Hold on tight boys and girls, cause Merkel is back from vacation, and she is not happy despite that healthy Santorini due diligence-inspired tan (as deputy-Chancellor Fuchs telegraphed earlier today, when he made it quite clear what his boss thinks about Greece, and about more printing). Per Bloomberg: "German Chancellor Angela Merkel returns to the front line of the European debt crisis this week as the bloc’s leaders squabble over measures including bond purchases to relieve concerns the single currency may fragment. Merkel ends her summer vacation and travels to Canada Aug. 15-16 for talks with Prime Minister Stephen Harper as a spiraling euro crisis threatens to constrain the global economy. With the region’s leaders awaiting a German high court decision on bailout funding next month, they’re struggling to smooth divisions over a European Central Bank plan to buy the bonds of indebted nations."
Bloomberg proceeds to recap what we already have explained over and over: the lack of an impetus by soon to be bailed out governments to act if they are bailed out, coupled with the impetus to cheat and do nothing, as well as the inevitable arrival of the German referendum.
"It makes no sense for the ECB to start financing” Spain and Italy, ECB Governing Council member Luc Coene said in an interview with newspapers De Tijd and L’Echo published on Aug. 11. “It would only lead to the ECB taking on the whole public debt of Spain and Italy onto its balance sheet.”
The possibility that Germany’s high court will demand greater elector participation in euro decisions raised the prospect of a referendum in the euro area’s biggest economy, placing the country’s commitment to the currency in the hands of voters at time that polls show rising discontent with the costs of the crisis.
The policy maker said the central bank’s experience a year ago demonstrates why the ECB is reluctant to step in.
"We haven’t forgotten what happened in August of last year: We bought Italian bonds and right after that the Italian government reneged on its pledges,” Coene was quoted as saying. “The conclusion is clear: When you take away the market pressure, you take away the pressure on politicians to act.”
While Merkel has resisted the notion of a referendum, Rainer Bruederle, the parliamentary caucus leader of her Free Democratic coalition partner, told Hamburger Abendblatt last week that Germany’s role in the crisis might need to be put to a vote.
“We may come to a point where a referendum about Europe becomes necessary,” Bruederle told the newspaper. “The future development of the debt crisis will show how much the EU countries will be asked to give up sovereignty.”
Finally, just because it has not been on the front pages in over a month, does not mean that Europe's basket case, Greece, has been fixed. Far from it.
The monthlong wait for the ESM decision will be paralleled by anticipation on whether Greece continues to receive euro rescue funds. Greece’s troika of international creditors -- the ECB, the European Commission and the International Monetary Fund -- will return to Athens in early September to resume talks as Greek Prime Minister Antonis Samaras seeks to hammer out 11.5 billion euros in budget cuts for 2013 and 2014.
German Vice Chancellor Philipp Roesler, who drew international criticism last month for resurrecting the possibility of a Greek exit from the euro, told Focus magazine that such a scenario would be “manageable,” echoing a statement by Luxembourg Prime Minister Jean-Claude Juncker.
“Hardly any of our offers have been taken up by the Greeks,” Roesler told Focus Aug. 11, referring to economic support put forward by the German government and industry.
The ECB’s Coene said a Greek exit “would be the worst solution,” adding in the interview that “it would raise a question about euro membership for everybody, not only for Greece.”
Oh well - the vacation was fun while it lasted. And now, as a complete tangent, here is a montage of Hitler repeating "nein" for 10 hours straight.