Mapping The EU Summit Political Maneuvers

Tyler Durden's picture


The politics of the EU summit appear quite tense, and as JPMorgan's CIO Michael Cembalest notes, you have to wonder if this is how monetary unions are made or broken: by strong-arming the Chancellor of the country primarily expected to fund the Euro’s survival. In order to better comprehend the shenanigans, Michael provides an aerial view of the summit and how these maneuvers played out. The next move is Germany’s.

The June 2012 EU Summit Maneuvers


The French Resistance to German austerity demands started with a threat by Hollande to surrender immediately, to not even support his own growth compact and to let the summit fail, unless Germany changed course. The growth compact was then agreed to. While it sounds good, no new monies were committed (the 120 bn Euros mentioned are from existing sources).

Italy switches sides: Prime Minister Monti, whose technocratic government was approved by Germany and who was expected to follow Germany’s austerity line, defected to Hollande’s camp and also threatened to allow talks to fail and blame the entire mess on Merkel. Sidenote: watch for a possible Napoleonic return from Berlusconi should conditions in Italy deteriorate.

Spain allied itself with Italy, and allowed Italy to attack Germany directly, since Spain’s banks and its entire economy are in much worse shape. Along with Italy, Spain is pushing for EU purchases of sovereign bonds with limited/no strings attached.

An isolated Germany retreated on its ESM lending stance and got little in return other than vague language about region-wide banking oversight by the ECB. Germany now has to sort out the internal politics of post-summit magazine covers showing an Italian kicking a soccer ball with Merkel’s head on it; a letter from 160 German economists criticizing Merkel’s approach at the summit; a comment by the German President that Merkel has the duty to describe in great detail what summit agreements mean for Germany’s budget; and France still reluctant to cede banking system or fiscal authority to an EU regulator, one of Germany’s demands.

Austria, Finland (inset) and the Netherlands, fiscally conservative allies of Germany, are dealt a blow by German concessions. Certain ESM provisions requiring 85% and 90% thresholds appear designed to thwart their potential objections.

Ireland sees itself as a big winner from the Hollande-Monti revolt, having argued since 2009 that the rich members should recapitalize EU banks directly, rather than each country being responsible for its own banks. Without any concessions from Germany, Ireland’s debt-GNP ratio would rise above 140%. Not clear if reality matches Irish expectations; perhaps Ireland will convince the EU to recap Allied Irish Bank and the Bank of Ireland with 15 billion (around 10% of Irish GNP).

After Great Britain vetoed the fiscal compact last year (which probably would not have applied to them anyway), it has been left on the sidelines politically, in “Splendid Isolation”. Given what is going on in Europe, not a bad place to be. The UK is not in great shape, but would be in disastrous shape had it joined the European Monetary Union.

Swiss wall of monetary neutrality under siege by capital inflows from the Periphery. Swiss National Bank FX reserves have grown by 40% of GDP since 2009, an enormous amount that China took over a decade to accumulate.

In a speech last November, Poland’s foreign minister stated that he may be the first to say he feared German inaction more than German action. On the other hand, he stressed the value of money, responsibility and the honest intention to repay as being the foundations of a moral order. Bottom line: Poland still wants to join the EMU, but is waiting for Germany to clean up the mess, and for the Periphery to adhere to new fiscal rules which would be “almost impossible to block”.


Source: JPMorgan

Your rating: None

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Mon, 07/09/2012 - 11:17 | 2598708 CitizenPete
CitizenPete's picture

UNRELATED: Blatent Spam / Notice:

All eyes on Nebraksa

If any free-market, Freedom and Liberty minded ZHers on here continue to support RP, then you probably are aware that the Nebraska convention is a hail mary for the campaign and that it could insure a voice for the Liberty platform at the RNC convention, and theoretically a possible nomination for RP (a dream). 

If you would like to help the Republican Liberty Caucus-Nebraska insure a legally fair shot at the Nebraska GOP Convention against "the powers that be", you can chip in here:




Ron Paul could be nominated at the RNC; Romney has not won yet. All eyes on Nebraska!


Mon, 07/09/2012 - 11:29 | 2598725 Dan The Man
Dan The Man's picture

A nice effort...but amerika is not a democracy.

Mon, 07/09/2012 - 12:46 | 2598910 Precious
Precious's picture

I saw John McCain on TV this weekend talking about Syria, Israel and the US need to intervene in Iran.

We need to have another John McCain post so that we can remind this senile sugarbaby, once again to FUCK OFF ASSHOLE.

Mon, 07/09/2012 - 11:30 | 2598726 veyron
veyron's picture

Millions of dollars and thousands of manhours wasted on the Pauls (Rand, who publicly sold out, and Ron, who aligned himself with the Bilderberg Peter Thiel).  Sunk cost, move on ...

Mon, 07/09/2012 - 11:44 | 2598759 Jim in MN
Jim in MN's picture

32 out of 35 Minnesota committed delegates are secured for Dr. Paul.



Mon, 07/09/2012 - 11:18 | 2598709 sockratte
sockratte's picture

well, the strong-arming would have worked if the EU were also a political union. thats the essence of the european crisis imho.

Mon, 07/09/2012 - 11:20 | 2598711 LULZBank
LULZBank's picture

What you call the essence, smells like shit to me.

Mon, 07/09/2012 - 11:23 | 2598713 Comay Mierda
Comay Mierda's picture

EU will get their fiscal union and countries will no longer have sovereignty

because nobody gives a shit.  Europeans dont give a shit. 'Mericuns dont give a shit.

the dwindling number of people with common sense will be overtaken by the handout moochers blaming successful people for their problems and electing the corrupt politicians who promise them the world for nothing

Mon, 07/09/2012 - 11:50 | 2598777 tiger
tiger's picture

As long as news don't ruin their summer holidays and ATMs keep distributing cash Europeans won't give a mierda.
Nothing has a price: the price of fake money paper
Print Print Print Draghi Print

Mon, 07/09/2012 - 11:30 | 2598728 asteroids
asteroids's picture

I've seen this diagram many many times, just go to youtube and type in "Hitler reacts".

Mon, 07/09/2012 - 11:31 | 2598733 moskov
moskov's picture

EU is still qualified to make rules for others? How many summits and mettigns of EU dear leaders have been making in the past years. That's more than the number of any peak meeting season in a communist system. To believe Europeans are capitalists these days is the biggest joke on earth. EU is the biggest communist turd. Communism itself is invented by Turd European too

Mon, 07/09/2012 - 11:33 | 2598734 FXPortent
FXPortent's picture

So, we are right where we started with the EU...


Just more debt and more people living in abject poverty as they gather around for more handouts.

Sound familiar?

Mon, 07/09/2012 - 11:34 | 2598738 Dr Paul Krugman
Dr Paul Krugman's picture

Germany needs to understand that economics trumps politics.  The fear of Weimar lives on in the history books, but the world is a new place where we understand that when all countries increase their debt then this raises asset prices which fuels investment.  It is important to back the firms of the world, as the Nations, those that are not communist, rely on these firms to create the products that people need.  Cars are not made by the State of Germany, but by BMW.  Loans to small businesses are made by Deutsche Bank.  The politicians need to do what they can to create opportunity for the firms by using the science of economics to properly spur growth. 

Germans must recognize how far the science has come.  We can create money at the push of a button, and this money will create growth because people will work for it.  Obviously unemployment is the main problem for europeans right now.  Germany should help get the Spanish, Greeks, and others back to work by using the policy tools we have developed to better society.

Mon, 07/09/2012 - 11:44 | 2598746 i-dog
i-dog's picture


"when all countries increase their debt then this raises asset prices which fuels investment"

What!?! MDB?

"Germans must recognize how far the science has come"

I think that's why they're saying "Nein!" ... they realise all too well how far down the wrong path the "science" has "come"!

Overall ... nice satire. Though we usually do Friday Humour on Fridays....

Mon, 07/09/2012 - 12:20 | 2598843 Nachdenken
Nachdenken's picture

Push button money will create growth because people will work for it.

This sounds serious,  the pump priming myth of unfunded, unrepayable debt. 

O debt where is thy sting.

Mon, 07/09/2012 - 13:07 | 2599004 ZIRPThis
ZIRPThis's picture

I'm hoping this is a parody-mocking of the idiocy of Krugman, in which case I both laugh and applaud; otherwise this is almost too stupid to waste a response on.  Debt financing through fiat currency digitization only raises the number of paper dollars it takes to purchase an asset.  If the price increases but the value remains stagnant, all you get is another bureaucrat's shriveled dick in your ass, and a lighter wallet.  And economics is only a science to the point that it incorporates basic math.  The rest is common fucking sense.  Elaborate econometric graphs and "theories" about the next micro-maniacal tool the central planners will use to convince the citizens of sheepletonia that they're actually working to help them..might win you another worthless Nobel Prize in economics, but will really just get you laughed out of the room anywhere else.

Mon, 07/09/2012 - 11:35 | 2598740 RobotTrader
RobotTrader's picture

Here we go again.  JPM's CIO's forecast now considered "expert opinion".


Tomorrow, gold and silver will get smashed and everyone will blame it on JPM the "evil empire".

Mon, 07/09/2012 - 11:41 | 2598749 Dr Paul Krugman
Dr Paul Krugman's picture

Gold bulls will clutch their metal from the top to the bottom in hope that a relic is a good investment. 

Maybe these people should make cave paintings and eat bone marrow, too?

Mon, 07/09/2012 - 11:48 | 2598769 Bay of Pigs
Bay of Pigs's picture

Doc, I have to say your writing is getting better all the time. Cave paintings and eating bone marrow? LOL.

Look out MDB, you have met your match.

Mon, 07/09/2012 - 11:48 | 2598770 slyhill
slyhill's picture

Uhhhm, check and check.

Mon, 07/09/2012 - 11:38 | 2598744 mrktwtch2
mrktwtch2's picture

krugman?? that liberla hack would never been on this we only tell the truth here!!

Mon, 07/09/2012 - 11:39 | 2598745 ParkAveFlasher
ParkAveFlasher's picture

Fcuk this, I'm moving the rest of my armies into the Kamchatka and Brazil.

Mon, 07/09/2012 - 16:25 | 2599835 smiler03
smiler03's picture

Risk On!

Mon, 07/09/2012 - 11:42 | 2598750 duo
duo's picture

Looks like we're only missing a France-Russia mutual defence pact to make it 1914 again.

Austrian politicians are to avoid Sarajevo at all costs.

Mon, 07/09/2012 - 11:53 | 2598784 luckylongshot
luckylongshot's picture

Even if Germany agreed to fund the rest of Europe it does not have enough money to do so. The only group wealthy enough to sort out this mess are the Rothschilds who, unlike the Germans,  have some major responsibility for creating this mess in the first place.

Mon, 07/09/2012 - 12:16 | 2598832 fuu
fuu's picture

Nice negative rates on the French auctions.

Mon, 07/09/2012 - 12:37 | 2598891 Sudden Debt
Sudden Debt's picture

belgium rates are dropping fast also.
without reason....
so I think it's a trick of the elite to let people feel save and kill the pension funds in the same time.

Mon, 07/09/2012 - 12:23 | 2598849 Nachdenken
Nachdenken's picture

Welcome to the money-go-round, chose the debt you will ride.

Mon, 07/09/2012 - 13:38 | 2599121 digalert
digalert's picture

Brilliant, meanwhile NATO surrounds them all, awaiting a call for 'aid' (bombs for peace) to shower over any rogue sovereign wishing to escape.

Mon, 07/09/2012 - 14:57 | 2599382 Vegetius
Vegetius's picture

Earth to Krugman! Lets hope we are not depending on the Great Krugman to save us.

Quote time-


“The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”
  -Friedrich von Hayek


“The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists.” 

- Ernest Miller Hemingway

Do NOT follow this link or you will be banned from the site!