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European Banks Tumble On Schauble Comments Against "Blank Check" EFSF
When we first summarized our take on the second European bailout package we completely ignored the specifics of the rollover mechanism and the private investor participation scheme because they were entirely irrelevant. We said: "This is merely a red herring that attempts to confuse the issues associated with the first, and far more important concept: the nuances of the EFSF and its imminent expansion. And expand it will have to, because in reality what is happening is that the net debt of the countries will end up growing even more over time for one simple reason: this is not a restructuring of existing debt from the perspective of the host country! Simply said Greek debt will continue growing as a percentage of its GDP, meaning it, and Ireland, and Portugal, and soon thereafter Italy and Spain will be forced to borrow exclusively from the EFSF. Therein lies the rub... The bottom line is that for an enlarged EFSF (which is what its blank check expansion today provided) to be effective, it will need to cover Italy and Belgium." We further said that "by not monetizing European debt on its books, the ECB has effectively left Germany holding the bag to the entire European bailout via the blank check SPV." We concluded with the rhetorical: "what happens tomorrow when every German (in a population of 82 very efficient million) wakes up to newspaper headlines screaming that their country is now on the hook to 32% of its GDP in order to keep insolvent Greece, with its 50-some year old retirement age, not to mention Ireland, Portugal, and soon Italy and Spain, as part of the Eurozone?" Well, German Finance Minister just gave us an answer, and it is the reason why various European banks are once locked limit down, and the entire banking industry in Europe is bleeding: "The government rejects a 'carte blanche' for widespread purchases on the secondary market." This means that the entire second bailout package has now been unilaterally unwound courtesy of German which has realized it was the "weakest link" patsy, and will not agree to the clause giving the EFSF unlimited PPT powers. Time to start planning bailout #3.
From Reuters:
Euro zone leaders agreed last Thursday on a second rescue package for Greece in a deal which includes the right for the European Financial Stability Facility (EFSF) to buy bonds on the secondary market at the ECB's recommendation.
"Even in the future, such purchases should only take place under very strict conditions when the European Central Bank deems there are exceptional circumstances on the financial markets and dangers for financial stability," Schaeuble said in the letter to members of parliament dated July 26.
"The government rejects a 'carte blanche' for widespread purchases on the secondary market."
He said the decisions taken at the summit were not without risks, "but the risks of the conceivable alternatives are much greater".
Indeed the summit's agreed measures could prevent Greece's debt crisis from becoming "a crisis that would endanger the euro zone as a whole and therefore the euro".
However, Schaeuble said one summit would not be enough to solve the euro zone's debt crisis, echoing cautious comments made by Chancellor Angela Merkel.
Even others have finally gotten to the same conclusion we did last week:
"If you look into the details of the EU summit decision, it doesn’t take you long to get to where the weak points are,” said Marius Daheim, a senior fixed-income strategist at Bayerische Landesbank in Munich.
The result from Bloomberg:
German bonds rose for a fourth day after Finance Minister Wolfgang Schaeuble said the government is against a “blank check” for the European Financial Stability Facility to buy bonds of troubled euro members in the secondary market.
Stoxx 600 banks declines 2.3%, insurers fall 1.5%, as main index drops 0.5%.
All major European insurers fall as earnings approach; Ageas slumps 4.4%
The race to the bottom between the US and Europe is now truly and fully on.
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At what point do these imbeciles realize that there is no permutation of reshuffled cards that does not result in someone eating the loss?
Rather than having endless meetings to discuss new permutations, perhaps a better approach would be to decide (in general) who should eat shit sandwiches in the event that they need to get eaten?
Taxpayers? ... or the banks that made the shit sandwiches? That's the only question. Focusing on new complex "solutions" is an obvious ruse to avoid answering the fundamental question: Who eats it?
they don't, that "concept" is not in their teleprompted thought balloon.
Ummm...let's have a look at who is doing all the deciding. OK...the banks are doing the deciding. So I guess that leaves the taxpayers to eat the sandwiches.
Nect question?
"Let them eat shit baguettes"
At the point where everyone has to eat the loss. Kinda like a suicide pact. This, imo, has been a part of the script so far. Keep waiting.
"Ve haff vunderbar schiessebrot mit xtra senf" Greeks will essen alles.
No printing?! How stupid of them. Were they asleep during Bernake 101?!
As always, it will be the taxpayers who end up eating the shit sandwiches. The future question will be which sector of potential shit sandwich eaters will convince the other sectors to gobble up their share...and you can bet when lunch is over, the top 1% will not be found anywhere at the table.
Don't worry. The can will be kicked -somehow, some way.
Safety in UST's...and the band plays on.
In other words then, we now need a bail out of the bail out. If it isn't the Germans, guess who it might be instead?
Enough Merkel/Sarkozy pajama party bingo!
Fish or cut bait.
And shame on all the so called market "experts" for constantly following the EURO Pied Pipers merrily into the next moment of crisis.
Man...it is awfully early in the morning for Greece to be NOT FIXED again. I haven't even finished my first cup of coffee.
So equity inflows from insolvent Europe into insolvent America today then?
Define 'equity'?
Capital....equity and bond purchases...running from insolvent Europe to insolvent America. Fund flows. Morons abroad who do not understand just how bad the debt situation and real economy are here in the US.
It is a phenomena that can be observed up until 11:30 a.m. est...followed be a reversal at that time once all the Euro sucker fish are in.
three days, they took their bloody time.
it might be the dutch on the hook now. since our politicians are still not quite sure what they signed.
At 00:42.. "the point that I want to make is.."
http://www.goldmoney.com/video/james-turk-presentation-on-gold-and-the-US-dollar.html?gmrefcode=gata
Yada Yada Yada and the "futures" are doing NOTHING:)))
The article assumes that the German people have the power to say "enough is enough." The German people do not (and never did) have a say in the matter.
Germany finally getting nervous that they are EFSF. That's what happens when Merkel spends a night with Sarkozy.
UG!!! I just got a visual of that and it made me spit out my coffee.......
What, Schäuble put the video he took on YouTube?
Margaret Thatcher naked on a cold day!
The ESFS is working as designed.
Peripheral problems like Greece, Portugal and Ireland are kept in check, the markets are kept from spooking and as long as nobody kicks the pillars the bridges will keep on standing there. Remember: ESFS is still a scheme starting in earnest in 2013. A bag full of promises not meant to be kept.
There was never the intention of having to bail out Spain or Italy, the math does not allow it. Nor does it make sense.
What you guys don't get is that European Contries have a long history of keeping this kind of issues in check.
Example: Italy. How do you grok a country which has a government debt of over 100% for FIVE FREAKING DECADES? And a fairly balanced budget, too. And an aging population which holds the majority of the debt (not that far from the Japanese model). They are debating between different schemes of AUSTERITY, for heaven's sake.
Other example: look up Belgium. Look up how many governments they had or did not have in the last twenty years. Could you imagine the USA without government? You'd be screaming chaos and mayhem even at the thought of it!
Perhaps some of you are simply too young yet to envision schemes going on since twice, three times as long as you lived?
Popo: the loss is on the one left holding the bag and trough inflation, as usual. Trust sovereign at your own peril, as usual.
"There was never the intention "
I wouldn't be so sure of that. Even if this is (now) a dog and pony show to keep the bid under treasuries, the long term goal of EurElites is to create Eurobonds and make the transfer union permanent.
No. The EuroBond scheme, with some EuroTax attached, is being aired in the freaking media from outside the Eurozone.
Some City of London banker is licking his lips at the thought about how much fees and bonuses this could generate.
Ask the Germans, the French, the Italians, the BENELUX countries, Austria, etc.
NO ONE is talking positively about EuroBonds and EuroTaxes except in the english speaking media, and all this seems to come from Down Under. Go figure. Happy to be proven wrong.
All but in name, dear Ghordius...
http://www.efsf.europa.eu/investor_relations/disclaimer.htm
I presume you are pointing at the "no 'mericans may enter" sign? LOL
It's a standard for many vehicles because US laws require a lot of paperwork to be sent to Uncle Sam. It's a shame...
No not that, but i might have difficulty grasping the intricate structure of the CDO once EFSF bonds trade side by side with any future Eurobonds.
Perhaps there will be no differences.
Whoa! EFSF and EuroBonds? Both? And both operational? Is this not a bit too much to wish for, even for bankers?
Why, i suspect in the next round of bailout the bonds might be issued not solely according to country but bundled by the "rating" of the new Europäische Rating-Agentur, Trash Periphery Bond, Club Med bond, Fleißige Germanenbond etc.
So that's almost three wishes...
Glad you pointed this out, Ghordius... "NO ONE is talking positively about EuroBonds and EuroTaxes except in the english speaking media, and all this seems to come from Down Under. Go figure."
All fiat printers are competing to be the 'last man standing'. The ecomonic war of fiats is heating up and that is exactly what we are witnessing.
China, by purchasing various EU members bonds recently, while avoiding more US debt, has cast their vote and weight behind the Euro.
The IMF is making a bid to have the SDR, another fiat vehicle, be the new 'UST'.
If I were to make an analogy of this situation it would be to a horse race; the leader entering the last quarter mile will not necessarly win the race.
.....USA without government" Nirvanna, heaven, utopia, LIBERTY. Fuck a bunch of gubmint. You need a leader, move to NK or Cuba.
You're discounting two pretty important factors in your Italy example:
1) The ease with which capital now flows, and globalism in general.
2) The introduction of the EU and Euro as an additional mask for Italy's cracking finances.
"Perhaps some of you are simply too young yet to envision schemes going on since twice, three times as long as you lived?"
That kind of blind faith is not helping your argument.
Yes, agreed, this is by far not the whole picture.
1) in 1995 the Italian Public owned nearly all debt, now only some 60%, most of the rest sits on French banks' balance sheets.
2) the Euro, being "harder" then the former Italian Lira, needs more "upkeep". This will mean more balancing of the budget.
I'm not making the case that it's all OK (far from me). I'm making the case that it COULD go on for another decade (or two).
Last time I nearly fainted when I found out that the mortgage market in Italy increased from EUR 50 billions in 1995 to EUR 550 billions in 2006. This means that 12% of the estimated value of private housing in Italy is mortgaged.
Germany is fucked. If they don't bail out the outlying countries they will bare the brunt of the criticism for the failure of the EU. If they do they screw themselves and their people.
Who gives a shit if the PIIGS go down the tubes! The EU was doomed from the start. Right now it's a matter of self preservation.
Doomed?
The EU (European Union) or the EuroZone (the countries sharing a common currency)?
Two different beasts. The United Kingdom is an unwilling part of the first and a staunch critic of the second, for example.
For "self preservation" there still are the sovereign countries below all this EuroStuff.
Are we talking about the same country that got royally fucked twice last century?
And that reemerged stronger than before every time?
That has a new BFF-trading-partner in form of Russia?
That is using natural gas (from Russia) and is building wind farms in every corner?
What's wrong with that? If they are more competitive , build a better product, don't sit on their asses collecting off the tax payer, then they deserve the fruits of their labor. They shouldn't be funding some lazy leach Greeks.
Game, set, match. Exactly. Loose loose - what will Merkel choose?
Delusion is still ongoing. The guild complex prohibits her to cut losses and run.
Bad days for Europe, worse days for Germany to come....
Especially Germany and Europe are ruled by criminals and dreamers. What currently taking place is unbelievable! In Brussels like to meet the "four horsemen" (Jose Manuel Barroso, Jean-Claude Trichet, Jean-Claude Juncker and the inimitable Herman van Rompuy - who knows not the latter, check out the excellent characterization by Nigel Farage, leader of the only opposition party in the European Parliament, to heart). Whole EU-democratic (ie without any democratic legitimacy) here to proceed the new super government decided then nod in the connection of the gathered finance ministers and governments. But always with Mr. Juncker, you can rest assured of a lie - after all, Mr Juncker's like lying, and often as long as it serves the noble goal. No matter what it said.
I still wonder why Nigel Farage is sooo keen on what the Eurozone is doing.
He is a member from a country that does not use the Euro.
There is plenty left of the EU he could improve outside of the monetary field!
In an with Stern magazine Schaeuble also said that:
euro-zone states that receive aid in the debt crisis to surrender more
sovreignity to the European Union.
And in other news the German Economic Minister sees opportunities for investment in Greek energy and infastructure.
Funny how in this century Germany doesn't even need jack boots to take over a country, just a monetary union, and an Amex black card.
http://www.bloomberg.com/news/2011-07-27/roesler-plan-may-aid-greece-ger...
Don't forget to bring your carpetbag to Zorba's asset stripping, and enjoy the EU subsidies on the way out...
...still better than invading Poland, after all...
They let the toxicity spread to the Eu core. Share the pain.
It's going to be interesting watching the Italian and Spanish 10yr yields go out to their historic levels, i.e. 12% ish, and the German's trying to stop the ECB from telling the EFSF "buy, Mortimer buy" ;)
@Ghordius but he is right!
You mean Nigel Farage? Well, I liked how he carried a coffin with the Euro Sign on it in Brussels!
Still, I can't take him too seriously. He is doing some non-constructive opposition in the Euro Parliament that gives me the wrong impression.
In Europe and America, there's a growing feeling of hysteria
Conditioned to respond to all the threats
In the rhetorical speeches of the bank experts
Mr. Blankfein said we will shorten you
I don't subscribe to this point of view
It would be such an ignorant thing to do
If the Trader love their children too
How can I save my little boy from Bernanke's deadly toy
There is no monopoly in common sense
On either side of the financial fence
We share the same biology
Regardless of ideology
Believe me when I say to you
I hope the "Market" loves their children too
There is no historical precedent
To put the words in the mouth of the President
There's no such thing as a defaulting USA
It's a lie we don't believe anymore
Mr. Obama says we will protect you
I don't subscribe to this point of view
Believe me when I say to you
I hope the Bankers love their children too
We share the same biology
Regardless of ideology
What might save us, me, and you
Is if the Banksters love their children too
Sting, Prokofiev and Philippe
It's a freakin miracle. The scenario is so obvious but no one really wants to see it. Germany was intentionally sabotaged with the debt burden of Europe, in similar vein to how the rest of Europe was sabotaged by their own smaller debt. There was never any intention of killing off the PIIGS and leaving France / Germany / or any other European nation unscathed. The financiers appear to have leveraged one nation against another, becuase they played the greed hand... people were looking for ways to make money instead of realizing this was a fucking heist. Instead of chopping off their heads, we're buying tickets of IOU, which when paid, will be a baton up the @$$.
Germany was not intended to survive the financial shenanigans. It was just used to help destroy itself while destroying the other nations. The same thing is happening to the US. Our funds went over to Europe to help create the debt problem, while simultaneously creating a debt problem here. Man these fuckers are brilliant. Please stop pretending we're all smarter than these people ... that's plain arrogance. We're not dumber either, we just didn't know the game plan from the outset.
"The race to the bottom between the US and Europe is now truly and fully on."
This is the crucial point. I expect the US to loose: the political establishment in the US finally cannot cheat together. Thanks to the teaparty movement. This is good for future generations, but bad for the debt driven economy. In eurozone on the other side, almost all political parties and the establishment want and will continue the cheating as long as it goes. In short: First crash of the US Dollar. Later rise of the US Dollar in conjunction with a meltdown of the Euro and a currency reform in europe.
Merkel = German Guilt Buffoon
Amazing how responsible monetary voices are being drowned out by the neo-monetary fascism of the day. Germans need to stand up to it now (in the same way they didn't in 1933-45.)
Obama and IMF to the rescue. The president of the USA saves Europe.
Why aren't the people of America listening to this great man. We are saved and he is not even European.
Sarcasm off
Oh, to watch the humans try to wriggle out of the consequenses... reminds me of the song, "Oh Death," by the Stanley Brothers... just replace "death" with "bankruptancy and default".
Oh death
Oh death
Won't you spare me over til another year
Well what is this that I can't see
With ice cold hands taking hold of me
Well I am death none can excel
I'll open the door to heaven or hell
Whoa death someone would pray
Could you wait to call me til another day
The children pray the preacher preached
Time and mercy is out of your reach
I'll fix your feet til you can't walk
I'll lock your jaw til you can't talk
I'll close your eyes so you can't see
This very hour come and go with me
In death I come to take the soul
Leave the body and leave it cold
To drop the flesh off of the frame
The earth and worms both have a claim
Oh death
Oh death
Won't you spare me over til another year
My mother came to my bed
Place a cold towel upon my head
My head is warm my feet are cold
Death is a movin upon my soul
Oh death how you're treatin me
You close my eyes so I can't see
Well you're hurtin my body you make me cold
You run my life right out of my soul
Oh death please consider my age
Please don't take me at this stage
My wealth is all at your command
If you'll remove your icy hands
Oh the young the rich or poor
All alike to me you know
No wealth no land no silver or gold
Nothin satisfies my but your soul
Oh death
Oh death
Won't you spare me over til another year
Won't you spare me over til another year
Won't you spare me over til another year
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