Europe is on the verge of a horrifying financial meltdown, and there are only a few short weeks left to avert total disaster. On Monday, talks that were supposed to bring about yet another temporary “resolution” to the Greek debt crisis completely fell apart. The new Greek government has entirely rejected the idea of a six-month extension of the current bailout.
The Greeks want a new deal which would enable them to implement the promises that have been made to the voters. But that is not going to fly with the Germans, among others. They expect the Greeks to fulfill the obligations that were agreed to previously. The two sides are not even in the same ballpark at this point, and things are starting to get very personal.
It is no secret that the new Greek government does not like the Germans, and the Germans are not particularly fond of the Greeks at this point. But unless they can find a way to work out a deal, things could get quite messy very rapidly.
Christian Reiermann Spiegel Online The debt crisis in Greece has taken on a dramatic new twist. Sources with information about the government's actions have informed SPIEGEL ONLINE that Athens is considering withdrawing from the euro zone. The common currency area's finance ministers and representatives of the European Commission are holding a secret crisis meeting in Luxembourg on Friday night. Greece's economic problems are massive, with protests against the government being held almost daily. Now Prime Minister George Papandreou apparently feels he has no other option: SPIEGEL ONLINE has obtained information from German government sources knowledgeable of the situation in Athens indicating that Papandreou's government is considering abandoning the euro and reintroducing its own currency. Alarmed by Athens' intentions, the European Commission has called a crisis meeting in Luxembourg on Friday night. The meeting is taking place at Château de Senningen, a site used by the Luxembourg government for official meetings. In addition to Greece's possible exit from the currency union, a speedy restructuring of the country's debt also features on the agenda. One year after the Greek crisis broke out, the development represents a potentially existential turning point for the European monetary union -- regardless which variant is ultimately decided upon for dealing with Greece's massive troubles. Given the tense situation, the meeting in Luxembourg has been declared highly confidential, with only the euro-zone finance ministers and senior staff members permitted to attend. Finance Minister Wolfgang Schäuble of Chancellor Angela Merkel's conservative Christian Democratic Union (CDU) and Jörg Asmussen, an influential state secretary in the Finance Ministry, are attending on Germany's behalf. Read Full Article
The International Monetary Fund has called on the EU authorities to boost their rescue fund and step up bond purchases to insure against a fresh financial crisis in the eurozone periphery.
Ambrose Evans-Pritchard Telegraph “The recovery could still stay the course, but this scenario could now easily be derailed by the renewed financial market turmoil,” the IMF says in a report for eurozone finance ministers today, according to Reuters. “The sovereign and financial market storm affecting the periphery constitutes a severe downside risk.” The IMF said the EU’s €500bn bail-out machinery was not enough to cope with the magnitude of the threat as Spain and even Italy start to come under pressure. “There is also a strong case for increasing the resources available for this safety net and making their use more flexible, including for the purpose of providing more effective support to banking systems,” it said.
Dominique Strauss-Kahn, the head of the IMF, will present the report on the economy of the 16 countries using the euro at a meeting of eurozone finance ministers and Jean-Claude Trichet, the European Central Bank president, on Monday.
The fund said the ECB’s bond purchases should be “expanded” to restore calm. The ECB bought Portuguese and Irish bond markets last week, forcing down spreads dramatically in a “short squeeze” against speculators in small illiquid markets. This merely buys time.
It is does not solve the structural problem that a large part of the eurozone faces a huge financing need yet has lost reliable access to capital markets. The ECB has so far ruled out mass purchases of Spanish and Italian bonds, bowing to a de facto German veto.
Alex Singleton The Telegraph If you think that leaving the EU would be catastrophic, take a look at Greenland. By rights its people ought to be poor. Their island is isolated, suffers from freezing weather, has a workforce of only 28,000 and relies on fish for 82 per cent of its exports. But it turns out that since leaving the EU, Greenland has been so freed of EU red tape and of the destruction of the Common Fisheries Policy, that the average income of the islanders today is higher than those living in Britain, Germany and France. Greenland’s politicians realised that the fisheries policy was ruining their fishing industry. They had the guts to stand up against the all the prophets of doom and let their people vote in a referendum on leaving the European Community, as the EU was then called. On January 1, 1985, it became independent of Brussels – the only country ever to do so. Read Full Article RELATED ARTICLE: Citizens of Europe Rage Against The Machine RELATED VIDEO: Who The Hell Do You Think You Are? - Nigel Farage
A MASSIVE wave of public support was last night surging behind the Daily Express’s crusade to liberate Britain from the stranglehold of Brussels.
An exclusive poll conducted on the first day of our crusade showed an astonishing 99 per cent of people agree we should quit the European Union.
In an indication of the strength of public feeling on the issue, the poll saw the biggest ever response to a Daily Express phone survey, with tens of thousands of people swamping our switchboards.
The newspaper’s phone lines and website were flooded with people backing our pioneering decision to become the first national newspaper in the country to call for British independence from the EU. And around the country, voters made clear their deep frustration with Brussels meddling and their anger that Britain has not been given a referendum on our EU membership for a generation, despite promises by several Governments.
The Irish government has been given a stark warning from some of the biggest American companies in Ireland on the risk of a mass exodus if the country's low corporation tax rate is raised.
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James Quinn Telegraph The warning – from executives at Microsoft, Hewlett-Packard (HP), Bank of America Merrill Lynch and Intel – spoke of the "damaging impact" on Ireland's "ability to win and retain investment" should the country's corporation tax rate be increased from 12.5pc. It came as talks between members of the Irish government and the European Union and the International Monetary Fund continued around the clock on a financial aid package of as much as €100bn to shore up the country's beleaguered banking system. Although Brian Lenihan, the Irish finance minister, has indicated Ireland's 12.5pc corporation tax rate – the lowest in the eurozone – will not be raised, a number of factions within the European Union are known to have pushed for it to be increased in return for the bail-out. Read Full Article RELATED ARTICLES: Eurozone Debt Crisis 2.0: Dollar Sucks Less than Euro, For Now Powerful EU Nations to Reform "Mission Impossible" Treaty in Secret
Eric Blair Activist Post The grand symphony of currency manipulation seems more finely orchestrated than ever before. However, it's not necessarily the fundamentals that are moving currencies so much as global perception. In the battle between the Fed's quantitative weakening of the dollar versus the eurozone debt crisis, the dollar is winning this round of who sucks less. On October 1st, I posed the question, will the dollar rebound before being dissolved into a global currency? At that time, no one was predicting the dollar to gain strength with the Federal Reserve planning more quantitative easing. The windbag media promoted QE2 as a stock market stabilizer and a boost to U.S. exports, yet mostexpertsopenly called it a backdoor bailout, or monetizing debt, or plain old money printing. Nearly everyone agreed it would ultimately erode the value of the dollar even further and cause measurable inflation.
Indeed, it was a well-justified gloom-and-doom 6 months for the dollar by Fed critics. After all the media build-up, the Fed's announcement of the $600B easing plancame strategically on the day after mid-term elections, when most of the media was focused on feeding the false left-right frenzy by digesting the election results. In other words, QE2 got some mention, but the timing was clearly a tactic to keep a lid on the talking-head backlash. Then, Obama rushed out of the country for the G20 economic summit taking the remaining media distraction with him. Between stories of Michelle's shopping trips, it was revealed that China and other foreign economic players were not very happy about the Fed's move. Yet, the dollar started to rally.
Recent commentary by Chuck Butler in the Daily Reckoning questions the commodity sell-off and dollar rally:
But does it all make sense, given what I mentioned above that the FOMC is looking for inflation to inject into our economy? No… But since when, going back to the financial meltdown, does anything the markets do make sense?
Nothing makes sense if we still believe fundamentals actually matter. Sure the dollar is nearly dead, fundamentally, but it seems that perception now trumps concrete analysis. As I reported in October:
The fundamentals suggest that it (the dollar) should be finished, but just as the world is about to declare it dead, miraculously a global storyline seems to emerge just when needed and foreign investors rush back in for "safety." A clear example was the steady drumbeat of a sovereign-foreign-debt war that resulted in reports of whether the Euro would even survive, while the dollar enjoyed a triumphant ride up victory mountain.
Now, here we go again. As soon as the Fed announcement was made, the media shifted its focus once again to the eurozone debt "crisis." Story after story, day after day, about the developing crisis in Ireland -- and now Portugal. News agencies often salivate to repost these headlines, because crisis sells. And it sells because doom and gloomers, otherwise known as fundamental analysts, are waiting for reality to catch up to the numbers -- not just in the eurozone, but globally. The debt-infected PIIGS is a legitimate story, but it is clearly being heavily pushed to make the dollar look less pitiful.
Today's major headlines from leading UK papers show how "critical" the eurozone debt crisis has become. The first story appeared in the London Guardian titled Ireland crisis could cause EU collapse, warns president, where EU President Van Rompuy warned in a speech in Brussels, that "We're in a survival crisis . . . we all have to work together in order to survive with the eurozone, because if we don't survive with the eurozone we will not survive with the European Union." The article went on to define the pressure cooker facing the PIIGS:
Van Rompuy's speech added to the pressure on the Irish government, which was continuing to resist international pressure to accept a bailout this morning.
Shares fell across Europe as pressure mounted on Ireland to accept an EU or International Monetary Fund bailout to stem contagion to other high-deficit eurozone countries. Portugal, which has seen its borrowing costs rocket along with Ireland's, warned last night that it too might need a rescue package.
But despite fears that the crisis could bring down the euro, Ireland's minister for European Affairs Dick Roche denied this morning that Ireland needed emergency financing.
The next article that encapsulates the heightened fear surrounding the debt crisis was written by the brilliant financial reporter Ambrose Evans-Pritchard of the Telegraph titled The horrible truth starts to dawn on Europe's leaders where he states: "The entire European Project is now at risk of disintegration, with strategic and economic consequences that are very hard to predict." Granted, he was basing his analysis on the same Van Rompuy speech, which seems eerily reminiscent ofHank Paulson's dire warning of complete collapse and martial law in the U.S. if the Congress did not pass the TARP bailout.
The situation for the PIIGS hasn't changed in the last six months. It isn't incredibly more severe than it was then. And despite mildly encouraging retail numbers this quarter, the U.S. is not much better off than it was when the dollar was sinking like a stone. So, it is vividly transparent that the global banksters use the media to move the FOREX at times of their choosing and in contrast to fundamentals. In turn, we all buy in and post and repost the crisis headlines feeding the manipulation machine.
The video below shows the absurd shell game that is the eurozone debt mess. It's comically and obviously robbing Peter to pay Paul to prop up the Ponzi scheme: The media machine seems unbeatable, but luckily it's somewhat predictable. I reiterate what I said when I predicted the dollar to rebound in October:
The severely debased dollar is unlikely to rebound to previous highs given the international awareness of America's financial problems. Understanding that the goal of the global elite is to move toward a global currency, ultimately they must kill the dollar and other major currencies.
Although the end may be very near for the dollar we will likely see the establishment play them off each other for as long as possible. These cycles have seemed to run for about six months, but I don't think we'll see the dollar rise again for that amount of time. Nor do I think it will reach its twelve-month highs against the euro again, but I would wager that we'll see very strong gains to the dollar by year end. The European Union heads are to meet again in December to determine amendments to the Lisbon Treaty, which some leading diplomats are calling "mission impossible." The lead-up to this meeting, coupled with the eurozone debt issues, will drive this quarter's news cycle and the FOREX.
Another development to watch in regards to the strength of the dollar is food, oil, and gold commodities. Since they trade in dollars, it would make sense that they would sink if the dollar starts beating up on the euro. And we already have witnessed some slight movements downward. However, I predict that they will remain relatively stable and fall far less than the euro will against the dollar. And by the first quarter of next year, commodities will be off to the races again where we will likely see $100 oil and $2000 gold by mid-year. That may be the real start of the end of the dollar, and the euro.
As a final note: They can't allow the euro to fail before the dollar because the European Union is the banking model they desire for the world currency; separate nation states with local currency but where consolidated economic governance is dictated by a grand central bank. Incidentally, theeurozone debt crisis 2.0 is a dog and pony show.
Rick Newman US News You may not have to worry about Ireland in a week, or a month. But at the moment, the Emerald Isle is causing global investors a whole lot o' anxiety. [See 20 industries where jobs are coming back.] On the surface, it's reminiscent of the problem Greece had with its unmanageable federal debt early this year, which shook world markets, ended a global rally in stocks and ultimately led to a $146 billion bailout by the European Union and the International Monetary Fund. Greece spent more money than it took in for years, papered over the gap, and essentially became insolvent when it could no longer borrow the money needed to finance its debt.
Ireland is on the brink of insolvency too, which has helped drive down the S&P 500 stock index by nearly 4 percent over the last few days. But unlike Greece, Ireland is a relatively wealthy country, with per capita GDP of nearly $38,000. That's 21 percent higher than per capita GDP in Greece, and in the top third for European countries. Low corporate tax rates and a skilled workforce have made Ireland a haven for some of the world's biggest companies. And its public debt, about 65 percent of GDP, is far below Greece's crushing load, which is 126 percent of GDP. Ireland's debt levels are even lower than those in France, Germany and the United Kingdom.
But Ireland has one huge problem that may soon make it a supplicant to its European brethren: A failed banking sector that Ireland's government can no longer rescue on its own. Ireland is in the midst of a real estate bust that could trump even the ruinous downturns that turned parts of southern California and Nevada into suburban ghost towns, with home-grown banks stoking it all. Now, those banks are trying to manage catastrophic losses. The Irish government has effectively nationalized the nation's biggest banks by guaranteeing their debt, which would be akin to the U.S. government taking over Citigroup, Bank of America, J.P. Morgan Chase and Wells Fargo.
That means the Irish government is also on the hook for the losses those banks endure--which have risen far beyond initial estimates, and may have a lot farther to go. So far, the Irish government is obligated to cover losses amounting to 175 percent of Irish GDP, which is becoming an unsustainable burden. "If the Irish banks go down, the Irish government also goes down," says economist Jacob Kirkegaard of the Peterson Institute for International Economics.
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