Best of the Week
Most Popular
1.Putin’s World: Why Russia’s Showdown with the West Will Worsen - John_Mauldin
2. Stocks Bull Market Grinds Bears into Dust, Is Santa Rally Sustainable? - Nadeem_Walayat
3. Gold and Silver 2015 Trend Forecasts, Prices to Go BOOM - Austin_Galt
4.Gold Price Golden Bottom? - Toby_Connor
5.Gold Price and Miners Soar on Huge Volume - P_Radomski_CFA
6.Stock Market and the Jaws of Life or Death? - Rambus_Chartology
7.Gold Price 2015 - EWI
8.Manipulated Stock Market Short Squeezes to Another All Time High - The China Syndrome - Nadeem_Walayat
9.Gold, Silver, Crude and S&P Ending Wedge Patterns - DeviantInvestor
10.Is the Gold And Silver Golden Rule Broken? - Michael_Noonan
Last 5 days
Why It's Way Too Early to Count Out Putin - and Russia - 22nd Dec 14
Stock Market At Minor Top - 22nd Dec 14
UK Christmas Sales 2014 High Street Start Dates List - 22nd Dec 14
Ruble Takedown Exposes Cracks in Putin’s Defense - 20th Dec 14
Oil Drilling Our Way Into Oblivion - 20th Dec 14
Stocks Bull Market Resumes - 20th Dec 14
Gold And Silver Nothing Is Ever As It Seems And No Respite For PMs - 20th Dec 14
What Are Technical Indicators Saying About the Stock Market? - 20th Dec 14
Here’s How You Can Still Make 27% With Apple Even if You Buy Now - 20th Dec 14
Gold Stocks to Shine in 2015 - 19th Dec 14
Why Alibaba Stock Shares Are a Screaming Buy - 19th Dec 14
China, Dollar, Japan, Europe Burning Questions for 2015 - 19th Dec 14
U.S. Economy is in a Sweet Spot! - 19th Dec 14
US Dollar and the Gold Fairy Tale - 19th Dec 14
Show Me The Money (Flow)! Tracking Money-Flow Through Value Shifts In Stock Markets - 19th Dec 14
The Commodities Market Is Not Dying, It’s Just Hibernating - 19th Dec 14
The Price Of Gold And The Art Of War - 18th Dec 14
Euro Succumbs to ECB QE Expectations and FOMC - 18th Dec 14
John Williams: A Downhill Run for the U.S. Dollar in 2015 - 18th Dec 14
Outrage at Taliban Islamic Fundamentalists Massacre of 132 Pakistani School Children in the Name of God - 18th Dec 14
How Inflation Changes Retirement Benefit Choices - 17th Dec 14
The Real Reason It's Tough to Beat the Stock Market - 17th Dec 14
Russian Currency Crisis and Debt Defaults Could Create Contagion in West - 17th Dec 14
How to Profit From Russia's Stock Market Crash - 17th Dec 14
Russia Crisis - If You Put Your Money in the Bank Will You Get it Back? - 17th Dec 14
Crude Oil Price Crash, U.S. Employment and Economic Growth - 17th Dec 14
Opposing Forces At Play In Gold and Silver Precious Metals Complex - 17th Dec 14
Wall Street Will Always Find An Excuse For Not Raising U.S. Interest Rates - 17th Dec 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Dramatic Stock Market Selloff

EU Agrees to Disagree on Debt Crisis until 2013 Whilst Greece Smoldwers in Riots and Firebombs

Politics / Global Debt Crisis Dec 16, 2010 - 05:43 AM GMT

By: Mike_Shedlock

Politics

Best Financial Markets Analysis ArticlePretty speeches regarding solidarity will not solve the European debt crisis. Yet, as Greece smolders in riots and firebombs over various austerity measures, pretty speeches, untenable pledges regarding haircuts, and continual bickering remain the only action items of note coming from Europe.


Smoldering Politics

Greece is not the only thing smoldering right now. Eurozone politics is on the front burner, with the heat on high. Please consider Europe Staggers as Critical Summit Looms

Europe’s smoldering financial crisis flared up on Wednesday, with riots over austerity spending in Greece, new signs of troubles in Spain and little indication that European leaders were moving any closer to agreement on a systemic approach to long-term stability.

In remarks to the German Parliament on Wednesday, Germany’s chancellor, Angela Merkel, tried to reassure the markets and answer some of her own critics by allaying fears about the future of the 16-nation monetary union.

“No one in Europe will be left alone, no one in Europe will be abandoned,” Mrs. Merkel said, offering an olive branch to her European partners, some of whom have questioned her commitment to the union. “Europe succeeds when it acts together and, I would add, Europe succeeds only when it acts together.”

Mrs. Merkel’s soothing words were undercut, for example, by her adamant rejection of euro bonds, European-wide bonds that would provide a way for the euro zone to pool its debt and risk, allowing weaker members to borrow at lower rates.

With Irish elections scheduled for early next year, investors worried that the opposition’s threatened move could soon become reality.

“Those who think we can unilaterally renege on senior bondholders against the wishes of the E.C.B. are living in fantasy land,” said Ireland’s finance minister, Brian Lenihan, referring to the European Central Bank.

In Greece, in a reminder of the social and political costs of extended austerity programs, Athens was hit with its seventh general strike this year, grounding flights, keeping ferries in ports, halting trains and closing government offices and schools.

Opposition to the measures, and to the pressure being applied by international creditors, was clear in the streets on Wednesday. Angry protesters wielded placards reading “I.M.F. out!” and “Let us not live as slaves!” while others chanted “Thieves, thieves!” and “Shame on you!” to unseen deputies in Parliament.

Recently, Merkel has been criticized for opposing an increase in the size of the nearly $1 trillion bailout fund operated by the European Union and the International Monetary Fund and for dismissing the euro-bond plan.

“Germany’s thinking was a bit simplistic on this,” said Jean-Claude Juncker, prime minister of Luxembourg and chairman of the group of euro-zone finance ministers, in a blistering attack last week in the German newspaper Die Zeit. “They are rejecting an idea before studying it.

In her remarks to Parliament on Wednesday, Mrs. Merkel tried to redefine the narrative of events shaking the union: “It is undeniable,” she said, “that some euro-zone countries face difficult challenges. But it is also undeniable that the euro has shown itself to be crisis-proof.”

Untenable Pledges Regarding Haircuts and a "Crisis-Proof" Euro

Does that look like a good backdrop for heading into a summit? I think not, and given that the Euro is in the midst of a crisis, Merkel's statements about crisis-proof certainly look absurd.

Moreover, once Ireland’s finance minister is thrown out on his ass, we will see just who is in fantasy land regarding haircuts on bonds.

My position is that the sooner Ireland tells the IMF and EU where to go, the better off Ireland will be. For more on this angle, please see To Ireland With Love.

Agreement to Agree in 2013

The summit is about to start but there is so much bickering going on that the current discussion pertains to what the agreement will look like post 2013. Bloomberg reports EU Faces ‘Gridlock’ on Debt Crisis, Nears Deal on Post-2013 Tool

European Union divisions widened over how to contain the debt contagion that threatens the euro, limiting a summit starting today to agreeing on a crisis- management mechanism that takes effect in 2013.

Strife among Merkel, the European Central Bank, Luxembourg Prime Minister Jean-Claude Juncker, and the German domestic opposition intensified on the eve of the Brussels summit, marring confidence in Europe’s handling of the fiscal woes that forced Greece and Ireland to fall back on financial handouts.

EU governments are close to agreeing on a two-sentence amendment to the bloc’s Lisbon Treaty foreseeing a “mechanism to safeguard the stability of the euro area as a whole” with financial aid for distressed governments “subject to strict conditionality,” EU officials told reporters in Brussels yesterday.

Germany has failed to get a reference to possible costs for bondholders enshrined in the treaty and is virtually alone in pushing for the amendment to say that any financial assistance will only be offered as a “last resort,” the officials said.

Merkel continued to hold out against calls by ECB President Jean-Claude Trichet to put more money into the aid fund. The ECB has bought 72 billion euros of weaker countries’ debt since May under a policy without unanimous support on the bank’s council.

Driven by a German public outcry against aiding fiscally reckless countries, Merkel also ruled out retooling the support facility to buy troubled governments’ bonds and opposed further entwining Europe’s economies by consenting to joint borrowing.

Luxembourg’s Juncker, the promoter of the joint bond-sale proposal, said it won’t go anywhere at the summit. Juncker told Luxemburger Wort newspaper that Germany is “allergic” to the idea, fearing it would push up German borrowing costs.

Crisis Won't Wait

One thing I am sure of is the crisis won't wait until 2013.

Frank-Walter Steinmeier and Peer Steinbrück, former German foreign minister and former German minister of finance respectively, came up with a multi-point proposal that could conceivably work. Please see PIGS Exposure Table, Explaining the Panic by Numbers; Credit Warning in Spain, Belguim; Piecemeal Proposals Doomed for details.

That's the good news. The bad news is the Steinmeier-Steinbrück plan would require agreements on haircuts, debt guarantees, E-bonds, fiscal policies, and debt rescues.

Good luck with that.

By Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Click Here To Scroll Thru My Recent Post List

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management . Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

Visit Sitka Pacific's Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.

I do weekly podcasts every Thursday on HoweStreet and a brief 7 minute segment on Saturday on CKNW AM 980 in Vancouver.

When not writing about stocks or the economy I spends a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at MichaelShedlock.com .

© 2009 Mike Shedlock, All Rights Reserved.


© 2005-2014 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Free Report - Financial Markets 2014