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The 10 Things Germany Needs To Do To Save The Eurozone (And Itself)
Submitted by Daniuel Stelter via The Globalist.com,
The political pressure on Germany is rising in Europe. The country faces a choice: Continue business as usual or change the strategy?
Only the latter option may give it real influence on shaping the future course of economic and political affairs in Europe. Playing defense is the comfortable choice, but it may be the wrong strategy.
What needs to be done? Below is a proposal for saving the Eurozone in a way that would safeguard Germany’s interests, too:
1. Admit the facts: Policymakers need to communicate the message very clearly that between 3.0 and 5.0 trillion Euros of government and private debt in Europe will not be served in an orderly way. This excess debt needs to be written off.
2. Pool the debt overhang: Excess debt should be pooled into a debt redemption fund, with all the Eurozone countries bearing joint liability for it.
3. Pay off the debt: Start an orderly process for paying off this debt over a period of at least 20 years. Such longer maturity periods will help to reduce the cost saving pressures that many Eurozone countries are facing.
4. Issue Eurobonds: The debt relief fund (see #2 above) will be refinanced by Eurobonds specifically issued for this purpose. These bonds, with joint liability of all Eurozone countries, will have long maturity periods and low coupon rates and should be amortized on an annual basis.
5. ECB intervention: The ECB could purchase some of these bonds, thus ensuring long-term financing for this legacy debt at low interest rates. The risks are properly balanced: The greater the portion of these bonds purchased by the ECB, the smaller will be the burden on the domestic budgets of the member countries.
6. Show solidarity: Countries like Greece, Ireland, Portugal and Spain are unlikely to be in a financial position to be able to deal with their debt overhang by themselves. Better-positioned countries, especially Germany, will need to make generous contributions to counter this.
Economically, this is equivalent to offering debt waivers – though in this case, extended over a longer and hence more manageable – maturity period. Hard though this may be to swallow politically, it is the mature choice to be made. Leadership means to look for what’s right for the continent over the long haul.
7. Cap the liability: A mandatory feature of socializing the unserviceable debt across the Eurozone in this manner is the establishment of a fiscal union, in which individual member states give up their budget sovereignty.
Alternatively, there needs to be a clear understanding that, as in the United States, there will be no joint liability for servicing the debt obligations of individual member states in the future. In the latter case, all member states would start with debt levels of 60% of their GDP.
Capital markets would then be free to determine the interest rates on the outstanding debt – based purely on the creditworthiness characteristics of the respective countries and without interference from the ECB.
8. Implement real reforms: Relieved of the pressure of severe austerity measures, Eurozone countries would find it easier to agree upon a common growth agenda: Free up and mobilize the labor market, adopt targeted immigration policies, make investments in education, innovation and infrastructure.
On the face of it, these points sound pretty similar to the requests by the critics of the current strategy. Both European “rockstar economists,” Varoufakis and Piketty have suggested similar things — but with two important differences:
9. Varoufakis and Piketty want to have mutualization and monetization without any economic reforms and agreements with the creditors. They just want to get the help without offering anything in return.
If Germany takes the lead, it will be in a much better position to ask for something in return. That will also generate political goodwill with the European public.
10. They not only want to clean up the existing mess, but rather want to get a blank check for future spending. If Germany took the lead on debt restructuring, it could insist on either full integration or a return to the no-bail-out principle similar to the United States, where no state has to guarantee the debts of another state.
No doubt, the financial costs of these moves to Germany could turn out to be significant. Depending on the total value of debt that is mutualized and the conditions under which the debt relief fund is refinanced, Germany’s liability could run up to about a trillion Euros.
Large as that sounds, it is almost exactly as much as the estimated adverse impact of the energy transformation (“Energiewende”) that Germany hastily embarked upon.
Unpopular decisions
I can already hear the critics shouting: Isn’t this unfair towards those who took care to keep savings? Why on earth should we be bailing out the creditors? Isn’t the ECB intervention tantamount to direct public sector financing, which in turn would have inflationary repercussions? How can we be sure that we won’t be in this same mess again in a few years? Why should Germany be doing this at all?
The answer to the first of these questions is easy: Yes, in fact it is really unfair! But the damage has already been done and all that we can decide upon now is how we want to bear it out. By unilaterally stopping the debtors from making repayments? By fueling inflation? Or rather by means of an orderly process? Given the potential collateral damage of the first two of these, I strongly favor the adoption of an orderly process.
Likewise, it is true that this would result in bailing out the creditors – in this particular case, banks and insurance companies. But here, too, what would be the alternative?
If we let banks bear the brunt of it, their losses would have to be salvaged by taxpayers’ money. Going for creditor participation – as in the case of Cyprus – would also have a severe adverse impact on the German depositors.
And if it is the insurance companies that lose out, their customers would end up bearing losses either directly, as in case of life insurance, or indirectly through higher premiums, as in the case of property insurance.
In short, there really are no scenarios where Germany exits from the present Eurozone mess in unblemished form. The only relevant question is what’s the least bad alternative?
What about the ECB?
Getting the ECB involved in order to resolve this issue will also be viewed with a lot of skepticism, and quite rightly so. Are we again being confronted with the inevitable prospect of hyperinflation, following direct injection of funds into the public sector, as seen in Weimar before?
Contrary to the ECB’s recent decision, which raises the funding cap for Greek banks by €500 million, the mechanism proposed above would be a one-off action only. Its financial scale will have been defined and well-confined in advance.
Getting rid of the debt overhang problems would boost the European recovery, thus making further intervention by the ECB redundant. Finally, it would be possible to assess the monetary impact of such a proposal with much greater accuracy than is the case in the current scenario, where there seems to be no foreseeable end to the ECB interventions.
Make no mistake about it: Implementing the above measures is still no guarantee that we will not face a financial crisis again.
But that only makes it all the more imperative that, when negotiating the terms of the debt relief fund, binding provisions are incorporated which foster comprehensive European integration and/or enforce a no-bail-out clause.
These terms would then be equally binding upon future governments, too. In the light of recent developments, there might understandably be reservations regarding the feasibility of such a proposal. However, as long as we are committed to the Euro, we have no better alternative.
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Crazy talk.
I visited Germany a few times, great place
Yes, it is a great place, pity about the Germans.
#7 = mission accomplished for EU technocrats who have planned this "crissis" from the start in order to force EU nations to merge into a single unified budget fiscal union. USofE
Issue Eurobonds. What crap.
Yes.
And don't one has to love the statement between 3.0 and 5.0 trillion Euros of government and private debt in Europe will not be served in an orderly way
3 euphemisms in one sentence, not bad!!
- Only 3.0 and 5.0 trillion? How did he come up with that low number?
- government and private debt Oh, so the technocrats are already lumping some private bailouts into that too?
- not be served in an orderly way or maybe not at all?
Your last word needs to be changed to "Auslander", to be accurate.
'Merica is the place to send the unwashed masses, the sick, the poor, the uneducated.
The USSA socialists got you covered. Obamacare, EBT, Sec.8, Medicaid, SNAP etc, has them covered for a non-taxing lifestyle.
Bet you didn't know that Asylum seekers in Germany are NOT allowed to work. They got welfare housing and food.
They boost their lifestyle by selling roses at dinner in restaurants and bars, or in the Vice trade (drugs, sex slavery of E. European girls and women).
Spare me your PC 'Merican social bullshit. The Agenda is clear: the steady and relentless destruction of Western Society, it's cultural and national boundaries and norms, to reduce the whole planet to one large peasant camp.
It should be clear by now that, rather than raising the 3rd World on its own efforts and merits, they are simultaneously lowering the level of the 1st world. All part of the NWO plan of OWG.
Germans need to smile more.
What,s to smile about when you are a defeated and occupied tribe made to feel guilty for some attrocity that never happened , your children are lied to and dragged constantly around hoax museums and made to feel generational guilt for what their tribe did to the chosenite masters and at the same time they are never EVER taught about the very real attrocities committed by the servants of the Bankers, the victors, against the Germanic peoples, the most abused people of the twentieth century. How many young German women know that their grandmothers were gang raped over a 2 year period ? And how many of todays German people were born or are decended from that deliberate policy of mass rape ? Can you imagine the anger if/when this becomes known ?
Germany is a cool place to visits. The story brings up very good point most of witch I don't see happening so I will bet on the break up of the EU. I would also add that if most of Europe excluding a couple of the Northern EU members don't start having babies and a lot of them soon they are done.
Pay off the debt? Impossible.
Repudiate the debt and let the banksters eat it. If the banks fail, buy off the assets and pay the depositors up to 100k. Jail those who deceived and start over.
+1 "Crazy talk" indeed. The reasoning that some bring behind their continuos calls for EuroBonds is incredible
blablabla... EuroBonds. blablabla... you must issue EuroBonds. blablabla... if you don't issue Eurobonds, the sky will fall on your heads
thanks, but no, thanks
EuroBonds means an EU Treasury, an EU Army and EU taxes
thanks, but no, thanks
oh, I nearly missed that one:
"Show solidarity: Countries like Greece, Ireland, Portugal and Spain are unlikely to be in a financial position to be able to deal with their debt overhang by themselves. Better-positioned countries, especially Germany, will need to make generous contributions to counter this."
that's the "S-word" that makes our friend Haus-Targaryen go frantic
Ireland, Portugal and Spain's governments explained in no unclear terms to Greece's government that they did their homework and aren't interested
thanks, but no, thanks
It's either default of selected countries, or Germany leaving the Euro. Any form of "solidarity" will only postpone the natural general collapse a bit longer (but not too long). There will be no European real growth under the Euro deadly shadow... it's that simple !
This should be titled "10 things that ain't gonna happen". No matter about the cheerleading for the EU it's still every country for itself and Germany knows there are limits. I don't think the northern half will bankrupt itself for the southern half, no matter what they proclaim.
You be our bitch, Germany.
Don't make us down another plane.
Do you know how expensive it is to mind fuck a suicide?
Pure comedy. Thanks for the laugh.
No shit, imagine the shit hitting the fan when Germany comes clean, and then pseudo dictates who gets their and who does not.
Total bullshit.
And this is why we are going down the drain. The emphasis is on saving Europe rather than the Europeans.
Saving "bankers and policians" is more like it. That is what this is all about. Note the cute "give up your sovereignty" hint in the remedy. Yeah, that will go over well.
They can no longer run the scum out of their respective nations that are behind their destruction. Many Europeans are starting to see who is responsible for the failed multiculturalism but fear speaking their minds on lest they face prosecution under hate laws.
I have Swedish friends who have made a total 180 degree change in their attitudes over the last decade. They were so politically correct when I met them but now they clearly see where their society is headed. They are a minority now but representative of the growing self awareness.
I wonder what the catalyst will be that leads to the expulsion of a very special group from most European countries?
11. Ask their pilots to please stop driving airplanes filled with people into mountains.
Crazy talk indeed. None of this is remotely feasible without a true political union.
As soon as the ECB buys Eurobonds, it's game on. That is what all this shit has been about.
No mention of Russia and Ukraine which because of US Neocon meddling is costing Germany and other EU countries negative energy, trade and financial impact. Germany, as strongest nation in EU, should lead coalition to reverse NATO military actions in Ukraine. Otherwise, EU , not US, will bear the negative consequences. Nuland has already expressed her feelings towards EU while Merkel was busy getting a facial.
A world wide debt jubliee is sounding pretty good right now. It certainly sounds better than vaporizing a few billion people if this continues on.
Now you begin to understand why believing evolution and billions of years is not only a lie, but dangerous. It leads to a few psychopaths(i.e. Bill Gates, Ted Turner, Rockefeller's, Obama's, Clinton's Draghi's Merkle's, Sorros, et al), deciding that to save the planet and nature to last thousands and millions of more years, then 95% of the population must be exterminated and only the best gene pool protected as determined by the worst gene pool.
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God was there and the only one there when HE created, He does not lie, and He wrote the end of human history from the beginning and what he tells us and warns us is for our good, not to be a kill-joy. Consider if everyone obeyed the commandments 6-10 for just 2 generations; would the world be better or worse? Not even hard to look at and know the answer; especially given the current worldwide trajectory morally, which translates in every aspect of an individual, society, nations and world.
An article which purports to want to save Europe but does not mention the tribe's deliberate efforts to destroy it is a waste of time, a trick of misdirection. The tribe and its banking system is the problem, not the solution. Get rid of both; problem solved.
Hate Fact.
Current euro-puppets will never do such things. They need to be replaced immediately.
Item 3 = Paying off the debt over a period od 20 years is = to condemning a country to 20 years of Recession . For example this year Italy will be forced to start repaying the debt of 2,2, trillions . Italy already pays at least 80 billions just in interest to service the debt . So a quick calculations to reduce the debt to 60 % ( estimated level of acceptable debt by the gurus of the EU ) is to reduce the debt to 1,32 trillions . This means that 880 billions have to be repaid in 20 years at the rate of about 44 billions every year . 44 for payment of the debt + 80 of interest = to 124 billions spent only to repay the debt and stay in the EU . This burden for a country that is in recession now and it is likely to be for another 20 years .
The guru of the EU , how long do they think that a country will exist in perpetual recession ? Already young and qualified italians are escaping and are being replaced by Africans and Asian with low skils .. This is madness , this might be the policy dictated by the Tribe from hell , but is sucks !
I suggest that al national debts be wiped out ,
Are you Germans men or whores?
Because you look like a bunch of whores.
Whores without a shred of dignity.
Many Americans share your shame.
But the comforts of being a whore are hard to walk away from.
There comes a time when you just have to get into your bunker. I don't have a bunker so I'm going back to bed. Spring break bitchez.
The problem with points 2-6 is that they give German citizens open-ended financial responsibility for the fiscal decisions of other countries. Dividing the sovereign bonds is no help.
This is PRECISELY why the US is in such trouble...because a wide variety of entities leverage this structure for their benefit, but the general populace's detriment.
Ask yourself simply, "For whom has the FED printed money?"
Are certain 'privileged' states included? Yes they are, NorthEastern states, and California.
Are certain 'privileged' cities included? Yes they are. They've printed for cities like Chicago, New York, etc for decades.
Are certain 'privileged' industries included? Yes they are.
So number 7, "Cap the Liability" is misnamed. It doesn't cap the liability. Both experience and theory mutually confirm it.
The result will eventually be moral collapse...because when open-ended punishment is offered for virtuous productive behavior, eventually everyone will cease producing. Collapse will happen long before the last virtuous person gives in. The problem is the structure itself.
Socialism, in a word, IS MORAL HAZARD. It is poison to a viable, survivable, humanity.
MORAL HAZARD.
Also; that assumes they will not continue to add more debt issuance, which all know they would. This is typical 101 Political "feel good and join together" garbage.
Who wrothe this? Juncker???
as a rule germans are rasist
oh and one more thing:
http://www.nationaldebtclocks.org/debtclock/germany
As a rule all people are racist because they foolishly believe that man evolved from "the goo to you via the zoo". The starting point of mankind will reflect your worldview. Anyone who does not believe the creation account in Genesis, which makes the earth very young, which scientist can validate by the detection of the radiation afterglow, that could not be detected & could not be there in the quanities that scientists have documented (they know the truth, but hate the word of God; therefore ignore the truth) if the world were millions and billions of years old.
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The end is genocide and eugenics because if you want to save the multimillion year earth, given it finite resources, then you must purge the population to save the race and be very selective to make sure those "bad genes" are not commingled with those "better genes". And who determines what is bad and good? Not you and not I, we are among the "bad gene pool". That has been and will always be the outcome of the lie of macro evolution. Eugenics and genocide is man's history and with new technologies; this will be performed in more sinister ways, such as super viruses and vaccines and just look at the past and the abortion industry; all a result of a misinformed academic, scientific and populace community; who deny the truth and have become wise in their own eyes!!
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Study the history of eugenics; it gave us mass sterilization, abortion on demand, multiple genocides and it goes on, then compare that to what God has told us and has warned us, not to be a kill-joy, but for our good. Do not give me the non-sense about Christians being mass -murderers. You must know what is a Christian; most think Roman Catholicism is Christian; yet it is closer to Islam than Christianity in its practices and has officially pronounced damnation on the gospel at the Council of Trent. 98% of what people see or hear and therefore erroneously believe as Christianity is not remotely close to the message God has given to mankind as written in Scripture.
Well, at least he kept it to 10 rules. Now all he or Germany needs to do is to turn water into wine.
They should create a structure where a localized default can happen without bringing everyone to their knees. All this monolithic organization crap just doesn't work. It doesn't work in nature. It doesn't work on paper. It doesn't work in financial practice. Multiple smaller systems are more stable as a whole than one giant one. But they are too greedy and this is about some pay to play asshats not wanting to take a loss on Greek bonds. Extending this Greek nonsense is purely corruption.
EVERY NATION FOR ITSELF - DO the EU members have any courage to sever the relationship that enslaves? Look at the goals of the EC (European Commission) and ask yourself where this leads to when if fully implemented. Commission priority - Do they want to look like the US and be more enslaved in all areas of academics, defense, medicine and all the rest of the immoral debauchery we have in the US? Do they want a dictatorship run by a puppet and non-elected puppet parliment as we have in the US; only a puppet President with a puppet Congress? God have mercy on mankind.
A Stronger Global Actor (Click link)-
Germany will and already has unofficially turned East and why should they bear the burden that Draghi and the EC has created?
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We are witnessing the failed EU experiment that made many rich get richer, thus the QE done by the EC to protect the wealthiest bad investments (European Union Commission).
The recipe would work to a certain extent but lower the level of German wealth (per individual) to somewhere between Spain and Romania - something that the electorate does not want to happen. The european debt as such is by far too big to be ever repaid. This is nothing but a dream. At some point the debt needs to be written off.
Love money,love authority, love power...I can never get enough of it!! (drooling all over myself) That is ALL people; just few have the means & authority. Got Christ? Why die in your rebellion (sin, is lawlessness is rebellion against GOD) for that which fades away? Humans are very stupid in so many ways; even the good a man does is bad-good because it is most often done for self-gratification out of a love that has conditions attached. God's love is unconditional to those who trust, have faith, in the finished work of Christ.
To save the Eurozone germany needs to leave it! The weaker nations cant live with a strong Euro caused by germany (and a few other strong nations) being in the zone. If poor countries like Greece try to leave their new Drachmas will devalue by 50% but their debts are in Euros which will then increase by 50%. Then they'll need to default with consequent massive reductions in living standards - que the revolutions and juntas. If Germany leaves the Euro, then it solves the poor nations problems as the euro will devalue but their debts will devalue at the same rate - then they can become competitive and rebuild. Meanwhile germany's new Marks will revalue higher making their euro debt cheaper. germany will then have to compete harder with its strong currency and may rebalance so as not to run such an unbalanced export surplus - it may suffer a recession hence the Germans selfishly refuse to rescue the Eurozone by leaving it. They'll just wait for the southerners to chuck them out at the point of a bayonet.
"Continue business as usual or change the strategy?"
It will be the first. But in Germany we call it ´sit and wait and do nothing´ Like Kohl, like Merkel.
BRUSSELS GIVES GREECE 5 DAYS TO PRESENT STRUCTURAL REFORMS FOR THE NEXT 800 YEARS
Germany opposes the European demand, claiming that "a plan for 8 centuries lacks strategic vision".
Source: www.financialpaparazzi.com
"in which individual member states give up their budget sovereignty."
lost me there...ain't happening
The entire system needs an enema. This is what should have happened in 2008 but that would have crashed the entire system....so....we are left with stop gap measures to keep us limping along until things break completely. We cannot (apparently) survive a cleansing bout of recession and deflation. We are pedal to the metal, do whatever it takes, until it all flies apart.........THEN we can begin to fix things.
An investors point of view. Comfortable but unrealistic.
We better should leave the Eurozone and transfer the "leadership" to Greece ;-)
For those that haven't seen it,the same thing applies to the European Union.Obama will run the national security threat to $20 trillion by the time he's done.You wonder if there's a plan by these economic morons to help destroy Europe and the United States.
http://www.zerohedge.com/news/debt-bomb-bailout-oooh-you-turn-me
Don't think it's worth worrying about?Demon-ocracy will show you just how big.
http://demonocracy.info/
The 2 Things Germany Needs To Do To Save The Eurozone (And Itself)
1. END SOCIALISM
2. Break tight connection between labor unions and politicians.
And when these amazingly brilliant ideas were implemented, then exponential growth because of compound interest on debt based money becomes sustenable on a limited planet.
/s