Axel Weber Warns "Euro Will Come Down To Earth.. Markets Are Disregarding Risks"

Tyler Durden's picture

It's not all ponies and unicorns in Davos today. Paul Singer's dismal views on financial fragility were followed up by a panel, as The Telegraph's Ambrose Evans-Pritchard reports, that poured cold water on the claims that the European crisis is over. Harvard professor Kenneth Rogoff said the launch of the euro had been a "giant historic mistake, done to soon" but EMU leaders are still refusing to take the necessary steps, and is squandering the "scarce resource" of its youth, badly needed to fortify an aging society as the demographic crunch sets in. But it is ex-Buba head Axel Weber that unleashed the ugly truth: "Markets are currently disregarding risks, particularly in the periphery...Europe is under threat. I am still really concerned."


Via The Telegraph,

A top panel of experts in Davos has poured cold water on claims that the European crisis is over, warning that the eurozone remains stuck in a low-growth debt trap and risks being left on the margins of the global economy by US and China.


Axel Weber, the former head of the German Bundesbank, said the underlying disorder continues to fester and region is likely to face a fresh market attack this year.


"Europe is under threat. I am still really concerned. Markets have improved but the economic situation for most countries has not improved," he said that the World Economic Forum in Davos.




"Markets are currently disregarding risks, particularly in the periphery. I expect some banks not to pass the test despite political pressure. As that becomes clear, there will be a financial reaction in markets," he said.




Harvard professor Kenneth Rogoff said the launch of the euro had been a "giant historic mistake, done to soon" that now requires a degree of fiscal union and a common bank resolution fund to make it work, but EMU leaders are still refusing to take these steps.


"People are no longer talking about the euro falling apart but youth unemployment is really horrific. They can't leave this twisting in wind for another five years," he said.


Mr Rogoff said Europe is squandering the "scarce resource" of its youth, badly needed to fortify an ageing society as the demographic crunch sets in.




Mr Rogoff said debt write-downs across the EMU periphery "will eventually happen" but the longer leaders let the crisis fester with half-measures, the worse damage this will do to European society in the end.


Mr Weber, who resigned from the Bundesbank and the ECB in a dispute over euro debt crisis strategy, said new "bail-in" rules for bond-holders of eurozone banks will cause investors to act pre-emptively, aiming to avoid large losses before the ECB issues its test verdicts.


"We may see that speculators do not wait until November, but bet on winners and losers before that," he said.




The danger is that bank strains will turn the spotlight back on those sovereign states that cannot easily afford to shore up their banking systems. While he did not name any country, Spain, Italy, and Portugal are viewed as vulnerable. Even Ireland may be at risk again with a debt ratio of 125pc of GDP. "This is the key issue this year," he said


Mr Weber warned EU leaders not to have "dangerous delusions" or become complacent about recovery. "Things feel better than they are. The recovery too weak to generate jobs. It's not about whether things are improving: the levels of growth, jobs, and GDP are way worse than before the crisis," he said.




Pierre Nanterme, chief executive of the French group Accenture, said Europe is losing the great battle for competitiveness, and risks a perma-slump...  "A lot is at stake. If in 12 to 24 months no radical steps are taken to break the curse, we might have not just five, ten, but twenty years of a low-growth sluggish situation in Europe," he said.




Mr Weber retorted that the euro will come down to earth as the tightening by the US Federal Reserve and other central banks leave Europe as the odd man out. "The ECB has an easing bias. Fast forward another year or two, and relative monetary policy will become obvious to everybody," he said.

We suspect these messages will not reach Samaras or Barroso... Meanwhile Spanish, Irish, and Italian yields will cross US Treasuries any day now at this pace of complacency...

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TeamDepends's picture

Ees okay, ze youth don't really want jobs.

NoDebt's picture

Ultimately, it's what's happening to the youth across ALL developed nations, to a greater or lesser extent, that will take this house of cards down.  We've done the financial equivalent of eating our children.  There is no next generation to pick up the mantle and carry it forward.  

onelight's picture

Is it really the dawn of a new era, the Brave new World of the New New Left?

Gist: Millennials don't remember Reagan, they don't live in his world, as Bill Clinton had to do, and as most politicians still do, except for Warren and Deblasio etc...times have changed, they're like the GI generation in the 1930's well before they found their destiny (acc. to that narrative), they have a quasi-communitarian ethos and feel screwed by the status quo, and many of them find socialism interesting...and they will be 25-30% of the vote for the next 2 decades...

Hard to imagine they don't go for the socialism redux experiment, at some point, or whatever mix-and-match left-tone authoritarian program prevails.

Even so, slowly but surely the other side is finding its way toward normalcy: be it ever so early, here's some Millennial-friendly political messaging, coming from a Millennial Republican presently in state office, 1 of 10-12 others in Wash state...start of a trend?

Somehow things need to evolve, or half the people will check out if they've not already, and not just in Hotel California..

The.Harmless.Who's picture


Well, this generation and the next shouldn't carry anything. 

Fuck the banks and their usury. 


Here's a solution - EVERYONE take out a credit card (or more): LOAD IT / THEM UP WITH GOLD PURCHASES (from bullion dealers).


and when the repayment requests come in, tell the banks to fuck off - in unison. 


Imagine if everyone with a Credit Card purchased bullion rather than plastic ipads and such like, and then told the banks to fuck off. 


There. Banks get fucked up - we as tax payers and citizens tell them to fuck off and make it clear to "law makers" that justice will be done if they dare to bail-in or bail-out the fuckers.


End product - bank die, and we get some nice gold gratis. 


There - problem solved.


booboo's picture

"dangerous delusions", I believe that is Mr. Barroso' Protective Details code name.

"Dangerous Delusions is on the move, pull up the limo and look lively you pussies, were moving out, butt sex party at the Monkey Palace, Porkins watch your six there's a homeless guy that looks sketch."

Sudden Debt's picture

nono, they'll blame the robots!

wanne bet? :)

FieldingMellish's picture

Euro puke = dollar soar = gold puke.

stant's picture

euro didnt have a common bond = failure

kaiserhoff's picture

 Meanwhile Spanish, Irish, and Italian yields will cross US Treasuries any day now at this pace of complacency...

Not sure I understand, Tyler.  Are you saying that's not natural;)

kaiserhoff's picture

I always thought Axel was a cool name.  Maybe in my next life.

Axel Vilhelm von Kaiserhoff..., needs work.

Maybe if Mad King Ludwig's castle came with it?


Dr Benway's picture

Agree. Alex, Felix and Maximilian are pretty cool names too.

gwar5's picture

Axel Weber, "... Markets are disregarding Facts."

Cognitive Dissonance's picture

"Ummmmm....Excuse me, but the music is still playing so I gots to dance my fool head off." - Jamie Dimon

Cabreado's picture

So then, those who get too excited in their proclamations of a concerted takedown need to investigate more thoroughly the endgame of the pathologically self-absorbed in places of influence and control.



Richard Whitney's picture

Watch markets after Davos breaks camp. 

order66's picture

Ah...the bliss of Moral Hazzard. Thanks TARP.

exartizo's picture

What bullshit.

There is nothing CURRENTLY in Europe that the MSM, financial elite, and government stooges cannot handle, just as they have done here.

Unexpected WAR will change that.

Consider the First American Great Depression.

What the controlling elite lacked then was control over the government, the markets, and the MSM.

Today, in the middle of the Second Great American Depression in early 2014 they now have those tools.

Nothing is as it seems and things are very different than they were.

kaiserhoff's picture

Oddly enough, I see where you are going with that.  Europe is too diverse for generalizations.  Hell, Germany is too diverse to say much about more that one region at a time.

Having said that, I think 50% youth unemployment is a brick wall.  Youth is a wasting asset.  The chicks know that even if some of the dudes don't.  This will get ugly, sooner rather than later.

Advoc8tr's picture

scary shit ... the only ones left on the field let alone in the game will be the little Oligarch clones :(

razorthin's picture

If by "markets" you central bank lunatics, yes they are!  Keep the casino out of it, it is just following cb orders.

new game's picture

churn out new and old financial products, churn moar profit, derive moar derivitives, churn moar, moar and keep it going with moar debt creation. til, hmmm, some people on the short end lose it all and lose it...

new game's picture

D. devoid

A. adults

V. void

O. of

S. sympathy





prains's picture

D.oing A.ssphyxiation V.all O.ofs S.atime

exartizo's picture

As Tyler(s) have eloquently stated, we are engaged in nothing short of class warfare.

The very wealthy are continuing to Decidedly Deliberately Debilitate the middle class. The poor have nothing to debilitate. But their lot has also Declined Dramatically over the past decade.

No big news there if you are a ZH'er.

What is interesting is that what many of us were taught in High School economics classes about "free markets" and "free competitive capitalist structures" and "supply and demand in a free market environment" were proven a Complete And Total Lie when the Banksters' hand was forced in 2008.

The suspension of the Mark to Market rule by the banks (showing that the United Stated government is indeed owned lock, stock and barrel by the Banksters) was a Watershed Moment in the history of the United States of America.

The Banks had to come out from behind the Puppet Strings for only one of the first times on record for the general public to see.

Not many were watching.

From that point it is very easy to connect the dots.

prains's picture

Ronnie Raygun made it pretty easy to see as well but the hemp was much stronger back then

Paracelsus's picture

This quite makes me want to puke.We went thru this in the Brazil debt crisis in the 80's.

No more loans to anyone until we see what kind of bank accounts they have off-shore.

Marcos,Somoza,Idi Amin,Selassie,Diem,Thieu,Suharto,etc. etc.

Kick the can down the road forever only don't default.

Interesting thing is now the ordinary person can take a peek behind the curtain.

Watch the CDS ramp on a country that is in "difficulty".

Too bad the FED never has to pay for its' transgressions.

And to think the whole mess could have been avoided by putting several thousand people behind bars for a good twenty year stretch.Moral hazard here we come....

ReactionToClosedMinds's picture

how many here at Zero Hedge have read about the crises going back to the LatAm debt crisie that SecTreasury Brady nobly negated (Brady was the last talented & dedicated public servat in the old way).  To be cynical, Brady knew that certain of his former competitors had sold a bill of goods into the capital markets.  Fast forward, Brady departs and eventually one Rbt Rubin takes over the Treasury ........ Jon Corzine game on.

In my lifetime, Citibank has been explicitly bailed out three times and more practically has been bailed out 5 or 6 times.  Read Peter Schweizer,,,,,, if you do not physically vomit then you are either a lobbyists, a dupe, a fool or an idealogue.

Ghordius's picture

from AEP's Telegraph article: "Mr Rogoff said it would be much easier for Europe to cope if the euro exchange rate was $1.10 to the dollar rather than $1.35, up 8pc in trade-weighted terms in the last 18 months."

interesting. so Rogoff is asking for a devaluation. what for? to increase exports? the eurozone has already a positive balance of trade. and we are in the middle of a currency war

Ghordius's picture

further, "Mr Weber retorted that the euro will come down to earth as the tightening by the US Federal Reserve and other central banks leave Europe as the odd man out. "The ECB has an easing bias. Fast forward another year or two, and relative monetary policy will become obvious to everybody," he said."

meanwhile, the ECB with an "easing bias" is really tightening, and the FED's "tightening" is 10 billion less easing per month. if Weber is talking about the next two years, then for sure not extrapolating from the current trajectories

Martel's picture

The stress tests don't matter at all, because they're 100% political. Every bank will pass them with flying colors, just like last time. The countries with bad banks are also the ones with most debt. Since nobody wants sovereign defaults, the debtor countries got the Brussels by the balls.

disabledvet's picture

there's a lack of "anti depression infrastructure." no FDIC, no European Treasury, no "wind down authorities" ala the USA and the S&L crisis, TARP, TALF, etc. I would argue nationalizations are right around the corner...although in Germany and Italy that won't be easy (for completely opposite reasons.) Could get a Nordic currency Bloc.....which would be a direct competitor to the euro. The Pound as well.

Bearwagon's picture

Those are all braindead idiots. One has to look no further than wages, to know that all of europe, including germany, is nowhere else but in recession, soon to be an outright depression. Just wait for this cesspool to implode.

satoshi101's picture

Well Europe had a real good 50 years, I remember back in the day they used to have a saying in ITALY, "The tourists will always come, there is only one Rome, ... Ufizzi"...

Well something has happened, and they're not coming,

What's a mother to do? Why trade shows in CHINA, I kid you not Europe is doing shows in Beijing to get Chinese tourists to go see Europe.

I always laugh,cuz I know chinese only tour for 2 reasons, gambling or sex.

The USA has potential designate the entire USA a CASINO, and legalize prostitution so little white girls can service chinese tourists for a $1/trick. The USA will once again become a TOURIST MECCA.

Ghordius's picture

are you talking about 2012 or 2013? Tourism to Italy is currently catching up quite nicely. Rome is at it's limits, bursting at it's seams

it's the American tourist that is missing, and the "real good years" were those when books were sold with titles like "Travel Europe with $1 per day"

btw, of course tourist organizations do tourist info shows. it's a biz

Ghordius's picture

bearwagon, the eurozone is currently in a mild deflation. really so, not just statistics. where do you expect wages to go in such an environment?

Bearwagon's picture

You know, the point is that I wouldn't expect them to go anywhere else, regardless of environment. I do not want to argue with you, but I regard sinking wages as a primary reason for said deflation.

Ghordius's picture

a valid perspective, imho. and partly a result of job competion from overseas

Herdee's picture

The Fed screwed Germany.They've got the old currency printed and ready to go but no gold to back it.England and Canada are two other examples of national sellouts to con artists.

falak pema's picture

Markets have improved as the debt is hidden under the carpet; like for US but there they have privilege of reserve status and BIG GUN. 

Europe's nations cannot take on any more public debt.

The only issue will be to burn the banks and the rich : slowly and down a slippery turnstiled highway with many round abouts; aka bitching and clawing banks being brolied and spoiled via bail ins.

In the meantime we are truly in the economic doldrums as this paradigm has to change and THAT is beyond current Europe's divided reach, as surrogate continent attached to the chains of Pax Americana NWO.

Whereas today the rich sing : this new financialised world is our playground and WE WILL INVENT the new world ! ...Good luck with that! 

The DCs will probably be first in line if the bubble bursts, like Brazil, Turkey, indonesia and Pakistan. 

WHo knows when and where this current print and dump currency and debt war will end. But it will end one day. The current dystopian trend is a long term one as monetary, financial and energy paradigms are all corrupted with no true issue in sight. (Not saying it is not around the corner but that corner the NWO people don't want to take!)

Social and political consequences are like those for "hors piste" elite skiers running ahead of an impending avalanche they've initiated, hoping it will miss them.