In The Case Of The World Vs Merkel, The Broke Prosecution Proposes Eurobonds Lite

Tyler Durden's picture

The battle fronts have been drawn out: it is literally the world against Germany.

What is happening in Europe is nothing short of a full-out onslaught to have Germany, which conventional wisdom says benefited from a decade of importing peripheral European prosperity (although conventional wisdom says little about whether the same Peripheral countries had a gun against their head when accepting the Euro or importing German goods, hence keeping German economy buoyant as everyone else was sinking under untenable current account deficits), repay the favor and literally hand out cash to Greece and now all the other insolvent European countries in order to preserve the European dream. So far so good - and if it was a modest and contained amount, we are confident Germany would have agreed.

However, as Zero Hedge first calculated last July, sticking Germany, and technically a few German states (we can't wait for calls for a return to a West-East German split at some point in the future, because economic prosperity is certainly not uniform across Germany itself), with the bill would result in a collapse of the German paymaster (which as a reminder, already funds a stealthy European bailout to the tune of EUR2 billion/day via TARGET2). Still, none of the matters to EU President Herman Van Rompuy, European Commission President Jose Manuel Barroso, Euro Group President Jean-Claude Juncker and European Central Bank President Mario Draghi, all of whom, Spiegel reports, will hand over a new proposal to Merkel, this time for a Eurobond Lite project. And with Obama's reelection chances on the line should Europe implode one can bet the US president will make his opinion quite clear too.

From Spiegel, google translated:

Euro-bonds are not only for the German government, a red cloth. But at the same time all participants are aware that without the guarantee must be kept of the rich EU partners, the interest on the loan crisis states barely in check. Feverishly looking for the elite of the EU, therefore, after a compromise solution. According to SPIEGEL information they rely on so-called Euro-bills - a common European bonds with short maturities and a limited amount.


EU President Herman Van Rompuy, European Commission President Jose Manuel Barroso, Euro Group President Jean-Claude Juncker and European Central Bank President Mario Draghi want the end of next week to present the leaders with a proposal. According to the plans of each State may fund up to a certain percentage of its economic output by €-bills. Those who do not comply with the rules will be banned from trading in the following year with the papers.


The quartet hopes to convince the model, the federal government. While France calls for common European bonds, Germany rejects the Euro-bonds from now. In Brussels, however, is convinced that now the model is outlined with the German constitution in line, because the common bonds in the amount and duration are limited.

Which again brings us to the fundamental tradeoff for Germany. On one hand:

Another way, however, seems hardly conceivable that also believe the financial experts of the Institute for World Economics (IfW) in Kiel. They quantify the financial risk for Germany in the collapse of the euro zone to SPIEGEL information on some 1.5 trillion euros.

Yet on the other, Germany will continue to be locked up with ever more contingent liabilities whose ultimate losses will be far greater the longer the illusion continues. Remember: Deus Ex Machinae exist only in ancient Greek theater.

 All of this was summarized previously by Carmel Asset Management in their presentation which we posted two weeks ago, and which correctly calculated that the loss from a European collapse now is greater than keeping the Euro together... but what about in 1 year...or 5 years...or 10 years, with the ECB funding peripheral current accounts to the tune of almost EUR100 billion in sunk costs each month and rising?

After all this is the pure definition of unsustainability.

The definition of a lose-lose situation.

Going back to the fundamental dilemma for Europe, those across the table from Merkel will continue to propose piecemeal solutions which will not work, something the market will make increasingly clear. Alternatively, Germany, which has all the trump cards, will merely wait for Europe to wither away until it has no leverage, at which point it will be willing to provide a DIP loan on whatever terms it decides on. If that means a true European Federalist state headed by Germany, so be it.

Just like a true vulture investor literally rolling-up the world one broke country at a time.

And to think all of this could have been avoided if people had actually listened to Milton Friedman, who once again got things right about 15 years of everyone else:

The drive for the Euro has been motivated by politics not economics. The aim has been to link Germany and France so closely as to make a future European war impossible, and to set the stage for a federal United States of Europe. I believe that adoption of the Euro would have the opposite effect. It would exacerbate political tensions by converting divergent shocks that could have been readily accommodated by exchange rate changes into divisive political issues. Political unity can pave the way for monetary unity. Monetary unity imposed under unfavorable conditions will prove a barrier to the achievement of political unity.

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Mr. Fix's picture

This is a war!

Those in hard assets (gold and silver) will win. 

Everyone else will lose.

Newsboy's picture

Harvard Prof. Miall Ferguson predicts that if Europe is going to have a Lehman moment, it will be this coming week. Is he right or wrong?

veyron's picture

Get his name right: Niall Ferguson

Aziz's picture

Surest way to earn lots of downvotes on ZH: link to Business Insider.

Colombian Gringo's picture

Why the hell should Germany bail out the Piigs? One tour throughout Europe and you can see the immediate differences in work ethic, responsibility and education.  Let the southern europeans eat dogshit.

JustACitizen's picture

For the same reason that China buys Treasuries - exporting giants need to export to someone/somewhere else.

Also, cuz their banks will fry.

Just sayin...

RiverRoad's picture

Just let them put out those Eurobonds; they'll acquire some tasty rates and the world's sheeple will have their revenge. 

Badabing's picture

The WORLD? THE WORLD Vs Germany. give me a brake!

Its the BANKERS!!!!

Greyhat's picture

Banksters ./. hard working German people...

They want our savings as collateral.

spine001's picture

Hey a smart one! You got it right, that is the whole game!!!!


Until next time,


optionsman's picture

excess manufacturing capacity financed in part with debt. they won't stop delevering with eurobills or eurobonds.

OttoMBMP's picture

Let's ignore the "Germany gained from the Euro" bullshit.

BUT: the above calculation is utter nonsense, too. It is based on the completely crazy assumption, that the ESM volume will not be repeatedly increased and that Germany's share in it stays where it is.
Obviously, a EUR exit would be the much cheaper solution.

Marco's picture

Exporting giants don't need to export to somewhere else (except oil suppliers). Rich people inside the exporting giants need to export somewhere else, to keep their fellow country men poor, hungry and distracted.

The Monkey's picture

Did we not get the expected price correction? Sorry, we didn't want to serve as the fuel for the next short covering stimulus rally.

Nukular Freedum's picture

@CG Might have helped to take this ultra-civilized attitude BEFORE taking away their currencies/means of adjustment on a fraudulent and self-serving ticket.

Hulk's picture

Piigs is now Pfiigs. Keep up with the program...

barkingbill's picture

i think that instead of eating your dogshit, the southern europeans should get out of the euro, turn down the 'bailouts' which in anycase dimwit are really bailouts of.....hey guess what? they are bailouts of "ethical, responsible, educated....GERMAN banks....and other think the guy on the beach you can't stand so much is going to see one penny of your holy german bankouts? 

malek's picture

You mean the southern Europeans should simply do the right thing? What a curious proposal.

AldousHuxley's picture

Because Euro is their own god damn bank.


Germany and France own most of PIIGS debt.

just like banksters owned subprime mortgages to people who shouldn't be owning a house in the first place. Those people are irresponsible by nature, so they will walk away from mortgages, have no quips about declaring bankruptcy...nothign to lose, but can you blame them? then the banks run to the government to tax future generations to bail them out of their own doing.

Tax may be indirect in this case....Tax as in high education cost compared to previous generations and high unemployment...ROI on education is low.



German and French banks got high off of bonuses flipping bad loans to PIIGS and now they are blaming PIIGS and asking for bailout at the same time. 


Justice is when you let those banks and greedy bond holders fail and kick out the politicians who believe in banksters. But once again, banksters know they will get bailed out. Who's paying? lazy greeks with no infrasturcture for productivity gains for decades? or tax increase on already productive German blue collar? certainly not banksters or politicians who made all the big decisions.

koperniuk666's picture


and  differences in hair color and eye color


but I might be wrong

The Monkey's picture

Ferguson gets the down votes, along with Harvard U.

The Monkey's picture

I couldn't help but notice the down votes. Sorry guys, but I'm not particularly impressed with Ivy League grads when contrasted with MIT, Stanford, or a smart kid at a state college.

Harvard is a name brand. I believe that says it all.

The Monkey's picture

If I had to sum it up...

Harvard - attempt to manipulate sentiment.
Stanford / MIT - watch.

unununium's picture

You've got a point. Who's more worth listening to, a Larry Summers or a John Taylor?

The Monkey's picture

Harvard represents a lot of the groupthink that brought us here.

AldousHuxley's picture

Harvard....MBA bull shit, feel good liberal fart.

MIT.....technical economics based on real numbers and reality, but heartless.



as long as majority of people are ignorant, Harvard's salesmen will obtain more power and wealth over rational MIT economists and scientists.


If you are smart, go to Harvard, ripoff stupid Americans, then donate money to MIT, NASA, NSF, etc to advance human kind.

Money is better spent in the hands of scientists than american idol watching fat fucks living off of government. However, Harvard's smooth talking sales men have to make that happen.



mcguire's picture

Ferguson is a globalist cheerleader, more recently transformed into an MSM whore... 

Itch's picture

Do you still piss the bed?

The Monkey's picture

I would never in a million years make a trading decision based on Ferguson blowing his horn. If anything, the Fed has closed their case for new stimulus.

Newsboy's picture

The "M" is next to the "N", and my eyes aren't so good these days...

Typographic error.

Glad ya' looked.

You did look, dintcha'?

This is a readily testable hypothesis, from somebody who is an independent voice, not often on B.I. and is making a bold statement about this coming week.

Whether you like the source or not, this guy is throwing down the gauntlet.

This is not "3 months" like Soros called, though Soros could get accused of self-fulfilling-prophecy if he made such a call.

Soros is careful to have his ducks in a row before he speaks.

Niall Ferguson may not have very many ducks.

i-dog's picture


"from somebody who is an independent voice"

ROFL. New here, I see. FYI, Soros and Ferguson compare/receive notes in the same locker room (or sauna, more likely).

They are not giving their opinions, they are attempting to manipulate public opinion. Check your sources before relying on them.

Itch's picture

Everyone tries to manipulate opinion, its called having a point of view, im pretty sure Soros and Ferguson know theirs. And if the opinions they put out there dont belong to dying to know, who's are they? And what are your "sources"?

Newsboy's picture

Maybe yes, but what's your point?

Is he right or wrong?

Not many responders want to take a stand, just give me down arrow for daring to post this unapproved source, via an unapproved source.

C'mon, whaddaya' think YERSELF?

Davalicious's picture

>Get his name right: Niall Ferguson Mial

Miel Fergie is a cunt shill for the NWO. Fuck his name.

Davalicious's picture

>Get his name right: Niall Ferguson Mial

Miel Fergie is a cunt shill for the NWO. Fuck his name.

Unholy Dalliance's picture

Look down at your keyboard… N is next to M. It was just a typo! Mmmmmm Veyron, I wonder where I have heard that name before? Oh, I know! I suppose we're supposed to believe from your handle that you own a Bugatti. Oooooooh, I am sooooooooo impressed - not!

Davalicious's picture

>Get his name right: Niall Ferguson

Myal Fuckercunt is a shill for the New World Order. Fuck him, and the horse he rode in on.

Greyhat's picture

We need some Lehman events. Germany has to cut of the PIIGS from the EURO System, one after another.

If Germany leaves the EURO zone we are broke, if we are the last ones using the EURO all EURO denominated debt will remain as it is. The blame will be on the PIIGS side.

Hulk's picture

PFIIGS dammit, its now PFIIGS...

Newsboy's picture

How do we work Slovenia and Cyprus into PIIGS, er PFIIGS?

Matt's picture

What about Belgium? Aren't they pretty close too?


(see pigs bestfriends)

False Capital's picture

FISCPIGS, as in fiscal pigs.

sunaJ's picture

 He wants a chaotic Lehman moment becuase he wants Germany to be compelled to accept eurobonds.  He thinks that will be the solution.  He is a European integrator in a skeptic's clothing.

Newsboy's picture

True enough. He's talking about Lehman moment, and we're looking for Minsky moment...

The Monkey's picture

Not likely. Sentiment may just as easily shift strongly bullish in the next few days. We can easily speculate on downside risks. We are more clueless on policy response. It might pack quite a surprise.

Eireann go Brach's picture

Harvard douchebag Ferguson who is a teacher and does not actually work in the business world, knows fuck all what will happen next!

francis_sawyer's picture

Rumor has it that he stayed at a Holiday Inn Express last night...

Newsboy's picture

It could be any one of "200 Motels"...