Best of the Week
Most Popular
1. Will Gold Price Breakout? 3 Things to Watch… - Jordan_Roy_Byrne
2.China Invades Saudi Oil Realm: PetroDollar Kill - Jim_Willie_CB
3.Bitcoin Price Trend Forecast, Paypal FUD Fake Cryptocurrency Warning - Nadeem_Walayat
4.The Stock Market Trend is Your Friend ’til the Very End - Rambus_Chartology
5.This Isn’t Your Grandfather’s (1960s) Inflation Scare - F_F_Wiley
6.GDX Gold Mining Stocks Fundamentals - Zeal_LLC
7.US Housing Real Estate Market and Banking Pressures Are Building - Chris_Vermeulen
8.Return of Stock Market Volatility Amidst Political Chaos and Uncertain Economy - Buildadv
9.Can Bitcoin Price Rally Continue After Paypal Fake FUD Attack? - Nadeem_Walayat
10.Warning Economic Implosion on the Horizon - Chris_Vermeulen
Last 7 days
Is War "Hell" for the Stock Market? - 19th Apr 18
Palladium Bullion Surges 17% In 9 Days On Russian Supply Concerns - 19th Apr 18
Breadth Study Suggests that Stock Market Bottom is Already In - 19th Apr 18
Allegory Regarding Investment Decisions Made On Basis Of Government’s Income Statement, Balance Sheet - 19th Apr 18
Gold – A Unique Repeat of the 2007 and How to Profit - 19th Apr 18
Abbeydale Park Rise Cherry Tree's in Blossom - Sheffield Street Tree Protests - 19th Apr 18
The Stock Market “Turn of the Month Effect” Exists in 11 of 11 Countries - 18th Apr 18
Winter is Coming - Coming Storms Will Bring Out the Best and Worst in Humanity - 18th Apr 18
What Does it Take to Create Living Wage Jobs? - 18th Apr 18
Gold and Silver Buy Signals - 18th Apr 18
WINTER IS COMING - The Ongoing Fourth Turning Crisis Part2 - 18th Apr 18
A Stock Market Rally on Low Volume is NOT Bearish - 17th Apr 18
Three Gold Charts, One Big Gold Stocks Opportunity - 17th Apr 18
Crude Oil Price As Bullish as it Seems? - 17th Apr 18
A Good Time to Buy Facebook? - 17th Apr 18
THE Financial Crisis Acronym of 2008 is Sounding Another Alarm - 16th Apr 18
Bombs, Missiles and War – What to Expect Next from the Stock Market - 16th Apr 18
Global Debt Bubble Hits New All Time High – One Quadrillion Reasons To Buy Gold - 16th Apr 18
Will Bitcoin Ever Recover? - 16th Apr 18
Stock Market Futures Bounce, But Stopped at Trendline - 16th Apr 18
How To Profit As Oil Prices Explode - 16th Apr 18
Junior Mining Stocks are Close to Breaking Downtrend - 16th Apr 18
Look Inside a Caravan at UK Holiday Park for Summer 2018 - Hoseasons Cayton Bay Sea Side - 16th Apr 18
Stock Market More Weakness? How Much? - 15th Apr 18
Time for the Gold Bulls to Show their Mettle - 15th Apr 18
Trading Markets Amid Sound of Wars - 15th Apr 18
Sugar Commodity Buying Levels Analysis - 14th Apr 18
The Oil Trade May Be Coming Alive - 14th Apr 18
Big Cap US Stocks Fundamentals - 13th Apr 18
Jaguar Land Rover Cuts 1000 Jobs on Diesel Sales Slump, Long-term Discovery Sport Review - 13th Apr 18
Stock Market SPX May Tangle with the 50-day MA - 13th Apr 18
Longtanding Chinese War: Intrigue & Betrayal - 13th Apr 18
How I Own My Gold - 13th Apr 18
ISupply Energy Consumer Warning - Never Put Your Account Into Credit! - 13th Apr 18
SPX Resistance May Prompt A Massive Short Squeeze - 12th Apr 18
Stock Market High Volatility is Not Consistently Bearish for Stocks - 12th Apr 18

Market Oracle FREE Newsletter

Trading Lessons

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.


© 2005-2018 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

6 Critical Money Making Rules