Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21
China / US Stock Markets Divergence - 10th Oct 21
Can US Save Taiwan From China? Taiwan Strait Naval Battle - PLA vs 7th Fleet War Game Simulation - 10th Oct 21
Gold Price Outlook: The Inflation Chasm Between Europe and the US - 10th Oct 21
US Real Estate ETFs React To Rising Housing Market Mortgage Interest Rates - 10th Oct 21
US China War over Taiwan Simulation 2021, Invasion Forecast - Who Will Win? - 9th Oct 21
When Will the Fed Taper? - 9th Oct 21
Dancing with Ghouls and Ghosts at Alton Towers Scarefest 2021 - 9th Oct 21
Stock Market FOMO Going into Crash Season - 8th Oct 21
Scan Computers - Custom Build PC 6 Months Later, Reliability, Issues, Quality of Tech Support Review - 8th Oct 21
Gold and Silver: Your Financial Main Battle Tanks - 8th Oct 21
How to handle the “Twin Crises” Evergrande and Debt Ceiling Threatening Stocks - 8th Oct 21
Why a Peak in US Home Prices May Be Approaching - 8th Oct 21
Alton Towers Scarefest is BACK! Post Pandemic Frights Begin, What it's Like to Enter Scarefest 2021 - 8th Oct 21
AJ Bell vs II Interactive Investor - Which Platform is Best for Buying US FAANG Stocks UK Investing - 7th Oct 21
Gold: Evergrande Investors' Savior - 7th Oct 21
Here's What Really Sets Interest Rates (Not Central Banks) - 7th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

What Do The Euro Crisis Summit Volcanic Eruptions Mean? Pyroclastic Flow Next

Politics / Euro-Zone Oct 24, 2011 - 04:29 AM GMT

By: DK_Matai


Best Financial Markets Analysis Article1. The summits of European leaders and finance ministers happening this weekend appeared to be filled with despair as personal relations amongst major European leaders -- most notably the Germans and French -- collapsed much further. In parallel, Anglo-French relations also deteriorated as British prime minister Cameron became embroiled in a furious row with French president Sarkozy over Britain's role in talks to resolve the euro crisis. The heated exchange between Cameron and Sarkozy was so bad that it held up the conclusion of the EU-27 summit for almost two hours.

The French president expressed rage openly in regard to the constant criticism and lectures from UK government officials. Sarkozy bluntly told Cameron, "You have lost a good opportunity to shut up. We are sick of you criticising us and telling us what to do. You say you hate the euro and now you want to interfere in our meetings." Those witnessing the angry exchanges said Cameron insisted that the package being adopted on Wednesday by the 17 eurozone countries had serious implications for non-euro countries amongst the EU-27 and their interests must be safeguarded as well. The European Union is also facing a rebellion from Italy, Spain and other smaller members over "imperious diktats" issued from Berlin and Paris. Post euro summit volcanic eruptions, is a pyroclastic flow next?

Euro Summit Volcanic Eruptions: Pyroclastic Flow Next

2. New EU Treasury? Herman Van Rompuy, president of the European Council, angered many Eurozone countries by making confidential proposals for the creation of a European finance ministry at the same summit. His plan for a unified EU treasury was presented as the only solution to the problem of countries spending more than the euro can sustain, according to many Eurozone officials. This new proposal would mean that a centralised body would be able to override national budgets and enforce cuts on profligate governments. This measure is proving to be highly unpopular already, as it goes much further than any vision of the EU's founding fathers who drew the line at yielding fiscal and military sovereignty of member states. Further, Van Rompuy suggested that the EU finance ministry should be based in either Frankfurt or Paris, giving the indelible impression to smaller EU members that they would be put in a position of submission. From the perspective of most EU members, they might as well conclude that they either do not matter or they do not have a voice.

3. No Grand Solution: Interpersonal relations between eurozone leaders hit an all-time low, reflecting sharp disagreements between Germany and France over using the ECB to bailout the euro and presenting an additional obstacle to finding a "grand solution" to Europe's debt crisis. France originally wanted the fund to be allowed to tap the massive cash reserves of the European Central Bank which is an option that Germany has rejected altogether. Without the ECB's firepower, the options are ugly with too much reliance on leveraging and complex financial instruments -- derivatives and synthetic constructs -- that the EU has previously blamed for causing the initial banking crises in 2007-08.

4. Acrimony: France and Germany remain deeply divided, and it's dawning on everyone there may be no good solution that :

a. Allows the European Financial Stability Facility -- EFSF -- to keep its firepower;
b. Greece to avoid a catastrophic default; and
c. The banks to avoid getting crushed as a result of that default and associated contagion.

5. The deep rift between Paris and Berlin is multi-dimensional and not just restricted to the immediate single currency crisis. It includes matters such as:

a. Management of foreign and defence policy including relations with the Middle East, Russia and Central Europe;
b. Nuclear power phase out in Germany and nuclear expansion in France; and
c. The future of the European common agricultural policy.

Further, both French and German diplomats agree that this is a crisis of leadership and perhaps very mediocre characters are in charge on both sides of the Rhine and Rhone.

6. Words used to describe the Euro summit over the weekend now include:

a. "Grim";
b. "Worst mood ever seen"; and
c. "Complete mess."

7. IMF threatening to extricate itself post grim warnings:

a. A joint report by the EU and the International Monetary Fund (IMF) now warns that, without a default, the Greek debt crisis alone could swallow the Eurozone's entire �440 billion bailout fund -- leaving nothing to spare to help the affected banks of Italy, Spain and France as well as other Eurozone members.

b. Christine Lagarde has said the IMF may no longer be willing to pick up a third of the total bill for rescuing Greece -- a contribution worth �73 billion -- unless European banks were prepared to write off voluntarily at least 50 percent of the Greek debt, although in practice this could easily cross 75 percent, which the market is discounting anyway.

c. France and the European Central Bank (ECB) have both been resisting any talk of a Greek debt default for fear it would damage French banks and rock the stability of their financial institutions. Notwithstanding French objections, a large Greek haircut is now inevitable.

8. Double Whammy and Credit Default Event: European Union leaders are now likely to ask banks voluntarily to accept much bigger losses on Greek bonds to ease the pressure on that country and to raise billions more in capital to bear those losses simultaneously. If the banks were not to submit voluntarily, the Eurozone governments may simply force deep hair cuts, which would trigger a credit default event.

9. Wolfgang Schaeuble, Germany's finance minister, has taken the "I told you so" approach throughout the summit. He did not mince words and strengthened his reputation for harshness. Many European Finance ministers found him to be unbearable. He was the first to call for an "orderly" default for Greece 18 months ago, at a time when the cost of such a move was less than one third of the price today.

10. Francois Baroin, the young French finance minister tried to hit back. He complained that the IMF's default medicine would hit France the hardest because his country's banks are most exposed; and France's "untouchable" AAA rating could be compromised. Christine Lagarde, who held Monsieur Baroin's post until taking up the IMF job, "shut him up" by brandishing the IMF report and pointing to its detailed figures. "She really slapped him down," according to senior diplomats.


Are Merkel-Sarkozy's previous expectations of a big breakthrough during these summits realisable? If an unstoppable force meets an immovable object, what happens? The global financial markets may be advised to expect a pyroclastic flow as a result of the recent euro summit volcanic eruptions.

Do the global financial markets genuinely expect a deal during these European summits? The EU arrogance to attempt usurping the sovereignty of all Eurozone members was bound to reach its destructive apex sooner or later. This said, the Eurozone powers may yet walk back from the brink before Wednesday evening and produce promises of further summits to resolve remaining differences. In this way, the horrible muddle through may continue.

History may record the most significant outcomes of the recent euro summit volcanic eruptions to be:

1. The diminished influence of president Sarkozy in particular and France in general;
2. France having to step back from the common European pool of funds and fixing its colossal banking problems by itself;
3. As a European Union founder country, whatever France enjoyed by way of special handouts from Brussels, may now be compromised;
4. The bitter confrontation of France with Germany without any tangible success is signalling a significant re-alignment of the power structure within Europe;
5. The bitter row between France and Britain in regard to the Eurozone crisis is also going to have monumental ramifications for their joint defence arrangements;
6. Less powerful members of the Eurozone are finally learning that the French-German monopolisation of the European power structures runs counter to their own interests;
7. The enormous gaps which exist between European Union member countries in regard to their domestic political and economic considerations;
8. The marker in the sand when the forces of European fragmentation -- or "Realpolitik" -- began to overtake the forces of cohesion;
9. The recent events highlight perils facing the European "political and economic" Union on the back of the unstoppable forces of Eurozone fragmentation; and
10. Other world leaders -- like those of the US and China -- taking note that there is not much they can do to repair the cracks now appearing within the Eurozone.

Note: In case you are wondering what a pyroclastic flow means... A pyroclastic flow is a fluidised mixture of solid to semi-solid fragments and hot, expanding gases that flows down the flank of a volcanic edifice post eruption. A pyroclastic flow can be a fast-moving current of superheated gas, which can reach temperatures of about 1,000 �C (1,830 �F), and rock -- collectively known as tephra -- which reaches speeds moving away from a volcano of up to 700 km/h (450 mph).

What are your thoughts, observations and views? We are hosting an Expert roundtable on this issue at ATCA 24/7 on Yammer.

By DK Matai

Asymmetric Threats Contingency Alliance (ATCA) & The Philanthropia

We welcome your participation in this Socratic dialogue. Please access by clicking here.

ATCA: The Asymmetric Threats Contingency Alliance is a philanthropic expert initiative founded in 2001 to resolve complex global challenges through collective Socratic dialogue and joint executive action to build a wisdom based global economy. Adhering to the doctrine of non-violence, ATCA addresses asymmetric threats and social opportunities arising from climate chaos and the environment; radical poverty and microfinance; geo-politics and energy; organised crime & extremism; advanced technologies -- bio, info, nano, robo & AI; demographic skews and resource shortages; pandemics; financial systems and systemic risk; as well as transhumanism and ethics. Present membership of ATCA is by invitation only and has over 5,000 distinguished members from over 120 countries: including 1,000 Parliamentarians; 1,500 Chairmen and CEOs of corporations; 1,000 Heads of NGOs; 750 Directors at Academic Centres of Excellence; 500 Inventors and Original thinkers; as well as 250 Editors-in-Chief of major media.

The Philanthropia, founded in 2005, brings together over 1,000 leading individual and private philanthropists, family offices, foundations, private banks, non-governmental organisations and specialist advisors to address complex global challenges such as countering climate chaos, reducing radical poverty and developing global leadership for the younger generation through the appliance of science and technology, leveraging acumen and finance, as well as encouraging collaboration with a strong commitment to ethics. Philanthropia emphasises multi-faith spiritual values: introspection, healthy living and ecology. Philanthropia Targets: Countering climate chaos and carbon neutrality; Eliminating radical poverty -- through micro-credit schemes, empowerment of women and more responsible capitalism; Leadership for the Younger Generation; and Corporate and social responsibility.

© 2011 Copyright DK Matai - 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.

© 2005-2019 - 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