Tag Archives: Europe

Deepening EU Banking Crisis Meets Euro-TARP and Taxpayers, by Don Quijones

The European banking crisis (and make no mistake, European banks are in a crisis) will follow the same story line as all banking crises: with taxpayers bailing out the banks. From Don Quijones at wolfstreet.com:

If the ECB scales back stimulus, banks face even greater risk of collapse. But now there’s a new solution.

Events are moving so fast in Europe these days, it’s almost impossible to keep up. While much of the attention is being hogged by political developments, including the election in the Netherlands, Reuters published a report warning that the European banking sector may face even higher bad loan risks if the ECB begins to scale back its monetary stimulus programs, something it has already begun, albeit extremely tentatively.

The total stock of non-performing loans (NPL) in the EU is estimated at over €1 trillion, or 5.4% of total loans, a ratio three times higher than in other major regions of the world.

On a country-by-country basis, things look even scarier. Currently 10 (out of 28) EU countries have an NPL ratio above 10% (orders of magnitude higher than what is generally considered safe). And among Eurozone countries, where the ECB’s monetary policies have direct impact, there are these NPL stalwarts:

Ireland: 15.8%
Italy: 16.6%
Portugal: 19.2%
Slovenia: 19.7%
Greece: 46.6%
Cyprus: 49%

That bears repeating: in Greece and Cyprus, two of the Eurozone’s most bailed out economies, virtually half of all the bank loans are toxic.

Then there’s Italy, whose €350 billion of NPLs account for roughly a third of Europe’s entire bad debt stock. Italy’s government and financial sector have spent the last year and a half failing spectacularly to come up with a solution to the problem. The two “bad bank” funds they created to help clean up the banks’ toxic balance sheets, Atlante I and Atlante II, are the financial equivalent of bringing a butter knife to a machete fight. So underfunded are they, they even strugggled to hold aloft smaller, regional Italian banks like Veneto Banca and Popolare di Vicenza, which are now pleading for a bailout from Rome, which in turn is pleading for clemency from Brussels.

To continue reading: Deepening EU Banking Crisis Meets Euro-TARP and Taxpayers

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Winners are Losers and Left is Right, by Raúl Ilargi Meijer

The European establishment are so worried about right wing insurgencies that electoral victory for the mainstream means they didn’t do quite as badly as expected, and electoral defeat for the right wing means they didn’t do quite as well as they might have. From Raúl Ilargi Meijer at automaticearth.com:

The Dutch elections on Wednesday have provided a whole bunch of Orwellian narratives. PM Mark Rutte’s right wing VVD party, actually the ‘business’ -or should we say ‘rent-seekers’ in 2017- party, who lost some 20% of the seats they had obtained in the previous parliamentary election in November 2012, down from 41 to 33 seats, is declared the big winner. While Geert Wilders’ very right wing party, PVV, won 25% more seats -it went from 16 to 20- and is the big loser.

Moreover, Rutte’s coalition partner, labor PvdA, gave up 29 out of 38 seats to end up with just 9. That’s a loss of over 75%. Together, the coalition partners went from 79 seats in the 2012 election to 42 in 2017. That’s an almost 50% less. Not that it could prevent Rutte from proudly declaring: “We want to stick to the course we have – safe and stable and prosperous..” Makes you wonder who the ‘we’ are that he’s talking about.

That course he wants to stick to had a finance minister named Dijsselbloem, and his party just lost by over 75%. So he won’t be back. But perhaps the EU can pull another ‘Tusk’, and leave him in place in Brussels as chairman of the Eurogroup no matter what voters in his own country think of him. Still, declaring your intention to ‘stick to the course’ when your coalition has just been sawed in half, it’s quite something.

The only reasons Rutte’s VVD ended up being the biggest party all have to do with Wilders. The anxiety over the election all had to do with polls. Wilders is a one man party and a a one trick pony. If he would leave, his party would dissolve. And his sole ‘message’ is that Islam is bad and should vanish from first Holland and then Europe. He doesn’t really have any other political program points. Ok, there’s Brussels. Doesn’t like that either.

To continue reading: Winners are Losers and Left is Right

 

Europe: “The Era of Liberal Babble”, by Judith Bergman

An ideological schism has opened up in Europe between those governments who embrace and reject multiculturalist open immigration. From Judith Bergman at gatestoneinstitute.org:

• Uninhibited by the obvious fear of their citizens, the EU nevertheless carries on its immigration policies.

• Ironically, Western political elites consider this clearly widespread sentiment against Muslim immigration “racist” and “Islamophobic” and consequently disregard it — thereby empowering anti-immigration political parties.

• “Islam has no place in Slovakia…. [the problem is not migrants coming in, but] rather in them changing the face of the country.” — Robert Fico, Prime Minister of Slovakia.

Europe, so many years after the Cold War, is ideologically divided into a new East and a West. This time, the schism is over multiculturalism. What Hungarian Prime Minister Viktor Orbán has termed “liberal babble” continues to govern Western Europe’s response to the challenges that migration and Islamic terrorism have brought, especially to personal security.

The Western European establishment considers arming oneself against terrorists, rapists and other ill-wishers outlandish, even in the face of the inability of Europe’s security establishments to prevent mass terrorist atrocities, such as those that took place in Paris at the Bataclan Theater or the July14 truck-ramming in Nice.

The European Union’s reaction to terror has been to make Europe’s already restrictive gun laws even more restrictive. The problem is that this restrictiveness contradicts the EU’s own reports: these show that homicides committed in Europe are mainly committed with illegal firearms.

In Eastern Europe, on the other hand, it is still normal to want to defend yourself. Last summer, Czech President Milos Zeman even encouraged citizens to arm themselves against Islamic terrorism. “I really think that citizens should arm themselves against terrorists. And I honestly admit that I changed my mind, because previously I was against [citizens] having too many weapons. After these attacks, I don’t think so”.

Since the president’s remarks, the Czech Interior Minister, Milan Chovanec, has proposed extending the use of arms in the event of a terrorist attack. He explained that despite strict security measures, it is not always possible for the police to guarantee a fast and effective intervention. Fast action from a member of the public could prevent the loss of many lives.

To continue reading: Europe: “The Era of Liberal Babble”

Euro Breakup Rattles Investors Once Again, by Don Quijones

Every so often investors are reminded that the breakup of Europe is a question of when, not if, and it upsets them. From Don Quijones at wolfstreet.com:

Only this time, the ECB is already doing “whatever it takes.”

With hotly contested general elections coming up in France, Germany, and Holland – where yet another upset could be on the cards – 2017 was always going to be a nail-biter for the Eurozone. That was before former Italian PM Matteo Renzi raised the prospects of fresh elections in the home of electoral chaos, Italy.

And investors’ nerves are fraying. The spread between the 10-year yields of French government debt and German government debt has already widened from 0.28% in October to 0.81% today in anticipation of French elections, to be held in April. According to Frankfurt-based Sentix research group, the probability that France could fracture the euro is also rising, reaching 8.4% in its latest survey of investor sentiment as concerns about Marine Le Pen’s threat to the French and European establishment continue to rise. It’s the highest level registered to date.

The poll, which was launched in June 2012, at the height of Europe’s sovereign debt crisis, surveys more than 5,000 retail and institutional investors from 20 countries about their expectations of Europe’s financial markets. The result of the latest survey is clear as day: the euro crisis is once again back front and center in investors’ minds.

A quarter of respondents believe that at least one State will abandon the single currency in the next 12 months. It’s the highest level since Brexit, when Sentix’s fear index reached 27.5%. The highest level ever recorded was during the euro zone’s peripheral debt crisis when it reached 73%. Ironically, no country left, thanks largely to Mario Draghi’s pledge to do whatever it takes to keep the euro intact.

But now, five years later, most of the Eurozone’s existential problems remain unresolved, despite the ECB having frittered €3.7 trillion (or roughly 36% of Eurozone GDP) on keeping the leaking ship — and the region’s biggest banks — afloat.

To continue reading; Euro Breakup Rattles Investors Once Again

Europe: Laughing at the Messenger, by Douglas Murray

Denying the truth doesn’t make it go away. It generally makes it that much harder to deal with when it’s finally acknowledged. From Douglas Murray at gatestoneinstitute.org:

Once again, an American has pointed to a failing in European society, and instead of focusing on the problem identified or even admitting that there is a problem, the European response has been to point at the American and blame him for creating the problem he has in fact merely identified.

• We are being given an accurate representation of a serious problem.

If the response to every problem is denial, and the response to anyone pointing to the problem is opprobrium, legal threats or hilarity, it suggests that Europe is not going to make the softer-landing it could yet give itself in addressing these issues.

• It might make us feel better, but every time we attack or laugh at the messenger, rather than addressing the message, we ensure that our own future will be less funny.

How can one excavate the minds of so many European officials and the extraordinary mental gymnastics of denial to which they have become prone?

One of the finest demonstrations of this trend occurred in January 2015, after France was assailed by Islamist gunmen in the offices of the satirical magazine Charlie Hebdo and then in a Jewish supermarket. In the days after those attacks, Fox News in the U.S. ran an interview with a guest who said that Paris, and France, as a whole, had “no-go zones” where the authorities — including emergency services — did not dare to go. In the wake of these comments, the Mayor of Paris, Anne Hidalgo, chose to make a stand. She announced that she was suing Fox News because the “honour of Paris” was at stake.

To continue reading: Europe: Laughing at the Messenger

How Many Euro Crises Will This Make? It’s Getting Hard To Keep Track, by John Rubino

Sooner or later, Europe and its euro will collapse under its debt load. From John Rubino at dollarcollapse.com:

Every few years, it seems, one or another mismanaged eurozone country falls into one or another kind of crisis. This leads to speculation about the end of the common currency, which in turn spooks the global financial markets. Then the ECB conjures another trillion euros out of thin air, buys up and/or guarantees all the offending country’s bonds, and calm returns for a while.

At least, that’s how it’s gone in the past.

The latest crisis has more than the usual number of flash-points and could, therefore, be something new and different. Currently:

Greece. This charming but apparently ungovernable country only got into the eurozone in the first place because its corrupt leaders conspired with Goldman Sachs to hide the true condition of the government’s finances. It quickly blew up and has been on intensive care ever since. Now the latest bailout has become deal-breakingly messy:

‘From bad to worse’: Greece hurtles towards a final reckoning

(Guardian) – With another bailout set to bring more cuts, quitting the euro is back on the agenda.

The country’s epic struggle to avert bankruptcy should have been settled when Athens received €110bn in aid – the biggest financial rescue programme in global history – from the EU and International Monetary Fund in May 2010. Instead, three bailouts later, it is still wrangling over the terms of the latest €86bn emergency loan package, with lenders also at loggerheads and diplomats no longer talking of a can, but rather a bomb, being kicked down the road. Default looms if a €7.4bn debt repayment – money owed mostly to the European Central Bank – is not honoured in July.

Amid the uncertainty, volatility has returned to the markets. So, too, has fear, with an estimated €2.2bn being withdrawn from banks by panic-stricken depositors since the beginning of the year. With talk of Greece’s exit from the euro being heard again, farmers, trade unions and other sectors enraged by the eviscerating effects of austerity have once more come out in protest.

To continue reading: How Many Euro Crises Will This Make? It’s Getting Hard To Keep Track

Things Just Got Serious in Europe’s War on Cash, by Don Quijones

Europe is tightening the screws on all those benighted idiots and criminals who want to use cash. From Don Quijones at wolfstreet.com:

To protect citizens from threats as defined by apparatchiks in Brussels.

The central authorities in Europe just launched their most important offensive to date in their multiyear War on Cash. The new move comes directly from the European Union’s executive branch, the European Commission, which just announced its intention to “explore the relevance of potential upper limits to cash payments,” with a view to implementing cross-regional measures in 2018.

Maximum limits on cash transactions already exist in most European countries, and the general trend is downward. Last year, Spain joined France in placing a €1,000 maximum on cash payments. Greece went one better, dropping its cap for cash transactions from €1,500 to €500. In simple terms, any legal purchase of a good or service over €500 will need to be done with plastic or mobile money.

In some countries, the maximum cash limit is significantly higher. For example, in Europe’s biggest economy, Germany, recent attempts by the government to set a threshold of €5,000 triggered a fierce public backlash. The German tabloid Bild published a scathing open letter titled “Hands Off Our Cash,” while a broad spectrum of political parties condemned the proposed measures as an attack on data protection and privacy.

Cash allows us to remain anonymous during day-to-day transactions. In a constitutional democracy, that is a freedom that has to be defended,” tweeted the Green MP Konstantin von Notz. Even Bunderbank President Jens Weidmann criticized the government’s proposals, telling Bild (emphasis added): “It would be fatal if citizens got the impression that cash is being gradually taken away from them.”

To continue reading: Things Just Got Serious in Europe’s War on Cash