The Beginning Of The European Endgame

Tyler Durden's picture

From Peter Tchir of TF Market Advisors

ECB Bond-Buying Should End With New EFSF, German Motion Says

I think this is one of the most important bits of news on the day. This and the fact that the Dutch finally said something - and it wasn't positive.

I have been arguing that the solutions create contagion rather than prevent it.  I've also argued that the ECB and EFSF and to some extent the IMF are all the same pools of money.

Now that Europe has actually tried to do some calculations, which it is apparent that up until last week, they hadn't done, they are coming to the same conclusion.

On Friday the "haircuts" on Greece get serious. No more bogus high coupon principal protected notes - but real notional reductions of 50 per cent or more.

I believe the ECB has a portfolio of 55 billion of Greek debt. If average price was 80 then that is a 16.5 billion actual loss.

ECB, unlike our beloved FED, doesn't want to just print money so they make a capital call on their members. Yes, the same members that back the EFSF.

How many of those members even remembered the ECB can call for additional capital (it's why they are so happy to employ the double down don't frown trading strategy).

The terms of ECB capital calls are worse than EFSF because they are joint and several. If countries don't meet their obligations they don't go away, they get passed to another country.

So as ECB loads up on PIIGS debt and losses or haircuts would be paid for by the non problem countries - in addition to their EFSF obligations.

Germany maybe has learned not to overextend and is scared to pile this (previously ignored) liability on top of it's EFSF guarantees. At least EFSF is something they have control over.

France I think was planning on loading up the ECB with so much debt they would just capitulate and print money.

Other people have more knowledge of the ECB but the ECB has things in common with the FED but also has similarities to the EFSF.  I think this is an important turning point for the politicians in Germany and other prudent countries and they are trying to limit how much they can lose in this last ditch attempt to avoid making countries and banks and investors pay for their mistakes.


From Bloomberg:

ECB’s Need for Bond-Buying Should End With New EFSF, Bundestag Motion Says

German lawmakers are set to vote on a non-binding call for the European Central Bank to end its secondary-market bond-buying program once the enhanced European rescue fund is enacted,

The joint motion, agreed on by the government parties and the main opposition in Berlin today, sets out terms for the lower house, the Bundestag, supporting the European Financial Stability Facility in a vote tomorrow. It “notes that the need” for the ECB to continue its secondary-market program ends with the new fund’s enactment and urges Chancellor Angela Merkel’s government to “respect” the ban on central-bank credits as well as primary-market purchases by the ECB as the EFSF is set in stone.

“For us it was a condition that the Bundestag, respecting the central bank’s independence, has a clear position: no more unconditional debt-buying by the ECB,” Carsten Schneider, the opposition Social Democratic Party’s budget spokesman in parliament, told reporters after a budget committee meeting.

The motion sets criteria to which Merkel must adhere when she goes to Brussels after the EFSF vote tomorrow for a second European summit in four days. The budget committee or the full chamber must be allowed to vote once more after leverage models have been transformed into guidelines for the fund, according to the text. It also stipulates that systemically important banks re-capitalize by June 30, 2012.

‘Non-Standard Methods’

Merkel said earlier today that Germany opposed the inclusion of a reference to the ECB continuing its bond-buying program in a draft text prepared for tomorrow’s summit. While officials are still working on the text, “the wording doesn’t state that there should be more secondary-market purchases, but rather that the non-standard methods of the European Central Bank could be pursued further,” she said.

The motion, drafted by ruling coalition lawmakers and distributed to reporters by Merkel’s Christian Democratic Union, aims to attract the broadest possible support from the opposition Social Democrats and Greens in tomorrow’s vote by seeking to curtail the potential demands on German taxpayers of the enhanced fund.

These include ensuring strict adherence to the EFSF’s guarantee framework, with a cap on German guarantees at the existing level of 211 billion euros ($293 billion), and ruling out “optimizations” of the EFSF that can alter its framework treaty.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
westboundnup's picture

It's over Johnny . . . IT'S OVER!

Ahmeexnal's picture

Netherlands told Merkel "fuck off beyotch" and is going back to the Gulden.

About effin time.

philipat's picture

But the attached Organisation chart shows the real situation in Europe:

Chuck Walla's picture

Now that chart is truly funny and truly true.

DutchDude's picture

whatwhut??? what did i miss?

PicassoInActions's picture

its not over till its over. we were thinking it was over in 2008... we are in 2011.

I am sure they will be another miracle devices like Ipad, FED, ECB, BOJ and so on.... Miracles just don't stop comming in...

philipat's picture

You mean Merkel is the Fat lady?

Ghordius's picture

wait until she sings!


I usually enjoy all Tchir posts - this one is not one of the best and I disagree.

The option of calling for capital of the ECB is only for cases where the ECB needs to "defend" a certain level of the EUR. Since we are all in the "down" leg of the currency wars, there is no need at all - although there might be a future (leg "up") where govs will be busy screaming at the CBs to "do something" to keep the currency up.

CB "losses" of 16.5 or even 50 bn? Peanuts. The puny little SNB can have more without breaking pace - for example last year because of the book value of the EUR and USD holdings they had (from memory) some 22bn.

It's like you know there might be a war next to your village and your wife complains you are buying ammo - it's a loss, she says. Yes, darling, it's a "loss". No darling, I will buy ammo.

Financial commentators have the bad habit of looking at Central Banks as if they were Banks - CB's can't go broke, they can only become - for lack of a better word - "impotent", i.e. without sufficient FX reserves at the right moment.

Withdrawn Sanction's picture

CB's can't go broke, they can only become - for lack of a better word - "impotent", i.e. without sufficient FX reserves at the right moment.

Nonsense.  Of course they can go broke.  Insolvency is an inescapable condition, not a state of mind. When a CBs owings exceed the value of what it owns (by more than its capital), it's done. Such a zombie may continue to stalk the landscape, but it is financially dead w/o new capital. A clever change of terminology to "impotent" is just a fashionable way of trying to try to evade this fact.

mayhem_korner's picture



Au still rippin' in overnight hours.  Curious.  Maybe the sideways movement is taking time out, or maybe there's a little more safe haven leakage going down here.  We'll see...

FinHits's picture

"The terms of ECB capital calls are worse than EFSF because they are joint and several. If countries don't meet their obligations they don't go away, they get passed to another country."


The obligations of the member national central banks may be joint and several, but the pass-through mechamism, if any, is to my knowledge not fixed at all. In theory it could be ECB Capital Key (but isn't even fixed to that), but how the money is contributed and in which order, if e.g. Greece and Ireland can't cough their share, is not defined by my knowledge. And won't be defined in a hurry.

So effectively, ECB capital call is toothless, and in fact ECB operates ring-fenced. It can easily take the losses and can not pass them on. Negative equity in balance sheet doesn't matter, or if it matters ECB can print money to make whole the minor shortfall of few billions. It is not like anybody cares what Bank of Japan balance sheet looks like as regards to equity.

I would like to see links here to ECB rules if there is disagremeenent on. This paper states there is no ECB loss/recapitalisation agreement in place:

A key quote there:

"If it is to be the euro area national Treasuries that will provide fiscal back-up for the ECB, in what proportions

will they share the fiscal burden of recapitalising the ECB, should the need arise?  

There is one readily available key for distributing the fiscal burden of recapitalising the ECB if in the future

its balance sheet is impaired as a result of lender of last resort operations or market maker of last resort actions

vis-à-vis EU-banks.  This would be for each euro areaMember State national Treasury to pay a share of the

bail-out costs equal to the share of its NCB in the totalshare capital of the ECB, divided by the sum of the

shares of all euro area NCBs in the total share capital of the ECB.  Other formulae can be thought of, but it

would be wise to have something agreed before the first EU Bank incorporated under EU statute law pops up and goes belly-up"

Withdrawn Sanction's picture

Negative equity in balance sheet doesn't matter, or if it matters ECB can print money to make whole the minor shortfall of few billions.

What you've just stated is equivalent to claiming the ECB has insufficient means to make good on its liabilities, the chief one of which is the euro.  I agree.  Whether they actually recognize this fact w/honest marks is an important but secondary consideration.  Financial gravity asserts its inexorable pull on all players, whether they choose to recognize it or not.   

TooBearish's picture

Take a seat, Pete, the ECB will never mark to market and therefore THERE WILL BE NO CAPITAL CALL - you shld know this - Dood

DebtSlaveZombie's picture

Nothing is over. Nothing. You just don't turn it off. It wasnt my war. You asked me I didnt ask you.... :-)

RemiG2010's picture

Nothing is over! Nothing! You just don't turn it off! Nothing is over until I say it is!

i-dog's picture


We interrupt your regular programming [pun intended!] to bring you this important development in the fight against global central planning ... aka the NWO.

Alternative media coverage of the Vatican's call for global economic central planning has been pulled!!

On Monday, the world's oldest, largest and richest multinational corporation--the Vatican--released this globalist blockbuster: (links*: Reuters; Vatican Radio)

Vatican calls for global authority on economy, raps “idolatry of the market"

The Vatican called on Monday for the establishment of a “global public authority” and a “central world bank” torule over financial institutions that have become outdated and often ineffective in dealing fairly with crises.

The document from the Vatican’s Justice and Peace department should please the “Occupy Wall Street”demonstrators and similar movements around the world who have protested against the economic downturn.

Though this release was originally covered by HuffPost, Drudge and Infowars without comment (but not by ZH!?!), both Matt Drudge and "anti-globalist" Alex Jones have since pulled this important globalist story from their home pages!! ... And the HuffPost is no longer covering it on their home page either, or even under either Politics or Business, but has buried it under "Life & Style", sub-topic "Religion"!!!

It seems to me that some Cardinal in the Vatican prematurely let the cat out of the bag and that the word has gone out from the masters to catch it and bury it at the back of the garden as quickly as possible!

FFS!! Those [apparently very few] of us who are opposed to global central planning by the NWO are on our own now!!

We apologise for the interruption and return you to your 'divide & conquer' programming....

Oh ... and PS: ... SECEDE NOW!!

*Note: Even Vatican Radio's original release (article #531752) has been pulled and replaced by this revised one (article #532223).

Ahmeexnal's picture


Carlyle Groupie's picture

LoL. Yes, nice. Take the focus off the lizard people, the Pope is actually the head of AIPAC.

i-dog's picture

PS. You sure do live up to your tag! Cute. "First they ridicule you,...." (PsyOps 101)

i-dog's picture

Thanks, but I'd already read it yesterday. Can you also post a link to where he discusses it on air and expresses his "outrage" along with his other "anti-globalist" rants?

navy62802's picture

The Vatican has one thing correct in their statement ... we do suffer greatly from idolatry of the market. As for their "global central bank," they can take that idea and shove it where the sun don't shine.

zorba THE GREEK's picture

The Vatican might be on to something, seeing how well

central planing is working out for Europe.  The Vatican has not been able 

to come up with a credible plan to rid its organization of child molestors

for nearly 2000 years. So what makes them think they can come up with

a plan to solve the worlds' financial crises? Like the politicians in Washington,

the Vatican is out of touch with the real world. If there was any real justice in

the world, the Catholic Church's central leadership should be tried for crimes

against humanity for their role in the global coverup of sex crimes involving


frenchie's picture


and what about all these muftis and rabbis sodoming boys around the world ?

hvl626's picture

Are you including members of the Sanhedrin who kept adolescent wards of the Temple in their homes and found to be impregnated at puberty around 7-5 BC ?

equity_momo's picture

Good spot. So whats next ? Whats the agenda? One currency? Would that benefit tptb? What do the vatican want -control/power. How do they get that? Bomb more brown people? Cause a global meltdown to starve out the threat? and force their flock to remember who provides the fish and bread? As usual , more questions than answers.
There are so many ways to divide and conquer now , tptb have got it made. Theyre loving this.

i-dog's picture

"Good spot."

The 'hat tip' goes to "Ahmeexnal" ... if he hadn't posted this on Monday, I wouldn't have even known about it!

"So whats next ? Whats the agenda?"

The agenda is "Problem. Reaction. Solution" or, as Hegel put it "Thesis. Anti-thesis. Synthesis". Create a problem (FED bailouts; European indecision), promote a reaction (#OWS; public outrage), then offer a [seemingly rational] solution (Global Central Bank; One World Government).

The solution that is put forward is totally pre-planned before the problem is deliberately created. It's all scripted and stage-managed.

"What do the vatican want -control/power."

The Vatican is just one organ of TPTB ... a very large organ with hundreds of thousands of priests, academics and 'knights' plus 2 billion adherents -- particularly concentrated in Southern Europe (the PIIS of the PIIGS) and Latin America (from Mexico to Tierra del Fuego). It is now controlled by the Jesuits (the Jesuits and the clergy have been fighting each other for centuries over control of the Vatican, but the Jesuits have been in continuous control now since before WWI).

So "yes", those who control the Vatican (the Jesuits and their brothers-in-Lucifer Labor Zionists, the Sabbateans) do wish to use the Vatican to control the serfs through propaganda and "the infallible [sic] authority of the Pope" ... but the One World Government would be the centre of executive power. The priests always work in concert with the rulers: the rulers manage the aristocracy and the priests manage the serfs.

"tptb have got it made. Theyre loving this."

I disagree. Central planners always fuck things up. I think that Europe has blown up prematurely for them (ie. prior to the final shutdown of the US) and that they are now scrambling to keep the EU together at the moment. IMO, they originally wanted to expand the EU to include the former-Soviet East European states and the North African states, but Gaddafi's resistance pushed their schedule and global acceptance out of whack.

So, I don't think they're loving this at all at the moment! And if any European or US states were to secede, then their plans would be shot to ribbons ... they'd have to resort to fascist force rather than political cunning to "herd the cats" -- and that could cause dangerous blowback. :)

PS. SECEDE NOW!! (If you can't get your state to do it, then just do it personally).

Mr_Wonderful's picture

The Vatican?

How many divisions do they have?

--- J. Stalin

i-dog's picture

LOL. The Jesuit-trained crypto-Roman Catholic Joseph Djugashvili (“Son of Steel”) Stalin (“Man of Steel”), certainly would have known. His 'job' was to eradicate the 'heretic' Orthodox Church from Russia ... at which he appears to have been quite efficient - certainly more efficient than he was at feeding the Russians or developing their infrastructure. ;)

erumisato's picture

So it's the Jesuits who pull Jones's strings after all. I held out (some)hope that he was the real deal.

i-dog's picture

Yep. As I said in another thread earlier today (while the story was still running, but without any commentary from Alex or his editors), he's blown his cover with this one!

erumisato's picture

It seems that everyone is a god damned double agent anymore, so I'll still listen to him. He's still a hell of a lot better than pretty much any other radio talking head. Something started to smell fishy to me after he kept on having Steve Pieczenik come on his show after he professed how much he loved Don Papa Bush as POTUS. The irony here is that it's from listening to Jones and a couple of other sources that got me to the point where I can understand how some of these fucks think and operate, and the ability to recognize the mechanisms that they use to sway opinion and to disseminate (mis/dis)information. 

i-dog's picture

Like you, I learned a lot from AJ and consider most of his information to be accurate and helpful. But after finding out about his true background, and also earlier considering this perspective from Alan Watt, I found it impossible to continue to listen to AJ's rants and obvious hiding of the real puppet-masters.

I do still check his website occasionally and also listen to the occasional interview to see how he and his guest handle a particular topic.

erumisato's picture

Watt hosts perhaps my favorite radio show. I'm sure that there's more to him than meets the all seeing eye as well. Same with Jeff Rense. All of them have some fantastic information, but each one has certain topics that never seem to be explored very deeply on their respective shows. Between those three and old William Cooper broadcasts, along with my daily dose of ZH and the Daily Bell, and the follow up research on the topics they cover, I've received an education that's more relevant than any BA degree.



Dapper Dan's picture

Good thing I printed and saved this,

Vatican Calls for Global Oversight of the Economy


Published: October 24, 2011


VATICAN CITY — The Vatican called on Monday for an overhaul of the world’s financial systems, and once again proposed the establishment of a supranational authority to oversee the global economy, saying it was needed to bring more democratic and ethical principles to a marketplace run amok.

Connect With Us on Twitter 

Follow @nytimesworld for international breaking news and headlines.

In a report issued by the Pontifical Council for Justice and Peace, the Vatican argued that “politics — which is responsible for the common good” must be given primacy over the economy and finance, and that existing multinational institutions like the International Monetary Fund have not been responding adequately to global economic problems.

 Update:  article is on Alex Jones web site just bumped down, not that I go there much ;)

 Here is an invaluable tool for my fellow ZH crew.  These people have our backs.

CrazyCooter's picture

My thinking, up until very recently, was that this "collapse" was just part of the script.

I don't think that anymore.

The Vatican is "telling" great weakness with this position in the media; they are clearly fucked if Europe blows up.

I really thought the real (i.e. final) crash would be after the next election, not before it. This is a huge X factor in political plans, to fuck the serfs over a barrel before they get to choose a House, part of a Senate, and a President.

Not to be US centric, but we are the worlds policeman and such things have to factor into real decision making (from an elite perspective).

Wow, just fucking wow.

And thanks for sharing. I got the word out to my five readers. :-)



Saxxon's picture

Yes crazycooter, something like that; or the Vat is trying, like the ratings agencies last week, to jump ahead of the parade before the shitbag blows up.

Who doesn't despise the lamprey banking system and its handlicking attendants (Sarkozy, Merkel, Obama, et al.).

msmith's picture

More EU problems will begin to weigh heavily once again on equities.  - After the correction for the SPX today, price action should push higher for the next several days.  The DX continues to look bearish in the short term as the EURUSD is pointing higher with equities.  More "risk on" ahead.

ISEEIT's picture

Wouldn't count on it. AUD seems to be decoupling from the EUR. That it not 'risk on'. To soon to really call it but I've been out of the EUR for the past month and am short AUD. It's a cheaper trade than EUR and will fall victim to USD strength whether via EUR going soft or global slowdown. My reasoning is that AUD drops regardless of EUR shenanigans.

Time will tell.

chump666's picture

I agree, looks like the market is going risk averse and the AUD is a good gauge.  Markets look thin right across the board. 

letitgo's picture

AUD was smashed by lower than expectation inflation figures and the consequent higher likelihood of a rate cut next week.  Its big moves will be on those factors for a while.

What's interesting right now is how the EUR is staying strong against the USD, GBP etc.  My guess is that non-Europeans are finally starting to work out that the EZ is less prepared to print than its counterparts.

Stagflationary's picture

Why would there be an end-game? Other than wishful thinking can you explain what would trigger such an event instead of continued postponement of the end?

iLoveMisesToPieces's picture

Because at some point you have to have capital and not just a bunch of paper.

Stagflationary's picture

Sure, but what makes that point this week? I'm sure a minimal amount of capital can be provided, accounting rules fudged to prevent mark-to-market, etc. for a very long time. After all, Greek current deficit is peanuts when spread across Europe's 500mm peeps.

iLoveMisesToPieces's picture

It looks like the prisoner's dilemma is breaking down.  TPTB aren't a homogenous unit, they just use each other to perpetuate the ponzi.  The weak links have cracked so now their only option is to toss each other under the bus and hope to come out the least unscathed.  The only reason the ponzi works is because enough of these groups conspire to make it work.  You can only flip paper back in forth so long as people with capital will trade that capital for paper.

Which is worse - bankers or terrorists's picture

This has been said for years. When is the tipping point?

knukles's picture

ECB has a Western Syndicate style Capital Call Arrangement?
You have got to be kidding me!
Those fuckers are absolutely batshit unbelievably crazy.
Deutscheland!  You best be a printing a whole bunch of new D-Marks and be getting' ready to walk the tab.
That is just down right irresponsible.
You got some old timers to hang out to dry.
Everybody else says "No" and you own it.
Musical Chairs.
Best just walk the game.
For shit sake, there is No Way Out!

(maniacal laughter)