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OUT OF MIND » THE INSANITY OF REALITY » GLOBAL FINANCIAL COLLAPSE » Germany faces impossible choice as Greek austerity revolt spreads

Germany faces impossible choice as Greek austerity revolt spreads

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PurpleSkyz

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Germany faces impossible choice as Greek austerity revolt spreads
Germany faces impossible choice as Greek austerity revolt spreads Teleg3_102127 By Ambrose Evans-Pritchard | Telegraph – 3 hours ago

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EU elites who forced a currency experiment on countries not ready for it have only themselves to blame
The political centre across southern Europe is disintegrating. Establishment parties of centre-left and centre-right - La Casta, as they say in Spain - have successively immolated themselves enforcing EMU debt-deflation.
Spain's neo-Bolivarian Podemos party refuses to fade. It has endured crippling internal rifts. It has shrugged off hostile press coverage over financial ties to Venezuela. Nothing sticks.
The insurrectionists who came from nowhere last year - with Trotskyist roots and more radical views than those of Syriza in Greece - are pulling further ahead in the polls. The latest Metroscopia survey gave Podemos 28pc. The ruling conservatives have dropped to 21pc.
The once-great PSOE - Spanish Workers Socialist Party - has fallen to 18pc and risks fading away like the Dutch Labour Party, or the French Socialists, or Greece's Pasok. You can defend EMU policies, or you can defend your political base, but you cannot do both.
As matters stand, Podemos is on track to win the Spanish elections in November on a platform calling for the cancellation of "unjust debt", a reversal of labour reforms, public control over energy, the banks, and the commanding heights of the economy, and withdrawal from Nato.
Europe's policy elites can rail angrily at the folly of these plans if they wish, but they must answer why ex-Trotskyists threatening to dismantle market capitalism are taking a major EMU state by storm. It is what happens when 5.46m people lack jobs, when 2m households still have no earned income, and when youth unemployment is still running at 51.4pc, and home prices are down 42pc, six years into a depression.
It is pointless protesting that Spain's economy is turning the corner, a contested claim in any case. There comes a point when a society breaks and stops believing anything its leaders say.
The EU elites themselves have run their currency experiment into the ground by imposing synchronized monetary, fiscal, and banking contraction on the southern half of EMU, in defiance of known economic science and the lessons of the 1930s. It is they who pushed the eurozone into deflation, and thereby pushed the debtor states into accelerating compound-interest traps.
It is they who deployed the EMU policy machinery to uphold the interest of creditors, refusing to acknowledge that the root cause of Europe's crisis was a flood excess capital flows into vulnerable economies. It is they who prevented a US-style recovery from the financial crisis, and they should not be surprised that such historic errors are coming back to haunt.
The revolt in Italy has different contours but is just as dangerous for Brussels. Italians may not wish to leave the euro but political consent for the project but broken down. All three opposition parties are now anti-euro in one way or another. Beppe Grillo's Five Star movement - with 108 seats in parliament - is openly calling for a return to the lira.
Mr Grillo proclaims that Syriza is carrying the torch for all the long-suffering peoples of southern Europe, as it is in a sense.
"What’s happening to Greece today, will be happening to Italy tomorrow. Sooner or later, default is coming," he said.
Premier Matteo Renzi staked everthing on a recovery that has yet to happen. He is running out of political time. Deflation is overwhelming the fiscal gains from austerity. Italy's public debt has jumped from 116pc to 133pc of GDP in three years. The youth jobless rate is 44pc and still rising. Italian GDP has fallen 10pc in six years, and by 15pc in the Mezzogiorno. Italy's industrial production has dropped back to the levels of 1980.
The leaders of Spain and Italy know that their own populists at home will seize on any concessions to Syriza over austerity or debt relief as proof that Brussels yields only to defiance. They have a very strong incentive to make Greece suffer, even if it means a cataclysmic rupture and a Greek ejection from the euro.
Yet to act on this political impulse risks destroying the European Project. Europe's Left would nurture a black legend for a hundred years if the first radical socialist government of modern times was crushed and forced into bankruptcy by Frankfurt bankers - acting at the legal boundaries of their authority, or beyond - choosing to switch off liquidity support for the Greek financial system.
It would throw the Balkans into turmoil and probably shatter the security structure of the Eastern Mediterranean. It is easy to imagine a chain of events where an embittered Greece pulled out of Nato and turned to Russia, paralysing EU foreign policy in a self-feeding cycle of animosity that would ultimately force Greece out of the union altogether.
The charisma of the EU - using the Greek meaning - would drain away if such traumatic events were allowed to unfold, and all because a country of 11m people wanted to cut its primary budget surplus to 1.5pc from 4.5pc of GDP and shake a discredited Troika off its back, for that is what it comes down to.
One is tempted to cite Jacques Delors' famous comment that "Europe is like a riding bicycle: you stop pedalling and you fall off" but that hardly captures the drama of what amounts to civil war in a union built on a self-conscious ideology of solidarity.
"The euro is fragile. It is like a house of cards. If you pull away the Greek card, they all come down,” warned Greece's finance minister Yanis Varoufakis.
“Do we really want Europe to break apart? Anybody who is tempted to think it possible to amputate Greece strategically from Europe should be careful. It is very dangerous. Who would be hit after us? Portugal?" he said.
George Osborne clearly agrees. The worries have been serious enough to prompt a one-hour Cobra security meeting. "The risks of a miscalculation or a misstep leading to a very bad outcome are growing,” said the Chancellor.
Currency guru Barry Eichengreen - the world's leading expert on the collapse of the Gold Standard in 1931 - thinks Grexit might be impossible to control. "It would be Lehman Brothers squared,” he said.
This is not the view in Germany, at least not yet. The IW and ZEW institutes both argue that Europe can safely withstand contagion now that it has a rescue machinery and banking union in place, and must not give in to "blackmail".
Such is the 'moral hazard' view of the world, the reflex that led to the Lehman collapse in 2008. "If we knew then what we know now, we wouldn't have done it," the then-US treasury secretary Tim Geithner told EMU leaders in early 2011, the first time they were tempted to eject Greece.
The fond hope is that the European Central Bank can and will smooth over any turbulence in Portugal, Italy and Spain by mopping up their bonds, now that quantitative easing is on the way. Yet the losses suffered from a Greek default would surely ignite a political firestorm in Germany.
Bild Zeitung devoted two pages this morning to warnings that Grexit would cost Germany €63bn, or much more once the Bundesbank's Target2 payments though the ECB system are included. The unpleasant discovery that Germany's Target2 exposure can in fact go up in smoke - despite long assurances that this could never happen - might make it untenable to continue such support.
It is unfair to pick on Portugal but its public and private debts are 380pc of GDP - the highest in Europe and higher than those of Greece - making is acutely vulnerable to toxic effects of deflation on debt dynamics.
Portugal's net international investment position (NIIP) - the best underlying indicator of solvency - has reached minus 112pc of GDP. Public debt has jumped from 111pc to 125pc of GDP in three years. The fiscal deficit is still 5pc. The country's ranking in global competitiveness is close to that of Greece.
"The situation in Portugal is very different," says Paulo Portas, the deputy premier. Sadly it is not. Once you violate the sanctity of monetary union and reduce EMU to a fixed-exchange system, the illusion that Portugal is out of the woods may not last long. Markets will test it.
Only two people can now stop the coming train-wreck. Chancellor Angela Merkel and her finance minister Wolfgang Schauble, a man who masks his passion for the EU cause behind an irascible front.
Syriza have made a strategic blunder by turning their struggle into a fight with Germany, demanding Nazi war reparations, and toying with the Russian card at the very moment when Mrs Merkel is locked in make-or-break talks on Ukraine with Vladimir Putin.
Mr Varoufakis is trying to limit the damage, praising Mrs Merkel as the "most astute politician" in Europe, and Mr Schauble as the "only European politician with intellectual substance" - a wounding formulation for the others. He has called on Germany to cast off self-doubt and assume its roll as Europe's benevolent hegemon, almost as if he were evoking the glory days of the Holy Roman Empire when pious German emperors stood as guarantors for Christendom.
This is the only pitch that will work. Angela Merkel has risen above her narrow East German outlook and her fiscal platitudes of the early crisis to emerge as the soul-searching Godmother of Europe and the last credible defender of its unity. But even Mrs Merkel can be pushed too far.
Read more articles from The Telegraph here

Thanks to be4ever for the forward from: uk.finance.yahoo.com



  

PurpleSkyz

PurpleSkyz
Admin

Zerohedge: Greek Deal Rumor Falls Apart After Eurogroup Says “No Deal… No Way Forward”, Greece “Questions Merit” Of Bailout Extension

Posted on February 11, 2015 by Jean
http://www.zerohedge.com/news/2015-02-11/futures-eur-surge-report-greek-agreement-reached-principle
NO DEAL!!! -

  • *DIJSSELBLOEM: NO STATEMENT POSSIBLE WITHOUT JOINT CONCLUSIONS
  • *DIJSSELBLOEM: POLITICAL AGREEMENT NEEDED ON THE WAY FORWARD
  • *DIJSSELBLOEM: TO CONTINUE TALKS ON MONDAY, MOVE ON FROM THERE

Dijsselbloem: People will not start working before Monday as there was no political agreement on the way forward
— Lorcan Roche Kelly (@LorcanRK) February 11, 2015
#Greece gov’t sources tell @geoterzis there was no agreement at #Eurogroup , extension to MoU will not be accepted & consultation will go on
— Kathimerini English (@ekathimerini) February 11, 2015
*  *  *
And why Greece matters…
Germany faces impossible choice as Greek austerity revolt spreads B9mj8ofieaa0fcw
Official exposure to #Greece for EZ countries non-negligible: €330bn of exposure to Greek govt, 3.5% of EZ GDP (Barc) pic.twitter.com/unXgd8rmTJ
— Holger Zschaepitz (@Schuldensuehner) February 12, 2015
*  *  *
But only one man mattered:
Germany faces impossible choice as Greek austerity revolt spreads 20150211_greece2_0
Greek FinMin varoufakis’ statement:
Germany faces impossible choice as Greek austerity revolt spreads B9mdb_4cyaat0va
What @yanisvaroufakis said in Greek to the Greeks sounded far more interesting than his words in English pic.twitter.com/09UqAPnDnn
— Bruno Waterfield (@BrunoBrussels) February 11, 2015
*  *  *
The Greek government has had enough of the delays, and has released its own statement, reports Helena Smith in Athens. And crucially, it reads,
“At this euro group there has been no agreement.”
 
“An extension of the memorandum cannot be accepted. Negotiations will continue with the goal [of achieving[ a mutually beneficial agreement.”
The statement added that the Greek side had put forward well-founded arguments as to why the bailout accord had failed, enlightening listeners on Greece’s problems of public debt and the humanitarian crisis it has also suffered.

  • *VAROUFAKIS HOPES FOR `OPTIMAL’ CONCLUSION AT MONDAY EURO GROUP
  • *VAROUFAKIS SAYS EURO GROUP MEETING WAS VERY CONSTRUCTIVE
  • *VAROUFAKIS: THIS EURO GROUP WAS NOT MEANT TO SETTLE ANY ISSUES
  • *VAROUFAKIS SAYS IT’S `NORMAL, NATURAL’ TO WAIT UNTIL MONDAY
  • *GREECE WOULD NEVER AGREE TO STAY IN CURRENT PROGRAM: VAROUFAKIS
  • *EXISTING PROGRAM HAS BEEN CATASTROPHIC, VAROUFAKIS SAYS

*  *  *
Thanks CNBC
— zerohedge (@zerohedge) February 11, 2015
Germany faces impossible choice as Greek austerity revolt spreads 20150211_oops_1_0-1
Thanks CNBC

  • *PADOAN SAYS GREECE EURO TALKS WERE ‘AT TIMES FRANK’

*  *  *
UPDATE: From Reuters: NO DEAL YET ON GREECE

  • EUROGROUP SOURCE TELLS REUTERS NO “DEAL” YET WITH GREECE, MAY BE AN AGREEMENT TO EXPLORE POSSIBILITY OF EXTENDING BAILOUT PROGRAMME
  • SECOND EUROGROUP SOURCE SAYS GREECE AGREES IN PRINCIPLE TO MEET ITS FINANCIAL OBLIGATIONS IN DRAFT COMMON STATEMENT
  • GREEK GOVT OFFICIAL SAYS NO AGREEMENT IN EUROGROUP, GREECE WILL NOT ACCEPT AN EXTENSION OF CURRENT BAILOUT

And stocks and EURUSD give back almost nothing…FOMO!!
Germany faces impossible choice as Greek austerity revolt spreads 20150211_deal1_0
*  *  *
And so it begins… 1am local time and we get ‘unidentified sources’ stating that:

  • *GREECE AGREEMENT `IN PRINCIPLE’ REACHED, CNBC REPORTS
  • *GREECE WILL STAY IN EU BAILOUT PROGRAM, CNBC REPORTS
  • *DETAILS OF GREECE DEAL UNCLEAR, CNBC REPORTS

Stocks futures and EURUSD are surging on it but we suspect – given the timing – that there is no detail yet and this is nothing but a blanket statement of effort for compromise to calm Greek bank stocks for the week as they reach ELA limits.

  • *GREECE, EUROPE SAID TO MOVE TOWARD BAILOUT EXTENSION
  • *GREECE, EURO AREA DISCUSSING LANGUAGE ON BAILOUT EXTENSION

It appears the “deal” of an agreement “in principle” means that if Greece folds and succumbs [original word: satocks? ] to Germany’s program demands then The EU will allow them to stay in and fund them… LMFAO!!
The knee jerk reaction…
Germany faces impossible choice as Greek austerity revolt spreads 20150211_greece_0
We can’t help but suspect this is about rallying Greek banks for the next few days to avoid being forced into a rapid decision ahead of the final statement next Monday:

  • *FINAL DETAILS OF GREEK DEAL WILL BE KNOWN MONDAY, CNBC REPORTS

We shall see…
*  *  *
The seating chart… Greece center stage right…
Germany faces impossible choice as Greek austerity revolt spreads 20150211_deal2_0

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