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On 'Silly Season' And The Danger Of European Politicians

Tyler Durden's picture


The coincidence of comments from Germany - both the Bundestag's Hasselfeldt "If a country is not in a position to fulfill its obligations, or is unwilling to, then it must leave the Euro zone"; and vice-Chancellor Philip Roesler (of the FDP) to the effect that the dangers associated with a Greek exit had faded - and the IMF (which has been suspect for a while in its 'steadfastness' with regard Greece, seem to suggest as UBS notes, that there is notable suspicion of collusion among the politicians to apply pressure to the Hellenic Republic. Against becoming too concerned there is the Realpolitik of the Euro area. Decisions about the direction of the Euro project are taken by a very small coterie of political leaders within the Euro area, and we should be concerned not necessarily because of the specifics of the comment or the associated “hardball” bargaining stance, but because politicians still feel that comments like this can be made at all without fear of repercussions. As silly season is set to begin, we should prepare for the impact of politicians need to hear themselves speak.


UBS: Greece, Germany and the problem of politicians


Against becoming too concerned there is the Realpolitik of the Euro area. Decisions about the direction of the Euro project are taken by a very small coterie of political leaders within the Euro area. Junior politicians, even senior politicians at a national level are not likely to guide the process of negotiation, nor do they necessarily have privileged information of the thinking of those at a heads of government level who do in fact take the decisions. As the “surprise” outcome of the nineteenth summit to save the Euro in June indicated, we should not become too focused on the opinions of those who do not sit at the decision making table of the councils of Europe.

Why should we be concerned? We should be concerned not necessarily because of the specifics of the comment or the associated “hardball” bargaining stance, but because politicians anywhere still feel that comments like this can be made at all without fear of repercussions. The danger is not in protracted negotiations with Greece, or in the risk of further Greek default (which must be thought to be inevitable at some point). The danger lies in the casual way that such comments are uttered by politicians. There are perhaps three reasons why this sort of comment causes economists to wince with intellectual pain.

  • Politicians are ignoring the costs of departure. The idea that a fragmentation of the monetary union is possible at low cost has been countered by private sector research and by government studies (including, of course, the German Finance Ministry). We believe that the costs of a Greek exit to Greece itself would be horrific, in economic, political and social terms. However the cost to the rest of the Euro can not be discounted - including rising risk premia, reduced trade, and financial system volatility.
  • Politicians are being inconsistent. There is a suggestion of moral hazard – if one country renegotiates, then others will want to renegotiate the terms of their own agreements. That is valid. But the insistence on moral hazard over renegotiation ignores the immense hazard of exit. If one country leaves the irrevocable monetary union (proving that exit is indeed possible and what is irrevocable can in fact be revoked) then other countries are likely to come under probably relentless pressure to leave. There implications of political remarks like these are that countries will leave or not leave as a consequence of their own decisions. These political comments make no allowance for the powerful and potentially overwhelming exogenous forces of the markets and bank runs. Evidence that politicians believe that they can confine a Greek crisis to Greece is alarming. If Greece exits, other countries would very likely follow suit in a very short space of time. The idea of a “firewall” around Greece is meaningless, in our view.
  • Political leaders could actually lead. There is a risk that by providing such opinions (even if a negotiating tactic) political leaders will influence market opinions and risk perceptions and thus aggravate the economic problems of countries within the Euro. International investors are not intimately familiar with the intricacies of national government politics in the Euro area. It is therefore hard for markets to distinguish between political posturing by less influential politicians, and substantive points of negotiation by politicians that carry more weight. Politicians making comments about the implications of a crisis may in fact bring about a crisis that they are subsequently unable to control by provoking an investor reaction.

With August looming, the prospect of high profile comment in the Euro area is increasing. August is known by the British tabloid media as the “silly season”, when a shortage of substantive news gives prominence to “silly” stories and views in order to fill the pages of newspapers. Unfortunately there is a risk in the Euro area that such “silly” political stories will still have real world economic implications. The best hope for some calm in the Euro may lie in the combination of news first from the Olympics and then from the US presidential race lowering the profile of Euro politicians.

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Mon, 07/23/2012 - 15:08 | 2643450 mrktwtch2
mrktwtch2's picture

the only 2 truths are death and taxes..you cant avoid either of them..

Mon, 07/23/2012 - 15:30 | 2643514 hedgeless_horseman
hedgeless_horseman's picture



...and the third truth is drone strikes...you cannot avoid them either.

U.S. drone kills 12 suspected militants in Pakistan

Is the U.S. at war with Pakistan?  Suspected militants in foreign countries are now issued a death sentence without trial. 

They hate us for our freedoms.

Mon, 07/23/2012 - 15:30 | 2643524 pods
pods's picture

We have always been at war with Oceania.

How many fingers Winston?


Mon, 07/23/2012 - 15:39 | 2643547 MillionDollarBonus_
MillionDollarBonus_'s picture

European politicians have shown themselves to be both impotent and indecisive when it comes to pushing for new economic reforms to strengthen the union. It seems that President Herman Van Rompuy is a lone voice pushing for real fiscal and monetary union. President van Rompuy is the father figure of the European Union; a leader who has demonstrated quiet courage and calm stoicism in the face of tremendous economic challenges, and I hope that these immature EU politicians have the wisdom to follow his lead to create the Europe that everybody wants to see. 

Mon, 07/23/2012 - 15:54 | 2643565 ZerOhead
ZerOhead's picture

Farage was right... Van Rompuy is an idiot.

And just who is everybody?

Mon, 07/23/2012 - 16:09 | 2643617 TrainWreck1
TrainWreck1's picture

van Rompuy is like Bond*




*except women detest him, he can't drive a stick and the report of a firearm makes him incontinent.

Mon, 07/23/2012 - 16:25 | 2643649 Ghordius
Ghordius's picture

He is our Clown-in-Chief. Perfect for the job.

"International investors are not intimately familiar with the intricacies of national government politics in the Euro area."


Mon, 07/23/2012 - 17:17 | 2643758 Jack Sheet
Jack Sheet's picture

Stupid fucker.

Mon, 07/23/2012 - 15:48 | 2643562 GeezerGeek
GeezerGeek's picture

I recall being absolutely astounded when, during the 2007-2008 primary campaign, Barack Obama suggested he would invade Pakistan. http://wizbangblog.com/content/2007/08/01/obama-ill-invade-pakistan.php

I was astounded because the limp-wristed anti-war left was so silent. I guess war is only bad when the other side (political party) wages it. Like the quote from Ron Silver when Clinton first took office.


Mon, 07/23/2012 - 16:06 | 2643611 TrainWreck1
TrainWreck1's picture

fourth truth: big women.

They sneak into your flat and replace the svelte ones you brought home the night before.


Mon, 07/23/2012 - 17:55 | 2643861 The Alarmist
The Alarmist's picture

"Suspected militants in foreign countries are now issued a death sentence without trial. "

You obviously didn't get the memo ... anyone of military age within the kill zone of a drone strike is declared a "suspected militant."  That is apparently all the due process needed in the post-constitutional USA. 

Mon, 07/23/2012 - 15:30 | 2643523 Stoploss
Stoploss's picture

And the post auction afternoon pump..

Mon, 07/23/2012 - 15:09 | 2643451 NotApplicable
NotApplicable's picture

So... where's the punchline?

Mon, 07/23/2012 - 15:08 | 2643453 sickofthepunx
sickofthepunx's picture

don't hassle the feldt

Mon, 07/23/2012 - 15:12 | 2643462 Dr. Engali
Dr. Engali's picture


"There is a suggestion of moral hazard"


When have they ever cared about moral hazard? Not in my lifetime. This whole silly system is propped up by government backed moral hazard.

Mon, 07/23/2012 - 15:25 | 2643509 bmusic
bmusic's picture

The threw moral hazard under the bus with Merrill Lynch.

Mon, 07/23/2012 - 15:33 | 2643527 Dr. Engali
Dr. Engali's picture

Shit they did it long before that with Chrysler. But they really got the ball rolling with LTCM. That is when the big headaches started.

Mon, 07/23/2012 - 15:13 | 2643464 suckerfishzilla
suckerfishzilla's picture

We won't get our politicians to lead.  We will get a big sticky pile of du du on the rotary blades.  That is what we'll get. 

Mon, 07/23/2012 - 15:16 | 2643475 NaiLib
NaiLib's picture

Everyday I ask myself: Who is buying equities? and Who's Money is used to buy equities?


Can anyone provide the answer?

Europe and Asia is running towards a severe recession. What about US? Profits are declining all over the field.

Mon, 07/23/2012 - 15:18 | 2643484 Deep79
Deep79's picture


Mon, 07/23/2012 - 15:19 | 2643485 GMadScientist
GMadScientist's picture

a) Roach Motel Funds

b) Workers

Mon, 07/23/2012 - 15:20 | 2643489 PontifexMaximus
PontifexMaximus's picture


Mon, 07/23/2012 - 15:32 | 2643532 NaiLib
NaiLib's picture

"algos" "robottrader" is perhaps a too spmple answer. How come they seen to come in just at the moment when markets seem to accellerat momentum on the downside?

From where I sit we have Credit Suisse, Morgan Stanley, Societee Generale and Barclays, running in the same direction every day, and they are constantly buying,

Also we have one or two participants buyn tonnes of tonnes of index futures. This is not a short term thing, They have been buyers

for a very long time, and at the same time Savings funds and private investors have been net sellers during the last two years.

Who is "betting" :):) And this absolutely unbelieavable "recovery" intor the close just now?


Must be taxpayers money through FED and ECB in my veiw.

We are copying Albania and its very disturbing.

Mon, 07/23/2012 - 15:18 | 2643482 GMadScientist
GMadScientist's picture

Fourth reason: if Greece goes, so does the rest of the PIIS.

Mon, 07/23/2012 - 15:21 | 2643494 Motorhead
Motorhead's picture

So ein Scheiss.

Mon, 07/23/2012 - 15:31 | 2643528 Calidreaming
Calidreaming's picture

Cue in " Last hour Cricle Jerk"

Mon, 07/23/2012 - 15:32 | 2643529 monopoly
monopoly's picture

My goodness, will this ever end....

And, lets see, with this headline, what should we do....Hmmmm

Goldman Sees ‘Strong’ Recovery for U.S. Housing


Mon, 07/23/2012 - 18:31 | 2643958 The Navigator
The Navigator's picture


Read the 1st 2 paragraphs for a good laugh but in order for people to buy homes, they need a few things

1- Income from a job - no improvement there

2- fairly good credit from a bank willing to loan

3 - belief that the housing market is not going down further or has stabilized.

There is a ton of shadow inventory and another big batch of ready-to-foreclose homes behind that - these stats are all over the internets - so that botches #3

Strong Recovery for US Housing??? - yeah, in 50 years maybe

I hope to live long enough to piss on the grave of Goldman Fucking Sachs

Mon, 07/23/2012 - 15:36 | 2643541 johny2
johny2's picture

Germany once again finding that building an empire in Europe is a bad idea. 

Mon, 07/23/2012 - 15:57 | 2643545 Duke of Con Dao
Duke of Con Dao's picture

posted this earlier... got one Thumbs Down... must be an Obama lover...

I'm going pull this later today and re-cut to emphasize the Parasite of the United States aspect: 

YouTube - "Howard Roark, You Didn't Build That!" says President Obama    (well worth 70 seconds of your life)

 I've done 5 anti-Romney vids... so give me a break... 

your man in NYC...

el Dukerino


Mon, 07/23/2012 - 15:46 | 2643560 Byte Me
Byte Me's picture

Political leaders could actually lead.

Yeah, riiiight, wake me up at the first hint that any of these self-agrandizing fuckwits are actually about to do their jobs.

Mon, 07/23/2012 - 15:51 | 2643567 Pretorian
Pretorian's picture

Try  mating a robotrader and you make money while you sleep. Jim O'neill practice.

Mon, 07/23/2012 - 16:20 | 2643631 Vegetius
Vegetius's picture

President Herman Van Rompuy is a lone voice pushing for real fiscal and monetary union. President van Rompuy is the father figure of the European Union - MillionDollarBonus

The funnest line I have seen in a long time. Rumpy will save us! Outstanding Mr Rabbit in the Headlights will pull the EU out of the fire, obviously you have never listened to him.

“You have all the characteristics of a popular politician: a horrible voice, bad breeding, and a vulgar manner.”

Mon, 07/23/2012 - 16:43 | 2643689 shovelhead
shovelhead's picture

Which will come in handy when he, in a bath-salts induced frenzy, chews Nigel Farage's face to bits.

Mon, 07/23/2012 - 16:45 | 2643692 TrainWreck1
TrainWreck1's picture

Ugh. "He's gumming him like there's no tomorrow"



Mon, 07/23/2012 - 18:01 | 2643881 The Alarmist
The Alarmist's picture

If you ever wondered why Greece wasn't booted out years ago, it might have something to do with Greece being an alternative route for new gas supplies coming into Europe. 

Haiku Herman ... entertaining gas bag at best. Shame we can't hook him to a turbine to fill our energy needs.

Mon, 07/23/2012 - 21:39 | 2644345 miltiadis
miltiadis's picture

In a parallel universe Greece has already exit and WWIII is starting....

Tue, 07/24/2012 - 02:51 | 2644771 StychoKiller
StychoKiller's picture

Meanwhile, Science marches on...

Tue, 07/24/2012 - 02:53 | 2644772 ejgej
ejgej's picture

The legal point is that, even if some politicians may shout otherwise, nobody can push Greece out of Euro and Eu but Greeks! -and Greeks voted and will vote again for not doing it. It will simply happen, in a day of Autumn this year, that Greece will legally default without any exit from Eurozone.

As it would happen in the US if any State would go bankrupt, it would not exit the Union. Most of politicians in Europe know that,and simply wait for that day. The Efsm will be rejected from the German High Court in September, and Greeks will understand they'd better default, and Greek private creditors if there is still any, know that. If Eu let Greece default, it will even save some money...

This is why I fear politicians in Europe keep low profiles and their life on, Merkel ready to go on vacation in Italy and Italy's Monti at Moscow to sign business deals. Financial hysteria, market worries, 3 rating sisters knockouts aren't anymore interesting, Germany pays undewater interests on debt even if Moody's tries to undermine that, Italy has simply canceled all Bonds Auctions till September as it doesn't need fresh money.

Yes, Spaniards are shouting loud in Madrid, but everybody knows even there that their way of bonanza had to come to an end, as Greeks. You shout loud to avoid being the sole bearer of cuts, simply. it's even tragic the life experience in Greece today compared to recent years, but the Country has not exploded, and money isn't coming.

Tue, 07/24/2012 - 03:03 | 2644778 Ghordius
Ghordius's picture

you are not sticking to the bankster's approved narrative! +1

yes, Greece defaulting (instead of restructuring in shady deals, like last time) is indeed likely

yes, Greece not leaving the eurozone is also likely - why should they? where is the upside in the current currency war environment?

but this is not the way the banksters want to see it! it messes up their models

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