Europe Faces A Perfect Storm In 2020

Via GEFIRA,

Clouds are gathering: Weidmann will end QE while Macron’s reform will not solve any problem whatsoever. It’ll be the final push for a Eurosceptic Italy, where plans for parallel currencies are popping up. Add Trump’s trade war to the soup and 2020 promises to turn nasty.

It is becoming increasingly clear that at the end of 2019 Jens Weidmann, current President of the Bundesbank, will replace Mario Draghi at the helm of the European Central Bank. The change in terms of economic beliefs will be radical and, combined with the other developing issues in Italy and the US, which will be discussed later in the text, might as well put an end to the misery of the Eurozone.

What does Jens Weidmann believe in?

As a typical post-Weimar German, he believes in strong currency and low inflation. The Financial Times carried an interesting interview with him a few weeks ago, in which the German financier expressed his opposition to everything that Mario Draghi has stood for in the last few years and made known his wish to stop the quantitative easing program and replace it with raised interest rates. What happens when interest rates increase? If they go up too fast, markets crumble. Low interest rates offered for too long have contributed to the subprime mortgages debacle of 2007-8. In 2012, at the peak of the Eurozone sovereign debt crisis, Draghi promised to do ”whatever it takes” to preserve the European common currency. Weidmann was the only one on the board of the ECB who was opposed to this too. Draghi’s statement had a therapeutic effect on financial markets which quickly calmed down after it. Once he’s gone, however, Weidmann is unlikely to show the same resolve to indeed do whatever it might take to keep the currency together. Finally, just like most Germans, he is not a fan of Emmanuel Macron’s idea of creating a Eurozone budget because the money transfer is seen as too much of a concession towards “lazy Southerners”. Maybe in the end Weidmann will opt to preserve the status-quo, but if he sticks to his beliefs, rates will increase, markets will fall and it’ll be the end of the Eurozone.

Trump is winning, Macron is not

The financial press ridicules the American President and regards his French counterpart as a godsend. Yet, when you look at their hitherto policies, they have been rather similar: less taxation, especially for the rich and restricted immigration. If you look at the results, both economies are experiencing solid growth. Still, it is Macron who is credited for “creating confidence among businesses for his reforms”while Trump’s success is framed as a fluke at best. It might as well be, but the US economic growth is stronger than France’s and the US stock market boom (which began on the night of November 8th 2016 when it became certain that Donald Trump had defeated Hillary Clinton and the market reversed galloping all the way throughout 2017) is a driving factor globally. So, if Mr. Market’s behaviour means anything, then Trump can partly claim credit, Macron can’t.

The balance of real strength between Trump and Macron couldn’t have been made clearer. A few days ago Trump signed his tariffs on steel and aluminium into law, and when Macron called him on the matter it was to no avail.2)The latter also called on for the WTO to intervene, but the motivation adduced by Trump is “national security” and there is little the WTO or Macron can do about it. It’s game, set and match for the American president.3)Even if the roles had been reversed, the mainstream press would be still praising Macron and mocking Trump. As it is, the French president’s debacle has been rather ignored.

The massive German trade surplus has often been named as a factor of instability on the international stage. Still, the European Commission, the IMF, former US presidents and the rest of the EU members have failed to lessen it so far. Trump is going to do what everyone else did not have the courage to: punish Germany. He will wage a trade and currency war against the Eurozone, and the above-mentioned tariffs are just the first act.

Finally, consider what will become of Macron’s reform of the Eurozone and its budget. The latter according to journalist Wolfgang Munchau, who’s generally well informed on the topic, will be a grand total of €3 billion a year, roughly 0.03% of the Eurozone GDP,4)so its contribution to the efforts rescuing the losing members of the European common currency from their fate is negligible. Even if Macron has the finance minister of his own choosing and the budget he is calling for, it won’t help.

Emmanuel Macron might have “all the right ideas” as the mainstream media love to say, but he’s also not delivering on them and there are doubts he ever will, while the media covering for him, come what may, keep digging the grave for their own credibility.

The Italian revolt

Since the last election, Italy is officially a Eurosceptic country. Mainstream parties committed to the European integration project have been vanquished. It is hard to predict if the country is going to have a government. The 5 Stars Movement won the most seats, but lacks the majority. The Democratic Party is imploding: the base wants to support a M5S government because “that’s where our voters went”, but the likely future leadership under the former development minister Carlo Calenda has no intention to do so. Lega has the strongest coalition, but also lacks the numbers and so far has been waiting on the sidelines. Its leader Salvini knows that in case a new election is held he is likely to finish off his ally Berlusconi, by taking even more votes from him. He also knows that if M5S makes a deal with the establishment, they’ll lose votes to him, making him the only credible candidate for change. He’s in no hurry. Mario Draghi will only become available for the position of prime minister in 2019. M5S might actually end up picking him, but supporting a technocratic government would be the end of the protest movement.

The other side of the coin is that once Draghi is no longer at the head of the ECB, keeping interest rates low for the benefit of Italy, the arguments in favour of Italy remaining in the Eurozone are running out.

Comments

silver140 Mon, 03/19/2018 - 03:40 Permalink

The EU is controlled by the bankers. If the people of Italy have any sense, they would vote to get out of the euro, if not the EU completely. It would need to have a currency ready to use, if not, look what happened to Greece.

JimmyJones purplewarrior Mon, 03/19/2018 - 05:48 Permalink

I don't think most people would choose to do that, they voted for people that did it but never said they would. Who openly ran on full blow open boarders? None of them, the people were lied to.

The fact is that oil being traded in Yuan on a Chinese exchange is going to shake the world, all those countries that hold huge amounts of US debt will be affected big time, interesting times are ahead of us. I expect the calls for war to only escalate. All those dollars with falling demand for them.

In reply to by purplewarrior

Crazy Or Not purplewarrior Mon, 03/19/2018 - 08:08 Permalink

>Europe's been through a lot.

"Bbbb-baby you ain't seen nothing yet!" Pretty soon all of that will pale with what's coming down the pike, there and here. 

Put all of your worst economic fears into a basket, sprinkle on a dusting of deteriorating regional conflicts then serve it all up with an increasingly unstable weather system, crop failures, food shortages, and brutal winters. Take undiluted for 15 years until cured.

 

In reply to by purplewarrior

OverTheHedge tato1969 Mon, 03/19/2018 - 08:44 Permalink

Italy has a long history of getting on despite its government. They have averaged a new government every year, and given that they have had a remarkable amount of stability the last few years, that means they have had more than one government a year for most of their modern history. Italians will be fine (ish), but the rest of the EU system may not.

I particularly like the idea of a German Banker taking over the EU Central Bank - that could only ever end in tears for everyone at this point. Lets all have sensible interest rates and lots of austerity for everyone except Germany. What could possibly go wrong?

In reply to by tato1969

silver140 tato1969 Mon, 03/19/2018 - 15:56 Permalink

Argentina refused to pay the debt slave ship IMF and was doing okay, until the CIA rigged the elections to put in another corporate fascist puppet, who immediately sold Argentina into slavery again. The lesson is to not pay off the banksters and develope an economy independent of them and associate with other countries that do the same.

In reply to by tato1969

ldd silver140 Mon, 03/19/2018 - 05:55 Permalink

In Greece outside of Athens/Piraeus in the smaller places life goes on for most people as they are not so beholden to industry. However a lot of abandoned buildings/projects all over the place, which can be deceiving as there is some arcane law whereby an uncompleted property is not subject to taxes. I know a guy there who has a factory in Athens and he is down to three guys to just maintain things. The people involved in industry are hurting. Many Chinese buying up and setting up shop most likely in anticipation of OBOR. And Athens/Piraeus in parts look on their way to "Escape out of New York". Many refugees in Athens. Amazing place, super nice people once you get past some of the detritus.

In reply to by silver140

Jung Mon, 03/19/2018 - 03:41 Permalink

Draghi there favouring his own country? You mean that they are not completely objective and play games? Then, the result will be down, down with the EU. To continue not heeding truth and somehow things start to suck. 

When will the time come that the debt economy needs to stop and be replaced by another system without the banksters and Rothschilds creaming off all wealth by usury system that are doomed to lead to endless debt and control by those anonymous bastards?

Sudden Debt EuroPox Mon, 03/19/2018 - 05:32 Permalink

Indeed, and Draghi only does what he's being told.

 

the west has a demographic problem, a immigrant problem, a bureaucratic problem, a massive financial problem...

for the moment it's still a socialists dream but not only is all the money now gone, the debts to keep the smoke curtain up are way to high also.

 

In Europe, rates are already going up for the servants and real estate has been stagnant for over a year where in certain regions prices are dropping pretty hard right now.

Also, there's no more access to easy credit for the servants also which is putting a brake on the real economy right now.

 

And what is also finally taking place is the realisation that pensions for everybody aren't going to be fact in the near future. We're seeing protest everywhere now that the morons finally are starting to understand it.

20 years to late but problems only exist when they happen and that's also why it's way to late to protest now.

 

In reply to by EuroPox

EuroPox Sudden Debt Mon, 03/19/2018 - 05:44 Permalink

Entirely agree, especially about the pensions - the money has gone.

But why have we not yet seen people take to the streets in Greece, Cyprus, etc.?  I think it is because the 'Boomers' always thought that their generation would never have to face a war, so they have done everything they can to maintain the easy life (without having to fight for it).  It is still in their interests to keep a lid on problems (even as the pressure builds). 

Boomers will never take to the streets; instead TPTB continue to pretend that violence against muslims is the threat to society - they will crush dissent until they slip up and do something that antagonizes the muslims ... then the muslims will take to the streets, the cork will be out of the bottle and white Europeans will finally fight back.  Essentially, civil war will be the solution.

In reply to by Sudden Debt

Golden Showers Mon, 03/19/2018 - 03:46 Permalink

We'll just have to see. Now one interesting fact is the birth rate. If Italy is still negative population growth how does it compare to other stultified Western European nations (sic)?

Also out of curiosity, what does Macron do? Oh Rothschild & Cie Banqe and is a socialist faggot. Well, jolly good.

Here's the thing: if your citizens don't fuck they are stressed out, bored or gay. Italy and Japan are in deep shit. But let Macron of France faggotry on behalf of the Rothschilds save the Eurozone with his brilliant pedantry somehow (fucking moron) and Pandas will fuck in zoos all across the world!

Bullshit.

What a canard!

 

Setarcos Golden Showers Mon, 03/19/2018 - 04:13 Permalink

If silver spoon Macron is a "socialist", then I'm a hairy nose Wombat.  FFS, everyone, please let's get some rationality and sense back in political/economic/ideological terminology!!   Agree with them or not, socialists are fundamentally believers in state ownership of at least key factors in an economy, such as power supplies, water resources, railways and defence - both industries and the military.  Traditionally they have been for national sovereignty and public banking, thus utterly opposed to globalism and private banksters (like Macron).  Traditionally they have been for national health care, pensions and education.  The European tradition was for a "mixed economy", by contrast with socialism-gone-too-far in the Soviet Union.  An especially successful socialist country was Libya (but typically destroyed by the fascist US Empire), but then so was Syria and Iraq (both Ba'ath Socialist) and even the Soviet Union managed to become a super power, despite so much being destroyed during WW2 (it too being deliberately destroyed by US machinations - know your history??).  Finally:  Vladimir Vladimirovich is a moderate socialist and that's why Russia has recovered substantially AND why it is now vilified and threatened.  Please think before down voting me to hell.

In reply to by Golden Showers

An Shrubbery Setarcos Mon, 03/19/2018 - 04:43 Permalink

I'm as guilty as anyone for railing against this system or that system. But at the end of the day, it's never the system's fault. The problem is ALWAYS CORRUPTION. Hell, communism MIGHT even work, IF I SAY IF IF IF you could eliminate corruption. But how the hell do you do that? As somebody famous once said, "Power corrupts, yadda yadda yadda..."

So is there any hope for the human race? I have hope. Not a lot of faith, but I have hope. To paraphrase Mark Baum, "For 15,000 years fraud and short-sighted thinking has never ever worked. When did we forget all that?" The better question might be, when will we ever learn?

In reply to by Setarcos

Setarcos An Shrubbery Mon, 03/19/2018 - 08:33 Permalink

I share your pessimism, but I did feel like trying to get some clarity for terminology.   Seems to me that psychopaths will always rise like scum to rule and be corrupt (by their very nature).  I am as sure as I can be that Muammar Gaddafi was an exception and FLAWED by being too decent to really imagine that charming (they often are) psychos like Obomber, the Bliar and Sarky would stab him in the back (pretty much literally) as soon as he gave up his weapons and "tried to be friends".   Vladimir Vladimirovich is similarly FLAWED, but he has learned a lot, so maybe …??  What a World when what most of us think of as virtues will get you killed.  I personally took heavy losses twice for being too trusting and doing what was ethically good.

I can't believe in "divine intervention" - well why hasn't it happened before - but it'll surely take something like that to eliminate psychopathy from the gene pool.  I've often thought that the myth/legend of Cain and Abel was an intuitive grasp on the human predicament thousands of years ago.

In reply to by An Shrubbery

Easyp Mon, 03/19/2018 - 03:53 Permalink

And as history has proven before England is able too see the political storm developing and get some distance from Europe.  Brexit is akin to leaving The Titanic on the first half empty lifeboat while passengers on deck laugh at us.

Scaliger Mon, 03/19/2018 - 03:57 Permalink

Last xmas had no market in Paris (Haram by the regime), so...

Q: Whose the voter, and which are his the interests?
A: Caliphate by means of Socialism.

An Shrubbery Mon, 03/19/2018 - 03:58 Permalink

Weidman is so screwed. When he raises rates, interest on eu sovereign debt goes ballistic, taxes will go even higher than they are now. It will be like firing a flare gun into the Hindenburg.

An Shrubbery gunzeon Mon, 03/19/2018 - 04:56 Permalink

The drip is only keeping european banks on life support. There has been no recovery, there will be no recovery. The best option for the entire world economy would be restructuring debt, in other words, bankruptcy and re-organization. But that would be painful, so the default solution will be... DEFAULT. Which will be ten times more painful, but we're just that fucking stupid. Damn the torpedoes, full speed ahead!

In reply to by gunzeon

Bahamas Mon, 03/19/2018 - 03:58 Permalink

Every once in a while the tyrannical vampires reclaim a  massive dose of Italian blood. There surely must be some special energetic virtue in those Italians for the elitist to hate them so much

Batman11 Mon, 03/19/2018 - 04:24 Permalink

Perhaps it was just a silly idea in the first place.

“"historically the German D-Mark had been strengthening since its introduction in 1948 against the currencies of its neighbours, and this reflected – and compensated for – increased German competitiveness. Their weakening currencies allowed German trade partners to keep their export industries in business and their workers employed.

.......

When visiting Europe at the time (I was based in Tokyo in the 1990s), and meeting my peers, the chief economists at other banks, I would of course discuss what in my view was the highly worrying prospect of these plans to abolish the D-Mark. I was astonished by their reaction. About half of them insisted that those plans were so lunatic that, of course, they would not be implemented.

.........

“The other half of the chief economists, like me, recognised that a single currency would be introduced, no matter how nonsensical the economics, since it was a political project. (The economics being bad, the politics was even worse: the end of democracy in Europe). They agreed with me that it was going to be a disaster. I asked the chief economist of what was then the fourth largest German bank: „If you think so, why don’t you speak up about this? You are forecasting gloom and doom, but I don’t see any reports by you or your bank about it.“ His answer was shocking: He said that there had been clear instructions from the boards of all the large German banks to their staff that no report on the abolition of the D-Mark and the introduction of a European single currency that was in any way negative was allowed to be published. The economists in the private sector had been muzzled by their bosses. The same I heard from journalists. So the German media only quoted the rigged reports from the banking economists.” Professor Werner 

The people that knew were muzzled.

IProtectYou Mon, 03/19/2018 - 05:43 Permalink

From a German tax payer point of view Macron definitely has NOT “all the right ideas” .

He wants German savers to be liable for bankrupt French and Italian institutions.

Davidduke2000 Mon, 03/19/2018 - 06:28 Permalink

what a silly article, did anybody expected vassal states to prosper ?? let's go back to the Roman empire  dying days , not even vassal states were spared, they were grabbed to be part of a dying empire for their resources, they did not fight because they were vassal states , their leaders were beheaded because they were spineless , but at the end, the empire and its former vassals died a horrifying death.