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Guest Post: The ECB Is Very P.O.'d
Submitted by Finance Addict
The ECB Is Very P.O.'d
The big news out of Europe on Friday was not S&P’s downgrade of 9 countries, France included. The ratings agency told us weeks ago that it might do this. No, much more important was the ECB’s saying in the bluntest possible terms that the EU leaders are backtracking on the fiscal compact agreed just 5 weeks ago by 26 of the 27 countries.
The Financial Times reports that ECB boardmember Jörg Asmussen has put pen to paper to accuse negotiators of “a substantial watering down” of the maximum debt pact.
Apparently he
wrote to negotiators that new provisions in the treaty that would allow highly indebted eurozone countries to breach budget deficit limits “in periods of severe economic downturn” amounted to an “escape clause” that could lead to “easy circumvention of the rule”.
“These revisions in my view clearly run against the spirit of the initial general agreement on an ambitious fiscal compact,” Mr Asmussen wrote in a letter on the ECB’s behalf, dated Thursday.
Mind you, this compact lacked credibility in the first place: it only focuses on austerity and ignores the need for troubled countries to adopt growth-stimulating measures, as well. So is the fact that it’s weaker now actually a good thing? Might looser shackles give Europe’s troubled economies, but especially the behemoths of Spain and Italy, the breathing room that they need to restart their troubled economies?
Sadly, no. Only the ECB can provide Spain and Italy with the oxygen being sucked away by the financial markets’ demands for ever higher compensation to hold Spanish and Italian debt. The only value of the fiscal compact in the current crisis — for it’s most truly a plan for preventing the next – is that it would have given the ECB the political cover needed to serve as a buyer of last resort for the Spanish and Italian paper. When it comes to how this new fiscal compact is perceived, the ECB is really the only audience that matters.
Will the ECB go on a buyer’s strike to make its point?
Remember, the ECB has so far bought €213.1 billion in troubled European bonds under its Securities Markets Programme. And it has shown before that it’s not afraid to use this as a weapon. We should keep a close eye on the ECB’s reaction to any eventual bond price falls due to the S&P downgrade.
Where does Germany stand on this?
Asmussen, the angry scribe, was previously Angela Merkel’s right hand man. Do his views reflect her own? Or is she happy enough with the symbolism of the compact exercise, as long as it deflects attention from the more thorny issue of today’s debt sustainability? Her statements over the next few days should give some clue.
Where do we go from here?
Now the folks responsible for the actual writing of this fiscal treaty have only two weeks before the next EU summit to come up with something that satisfies both the EU heads of state — whose attempts to soften the terms show that they are apparently having second thoughts about giving away fiscal sovereignty — and the ECB paymaster. They’ll need to be as flexible as Chinese acrobats to make it work.
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EFSF downgrade ain't a problem if Merkel says it ain't
BERLIN (MNI) – German Chancellor Angela Merkel signaled over the
weekend that she would rather accept a downgrade of the European
Financial Stability Facility (EFSF) than increase German guarantees for
the bailout fund.
“I was never of the opinion that the EFSF necessarily has to be
AAA,” the Chancellor said at a gathering of her center-right CDU in the
northern German town of Kiel. “AA+ is also not a bad rating,” she said.
Timmy should be commended. Look how he has the Euros fighting amongst themselves, and destroying the Euro as an alternative for petrol purchases and a reserve currency. Divide and conquer FTMFW!
Timmy and Ben will be considered early American heros of the Great Resource Wars.
Gasoline costs $3.05 per gallon here in the USA. Europe?
Considerably more but we're not as dependant. Currency problems have made even the Eastern block very adaptable by converting engines and other clever adjustments. Will LA be able to do the same?
I know, tiny villages and bicycles. For real dependency you only need to look for Europe's reliance on Mother Russia for natural gas to keep from freezing to death. Here in the USA, our cup runneth over.
Europe Can Only Envy U.S. Gas Miracle From Sidelines
Realtime scores
European Socialism: 0
American Exceptionalism: 2
I would also point out that LA is a boil on the ass of America.
Regards,
Cooter
But the weather is great!
did these euro idiots think good times and consequent fiscal discipline as a function of nonstop growth would last forever?
JFC, EACH of these nations is COMMITTED to the principle of PRINTING money when times get tough! They will each in turn shit their own currency into the sewer rather than behave like stingy germans or scandinavians.
People are just fucking different, yes, even "white" people are not all the same.
the reason LA is even THERE is because of oil, btw
Short distances, Vespas all over, and most importantly a working Eurorail system. Regardless we're all going to be traveling less no matter what as tensions rise.
Forget natural gas dependency, another completely irrelevant topic that has been blown way out of proportion by the Anglo media. Heating Europe won't be a problem should Russia get uppity.
Make no mistake: This is an Anglo problem. For everything you point to, I could find a corresponding fault within the UK and US.
http://theautomaticearth.blogspot.com/2012/01/january-16-2012-quo-vadis-...
*Correction: UK ain't Europe, please regard the UK as that fish that attaches itself to the shark(US being the shark)
Long Husqvarna?
The American Exceptionalism bullshit was over the top, dude. I know the panic is setting in, as you/we(I have a US passport among others) are soon going to be saying: President Romney but of all things to cling to blind jingoism is probably the most obvious for the terror stricken. For the record I wish you well. I really do. Much love for certain aspects of the US. Yet if I were to go into the absolute criminal nature of the system, I'm afraid I'd be writing books not posts.
How Europe get's through winter is weak if we're talking crisis and probably not very high on the: Things-to-fear list. Especially if you're in the US.
I could not disagree with you more, Gene. Europe's inability to purchase affordable energy is EXACTLY what Europe should be fearing the most.
We're not seeing the same things, obviously, either statistically or in day to day observations. Many European nations have alternative ways to heat themselves.
If you're alluding to geo-politics, then i) I'd prefer not to resort to that discussion and ii) if you believe the Euro is in real danger I'd just like to point you to the fact that it's the $ with the most to lose, being the reserve status.
I understand the need to minimalize a loss after the battle. The truth is most of us don't know there is a resource and currency war on going. You Europeans are all too busy fighting with your teammates. We Americans are mostly too stupid.
Apart from France's nuclear energy, what other alternatives do you speak of? Norwegian whale oil? Irish peat?
I am envious of EuroRail, the walkability of European cities, and the EU's push to eat local foods.
The battle is only in your head my friend. There are no teammates. The war that is raging is over influence with resources a part of the question.
Let's see, there's the COOPENER project and the ITER project are both something within the EU. But again, silly to point to something and claim it a saviour. I mean, Denmark & Norway are doing things much differently from Slovenia. It's very decentralized here, EU can't be thought of as a homogonous entity like Japan. I suppose it's the urgency factor that I don't agree with.
And that, my friend, will likely be the chief cause of failure for the EMU and the EU in the medium term.
In the long term, after the shit hits the fan, nationalism or tribalism (having teammates) will likely be an advantage for those of you able to make it on your own.
Peace.
I'll gladly take the last word. EU will survive and so will Europe as a whole. EMU will suffer because of its own folly and because it is being undermined by propaganda from the Western media.
Peace indeed...
Gene and Hedgeless:
I want to commend you both for the manner in which you conduct your argument. Truly refreshing, especially when compared to some of the truly embarassing stuff we get sometimes. Thanks.
Wholeheartedly agree with the Cap'n on this. Nice to see an informal debate with two diametrically opposed views arguing their case, yet no resorting to low blows and logical fallacies (for the most part). Could use some more facts to back up opinions, but nonetheless, truly a breath of fresh air and one can only hope that more read your back and forth as an example of how to espouse one's thoughts and how to defend/rebutt arugements against their view.
reserve status? not anymore. yuan is trading gold and iran and russia are in the rupel(sp). I think US has more to fear than EU. EU has experience in this "crisis" dept, they have more freedom with what they can grow at home, more localized resources,.. US is being fed that "were the best and well destroy anyone"....i heard that before from russia a while back, then they went bankrupt and no one heard from them for like 20+ years...history is cyclical, not linear, people are focusing on how we are like japan, in my opinion more like russias history, "big tough, brute force, but dont look at the big picture and longrun" unfortuntely it is the time of china, US citizens need to wake up, big time, we will soon see the european gas prices and i would predict at least 20% min raise on food costs. ok. US govt controls media industry, power, food, that shit is scary in my opinion. but if you have better information, please inform me, thats why im here, not to be a "knowitall"
The reason gasoline costs more in Europe is because they simply tax it even more than we do. Commend Timmer if you believe in the greater fool theory. I myself believe Timmer and the Chairsatan will go down as the worst leaders in our financial history. So far the two are right on track.
Really?
Please list the exporters that trade oil in Euros.
Theyll be writting the historical account of Ben and Timmay on cave walls pretty soon.
Spears and pitchforks?
Chicago, gasoline $3.65, you must live in Oklahoma or Mississippi?
... and Merkel said the downgrade ain't a problem. Finished!
Guys, I am really getting worried about you... how about some realitycheck?
Greece is too small to really pose a problem and a downgrade comes at a time when everyone in the US is short the EURO... Rings a bell? Let me put it more bluntly: WHo pays for S&P's "work"? Right, the financial firms in Wall Street and London. Who is actually shorting the Euro? ....
Don't bet against Merkel, she had her way in 2011 and she will in 2012.
If Merkel had it her way, Greece would have restructured a year ago and other PIIGS debts would have been dealt with already. Merkel’s problem is that she’s listening to Sarkozy way too much. Things would get a lot better if that would stop.
Wrong. She said in April 2011 that Greece may leave the Eurozone "not before 2013". She was buying time in order to prepare and Greece or anybody will leave not a moment earlier ....
The Germans are not willing to commit any more funds. They will absolutely not put in a penny more than the 300B they are committed to. The ESM/EFSF is a joke – it’s barely enough for Greece/Ireland/Portugal. Spain/Italy are completely at the mercy of the ECB.
LTRO looks like a huge success at this point – short term yields for Italy/Spain have pretty much collapsed. Overall, the liquidity crisis looks to be solved and Italy/Spain can refinance at very low short-term rates.
The question right now is can they make it credible? Can Italy/Spain contain deficits in a recessionary environment in 2012? If both countries enter a deep recession and print -4% GDP, nothing the ECB can do will help.
We’re entering a new stage in the crisis, where liquidity is no longer a problem and it’s up to sovereigns to prove they’re solvent.
Who cares what changes are made to treaties in theory?
Meanwhile Gene's BDIY Back to Triple Digits party kicks off this sometime this week:
'Baltic Dry index falls 3.8% to 1,013 points'For those that need a visual:
http://www.bloomberg.com/apps/quote?ticker=BDIY:IND
Thanks Gene, I've had a hell of a time finding...exactly what I was looking for.
I was thinking “what up with copper?”, and I recall reading a few articles a while back about mountains of it being warehoused by spec interests. So it might be that copper is being stockpiled like the oil is and subject now to the same manipulation as other leading indicators.
But oceans full of empty containers are as hard to conceal as are cities full of empty houses in the PTB con game.
And Goldman is warehousing stockpiled aluminum.
How do you tell if that's from a drop in demand or a rise in the supply of ships?
Rating agencies have become largely irrelevant. Which crack whore has the best shot at living til Friday?
Right. If everybody who's anybody is being downgraded, does downgrading even matter anymore?
B is the new A, bitchez.
Looks like Cameron is smarter than many of his country.
Only.... there will be no ECB once England (minus Scotland etc...) gets downgraded which is not too far off the radarscreen. Then we'll talk again about Cameron's arse ;-)
Downgrades are the new "IN" thing. I am going to enjoy watching the EU's Socialist agenda burn in the wind with it...
I feel sorry for that can. God knows how long they will be kicking it...
Send you tax deductible donations to:
Friends of the Can
PO BOX 123 Moot Point Montana
Please, give generously.
Well, after all kicking the can got its start over there..
http://www.youtube.com/watch?v=lK0gYi1YEZ8
Super Mario @ 1:00
Debt levels are well past the point where spending constraints can deal with them. These types of agreements are just smoke and mirrors. It's print or die, period. Just wait until it is Uncle Sam's turn. Then we will see a new definition of "screwed".
I hear from my Sister in Law who is currently living in Spain that in her region (near Malaga) Public sector workers have not been paid for over 2 months. Public disorder is daily - road blocks - sporadic vandalism and violance, etc. Many local bank branches boarded over, growing sense of Anger among Spaniards and fear among expats. She says it is now vital to check the local radio for updates of protest road blocks before planning journeys. Authorities are trying to appease the growing anger and have recently jailed a number of local government officials for stealing public funds, Small fry fall guys probably, but the tension is getting real.
And yet narry a word in the good ole US MSM.
Doesn't that tell you something? It should.
No problem -
The Patriotic Act was written, revised, signed into law, printed and distrbuted in less than 6 weeks.
It was 342 pages long.
They should have this wrapped up by end of day.
So you don't believe they didn't have a draft lying around for years just waiting for the right opportunity to dust it off and trot it out?
[/sarc off]
And shortly after, there was a Patriot Act part II. Supposedly, Cheney had a hand in penning that one.
Ah, the summit of all summits that will solve the problem once and for all.
Just imagine the ramp job they can do on the hope of a rumor of bazooka coming out of the meeting.
Their ponzi can go on until all interest rates are at zero. We are a years away from this. The only way to to stop it now, is politically.
Or Greece demands 60%-100% haircuts on their debt, triggering CDS, in a true default.
They will be voluntary, LOL. Keep fear high so inflation doesn't get out of control. Same with the downgrades, more fear. Print money and prevent inflation through fear.
A lot of head fakes here. The puppet masters are not going to cede their vision of the NWO which requires that individual sovereignty must be subordinated for "the common (socialist/fascist) good".
Maybe they will have another important meeting to talk about it yet again. That way they can all sit around and look official while they print money and rape the public.
And the food is great and the beds are comfy.
OT:
F'k'n Bloomberg CHEER LEADING:
As opposed to ACTUAL JOURNALISM(RanSquawk):
Or maybe it's just me...
for every clause there is a weasel
France was downgraded from Pimp to Whore ! That hurts their inflated pimpy pride ! Mr. Sourkozy, the peasants have no wine ! Let them drink Kool Aid ! Monedas 2012 Sourkozy pops his cork for Merkel ! He used a kitchen stool and tippy toes to reach her Teutonic Treasure !
Fiscal treaties now have a lifespan of 2-3 weeks...check.
Tyler and others (including Jeff Miron at Harvard and me on Fox Business) have been saying that this WON'T WORK. Socialism is hard to dismantle since so many get on the dole. Vague promises of austerity won't work. Even the French PM said that France won't undertake further austerity. See here.
http://confoundedinterest.wordpress.com
How would 'austerity' ever work in a vacuum? Especially when the plundering continues unabated. The 'deficits' are not going down in this story, not without a purging of the entire corrupt system.
Looks like the ECB is in the same position as the sovereigns (vs the debt holders). Either they accept what the pols (debt holders in this case) come up with, or they blow themselves up. It's a strategy I guess. Wonder if Hildebrand's got a new job? :)
He's with the Carlyle Group now.
Otto von Bismarckitis and Central Bankitis - the new "Black Death"... coming to your neighborhood, soon!
The fiscal treaty was a bad idea to begin with and would have never held. The peripheral countries are not really willing to give up sovereignty and they will violate any treaty just like they did with the Maastricht treaty.
The solution is simple – allow sovereigns to default. There is no better mechanism than the market mechanism. All the treaties in the world will not do what a rise in bond yields can do.
"Now the folks responsible for the actual writing of this fiscal treaty have only two weeks before the next EU summit to come up with something that satisfies both the EU heads of state — whose attempts to soften the terms show that they are apparently having second thoughts about giving away fiscal sovereignty — and the ECB paymaster."
NO problemo:
Italy-France-Germany summit in Rome postponed-German embassyROME, Jan. 16, 2012 (Reuters) — A meeting between Italian Prime Minister Mario Monti, French President Nicolas Sarkozy and German Chancellor Angela Merkel planned on January 20 in Rome has been postponed and will probably be held at the end of February, the German embassy in Rome said on Monday.
VVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVV
Now they have six weeks to come up with a lot of nothing. In the meanwhile we can be entertained by reading such as this:
Euro could become world's leading currency: Noyerhttp://www.newsdaily.com/stories/tre7bu0fo-us-euro-noyer/
They will be as flexible as a strippers on a pole. There is a Ponzi at stake.
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