Best of the Week
Most Popular
1.U.S. Inner City Turmoil and Other Crises: Ron Pauls Predictions for 2015 - Dr_Ron_Paul
2. What’s In Store For Gold Price in 2015? - Ben Kramer-Miller
3.Crude Oil Price Ten Year Forecast to 2025: Importers Set to Receive a $600 Billion Refund - Andrew_Butter
4.Je ne suis pas Charlie - I am not Charlie - Nadeem_Walayat
5.The New Normal for Oil? - Marin_Katusa
6.Will Collapse in Oil Price Cause a Stock Market Crash? - OilPrice.com
7.UK CPI Inflation Smoke and Mirrors Deflation Warning, Inflation Mega-trend is Exponential - Nadeem_Walayat
8.Winter Storms Snow and Wind Tree Damage Dangers, DIY Pruning - Nadeem_Walayat
9.Oil Price Crash and SNP Independent Scotland Economic Collapse Bankruptcy - Nadeem_Walayat
10.U.S. Housing Market Bubble 2.0 Meet the Pin - James_Quinn
Last 5 days
Gold And Silver Price Probability for A Lower Low Has Increased - 31st Jan 15
U.S. Bond Market Has Reached Tulip Bubble Proportions - 31st Jan 15
The 3 Big Reasons My Apple Stock Price Prediction Is Still Coming True - 31st Jan 15
199 Days of Hell - Unintended consequences: Oil and the Worst Battle in History - 31st Jan 15
Kaminak Yukon Gold - 30th Jan 15
U.S. Asset Price Deflation Coming Up? Food Prices Drop? CPI Negative? Credit Deflation? - 30th Jan 15
An Often Overlooked Predator: State Governments and Income Taxes - 30th Jan 15
Bullard Says Rates at Zero Interest Rates Not Right for U.S. Economy - 30th Jan 15
Why the European Central Bank's Massive Economic Experiment Will Fail - 30th Jan 15
Gold Price Short-Term Bottom Due, Higher into February - 30th Jan 15
Silver and Other Precious Metals To Manipulate - 30th Jan 15
Socialism Is Like a Nude Beach - Sounds Like a Great Idea Until You Get There - 30th Jan 15
To Create Unlimited Market Liquidity or Not; That Is the Question - 30th Jan 15
Seen the Energy Downturn Movie Before, and Not Worried - 30th Jan 15
It’s Not Time to Sell Everything – Yet - 30th Jan 15
13 Investment Themes for 2015 - 29th Jan 15
The Raging Currency Wars Across Europe - 29th Jan 15
The End of Currency 'Safe-Havens' - 29th Jan 15
Ron Paul on U.S. Fed, Central Bankers Monetary Psychopaths - 29th Jan 15
Why Microsoft Stock Will Provide Major Investing Returns - 29th Jan 15
Exploring the Clash Within Civilizations - Mind the Gap - 29th Jan 15
Saudi Arabia Changes Kings, But Not its Oil Policy - 29th Jan 15
Crude Oil Price Bulls vs. Resistance Zone - 28th Jan 15
Acceleration Of Events With Rising Chaos – US Dollar Death Foretold - 28th Jan 15
The Fed and ECB Take the West back to when the Rich Owned Everything - 28th Jan 15
Washington's War on Russia - 28th Jan 15
Cyber War Poses Risks To Banks and Deposits - 28th Jan 15
Lies And Deception In Ukraine's Energy Sector - 28th Jan 15
EUR, AUD, GBP USD – Invalidation of Breakdown - 28th Jan 15
“Backup-Camera Envy” Is Driving This Unstoppaple Investment Trend - 28th Jan 15
The Great "inflated" Expectations for Gold, Oil, Commodities -- and Now Stocks - 28th Jan 15
How to Find the Best Offshore Banks - 28th Jan 15
There’s More to the Gold Price Rally Than European Market Fears - 28th Jan 15
Bitcoin Price Tense Days Ahead - 27th Jan 15
The Most Overlooked “Buy” Signal in the Stock Market - 27th Jan 15
Gold's Time Has Come - 27th Jan 15
France America And Religious Terror War - 27th Jan 15
The New Drivers of Europe's Geopolitics - 27th Jan 15
Gold And Silver - Around The FX World In Charts - 27th Jan 15
It’s Not The Greeks Who Failed, It’s The EU - 27th Jan 15
Gold and Silver Stocks Investing Basics - 27th Jan 15
Stock Market Test of Strength - 26th Jan 15
Is the Gold Price Rally Over? - 26th Jan 15
ECB QE Action - Canary’s Alive & Well - 26th Jan 15
Possible Stock Market Pop-n-drop in Store For SPX - 26th Jan 15
Risk of New Debt Crisis After Syriza Victory In Greece - 26th Jan 15
How Eurozone QE Works: A Guide to Draghi's News - 26th Jan 15
Comprehensive Silver Price Chart Analysis - 26th Jan 15
Stock Market More Retracement Expected - 26th Jan 15
Decoding the Gold COTs: Myth vs Reality - 26th Jan 15
Greece Votes for Syriza Hyperinflation - Threatening Euro-zone Collapse or Perpetual Free Lunch - 26th Jan 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Learn to Trade

Germany Will Bail On the Euro Rather Than Bail the Euro Out

Politics / Eurozone Debt Crisis Jul 07, 2012 - 12:44 AM GMT

By: Graham_Summers

Politics

Best Financial Markets Analysis ArticleIt all boils down to Germany.

I’ve been forecasting for months that the country will increasingly focus on domestic interests and that it will ultimately opt to leave the Euro rather than prop up the EU.

The former (focusing on domestic issues) is already underway.


Germany Plans Joint Federal-State Debt in Merkel Fiscal Deal

Chancellor Angela Merkel agreed to share borrowing costs with Germany’s states to help ease their budget squeeze, completing a deal the opposition said will help secure German ratification of the European Union’s fiscal pact.

Germany’s federal and state governments plan their first joint debt sale in 2013 to help the states meet the pact’s deficit limits, the German government’s press office said in an e-mailed statement in Berlin today.

Pressed by the Social Democrat-led opposition that could block the stricter European fiscal rules in parliament, Merkel agreed to a policy she opposes in confronting the debt crisis in the rest of the 17-nation euro area. She signaled her rejection of joint euro-area debt as recently as June 23, saying “liabilities and controls” must “go together.”

“We reached a solution that makes it clear there will be approval” of the fiscal pact in the upper house of parliament, Kurt Beck, the premier of Rhineland-Palatinate state and member of the opposition SPD, said in an ARD television interview.

http://www.bloomberg.com/news/2012-06-24/...

As for the latter development (Germany leaving the Euro), I believe that this will occur once the EU Crisis spreads to France.  At that point any discussion of EU bailouts is pointless, as the very countries needing aid (France, Italy, Spain, and Greece) account for 53% of the ESM’s funding.

So far the markets have been willing to ignore the fact that Spain and Italy are meant to contribute 30% of the ESM’s funding. However, if France starts needing aid (and it will) it’s GAME OVER as any discussion of where the money will come from is moot.

By the look of things, this development is not too far away. France’s Socialist party took its lower house during the most recent elections. Already they are proposing reforms that will result in French businesses and capital leaving the country.

France’s new Socialist government is embarking on a series of risky experiments in business

Michel Sapin, the labour minister, has promised to make it so expensive for companies to lay off workers that it will no longer be worth their while. Firms that fire people while still paying dividends may be penalised. Another planned ruse is to force companies to sell factories, presumably along with the brands manufactured there, to competitors rather than close them down

Paris is full of rumours of hasty departures. PPR, a luxury-goods group which owns Gucci and Yves Saint Laurent, is reported to have plans to move its entire executive committee to offices in London as soon as this summer. Technip, a global oil-services firm, is rumoured to be about to move its official headquarters across the Channel. (PPR declined to comment, and Technip said it has no plans to move for now.) To the fury of a French member of parliament, David Cameron, Britain’s prime minister, this week promised to “roll out the red carpet” for French companies on the run from the new tax.

But the most important consequence of stratospheric taxes will be less visible, at least at first. Marc Simoncini is one of France’s best-known entrepreneurs—and one of the few business leaders to denounce the new measures publicly. Why, he recently asked, would anyone want to start a business, invest and succeed in the most taxed country in the world?

Tax is not the only threat to executive pay. Last week Pierre Moscovici, the finance minister, announced that pay for bosses of companies in which the French state holds the majority of shares will be capped at a flat rate of €450,000, or roughly 20 times the wage of the lowest-paid worker. The French experiment will no doubt be watched with interest around the rich world. In some cases it will lead to a 70% pay cut. Over time, the quality of management at these state firms, which had become more professional over the past decade, will surely suffer. Executives such as Guillaume Pepy, the boss of SNCF, the national railways, for instance, could secure a top position anywhere in his industry. Measures to limit pay at fully private firms are expected before long.

http://www.economist.com/node/21557318?fsrc=rss|bus

As one would expect, the wealthy French are fleeing the country.

Wealthy French Take Their Assets to London

It began in 2010, when wealthy Greeks started coming to London and buying up expensive townhouses in upmarket neighborhoods. Amid fears that Greece might leave the euro zone, they believed their money would be safe in Britain in its splendid isolation from the euro and the Continent’s sovereign debt crisis.

Then rich Spaniards started arriving. They were following by well off Italians, who at the start of the year overtook Russians as the biggest group of foreign buyers snapping up property in London, according to a survey.

Whenever the euro crisis heats up somewhere in Europe, the demand for expensive homes increases in Western Europe’s largest city particularly among well-heeled foreigners beset by asset angst.

London real estate agents are like the canary in the coalmine for the debt crisis. They can sense early on the next country to get sucked into the vortex. So who’s up next? Apparently it’s the French.

Real estate agents have been aware of a new wave of interest for months, but it’s been especially noticeable since Feb. 28. The night before, the then Socialist candidate for French president, François Hollande, who famously said “I don’t like the rich,” announced that, if elected, he would raise the top rate of tax on incomes over €1 million to 75 percent. At home, he got much applause for the announcement. But in London, the news produced a reaction that was noticeable on the computers of the London-based property company Knight Frank.

“Since February, when Hollande announced his wealth tax, there has been a large rise in web searches from French customers,” Liam Bailey, head of residential research at Knight Frank, recently told the Daily Telegraph…

To meet the demand, the property company Douglas & Gordon has just opened an office in South Kensington, where four native French speakers will be available to help out their house-hunting compatriots. Hollande’s tax speech immediately led to a 40 percent increase in inquires from worried French citizens, says David Blanc from the London asset management firm Vestra Wealth.

http://www.spiegel.de/international/europe/...

French banks are already leveraged at 25-to-1. The impact of a capital exodus by the wealthy will rapidly push leverage levels even higher. And given that French banks’ exposure to the PIIGS is equal to 30% of French GDP, it’s no surprise that French banks are posting some truly horrible charts.

I expect the EU Crisis to spread to France before autumn. At that point, it’s game over for any notion of the current EU lasting. Germany will walk.

Those investors looking for actionable investment ideas could also consider our Private Wealth Advisory newsletter: a bi-weekly detailed investment advisory service that distills the most important geopolitical, economic, and financial developments in the markets into concise investment strategies for individual investors.

To learn more about Private Wealth Advisory and how it can help you navigate the markets successfully…

Click Here Now!!!

Graham Summers

Chief Market Strategist

Good Investing!

http://gainspainscapital.com

PS. If you’re getting worried about the future of the stock market and have yet to take steps to prepare for the Second Round of the Financial Crisis… I highly suggest you download my FREE Special Report specifying exactly how to prepare for what’s to come.

I call it The Financial Crisis “Round Two” Survival Kit. And its 17 pages contain a wealth of information about portfolio protection, which investments to own and how to take out Catastrophe Insurance on the stock market (this “insurance” paid out triple digit gains in the Autumn of 2008).

Again, this is all 100% FREE. To pick up your copy today, got to http://www.gainspainscapital.com and click on FREE REPORTS.

Graham also writes Private Wealth Advisory, a monthly investment advisory focusing on the most lucrative investment opportunities the financial markets have to offer. Graham understands the big picture from both a macro-economic and capital in/outflow perspective. He translates his understanding into finding trends and undervalued investment opportunities months before the markets catch on: the Private Wealth Advisory portfolio has outperformed the S&P 500 three of the last five years, including a 7% return in 2008 vs. a 37% loss for the S&P 500.

Previously, Graham worked as a Senior Financial Analyst covering global markets for several investment firms in the Mid-Atlantic region. He’s lived and performed research in Europe, Asia, the Middle East, and the United States.

© 2012 Copyright Graham Summers - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Graham Summers Archive

© 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