Tag Archives: European Union

The Euro Crisis Is Only Just Beginning, by Harry Dent

Posted on December 15, 2015 | Leave a comment

From Harry Dent at davidstockmanscontracorner.com:

I’ve been shocked over how much QE and stimulus the central banks have signed on for in the last seven years, but they’re finally starting to reach their limit.

The U.S. already did in 2014 when the Fed finally tapered. And this week, the markets are betting on a rate hike – never mind the trouble brewing in China, other emerging markets, and now Europe.

Good luck with that.

There’s just too much going on in the world suggesting deflation is the real fear, yet the Fed’s betting on 2% inflation to justify a hike. Give me a break!

There’s a reason the Fed has put off raising rates time and time again, and it hasn’t gone anywhere.

The fall in commodities prices is nowhere near its conclusion. That will only continue to ravage emerging nations as those prices continue to fall for several years.

And now Europe has its own troubles that are only getting worse… and could potentially signal the end of the euro and the economic bloc itself.

Recently I explained why the attacks on Paris were such a major issue. It was like the 9/11 wake-up call over here. Sure, our attack was larger. But Europe’s came after the recent terrorist attack on Charlie Hebdo, and while a massive refugee crisis was already calling everything into question.

This recent escalation in terrorist events, including the Russian Metrojet being bombed, only creates an atmosphere within the euro zone of individual nations re-asserting their own sovereignty over one another. And that includes controlling their own borders and trade flows.

That’s been the major flaw of the euro and the euro zone from the beginning.

These very diverse nations with long histories of shifting alliances and wars don’t really trust each other – they never did. And they’d never fully submit to a fiscal and political union. Greater trade and migration flows were just fine – until something went wrong. Something like the Paris attacks… Russian aggression in the Ukraine…

Or 800,000-plus refugees from Syria and the Middle East, with three million or more still expected to come.

It’s a giant mess! And the refugee crisis specifically is a huge expense to the many European nations accepting them, all while they’re teetering on the verge of recession again.

To continue reading: The Euro Crisis is Only Just Beginning

See also: Europe Is Toast, SLL, 12/2/15

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European Dream Turns into Dystopian Nightmare, by Don Quijones

Posted on December 14, 2015 | Leave a comment

From Don Quijones at wolfstreet.com:

Why We Brits Should Vote for Brexit.

As a Europhile British ex-pat who has spent most of his adult life living on “the continent,” as we Brits are fond of calling the non-British part of Europe, it might seem rather odd to be encouraging my fellow Brits to vote to leave the European Union.

Not so long ago — perhaps a decade or so — I believed that the interests of Britain would be best served if the country was a full-fledged member not only of the EU but of the euro zone. I was wrong, but it was a different time and I was a different, more innocent me.

Total Dependence

By the time the sovereign debt crisis hit Europe in 2010, the full extent of the EU’s ambitions was clear: to slowly, almost imperceptibly, weaken nation-state institutions to the point of total dependence on Brussels; and then have them supplanted with EU institutions. As I wrote in a 2014 article, it is the financial equivalent of death by a thousand cuts. The EU’s weapon of choice was the single currency.

Luckily for Britain, its government had not joined the euro. The Chancellor of the Exchequer at the turn of the century, Gordon Brown, knew that sacrificing the pound would have been electoral suicide. Preserving the national currency has provided the UK with some measure of economic independence and flexibility.

For many other European countries, their economic independence and flexibility died the day they joined the euro. As Spain’s economy minister Luis de Guindos recently put it, “the Eurozone is a club where you can check in but you cannot check out.” The main reason for this is that the euro is merely a means to a much more coveted end — political union, as Germany’s Finance Minister glibly admitted in a 2011 interview with Welt am Sontag:

Schauble: “We decided to arrive at a political union via an economic and currency union. We had the hope – and we still have it today – that the Euro will gradually bring about political union. But we’re not there yet, and that’s one of the reasons why the markets are distrustful.”

Welt am Sontag: “So will the markets now force us into a political union?”

Schauble: “Most member states are not yet fully prepared to accept the necessary constraints on national sovereignty. But trust me, the problem can be solved.”

To continue reading: European Dream Turns into Dystopian Nightmare

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FT Bombshell: EU Unveils Standing Border Force That Will Act “Even If A Government Objects” by Tyler Durden

Posted on December 11, 2015 | Leave a comment

As SLL recently said, Europe Is Toast. From Tyler Durden at zerohedge.com:

Last weekend we wrote that in Europe’s attempt to contain the greatest refugee crisis since WWII, it would directly take control over the border control of the one country which over the summer lost its sovereignty (but at least it still has the euro), and which serves as a springboard for tens of thousands of migrants to proceed onward with their journey to Germany (where as reported earlier, they are no longer desired, as their continued arrival results in a plunging approval rating for Angela Merkel).

We added that the deployment of additional officers will begin next week, and noted that as our friends at Keep Talking Greece wrote:

“the masks have fallen. Hand in hand, the European Union and the Frontex want to cancel national sovereignty and take over border controls in the pretext of “safeguarding the Schengen borders”. With controversial claims, they use the case of Greece to create an example that could soon happen “in the border area near you.” And the plan is all German.”

Finally, we asked whether this was merely Paranoia…

“or just another confirmation that the Eurozone is using every incremental, and produced, crisis to cement its power over discrete European state sovereignty and wipe out the cultural and religious borders the prevent the amalgamation of Europe into a Brussels, Berlin and Frankfurt-controlled superstate? “

It was not paranoia, because according to blockbuster FT report released moments ago, “Brussels is to propose the creation of a standing European border force that could take control of the bloc’s external frontiers — even if a government objected.”

As even the otherwise pro-EU FT cautiously notes, “The move would arguably represent the biggest transfer of sovereignty since the creation of the single currency.”

We agree, because this is precisely what we said would happen.

… the European Commission will unveil plans next week to replace the Frontex border agency with a permanent border force and coastguard — deployed with the final say of the commission, according to EU officials and documents seen by the Financial Times.

The blueprint represents a last-ditch attempt to save the Schengen passport-free travel zone, by introducing the kind of common border policing repeatedly demanded by Paris and Berlin. Britain and Ireland have opt-outs from EU migration policy, and would not be obliged to take part in the scheme.

Naturally, the first guniea pig wil be Greece: the state which has already lost its sovereignty courtesy of capital controls that will likely persist in some form in perpetuity, and which is most distressed and thus least equipped to say no. It will spread from there and promptly become the norm for a “project” which the European apparatchiks think is long overdue.

Indeed, as the FT adds, “European leaders have discussed a common border force for more than 15 years, but always struggled to overcome deep-seated objections to yielding national powers to monitor or enforce borders — one of the core functions of a sovereign state. Greece, for instance, only recently agreed to accept EU offers to send border teams, after months of wrangling over their remit.”

To continue reading: EU Unveils Standing Border Force

 

 

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Greece Is A Nation Under Occupation, by Raúl Ilargi Meijer

Posted on December 5, 2015 | Leave a comment

From Raúl Ilargi Meijer at automaticearth.com:

Perhaps the best way to show what a mess Europe is in is the €3 billion deal they made with Turkey head Erdogan, only to see him being unmasked by EU archenemy Vlad Putin as a major supporter, financial and who knows how else, of the very group everyone’s so eager to bomb the heebees out after Paris. It could hardly have been more fitting. That’s not egg on your face, that’s face on your egg.

But Brussels thinks it’s found a whipping boy for all its failures. Greece. It’s fast increasing its accusations against Athens’ handling of the 100s of 1000s of refugees flooding the country. Everything that goes wrong is the fault of Greece, not Brussels. The EU has so far given Greece €30 million in ‘assistance’ for the refugee crisis, while the country has spent over €1.5 billion in money it desperately needs for its own people. But somehow it’s still not done enough.

The justification given for this insane shortfall is that Greece doesn’t blindly follow all orders emanating from Europe’s ‘leaders’. Orders such as setting up a joint patrol of the Aegean seas with … yes, Erdogan’s Turkey. Where Greece gets next to nothing as the children keep drowning, Turkey gets €3 billion and a half-baked promise to join the Union sometime in the future.

Which was never going to happen, the EU would blow up before Turkey joins and certainly if it does, and most certainly now that Russia’s busy detailing the link between the Erdogan cabal and Europe’s supposed new archenemies -move over Putin?!, which, incidentally, are reason for France to ponder a kind of permanent state of emergency; ostensibly, this is Hollande’s way of exuding confidence. ‘We must protect our way of life’.

Given Schengen -while it lasts-, which effectively erases all frontiers, this de facto means permanent emergency across the entire EU. And that, to a degree, though the two may seem unrelated, plays into the EU’s insistence to station foreign border guards (military police) at Greek borders. A, we can’t put it in different words, completely insane demand to which Alexis Tsipras’ government has apparently even acceded.

Insane because once you have foreigners deciding who can enter or leave your country, you’re effectively a country under occupation. It really is that simple. This latest attempt at power grabbing on the part of Brussels could have some ‘unexpected side effects’, though. And that may be a good thing.

To continue reading: Greece Is A Nation Under Occupation

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BlackRock Spreads its Tentacles in Brussels, by Don Quijones

Posted on November 29, 2015 | Leave a comment

From Don Quijones at wolfstreet.com:

Exploiting knowledge and connections, Goldman-like.

In Brussels there is one industry that is thriving better than just about any other: the bailout business. In the last five years, some of the world’s biggest financial consultancies have trousered tens of millions of euros apiece advising bailed-out governments and central banks how to reorganize their finances.

As Irish central bank governor Patrick Honohan said during Ireland’s 2011 bailout, “it’s amazing when you pay large sums of money, how the best consultants in the world can come flocking.” Those firms include Alvarez and Marsal, Oliver Wyman and Pimco.

A Bright Future

Unlike many other industries in Europe´s crisis-ridden economy, the bailout business appears to have a bright future in store. As long as the continent’s banking industry remains prone to the occasional meltdown, the bailout business should remain a lucrative source of revenues and profits.

One firm that has proven particularly adept at carving out a niche in this sector is BlackRock Solutions, a small – in relative terms – advisory unit of BlackRock, the world’s largest asset management fund, with roughly €3 trillion under management. In 2011 the firm was hired by the Bank of Ireland to forecast how much Irish banks would risk losing and to carry out a “stress test” on worst-case scenarios for the Irish banking system, which had just been bailed out to the tune of €85 billion.

Despite providing embarrassingly wayward forecasts, BlackRock Solutions pocketed €30 million for the job. The firm got a similar contract worth €12.3 million from the Bank of Greece and was also hired by the Bank of Cyprus to double-check the methodology used by Pimco to evaluate the recapitalization needs of the Cypriot banking sector.

To continue reading: BlackRock Spreads its Tentacles in Brussels

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Will Europe Man Up? by Patrick Buchanan

Posted on November 24, 2015 | Leave a comment

From Patrick Buchanan at buchanan.org:

If the purpose of terrorism is to terrify, the Islamic State had an extraordinary week. Brussels, capital of the EU and command post of mighty NATO, is still in panic and lockdown.

“In Brussels, fear of attack lingers” was Monday’s headline over The Washington Post’s top story, which read:

“Not since Boston came to a near-standstill after the Boston Marathon bombing in 2013 has the life of a major Western city been brought to a halt this way by the fear of terrorism.”

Below that is this headline: “After Paris, a campaign changed by fear.”

That story is about what’s happened in our presidential race: “Across the country … have come pronouncements of anger and fear not seen after the terrorist attacks in London and Madrid — or even in some ways after Sept. 11 2001.”

Voters speak of “feeling more afraid of the Islamic State, more horrified by the imagery of the beheadings and other atrocities.”

The New York Times’ Roger Cohen describes the Paris he loves.

“[T]hey are shaken. There is a void in the streets too empty, a new suspicion in appraising glances, a wary numbness. Paris is afflicted with absences — the dead, of course; visitors frightened away; minds frozen by fear; and tranquility lost. The city feels vulnerable.”

“I think France is attacked above all for what it is,” writes Cohen, “That in turn is terrifying. … I don’t think Paris has ever felt so precious or precarious to me as it did over the past week.”

Terrible as the massacres were, some perspective is in order.

To continue reading: Will Europe Man Up?

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The Mad Euro Project Just Got A Lot Madder, by Don Quijones

Posted on November 21, 2015 | 1 comment

A country, Portugal, with debt in excess of five times is GDP is borrowing at negative interest rates. Insanity is the right term for it. From Don Quijones at wolfstreet.com:

Feeding a Monstrous Pile of Debt.

Under Mario Draghi’s radical stewardship, the ECB seems determined to push the limits of monetary experimentation. And by all accounts, it’s succeeding.

This week saw numerous eurozone governments sell bonds at negative rates, an economic anomaly that has no place in a rational world. Even some mainstream economists still seem confused by it. Unfortunately, thanks to the tireless efforts of central bankers around the globe, we stopped living in a rational world a long time ago.

Feeding a Monstrous Pile of Debt

The latest government to enjoy the perks of negative-interest-rate living is Portugal. That’s right, Portugal, a country that four years ago was selling 12-month notes with an average yield of 6% amidst fears about the government’s ability to service its monstrous debt pile, is now able to sell €1.1b billion of 12-month debt at a -0.06% yield. In other words, if investors hold the bonds to maturity they will actually pay the Portuguese government – a government that doesn’t yet exist – for the privilege of holding its debt.

This is despite the fact that Portugal has not only a perpetually stagnating economy but also one of the highest debt-to-GDP ratios in the world. After four years of so-called “austerity,” Portugal’s combined public and private debt is now a mind-blowing 530% of GDP, with total corporate debt expected to reach 240% of GDP.

Most of the country’s public debt is foreign owned, and while there aren’t any reliable figures on who exactly owns the private debt, it is a fair bet that it is also mainly foreigners (and, of course, local banks). In other words, the country’s heavily-levered corporate sector is sitting upon the granddaddy of tick-tocking debt time bombs.

To continue reading: The Mad Euro Project Just Got A Lot Madder

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A Most Convenient Massacre, by Dmitry Orlov

Posted on November 17, 2015 | 1 comment

From Dmitry Orlov at cluborlov.blogspot.com:

What a difference a single massacre can make!

• Just a week ago the EU couldn’t possibly figure out anything to do to stop the influx of “refugees” from all those countries the US and NATO had bombed into oblivion. But now, because “Paris changed everything,” EU’s borders are being locked down and refugees are being turned back.

• Just a week ago it seemed that the EU was going to be swamped by resurgent nationalism, with incumbent political parties poised to get voted out of power. But now, thanks to the Paris massacre, they have obtained a new lease on life, because they can now safely embrace the same policies that a week ago they branded as “fascist.”

• Just a week ago the EU and the US couldn’t possibly bring themselves admit that they are utterly incompetent when it comes to combating their own creation—ISIS, that is—and need Russian help. But now, at the après-Paris G-20 summit, everybody is ready to line up and let Putin take charge of the war against terrorism. Look—the Americans finally found those convoys of tanker trucks stretching beyond the horizon that ISIS has been using to smuggle out stolen Syrian crude oil—after Putin showed them the satellite photos!

Am I being crass and insensitive? Not at all—I deplore all the deaths from terrorist attacks in Iraq, in Syria, in Lebanon, and in all the other countries whose populations did absolutely nothing to deserve such treatment. I only feel half as bad about the French, who stood by quietly as their military helped destroy Libya (which did nothing to deserve it).

Note that after the Russian jet crashed in the Sinai there weren’t all that many Facebook avatars with the Russian flag pasted over them, and hardly any candlelight vigils or piles of wreaths and flowers in various Western capitals. I even detected a whiff of smug satisfaction that the Russians got their comeuppance for stepping out of line in Syria.

To continue reading: A Most Convenient Massacre

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Is the Troika About to Lose Control of South-Western Europe? by Don Quijones

Posted on November 11, 2015 | Leave a comment

From Don Quijones at wolfstreet.com:

The Price of  “Austerity”

Passos Coelho, who was until Tuesday Prime Minister of Portugal, knew “what to do.” After signing along the dotted line for a €78 billion bailout he embraced the Troika’s austerity agenda with abandon. Public spending was slashed, taxes were hiked, wages were cut, and a whole gamut of public assets and services were privatized.

As they say in Brussels these days, no pain, no gain. After four years of excruciating belt-tightening, Portugal was apparently back on the mend, despite its public debt almost doubling since 2008. Its economy had been through the grinder but it had come out the other end in much leaner shape. The public deficit had shrunk from 11% in 2011 to 3% today.

Unemployment had also fallen, and kept falling month after month, to the point where it was getting monotonous. Until two months ago, that is, when it shot back up over 14%. Then came the bomb shell: the country’s Ministry of Statistics announced in a rare moment of candor that unemployment, in an “extended sense,” was actually around 22%. As Deutsche Welle reports, the Portuguese government had been doctoring the figures to keep the European institutions (i.e. the Troika) happy:

European politicians prefer lower unemployment figures rather than higher ones, and as a consequence, there are now unemployment figures in “narrower” and “extended” senses. Mostly, the headline figures reported are the lower, “narrower” ones.

Flimsy Façade

In other words, in the real world Portugal has almost identical depression-era levels of unemployment as Spain. Its government is just more skilled at masking the grimness of its economic reality.

However, hiding a decidedly grim reality with a flimsy façade of doctored numbers may work on international investors and rating agencies – at least for a while – but it doesn’t work on those who have to live in that grim reality. And at election time that can be a serious setback.

When Coelho’s governing coalition received only 38% of the vote in last month’s elections, the game was as good as up, especially when it became clear that three parties on the left — the so-called “triple left” — had won an absolute majority and seemed willing to form a coalition.

Even when the Portuguese President Cavaco Silva, a former member of Coehlo’s pro-Euro party, reappointed Coehlo as prime-minister in a desperate bid to prevent “anti-European,” “anti-Nato” forces from winning the keys to government, he merely forestalled the inevitable. Today the inevitable happened: the “triple left” roundly rejected Coelho’s policy proposals, forcing Portugal’s Troika-friendly government to resign.

To continue reading: Is the Troika About to Lose Control of South-Western Europe?

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ECB Chief Economist: OK, I Get it, the Euro Doesn’t Work, by Wolf Richter

Posted on October 2, 2015 | 1 comment

From Wolf Richter at wolfstreet.com:

The ECB started its €60-billion-a-month QE bonanza earlier this year and was expected to run it through September 2016, but already the Big Money is clamoring for more. Shook up by what’s happening in China, the ECB said it might accommodate them.

Now Standard and Poor’s warned or recommended – whichever – that the ECB could double the size of the QE program, to €2.4 trillion and extend it “until mid-2018.” That the Big Money is clamoring for more is no surprise: despite the ECB’s QE and negative deposit rates, stock prices have plunged, with the German DAX down 23% in six months.

So here comes Peter Praet, ECB Executive Board Member and Chief Economist, with an amazing presentation at the BVI Asset Management conference in Germany, showing one devastating chart after another on how the euro has failed the Eurozone economy.

Optimism, when published by economists, is usually designed to hype what needs to be hyped at the moment. This is universal. But in the Eurozone, even economists are dialing back their optimism. In the chart below, Praet shows how expectations of economic growth for five years ahead have dropped over the 15 years that the euro has been around:

To continue reading: The Euro Doesn’t Work

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