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With Europe Broken Again, Sarkozy And Lagarde Are Back To Begging

Tyler Durden's picture


What a difference a month makes. About 4 weeks ago the European crisis was "over" - French President Sarkozy exclaimed that: “Today, the problem is solved!” Christine Lagarde, former French finance minister, and current IMF head following the framing of DSK, added that “Economic spring is in the air!”... Fast forward to today when following the inevitable end of the transitory favorable effects of the LTRO (remember: flow not stock, a/k/a the shark can not stop moving forward), the collapse of the Spanish stock market, the now daily halting of Italian financial stocks, the inevitable announcement that shorting of financials in Europe is again forbidden, and finally the record spike in Spanish CDS, Europe is broken all over again. Which brings us again the Sarkozy and Lagarde. The Frenchman who is about to lose the presidential race to socialist competitor Hollande (an event which will have major ramifications for Europe as UBS' George Magnus patiently explained two months ago), no longer sees anything as solved, and instead is openly begging for the ECB to inject more, more, more money into the system to pretend that "problems are solved" for a few more months. Incidentally, so is Lagarde, for whom in an odd change of seasons, economic spring is about to be followed by a depressionary winter. The problem is both will end up empty handed, as the well may just have run dry.

From the FT:

In effect ripping up a deal to shelve public differences over the ECB reached in November at the height of the eurozone crisis with Ms Merkel and Mario Monti, the Italian prime minister, Mr Sarkozy said the matter of ECB support for growth was “a question we cannot avoid”


He said: “If the central bank does not support growth, there will not be enough growth . . . I know the difficulties that surround this subject but we have the duty to reflect on it because it is a major problem for the future of Europe.”


Mr Sarkozy said: “Europe must purge its debts, it has no choice. But between deflation and growth, it has no more choice. If Europe chooses deflation it will die. We, the French, will open the debate on the role of the central bank in the support of growth.”

In other news, remember that so very "friendly" relationship between Merkel and Sarkozy? Kiss that goodbye.

And while Germany may or may not have had enough of bailing out everyone (between the ECB funding all peripheral banks, and TARGET2 funding all peripheral current account deficits), the IMF just can't get enough. Unfortunately, unlike the ECB, it does not have its own printer. Enter panhandling. Literally:

Holding up her Louis Vuitton handbag, the new managing director of the International Monetary Fund (IMF) turned to her fellow power brokers in one session and said: “I am here, with my little bag, to collect a bit of money.”



The joke broke the ice and the room rippled with laughter. But, beneath the disarming charm, Lagarde was deadly serious. For months now, the IMF has been trying to coerce its 187 members into committing as much as $600bn (£378bn) more to the fund to build what she described at the Brookings Institute in Washington last week as a “global firewall” to defeat once and for all the European sovereign debt crisis.

The problem, as is glaringly obvious, is that the IMF's piggybank really is the US. And no US, no "big bazooka", no "giant firewall"

Ever since “the Greek problem” flared up again in July last year, the talk from Brussels to London to Beijing has been about “big bazookas” and “giant firewalls” – a vast bail-out fund available to rescue any struggling nation from bankruptcy.




It has been a baptism of fire for Lagarde, France’s former finance minister who was appointed after the disgraced Dominique Strauss-Kahn stepped down in the wake of rape allegations. Just nine months into the job, she has the unenviable task of trying to build a co-ordinated global strategy on the shifting tectonic plates of domestic politics.


At the IMF’s key spring meetings in Washington this week, she faces her first real test. If Lagarde can strike a big deal on resources, she will be garlanded with praise. If she can’t, the jury will remain out. Either way, the pressure is now on.

Sorry, but with a US debt ceiling fiasco due in 4 months just ahead of a critical presidential election, the fire is about to be turned up a notch. Or ten... and be sulfur based. Because the math no longer works... And it never did.

Tellingly, all the US Treasury could muster in response to the eurozone agreement was the weak recognition that it “reinforces a trajectory of positive efforts to strengthen confidence in the euro area”. UK sources said that, privately, the US was bitterly disappointed, and adamant that no further US taxpayer money would be put at risk of more euro bail-outs.


Normally, US opposition would be enough to kill any plan to increase resources. But Lagarde has other ideas. She hopes to corral the rest of the major non-eurozone players – the UK, Canada, Japan, Australia, China and India – into a joint agreement. But she has already begun managing down expectations.


Having previously indicated that she wanted as much as $600bn more, she said at Brookings: “The needs now may not be quite as large as we had estimated earlier this year.”


UK sources said she would be lucky to secure $400bn. Of that, the eurozone members have committed to contributing €150bn – on top of their own bazooka – leaving just $250bn to be gathered from other members.


Even at $400bn, the extra resources would be a retreat from earlier ambitions. Lagarde wanted to increase the IMF’s available resources from the current $400bn to $1 trillion, while global policymakers had hoped for a total bazooka of €2 trillion to allay concerns about Europe. The IMF and the eurozone’s combined funds will fall well short of that.

Forget bazooka: IMF will be lucky to get a peashooter. In the meantime, Spain will not wait:

As markets have lost faith in Spain, questions have resurfaced about whether the eurozone firewall is big enough. According to CEPS, “even if the [firewall] only had to cover half of the financial needs of Spain and Italy”, it would need another €400bn.


Even securing €250bn from non-eurozone members excluding the US could prove difficult.

So now that Europe is broken all over again, and with elections, riots, strikes, tumbling markets, hundreds of sovereign bond auctions, and no promise of free liquidity from anyone despite daily rumor otherwise... what happens next?


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Mon, 04/16/2012 - 00:25 | 2347812 kennard
kennard's picture

Europe will be the trader's gift that keeps on giving for the next decade or so.

The reason is that their governments will continue spending more than they take in.

Attempts to paper it over, pardon the pun, will always fail, like clockwork.

This ongoing crisis has been half a century in the making.

Only Sweden, whose populace is culturally resigned to paying exhorbitant tax rates, will be spared.

Mon, 04/16/2012 - 00:47 | 2347842 Peter K
Peter K's picture

Socialism es Muerte:)

Mon, 04/16/2012 - 06:47 | 2348040 falak pema
falak pema's picture

Elitist socialism, central bank backed, fiat pump frakked,  is alive and thriving, its morphed into global Corporate Oligarchy; the 1% brigade who own the world, who have socialised the debts and privatised the profits sitting in Caymans to the tune of 25 T. They are the future of the world and its one big, happy, elitist social network; Uber-alles, chic and spick, diamonds are beautiful  WS assets hyped Facebook is their present, as it will be the sheeple's future at the other end of the social spectrum. Facebook of the Oligarchs and facebook of the serfs; those who get it up the rectum and those who laugh about the absurd of WSO protesters.

The people of the First world, the middle and working class sheeple, now the young out of work people, have not realised the future that Reaganomics-Thatcherism-NWO has created; FIRST WORLD PENSIONS ARE THE BREAD AND BUTTER THAT FEED THE OLIGARCHY SCAM, JUST AS FIRST WORLD LABOUR IS NOW THE VARIABLE OF ADJUSTMENT OF ECONOMIC LEVELLING OF THE PLAYING FIELD, all around the world. Aapl-Foxconn, the Oligarchy con man's iconic sword of Damocles over our collective heads; their sweat our gravy baby! And it could move elsewhere the sweat; but not the gravy! So watch out sheeple, we hold you by the nuts. 

If you want your jobs back fellas you gotta compete with the Chindia mob, the Vietnam-Afghan-Filipino-Indonesia mob. The tommorow boys of the African spring which will turn into African winter, when the shit hits the fans over there, as it will.  We are all now adjustable variables on the global playing field of Oligarchy rule, who control the money line, the food line, the WMD line and the RM commodity line; king of which stays OIL. Whence the Middle east play currently. 

Want to be an adjustment variable and not a free citizen, just play along...Don't worry about labels, socialism and capitalism, is now one party rule; those of the international Oligarchs. 

Their comeuppance will occur, but when...zat is ze question.  We have to go local and break down this globalist cabal that only feeds the 1%; it will take blood, sweat and tears; lots of it. And its starting in Euroland...


Mon, 04/16/2012 - 00:52 | 2347846 Clowns on Acid
Clowns on Acid's picture

LaGarde, Bernanke, Geithner, et al are all insane, however they still have one bullet left...and that is to swap ECB / IMF gold for cash to buoy the LTRO.

I know that it would be crazy...but remember these people are insane.

Mon, 04/16/2012 - 05:23 | 2348017 Sandmann
Sandmann's picture

Lagarde is a lawyer from Baker & Mackenzie - that is a qualification ?

Mon, 04/16/2012 - 01:36 | 2347885 20-20 Hindsight
20-20 Hindsight's picture

How utterly pathetic she looks with her purse.  This is what the IMF has become: a goddamned beggar.  Christine Lagarde... toi et toute ta bande de bouffons kleptomanes, vous pouvez aller vous faire foutre!  In other words, the IMF and all the banksters of the world can all go screw themselves.  Enough of this bullshit already! 

Mon, 04/16/2012 - 03:34 | 2347977 Overflow-admin
Overflow-admin's picture

This is a little out of the subject, but I think it's important:


Mon, 04/16/2012 - 06:39 | 2348016 Sandmann
Sandmann's picture

Riot Season is May to September in Northern Europe and with the London Olympics being a superb opportunity for the English Police State + 500 FBI Agents to meet Frustrated Peasants on Gilligan's Island as The Revolt starts; there will be France in flames as the banlieues get torched by frustrated youth unemployed after the French Selection in May.

France is the key to the whole Euro Disaster because like the CAP and the Brussels/Strasbourg Travelling Circus it was all designed to benefit France and keep Germany pulling the French cart with the British pushing the French cart. NOw the tide has come in and it is all being washed away

Mon, 04/16/2012 - 06:47 | 2348043 j0nx
j0nx's picture

This bitch looks like Don Knotts in drag. With a spray tan.

Mon, 04/16/2012 - 12:30 | 2348844 Nussi34
Nussi34's picture

Lagarde ze bitch!

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