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EU Bonds Rollover Debt with a Chinese Bailout

Interest-Rates / Global Debt Crisis Sep 19, 2011 - 10:46 AM GMT



Best Financial Markets Analysis ArticleThe financial press is inundated with the most ominous reports of an EU meltdown. The downturn in economic activity and little growth all comes down to the unsustainability in servicing the debt obligations. Sovereign countries bailouts only pile on even more debt. European banks are tied to a Euro dominated currency, while the political union is anything but unified. Any serious student of European history inescapably concludes that the perennial ambition to orchestrate a single patchwork of diverse cultures and interests into a pan European brotherhood is always doomed. A consensus fraternity based upon socialistic economics feeds the inevitable default. However, never fear the banksters will not suffer, as the globalists prepare to use their next crisis, to consolidate their grip of world dominance.

Greece is the Sarajevo in the start of the next currency world war. A containable matter ready to snowball into a full-scale mobilization of competing factions, poses the unwinding of world markets. Never underestimate the inventiveness of financial ministers to paper over an impending default with more debt. Bloomberg reports, “The following is an English translation of a statement made by Government spokesman and Minister of State Elias Mosialos after a conference call between Greek Prime Minister George Papandreou, German Chancellor Angela Merkel and French President Nicolas Sarkozy today, received by e-mail from Mosialos’s Athens office.”

 “In response to the rumors of the recent days it was emphasized by all that Greece is an integral part of the eurozone.

“Greece is determined to meet all its commitments to its partners, ensuring in this way the full implementation of the support program.

“The decisions taken by the Cabinet in recent days and the additional measures announced lead to meeting fiscal targets for 2011 and 2012 and the creation of primary surpluses. This will fortify the Greek economy, relieve the public debt burden and reinforce the country’s growth prospects.”

The distinctive difference and shortfall of the Euro from the U.S. Dollar (actually Federal Reserve note) is that the former is competing money, to the later world’s reserve currency status.  No restraint is in effect that prevents mandatory acceptance of the U.S. Dollar as settlement payment, since creating unlimited credits is the prerogative of the reserve currency. As long as regimes fear their own demise from either bombing drones or the ending of new credit, the shell game continues.

Therefore, when U.S. Treasury Secretary Timothy Geithner backs an American infusion of even more debt created Dollars to rescue the EU banking system, you know the race to the bottom has begun.  Market Watch reports, “The European Central Bank, the Bank of England, Bank of Japan, and the Swiss National Bank announced they will each conduct additional dollar tenders in an effort to provide liquidity through the end of the year. The central banks said the auctions are coordinated with each other and the U.S. Federal Reserve.”

This effort will not alter the fundamental plight that faces Europe. As the crunch intensifies, Greece will be sacked. If the British Museum refuses to return the Parthenon, or Elgin Marbles, what would make anyone think that the byzantine Brussels bureaucracy would share any of the renowned fairness and compassion of the goddess Athena? Annihilating Greek democracy is all in a day’s work for the European Commission.

So what is the proposed EU solution? European Commission president Jose Manuel Barroso announces,

“He will "soon" present proposals for eurozone states to issue joint bonds, a way to even out interest rates among the single currency area's 17 nations. Such "eurobonds" are currently opposed by Germany and could require a new round of painful EU treaty negotiations.”

Reuters lays out the conflict. “Germany, which is the euro zone's most powerful economy and enjoys the lowest sovereign borrowing costs, would stand to lose most if such bonds were introduced as it would effectively end up having to underwrite weaker, more risky member states. As a result, German Chancellor Angela Merkel is adamantly opposed.”

It needs to be recognized that the German economy is the only thread that keeps the EU alive. The political reality is that what Germany could not conquer militarily, she accomplished by way of her industry and positive trade balances.  

Examine two separate bond proposals.
  1.  Bruegel, a Brussels-based think-tank whose research frequently informs EU policy, last year put forward a proposal for separate 'red' and 'blue' bonds. Under the plan, euro zone bonds -- blue bonds -- would be issued jointly and collectively up to the value of 60 percent of each euro zone member state's gross domestic product (GDP). Borrowing beyond that level would require an individual state to issue red bonds without the collective guarantee of the euro zone, with the market likely to charge a higher yield to reflect the additional risk.

The disparity in financing costs between blue and red bonds -- potentially, a jump of more than 50 percent by some estimates -- would be a big incentive for euro zone countries to bring their debts rapidly down to below 60 percent of GDP, the limit originally targeted by the EU.

  1. Separately, Berlin-based economist Hans-Joachim Dubel has proposed creating European sovereign bonds -- dubbed 'purple' bonds -- that are part-insured by the EU's rescue fund, the European Financial Stability Facility (EFSF).

Each bond would be split into senior and junior tranches, with the senior section, around 60 percent of the total, insured by the EFSF and its successor, the European Stability Mechanism (ESM).

The ESM would become a monoline bond insurer that in the event of a default would pay investors quickly and in full on 60 percent of their assets, while the junior debt could be restructured. Such junior debt could trade separately after a default.

The dual structure of the bond would mean sovereigns are charged a higher interest rate than for blue bonds, reflecting the implicit 40 percent first loss carried by the uninsured junior tranche. So the mechanism would still provide an incentive to avoid excessive debt issuance when times are good.

It is not hard to envision why Angela Merkel is reluctant to turn over the fruits of a German work ethic and advanced engineering to subsidize a continent of fainéant ingrates.

So where will the money come from to rollover existing government debt or finance the additional sums required to keep the socialist experiment intact? The globalists have an answer, their own ingenious Reich, called China. The Chinese communists are the ultimate banksters’ tool. Their model for economic control is the product of the same clan of London and New York financiers who set the stage for European conflicts designed to move the planet into a vortex of their intention.    

The Globe and Mail offers up this account.

“Chinese Premier Wen Jiabao has outlined conditions that Europe must meet before China will increase support for debt-laden Europe in a sign of Beijing’s reluctance to be cast as a savior for the global economy.

His top condition was the long-standing demand that Europe recognize China as a full “market economy,” a technical definition that would benefit Chinese companies involved in trade disputes.”

The McClatchy-Tribune Information Service also reports.

 "As the global economy slowly recovers, we still face a host of uncertainties and destabilizing factors," Wen Jiabao said at the opening of the World Economic Forum's meeting in the north-eastern port of Dalian.

"Under these circumstances, the Chinese economy is closely linked with the global economy," he told 1,500 delegates from 90 nations at the meeting that has come to be known as the "Summer Davos."

The way to view the Chinese money machine needs to acknowledge that the globalists want to use the same coolie labor structure for the entire world. Europe is slated to adopt the type of a New World Order that strips all sovereignty from individual countries. China has an undemocratic culture and a rigidly proscribed regiment for political dissenters. The bondage of European debt financed by a PRC slave system is straight out the funding of the Nazi regime playbook.

When Wen Jiabao patronizes the EU, he is instructing the masses to accept the dictates of the EU Commission. The purpose of keeping the phony bond obligations roll over scheme is to use the extortion payments for additional real assets acquisitions and control by the very bankers that designed the collapsing and fake international trading framework.

EU beggars acquiesce to tyrants. Their long record of internal conflict seldom focuses on the underlying masters of the financial fraud. China is the new capital of the banksters’ Babylon. Its location is an armed camp and protectorate of the Mattiods. Their assets are the direct result of the global free trade deception.

The best hope for Europe is that Germany, not Greece, leave the EU. As long as Eastern Europeans and Middle East immigrants clamor to tap into the wealth of “Teutonic Fatherland”, the notion of a United States of Europe will suffer from the same invasion and fate as America.  “He, who learns but does not think, is lost! He who thinks but does not learn is in great danger.” -Confucius


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20 Sep 11, 06:03

Yup, the EU is in deep trouble, but I highly doubt the US is really in that much of a better position...

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