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Nein, Nein, Nein, And The Death Of Eu Fiscal Union

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Another AEP piece but the headline is too good to be missed. :)

Those hoping for a tsunami of new inflationary cash in Europe might want to think again, whatever their VI. It looks like the Germans have done what it took to appear to be good Europeans, but 'no mas' or as the German Finance Ministry spokesman put it this morning: 'finito'.

Perhaps the Germans can play poker after all... And has anyone noticed how quiet Sarkozy is now that the issue of French banks is clear to all?

http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100012332/nein-nein-nein-and-the-death-of-eu-fiscal-union/

Judging by the commentary, there has been a colossal misunderstanding around the world of what has just has happened in Germany. The significance of yesterday’s vote by the Bundestag to make the EU’s €440bn rescue fund (EFSF) more flexible is not that the outcome was a "Yes".

This assent was a foregone conclusion, given the backing of the opposition Social Democrats and Greens. In any case, the vote merely ratifies the EU deal reached more than two months ago – itself too little, too late, rendered largely worthless by very fast-moving events.

The significance is entirely the opposite. The furious debate over the erosion of German fiscal sovereignty and democracy – as well as the escalating costs of the EU rescue machinery – has made it absolutely clear that the Bundestag will not prop up the ruins of monetary union for much longer.

Horst Seehofer, the leader of Bavaria’s Social Christians, said his party would go "this far, and no further".

There can be no question of beefing up the EFSF to €2 trillion or any other sum, whether by leverage or other forms of structured trickery. "The financial markets are beginning to ask whether Germans can afford all this help. We must not risk the creditworthiness of the German state," he said.

The best-read story in today’s Handelsblatt is the mounting rebellion against the EFSF in the Bundesrat, the German senate representing the interests of the regions. While this chamber does not have the power to block budget deals, it has begun to express deep alarm about the drift of events.

Marcel Huber, Bavaria’s Staatskanzleichef, gave an explicit warning that the Free State of Bavaria will not take one step further towards an EMU fiscal union or debt pool.

“A collectivisation of debts will under no circumstances be accepted. We oppose credit lines for the EFSF or leveraging through the ECB. Our message is simple and clear.”

Since the existing EFSF is too small to make any material difference to the EMU debt crisis, this means that nothing has in fact been resolved. We are where we started, almost entirely reliant on the ECB to play the role of lender-of-last resort.

Can it realistically play this role after the double resignation of Axel Weber at the Bundesbank and Jurgen Stark at the ECB itself over bond purchases? Can it defy Europe’s paymaster state for long? You decide.

This great eruption of feeling in Germany has been the transforming political and strategic fact of Europe over the summer. Finance Minister Wolfgang Schäuble is no doubt scrambling around trying to find some formula to breach his pledge that there is no secret plan to leverage the EFSF into the stratosphere.

He will try to pretend that this is not a flagrant double-cross. But his scheming with the French is largely irrelevant at this point. Bigger events are rolling over him. If he really thinks he can dupe the Bundestag yet again, he is out of his mind. And will soon be out of office.

As Bundestag president Norbert Lammert said yesterday, lawmakers had a nasty feeling that they had been "bounced" into backing far-reaching demands. This can never be allowed to happen again. He warned too that Germany's legislature would not give up its fiscal sovereignty to any EU body.

In a sense, the Bundestag vote was much like the ruling by the Constitutional Court earlier this month. It too said "Yes" to the bail-out machinery, but that was not relevant fact. What mattered was the Court’s implicit warning that Germany had reached the outer boundaries of EU integration, that German democracy is under threat, and its explicit warning that the Bundestag’s fiscal powers could not be alienated to Brussels.

Something profound has changed. Germans have begun to sense that the preservation of their own democracy and rule of law is in conflict with demands from Europe. They must choose one or the other.

Yet Europe and the world are so used to German self-abnegation for the EU Project – so used to the teleological destiny of ever-closer Union – that they cannot seem to grasp the fact. It reminds me of 1989 and the establishment failure to understand the Soviet game was up.

Our own Chancellor George Osborne has fallen into this trap. I can entirely understand why he is calling for quick moves towards EMU fiscal union, but such an outcome is not on the table.

Repeat after me:

THERE WILL BE NO FISCAL UNION.

THERE WILL BE NO EUROBONDS.

THERE WILL BE NO DEBT POOL.

THERE WILL BE NO EU TREASURY.

THERE WILL BE NO FISCAL TRANSFERS IN PERPETUITY.

THERE WILL BE A STABILITY UNION – OR NO MONETARY UNION.

Get used to it. This is the political reality of Europe, since nothing of importance can be done without Germany. All else is wishful thinking, clutching at straws, and evasion. If this means the euro will shed some members or blow apart – as it almost certainly does – then the rest of the world must prepare for the day.

It has certainly been an electrifying few weeks.

I happened to be in the room with a group of Nobel economists in Lindau last month when German President Christian Wulff lashed out at Europe, accusing the ECB of violating its mandate and subverting the Lisbon Treaty.

“I regard the huge buy-up of bonds of individual states by the ECB as legally and politically questionable. Article 123 of the Treaty on the EU’s workings prohibits the ECB from directly purchasing debt instruments, in order to safeguard the central bank’s independence,” he said.

“This prohibition only makes sense if those responsible do not get around it by making substantial purchases on the secondary market,” he said.

Mr Wulff said Germany itself risks being engulfed by escalating debts. Who will “rescue the rescuers?” as the dominoes keep falling, he asked.

"Solidarity is the core of the European Idea, but it is a misunderstanding to measure solidarity in terms of willingness to act as guarantor or to incur shared debts.
"With whom would you be willing to take out a joint loan, or stand as guarantor? For your own children? Hopefully yes. For more distant relations it gets a bit more difficult."

More distant relations?

“All I heard was Germany, Germany, Germany. There was nothing about Europe. It was astonishing,” said Myron Scholes, the winner of the 1997 Nobel Prize.

Indeed it was. Fellow laureate Joe Stiglitz said that if President Wulff’s views reflected the outlook of the German government, monetary union would have collapsed already.

Well yes. Quite.

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Something profound has changed. Germans have begun to sense that the preservation of their own democracy and rule of law is in conflict with demands from Europe. They must choose one or the other.

I think it's more than that. Germany's culture is at stake. The strong arming attempts by over indebted propagandists threatens to turn them into latin style inflationists / devaluers.

The VIs are trying to change Germany's identity for a quick buck or salvation from bankruptcy. And that is not going down too well in the land of the krauts.

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Since the existing EFSF is too small to make any material difference to the EMU debt crisis, this means that nothing has in fact been resolved. We are where we started, almost entirely reliant on the ECB to play the role of lender-of-last resort.

And that is an astonishingly wrong statement. E400bn is sufficient to help countries in dire need of finance as they go bust. Banks should go bust, those that can be saved would be nationalised by their respective governments (sorry Sarkozy, you might lose your election over that but the stakes are bigger than your personal career).

The premise that we need trillions is a fallacy promoted by those who would like your children and mine to pay their debts or in the case of bankers, their wages and bonuses.

Edited by _w_

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Probably why the IMF wants to start issuing bonds, if the Europeans won't they will.

I think Madame Tango will be disappointed. Within the EU, the over indebted bankrupts could try the emotional blackmail and strong arming of Germany. But try telling the US republicans that their children will be loaded with more debt to help people who refuse to pay their debts. It might happen but it looks more like desperate bankrupts' wishful thinking.

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Maybe Merkel should tell the truth that this is a bailout of French banks. Why lenders shouldn't be punished for lending to a country that defaults is beyond me, too much emphasise on the badly run Greek economy, the market gave them the mone......sorry,sorry just had temporary amnesia..

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FTSE down to 5,082.64

Seems the temporay euphoria has worn off and it's business as usual slipping down.

Can't say I am surprised. Traders are growing weary of these temporary respites.

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Richard Sulik, the Slovak parliament’s speaker and leader of a party of lawmakers who oppose the endorsement of the euro-zone rescue package. Mr. Sulik’s team has repeatedly advocated shepherding Greece through a managed bankruptcy procedure instead of pumping further rescue funds in the southern European nation, whose debt woes have roiled European credit markets. Mr. Sulik’s views the ringfencing of Greece (by letting the country go bust) as the only viable option to shield other euro member countries such as Spain and Italy from further credit problems.

Mr. Sulik has steadfastly opposed all recently suggested bailout schemes for profligate euro-zone members, arguing that Slovak tax payers, ranking as the second poorest after Estonia in the euro zone, shouldn’t pay up for debts of richer, spend-free members of the currency union.

Unless Slovakia endorses the EFSF project in the parliamentary vote, expected as early as Oct. 25, the fund won’t become operational, which in turn can risk further destabilization of the shaky euro-zone credit markets.

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I think Madame Tango will be disappointed. Within the EU, the over indebted bankrupts could try the emotional blackmail and strong arming of Germany. But try telling the US republicans that their children will be loaded with more debt to help people who refuse to pay their debts. It might happen but it looks more like desperate bankrupts' wishful thinking.

This is the denial of the creditors.

Germany has benefitted massively from an undervalued currency, captive export markets and exported inflation.

Of course now they need to pony up they don't like it.

Savings are just the flipside of debts. They can kick and scream all they like but the 'savings' have already gone. They can choose to understand this or remain in denial and kick off. History suggests they'll kick off, which will be bad for all of us.

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This is the denial of the creditors.

Germany has benefitted massively from an undervalued currency, captive export markets and exported inflation.

Of course now they need to pony up they don't like it.

Savings are just the flipside of debts. They can kick and scream all they like but the 'savings' have already gone. They can choose to understand this or remain in denial and kick off. History suggests they'll kick off, which will be bad for all of us.

And again you ignore the fact that Germans didn't just do OK but thrived with an extremely strong currency in the 70s and after while everybody else was inflating. And you still come up with the same tired argument that is contradicted by facts.

The protestant ethos is to work hard and save, the antithesis of the latin (and now British???) ethos to spend, borrow, inflate and speculate. Nothing to do with captured markets and cheap currencies, it's to do with cultural identity. You can see the same cultural conflict on a smaller scale in France and particularly Belgium.

Edited by _w_

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Warning that there is no "Plan B" for the eurozone.

The European Commission pressed Slovakia on Friday to approve the expansion of the eurozone debt rescue fund, while warning it could not opt out of paying its own contribution, AFP reported.

Slovakia is among four nations in the 17-state eurozone that have yet to get parliamentary approval to boost the European Financial Stability Facility (EFSF), amid divisions within the country's ruling coalition. Among the three other holdouts, Austria was expected to vote on Friday while the Netherlands and Malta are to vote in October.

Solidarity party (SaS), has repeatedly vowed to torpedo the fund's passage.

The SaS says it is futile to throw good money after bad in light of a probable Greek default.

The party said for the first time this week that it could support the EFSF increase, but only if there is no cost to the Slovak taxpayer.

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Warning that there is no "Plan B" for the eurozone.

The European Commission pressed Slovakia on Friday to approve the expansion of the eurozone debt rescue fund, while warning it could not opt out of paying its own contribution, AFP reported.

Slovakia is among four nations in the 17-state eurozone that have yet to get parliamentary approval to boost the European Financial Stability Facility (EFSF), amid divisions within the country's ruling coalition. Among the three other holdouts, Austria was expected to vote on Friday while the Netherlands and Malta are to vote in October.

Solidarity party (SaS), has repeatedly vowed to torpedo the fund's passage.

The SaS says it is futile to throw good money after bad in light of a probable Greek default.

The party said for the first time this week that it could support the EFSF increase, but only if there is no cost to the Slovak taxpayer.

One day, somebody will have to take care of the unelected bullies.

This is ridiculous.

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This is the denial of the creditors.

Germany has benefitted massively from an undervalued currency, captive export markets and exported inflation.

Of course now they need to pony up they don't like it.

Savings are just the flipside of debts. They can kick and scream all they like but the 'savings' have already gone. They can choose to understand this or remain in denial and kick off. History suggests they'll kick off, which will be bad for all of us.

Absolutely correct.

However, what's to stop them for saying "many thanks, dear PIIGS partners, for supporting our prosperity for the last eleven years. Ta ta now, we're going back to the Deutschemark" ?

In other words, would Germany be better off picking up the PIIGS tab and losing their AAA rating just to stay in the Eurozone - or leaving and accepting the loss of competitiveness stemming from a stronger DEM?

EDIT: spling

Edited by Deckard

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Probably why the IMF wants to start issuing bonds, if the Europeans won't they will.

But the IMF already said just a few weeks ago it had insufficient funds to deal with this crisis if it escalates. That was true I expect since they only get funds from member countries. As all those countries are almost all under water, there can be no real reflating of the IMF just now.

I have been saying it ever since the TWO TRILLION EUROS rescue fund was being banded about, supposedly being put together to save the Euro and Default Greece off in one - WHERE IS THIS MONEY COMING FROM? IT DOES NOT EXIST DOES IT?! If I was Portugal or Ireland I would ask for a nice little default aswell...then..well, you get the picture....intervention is dead for now; keynesianism at the non-workable point, deficit financing more harmful than doing nothing unfortunately. It would not have been so had there been bank regulation, lending rules, a gold standard. Neither would house prices and property specualtion have ever reached the current situation. They would have been approximately half current prices looking at historical data. To deflate to that will be very painful indeed. But I grow more confident every day that it's exactly where we are going 30-60% falls in price depending on circs/region - harder falls than I previously thought. But the situation is made worse every time these clowns pump prime or print/pretend for a while longer.

We cannot cure the Eurozone sovereign debt crisis by applying for more credit cards - the banks have no more money to lend, unless you print/elecronically create it and pretend. I do not believe the markets will accept that situation - a lie of a rescue fund. If this article 'Nein, Nein' is correct, then it will not be long before we see big falls in the stock markets and temporarily gold/silver. Look out for massive rise in the USD too. If you want to know what to do about that..send me a friend request....

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The Germans will agree to print as soon as their own banks are in trouble, which won't take very long when the real estate and government bond bubbles in southern Europe start to burst. A cultural aversion to 'latin devaluation' is no match for fiat's ability to take away pain today.

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The Germans will agree to print as soon as their own banks are in trouble, which won't take very long when the real estate and government bond bubbles in southern Europe start to burst. A cultural aversion to 'latin devaluation' is no match for fiat's ability to take away pain today.

Indeed that's true, but as with the Flemish stand off in Belgium I wouldn't bet the house on the Germans giving up their cultural identity for easy money.

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Slovakia parliament to ratify fund by Oct 14 latest, says Prime Minister Iveta Radicova, under domestic and international pressure to win approval for the euro zone bailout fund.

However , Radicova also said the European Financial Stability Facility (ESFS) was not the only possible solution to resolve the euro zone's debt crisis, calling it an 'interim tool'.

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Slovakia parliament to ratify fund by Oct 14 latest, says Prime Minister Iveta Radicova, under domestic and international pressure to win approval for the euro zone bailout fund.

However , Radicova also said the European Financial Stability Facility (ESFS) was not the only possible solution to resolve the euro zone's debt crisis, calling it an 'interim tool'.

An 'interim tool'?

That's no good, we need a complete tool.

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One last barrier to Greek bailout

Pressure was mounting yesterday on Slovakia, the newest member of the eurozone, to drop its opposition to the expanded EU bailout fund as the country looked set to be the main stumbling block in the way of final ratification of the €440bn (£379bn) package.

Stiff opposition has surfaced in Slovakia from the junior partner in a four-party coalition government.

Slovakia, which joined the eurozone in 2009, is due to ratify the bailout fund in mid-October. But the leader of the country's Freedom and Solidarity Party has threatened to vote against the package. If carried out, his threat would block the bill's passage through parliament as Slovakia's opposition parties have said they will also oppose the measure and not come to the aid of the remaining parties in the governing coalition.

"The rescue fund is simply buying time in an incredibly costly way, but it's not solving the problems," Richard Sulik, Slovakia's Freedom and Solidarity party leader, told German television.

"If the euro crumbles it will be because of said massive deficits in individual countries, not because we rejected the rescue fund."

Intense political wrangling is underway in Slovakia to persuade Mr Sulik and his party to change its mind. :lol::lol::lol:

Observers were predicting yesterday that Slovakia's coalition could be offered a face-saving clause which would enable it to officially approve the bailout but opt out of its contribution in an emergency. The other possibility under discussion was that remaining eurozone countries would pick up Slovakia's share of the rescue package.

Lüder Gerken, of Germany's Centre for European Politics, told Der Spiegel that Germany could be asked to up its share of the EFSF package by a billion euros if Slovakia refused to pay up. The Greek Prime Minister, George Papandreou, yesterday held talks with the European Council chief, Herman Van Rompuy, and the French President, Nicolas Sarkozy, to try to show them Athens can meet the demands of the austerity programme imposed on it.

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I think it's more than that. Germany's culture is at stake. The strong arming attempts by over indebted propagandists threatens to turn them into latin style inflationists / devaluers.

The VIs are trying to change Germany's identity for a quick buck or salvation from bankruptcy. And that is not going down too well in the land of the krauts.

Indeed they're trying to do something like they've tried to do / done to the UK.

Edited by billybong

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Euro-decision in the Bundestag

Because they did not know what they are voting:

Germany at odds over the euro rescue, strongly urges the Federal Parliament a greater say. But what do the MPs want to anyway? This question is likely to make anyone who has seen an ARD report about the embarrassing ignorance of some elected officials.

When Norbert Lammert (CDU) called the vote is on Thursday against the euro rescue fund as “the single most important legislative initiatives this legislative period,” then that is taken quite seriously.

For months, the deputies have struggled to say in the euro rescue may be. She repeatedly warned that relief for highly indebted billion-euro countries are likely to decide not the government alone. And also the Constitutional Court dismissed the parliament in its ruling in early September to more rights.

. The more likely to think about, what about the expertise of the membersreporter for ARD magazine “Panorama” , politicians of all political groups outside the Chamber asked . what they are voting because actually the result of the Thursday broadcast poll is disastrous: Many could not even answer how many billions of euros, the German taxpayer is liable for now. There are 211 billion euros.

Also on the question of which countries of bailout funds already disbursed EFSF aids, several deputies are overwhelmed. “Greece?”, Recommend two members.But in fact, the heavily indebted country in the euro emergency loan from partner gets a separate aid package. EFSF has so far only Portugal and Ireland borrowed money.

Now you can not ask of the representatives of the people that they know the details of all proposed legislation. But with the euro rescue package, it’s not about any law, but to save the monetary union. The theme determines the political agenda. Since it would be desirable that the politicians know what they actually vote.

But there is obviously some representatives of the people some hope, as an example:

Reporter: “How high is because the German share of the loan guarantees?”

Gabriele Fograscher , SPD deputy: “I can not now tell you in detail.”

Reporter: “About?

Fograscher: “Billions?”

When asked by SPIEGEL ONLINE, the only politician left Vogler is capable of self-criticism – “it was an embarrassing situation.” The others defend themselves, they had been caught unawares by the camera team. “The journalists there was just about to portray us as idiots, because we could not give the details right away,” said the SPD politician Fograscher. “It can be seen as MPs now know not all times.”

The authors reject this allegation of the contribution: “Even when asked about the 211 billion euros in 40 to 50 percent of the interviewed MPs were wrong or had no idea,” says the editor Tamara Anthony. They have consulted with her colleague John Edelhoff 25 politicians from all factions. And it was plain from the liability coverage does not even have been the worst: “The other question was the picture even bleaker.”

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...someone switched the lights on in Germany:

Mr Wulff said Germany itself risks being engulfed by escalating debts. Who will “rescue the rescuers?” as the dominoes keep falling, he asked.

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  • 336 Brexit, House prices and Summer 2020

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      • down 5% +
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