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Euro Is Not Under Attack, Ecb's Trichet Says

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http://www.guardian.co.uk/business/feedarticle/9079382

BERLIN, May 15 (Reuters) - The euro currency is not under attack despite its steep fall, European Central Bank President Jean-Claude Trichet was quoted on Saturday as saying.

Trichet also told Germany's Der Spiegel magazine that any suggestion governments had forced the ECB to act in the current euro zone crisis, giving a fatal signal on its independence and credibility, was "nonsense".

Famous last words?

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http://www.spiegel.de/international/europe/0,1518,694960,00.html

In a SPIEGEL interview, Jean-Claude Trichet, the 67-year-old president of the European Central Bank, discusses the largest financial rescue package in the history of Europe, the role and importance of speculators in the euro crisis and the weakness shown by politicians in the euro zone member states.

SPIEGEL: Mr. Trichet, how have you been sleeping these last few days?

Trichet: I always sleep well!

SPIEGEL: You haven't had any nightmares?

Trichet: No.

SPIEGEL: Nevertheless, the financial world has changed since the weekend before last. The countries of the euro area have put together a previously unimaginable rescue package with a value of over €700 billion ($889 billion) in order to save reeling member states from default. Even your institution has relented on a few of its firmest principles and now intends to purchase even poorly rated government bonds.

Trichet: No, we have not relented on our principles. Price stability is our primary mandate and compass. That being said, it is clear that since September 2008 we have been facing the most difficult situation since the Second World War -- perhaps even since the First World War. We have experienced -- and are experiencing -- truly dramatic times.

SPIEGEL: That's been evident from the way that you and others have been behaving over the last few days.

Trichet: At times like these, you have to keep your composure and analyze the situation as lucidly as possible. Back in August 2007, we were the first major institution in the world to correctly judge what was happening on the capital markets with the start of the turbulence. And we reacted swiftly.

SPIEGEL: What exactly happened between Thursday and Sunday of the week before last, when Europe's heads of state and government launched the largest financial rescue package in the history of Europe?

Trichet: On Thursday afternoon and throughout Friday, we had a continuous deterioration of the situation in the financial markets, both in Europe and, as a consequence, at the global level. On Friday, markets closed and number of important indicators -- spreads on sovereign bonds in Europe, CDS spreads and the situation in the interbank market -- were signalling the spreading of severe tensions. I made those points to the heads of state and government on Friday evening. That is what happened between Thursday morning and Friday evening. Being permanently alert is of the essence when you have important responsibilities.

SPIEGEL: Hedge funds and other speculative investors currently manage assets with a total value of $2.6 trillion. But even an unimaginable sum like that should not really be enough to bet against the euro area. So, do you think that we're vulnerable?

Trichet: Not if we do our job, properly.

SPIEGEL: The speculators just exacerbate existing problems?

Trichet: One has to put one's own house in order first. These big and highly leveraged institutions are a major issue to be addressed at the global level.

SPIEGEL: So, what was in danger? Just the banks? The euro? The European Union?

Trichet: We are now experiencing severe tensions, which are coming after the events of 2007-2008. At that time, private institutions and markets were about to collapse completely. That triggered a very bold and comprehensive financial support by governments. And now we see the signature of some governments put into question. This is a problem for almost all industrialized countries. In the G-7, the major economies have a yearly deficit of around 10 percent of gross domesitc product (GDP). In the euro area as a whole it averages 7 percent of GDP. In this situation with extremely elevated deficits across the globe, the markets have singled out a weak link: Greece. Also taking into account the fact that its statistics were incorrect at one time, market pressure was concentrated there and a drastic adjustment program was necessary.

Genius there's another 2 pages at the link from Europe's head banker.

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http://www.spiegel.de/international/business/0,1518,693352,00.html

Despite the 110 billion euro aid package offered to Greece over the weekend, investors still don't believe the country can solve its financial woes. The euro continues to slide and the European Central Bank doesn't have many arrows left in its quiver.

Jose Luis Rodriguez Zapatero is not generally considered to be a firebrand. The Spanish prime minister seldom loses his temper. But on Tuesday, he was clearly perturbed as he stepped before reporters' microphones in Brussels. Rumors have been circulating on the financial markets that Spain will soon be making a request to euro-zone countries for aid similar to the kind recently offered Greece. "That is complete madness," Zapatero hissed.

But Zapatero's eruption did little to calm the markets -- indeed it may actually have fanned the flames of mistrust. Even the confirmation by the ratings agency Fitch that it was not downgrading Spanish debt did little to calm investors. In just a few hours of trading, risk premiums on credit default swaps for Spanish bonds jumped by 18 percent.

A rumor of unknown provenance, a nervous denial from a head of government -- it doesn't take much these days to stir up the financial markets. To make matters worse, the US ratings agency Moody's announced that it may downgrade Portuguese debt yet again.

Under Intense Pressure

The impression is growing that fewer and fewer investors are prepared to bet even a single cent on European sovereign bonds or on the euro. The mistrust is no longer limited to countries like Greece, Spain and Portugal. The problem has become much bigger: The entire European common currency has come under intense pressure.

On Tuesday night, the euro's value dropped below $1.30 for the first time since April 2009. On Thursday morning, it was trading below $1.28 -- and drifting downward. Experts like Ansgar Belke from the German Institute of Economic Research (DIW) predict that it could fall to $1.20, while analysts from the Bank of New York Mellon say it could drop to $1.10.

Other forecasts are even more dire. "I can easily imagine the euro reaching parity with the dollar by the end of the year, give the markets' tendency to exaggerate," says Anton Börner, president of the Federation of German Wholesale and Foreign Trade.

A devaluation of the euro does not, of course, represent a major problem. On the contrary, many have long been complaining about how expensive the euro had become relative to the dollar. Business in China had also suffered, given that the Chinese yuan is pegged to the dollar. That pressure is now dissipating. Indeed, aside from making trips to the US slightly more expensive for Europeans than they have been in the past, there are few disadvantages to a lower euro exchange rate.

Symptomatic

But the dropping exchange rate is symptomatic of a phenomenon that does represent significant dangers to the European common currency. "The financial markets simply no longer have faith that Europe will be able to get its debt crisis under control," says Manfred Jäger, a financial market expert at the German Economic Institute in Cologne, says.

Mohamed El-Erian, a manager at Pimco, a global leader in the bond market, is even clearer, writing in the Financial Times that, while the €110 billion aid package agreed on by euro-zone countries together with the International Monetary Fund over the weekend may solve Greece's immediate liquidity problems, it will not solve the country's more fundamental solvency issues. Others fear that the money pledged to Athens won't even be enough to bridge the next three years.

More at the link.

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http://www.spiegel.de/international/business/0,1518,693991,00.html

SPIEGEL: Is it really the right thing to do for the IMF and the EU to help out Greece with €110 billion?

Roubini: That is only kicking the can down the road for a year. I am afraid that Greece, more likely than not ,isn't just illiquid, but insolvent. And providing an insolvent country with money and forcing it to make painful cuts isn't going to do it. Even if taxes are raised and spending is cut, Greece won't necessarily become more competitive. On the contrary, output might fall, unemployment might rise and market share will be lost. We need a plan B.

SPIEGEL: What should that plan B look like?

Roubini: It is necessary to start with a pre-emptive debt restructuring. We have to find an orderly solution for debtors and creditors. And we also need to work out fiscal adjustments for other euro zone countries like Portugal or Spain.

SPIEGEL: Do you think the German government would agree to that? German banks would have to come up with billions once again.

Roubini: Indeed, more than €300 billion of Greece's public debt is held by non-residents, mostly financial institutions from Germany, France and Switzerland. They will have to forego a part of that. Too much time has already been lost by ignoring the Greek crisis. Without such a plan B, if Greece collapses in a disorderly way then the domino effect hitting Spain, Portugal and other parts of the euro zone could be very rapid and dangerous. Eventually, this could lead to a destruction of the monetary union.

SPIEGEL: Did German Chancellor Angela Merkel make things worse by not reacting fast enough to the crisis?

Roubini: Yes, the EU wasted several precious months in designing a support package for Greece in part because of German political resistance to such a package. Domestic German politics and growing skepticism about European monetary union led to a delayed policy response that damaged the efforts to contain the Greek crisis and prevent it from infecting other parts of the euro zone.

SPIEGEL: Was monetary union a mistake?

Roubini: I wouldn't go that far. But it might have been a mistake to allow so many countries in so early. A smaller core of countries that are economically more homogenous, fiscally more sound and committed to structural reforms would have made for a more successful monetary union. The trouble is, once they are in there is no exit without causing a lot of damage.

It would appear the currency speculators are also betting Greece is insolvent.

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I guess this is the key point, everything else is just purposedly created panic, so that small groups of powerful investors can profit from it:

A devaluation of the euro does not, of course, represent a major problem. On the contrary, many have long been complaining about how expensive the euro had become relative to the dollar. Business in China had also suffered, given that the Chinese yuan is pegged to the dollar. That pressure is now dissipating. Indeed, aside from making trips to the US slightly more expensive for Europeans than they have been in the past, there are few disadvantages to a lower euro exchange rate.

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People seem to completely misunderstand the concept of financial markets.

Markets are just people, organisations and countries with money to lend

If these people do not want to invest in the Eurozone this is entirely up to them

It's not some sort of Global conspiracy, the run on the Euro was started by one of the Euro Zone member governments lying about its debt

How the hell can the market have confidence in a currency when the information on which this confidence is based is shown to be fabricated

If a tramp knocked on your door and said 'Lend me a hundred quid and I'll come back next week and give you two hundred quid back' would you lend him the money?

Of course not.

Why the hell should anyone lend money to someone if they stand a good chance of losing that money?

:blink:

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How the hell can the market have confidence in a currency when the information on which this confidence is based is shown to be fabricated

The lies are everywhere.

The Fed lends in secret and doesn't want auditing how can anyone seriously lend money to the US, but yet they do.

WorldCom and Enron both had the markets confidence and then it was all found to be a fraud.

Even Lehmans and Bear Stearns held the markets confidence until the end.

The whole system is one fabricated lie.

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People seem to completely misunderstand the concept of financial markets.

Markets are just people, organisations and countries with money to lend

If these people do not want to invest in the Eurozone this is entirely up to them

It's not some sort of Global conspiracy, the run on the Euro was started by one of the Euro Zone member governments lying about its debt

That would be all true if the markets weren't distorted and manipulated by some players that have vastly more money then everyone else put together.

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That would be all true if the markets weren't distorted and manipulated by some players that have vastly more money then everyone else put together.

The 'attack' on the Euro did not begin until it became clear that Greece had lied about its debt and then it also became clear that the other Euro Zone members were extremely unwilling to bail them out.

Why should anyone lend money if there is a chance they won't get it back.

And the Dollar is not the Euro - the Dollar is the World's reserve currency for the forseable future backed by the World's strongest economy - the Euro is toilet paper with ink on it.

:blink:

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http://www.spiegel.d...onal/business/0,1518,693991,00.html

It would appear the currency speculators are also betting Greece is insolvent.

I rather suspect they're betting the French and German banks are insolvent.

That is the reality that dare not speak it's name. Nobody gives a toss about Greece per se.

Creditors must always be part of the solution. They have to take the hit. The only real question I think is when and in what form this will be implemented.

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The 'attack' on the Euro did not begin until it became clear that Greece had lied about its debt and then it also became clear that the other Euro Zone members were extremely unwilling to bail them out.

It was well planned in advance:

http://www.rense.com/general90/euro.htm

And the Dollar is not the Euro - the Dollar is the World's reserve currency for the forseable future backed by the World's strongest economy - the Euro is toilet paper with ink on it.

The 'Federal Reserve Note' (commonly known as US dollar) is not backed by anything at all (other than the trust people put in it), same as the Euro and the Pound, they are all equally toilet paper.

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I rather suspect they're betting the French and German banks are insolvent.

That is the reality that dare not speak it's name. Nobody gives a toss about Greece per se.

Creditors must always be part of the solution. They have to take the hit. The only real question I think is when and in what form this will be implemented.

Would Germany rather the PIIGS go bust or Eastern Europe?

As Germany is now reunified my guess would be that their strategic interests lie in ensuring that Eastern Europe does not turn back to Russia.

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It was well planned in advance:

http://www.rense.com/general90/euro.htm

The 'Federal Reserve Note' (commonly known as US dollar) is not backed by anything at all (other than the trust people put in it), same as the Euro and the Pound, they are all equally toilet paper.

'other than the trust people put in it'

Your caveat is actually the most important factor

And the factor that means one of the currencies you name is destined to fail.

:blink:

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'other than the trust people put in it'

Your caveat is actually the most important factor

And the factor that means one of the currencies you name is destined to fail.

All 3 are being pushed into failing, that's the plan which has been forecasted years ago already right here on this forum.

The only way to make people accept a NWO controlled global currency (global means europe and north america, the rest will have to accept it to continue trading with them) is to first destroy existing currencies.

That's what's currently going on.

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All 3 are being pushed into failing, that's the plan which has been forecasted years ago already right here on this forum.

The only way to make people accept a NWO controlled global currency (global means europe and north america, the rest will have to accept it to continue trading with them) is to first destroy existing currencies.

That's what's currently going on.

I thought this was a sensible discussion.

Who exactly is orchestrating the creation of this NWO currency?

I believe that the World is far too chaotic and unpredictable for anyone to credibly suggest that somone has actually planned all that has happened in order to achieve a particular goal.

:blink:

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It was well planned in advance:

http://www.rense.com/general90/euro.htm

The 'Federal Reserve Note' (commonly known as US dollar) is not backed by anything at all (other than the trust people put in it), same as the Euro and the Pound, they are all equally toilet paper.

I cant agree that anything like this was 'planned'. Greece is bust, they cant possibly pay. Easy money to be made betting they wont pay, just as long as you can find a mug to bet against. So the ECB has come along and decided to be that mug. In short order they will own all the Greek bonds, no one else wants them.

And it is easy to avoid a speculative attack. If you are creditworthy, and have a plan to repay your debts, and you dont get caught telling lies, then no one can speculate against you, unless they want to lose their money.

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indeed.

the economic/idealogical attack on us has been unprecedented.

Holy roman empire by stealth/reverse psychology won't be happening.period.

the euro-zone will survive but in a vastly different guise to what the politicians have envisioned.It won't be wholly federal.

Existing EU area minus turkey will end up as 4 separate governships.

anglo-gallic,nordic,prussian and greco-latin.

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I thought this was a sensible discussion.

Me too. What makes you think otherwise?

I believe that the World is far too chaotic and unpredictable for anyone to credibly suggest that somone has actually planned all that has happened in order to achieve a particular goal.

Don't draw conclusions based on your own limited understanding, the world is chaotic to a point but it's all too easy to see that much of the chaos is created at will and that those who control most of the money (I hope you won't tell me you believe that people like Soros, Rockefeller etc. don't have that much money) will do everything in their considerable power to maintain and increase their wealth, including ganging up with their fellow rich friends.

Edited by wise_eagle

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I cant agree that anything like this was 'planned'. Greece is bust, they cant possibly pay.

Sure after Goldman Sachs has been 'advising' corrupt Greek politicians for years on how to take on as much debt as possible, it's all to easy for the same Goldman Sachs to now profit from it again by speculating against Greece and the Euro.

If this is not clear evidence of it being planned then I don't know what is.

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The whole system is one fabricated lie.

ripoff, that has always been the case for millenia. In fact, that is civilisation for you.

do you have any fresher insights to offer?

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ripoff, that has always been the case for millenia. In fact, that is civilisation for you.

do you have any fresher insights to offer?

That's exactly what he did, shame on you for just quoting the last sentence of his post (you certainly learned the art of manipulating other people's thoughts).

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If a bank goes on the record and says it has ample liquidity to over ride any sort term problems what does the history of the last couple of years tell us?

Bit of a clue there!!

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People seem to completely misunderstand the concept of financial markets.

Markets are just people, organisations and countries with money to lend

If these people do not want to invest in the Eurozone this is entirely up to them

It's not some sort of Global conspiracy,

If someone stands up in a crowded room and shouts fire, the consequent rush for the exits is not a conspiracy either,- but it is an effective way to clear a room.

Take a look at the Ellen Brown interview here http://maxkeiser.com/watch/on-the-edge/episode-53-8-may-2010/ (at the end of part one)

She has some interesting ideas about how computerised front running could be used to manipulate Greek bond prices.

The ability of a few key players to create market movements does open up the possibility of speculative conspiracies.

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