial bodies were exposed as lying thieves who favor thier cronies. A substial amount of the money evaporated - I suspect thier take was symbolic. They trashed Cyprus for which they will pay I suspect.

Not meaning to be too trite, I picture them like that Nazi guy in the Raiders of the Lost Ark movie when he finally opens the ark that he managed to take possesion of - he starts out laughing joyously...

Wed, 04/03/2013 - 16:31 | 3405268 Winston Churchill
Winston Churchill's picture

BBIB

Whats the scoop on bank runs from Brussels ?

SWIFT seems overloaded with wire instructions.Delayed 24 hrs so far on mine

Wed, 04/03/2013 - 16:19 | 3405188 The Continental
The Continental's picture

Testicle Pit - LOL

 

The imagery...the imagery.....

Wed, 04/03/2013 - 16:07 | 3405065 Mototard at Large
Mototard at Large's picture

The new spelling for KA-BOOM is DIESEL -BOOM.

 

Different spelling, but same set of delayed consequences.

 

 

Wed, 04/03/2013 - 13:50 | 3404245 Cycle
Cycle's picture

And all the ECB horses and all the ECB men,

Couldn't put the Euro together again.

Wed, 04/03/2013 - 21:52 | 3406508 Buck Johnson
Buck Johnson's picture

I know, and eventually when it falls apart it will be horrible.

Wed, 04/03/2013 - 17:58 | 3405720 Peter Pan
Peter Pan's picture

The only thing the politicians learned is that savings are another source of revenue for cash strapped governments. Why else are so many other jurisdictions readying themselves for such a move?

The biggest lesson that governments are yet to learn, is that they have to shrink themselves and their involvement in the economy.

The success or otherwise of their policies must be gauged only by what percentage of people are employed and how many job vacancies there are.

Wed, 04/03/2013 - 14:18 | 3404398 newworldorder
newworldorder's picture

You are correct in your conclusion. However, each ECB sovereign is standing and may appear healthy. It will take a number of these horses to keel over, their rotting flesh exposed to the sun, for the Euro game to stop. Powerfull forces and vested interests will intervene to keep this ponszi alive.

Wed, 04/03/2013 - 14:38 | 3404515 Cycle
Cycle's picture

Indeed - I am waiting for the meeting where the NEURO takes shape. 'N' for Nordic...

Thu, 04/04/2013 - 01:07 | 3406917 Frozen IcQb
Frozen IcQb's picture

The only viable solution in Europe for both Germany and Russia as creditors of deadbeat states and banks is to join forces. The current Euro Zone (EU) must be split along a horizontal axis combined with the creation of a New Northern Euro currency grouping Germany, Russia, the Netherlands and Norway for starters. This will allow the Med countries to amortize their inflation as a group instead to having to bear the pain singlehandedly.

Thu, 04/04/2013 - 09:11 | 3407509 Son of Loki
Son of Loki's picture

Perhaps the partee is over for Euro 'Deadbeats' but it's still going stong in the usa:

 

No Money Down Car Loans for Buyers

http://www.loansstore.com/car-loans/no-money-down-car-loans.php

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

 

No Money Down New Home Loans

 

http://www.lgihomes.com/no-money-down.cfm

 

It's all Boooooyaaaah! still.

Wed, 04/03/2013 - 14:08 | 3404338 boogerbently
boogerbently's picture

Such a noble name for it, "stability collaboration".

Reminds me of...."alternative lifestyle".

Wed, 04/03/2013 - 16:54 | 3405384 Diogenes
Diogenes's picture

How about "elastic currency" they don't use that much anymore, it sounds too much like "rubber check".

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