Financial Napoleons out to Crush Europe

EU leaders are in a multi-layered bind of their own making but it is European taxpayers who will pay dearly for the Euro vanities of politicians desperate to save the battered common currency by dancing around in ever-diminishing and ever-more expensive circles.

Prof Michal Hudson describes the bankers’ heist taking place around Europe

Finance, according to Michael Hudson Professor of Economics at the University of Missouri, Kansas City, is undermining European democracies, bankers are seen as new Napoleonic armies of invaders, financiers have mounted an effective coup against countries like Greece and European citizens face confiscation of public realm assets – the el Gordo lottery in Spain, Greece’s famous islands, the giant Portuguese electricity utility EDP – so bankers can place toll booths on them, to redeem earlier bad loans.

Listen to the argument on what he calls Europe’s Neo Feudalism, here:

Matters have just taken a dramatic turn for the worse as it becomes clearer that Italy, the eurozone’s third largest economy, might be next to join the euro-debt crisis. European Council president Herman Van Rompuy has summoned ministers to yet another emergency meeting over concerns that Rome might follow Greece, Ireland and Portugal into the IMF/ECB gruel queue so as to avoid a default on its national debt — estimated at 1.249,025,19 trillion Euros or 103.7% of GDP. That compares to Greece’s national debt of around 158% of GDP – and the UK’s debts of 47.2% of GDP.

The Western world – not only the US and the eurozone’s “usual suspects”, but also the UK– is, writes Liam Halligan chief economist at Prosperity Capital Management “in great fiscal danger. The only reason we are still able to roll over our sovereign liabilities is because, for the most part, the true extent of the fiscal risks we face hasn’t yet been priced in to yields on global markets. What’s happening on the eurozone’s periphery, even if the current crisis is averted, is just the beginning. In my view, a sudden and massive re-pricing of Western sovereign risk will happen much sooner than is widely expected. For now, global investors are in denial, assessing that default risks in many of the big emerging markets are much greater than in the West. This is nonsense – particularly when you consider that the governments of the ‘advanced’ countries are tacitly reliant on debasing and depreciating their currencies in order to lower their liabilities, so imposing on their creditors a form of ‘soft default’.”

The seriousness of the situation is summed up by the latest press summary issued by Open Europe, an independent think tank campaigning for radical reform of the EU : “The FT reports that many EU leaders now believe that any new bailout package may involve some form of Greek default and debt reduction. Eurozone finance ministers will meet today to continue discussions on a new plan for dealing with Greece, with one senior official saying, “The basic goal is to reduce the debt burden of Greece both through actions of the private sector and the public sector”. Discussions over the past week have focused on the ‘French plan’ which seeks to gain voluntary private sector involvement, with that now looking unworkable, attention is turning to Germany’s original plan of a bond swap or even some form of bond buyback.

“Meanwhile, fears were growing on Friday that contagion could spread to Italy, causing the country’s cost of borrowing to reach its highest point for nine years as well as a large sell off in bank shares and a big decrease in the stock market. The panic led Italy’s stock market regulator, Consob, to rush through new rules on short selling, which state that any short positions involving Italian firms equal to more than 0.2% of the firm’s capital will need to be disclosed. The on-going dispute between Prime Minister Silvio Berlusconi and Finance Minister Giulio Tremonti is only serving to increase the worries, with Tremonti saying, “If I fall, Italy falls as well…If Italy, a country too big to be rescued, falls, then the euro falls too”, reports FTD. An ECB official is quoted saying, “We can’t afford many more days like Friday. We are really worried about Italy.” Die Welt reports that ECB officials have stated that the current eurozone bailout funds are insufficient, following the fears of contagion to Italy. The ECB is reportedly in favour of doubling the funds available to €1.5 trillion.

“In the Telegraph, Ambrose Evans-Pritchard argues that, with the eurozone crisis seemingly turning to Spain and Italy, “Germany must now be willing either to buy or guarantee Spanish and Italian debt, and in doing so to cross the Rubicon to fiscal and political union, or accept that EMU must break up with calamitous consequences for German foreign policy. Large matters, beyond the intellectual vision of Germany’s current leaders.”

“In the FT, John Dizard argues that eurozone policymakers’ threats of Lehman-style contagion, should Greece default or leave the euro, are “nonsense” designed to “corral the doubters into agreeing to the most recent, half-thought through, workout or ‘rescue’ plan the speaker is sponsoring.”

FT WSJ EurActiv Le Figaro La Tribune WSJ 2 WSJ: Borg Interview FT Weekend FT Weekend 2 Times City AM IHT Mail Le Soir El Pais FT: Munchau FT: Dizard WSJ: Stelzer Telegraph blogs: Hannan Telegraph: Evans-Pritchard Sunday Telegraph: Halligan FTD FTD 2 FTD 3 FTD 4 Die Welt

Next domino to fall under the bankster onslaught? Image: Wikipedia

In France Roland Hureaux, who is described as gaulliste, libéral et catholique, and is an associate professor at Institut d’études politiques de Toulouse writes in the latest Marianne : “While Europe has adopted a new rescue plan for Greece, this is unnecessarily aggressive therapy. For both in Germany and in France,  European leaders, while seeking to save face,  know full well that the situation is hopeless and that they should be preparing for the post-euro period.  The situation in Greece is desperate … can anyone seriously believe Greece will come out of the current  mess without leaving the euro? Why are we prolonging the life of the terminally ill with a fresh bailout plan every week? The truth is that these successive bailouts serve primarily to save  face for key decision makers … Western leaders legitimately fear that the collapse of Greece (which would have a far greater impact than did the failure of Lehman Brothers) would rebound with incalculable consequences far beyond Europe. It would lead to another global crisis and provoke further bank and stock market panic. Clearly nobody wants to take responsibility for such a cataclysm, even though they know the end of the euro is inevitable. In France and Germany, the threat is even greater due to the exposure of  their banks to  Greek sovereign debt. The failure of Greece would likely bring down Crédit Agricole and BNP Paribas. Of course, the state would come to their rescue, but (can such rescues be open ended and who is really paying? The taxpayer?)  Behind all this (stubborn talk about rescues) lies one clear fact, all Western European politicians have laid their reputations on the line and that line is the credibility of the euro. This is an echo of the how the political class in the Soviet Union under Brezhnev swore undying allegiance to the credibility of that regime’s communist philosophy. This has led European politicians into the  intellectual trap of being unable  to look beyond the crisis and so they manifest a collective refusal to consider that the system is on its death bed “.

Meanwhile Germany, the other vital cog in the Franco-German engine that drives the EU, is also kicking over the traces: Here is an extract from a SPIEGEL ONLINE interview with Joachim Starbatty, 71, professor emeritus of economics at the University of Tübingen and one of most vocal critics in Germany of the euro:

SPIEGEL ONLINE: Mr. Starbatty, the Greek parliament last week passed a €78 billion package of austerity measures in return for billions more in aid from the European Union.

Starbatty: By approving the package, the parliament decided against the will of the people. But only because it was blackmailed by Greece’s partners in the euro zone .


SPIEGEL ONLINE: Is it not legitimate for governments in Europe’s common currency zone to want to see a Greek contribution to solving the problem before releasing billions in aid money?

Starbatty: The financial assistance is only there to save the European banking industry. The EU is throwing massive amounts of good money after bad. But it is the Greek people who must endure the brutal belt-tightening measures. I don’t consider that to be legitimate.

SPIEGEL ONLINE: Should the German high court side with your view and no longer allow Germany to participate in providing financial assistance to debt-stricken euro-zone countries, Greece would likely become insolvent in a hurry. The monetary union as a whole would also be endangered.

Starbatty: Greece is already broke. The country needs to be given a chance to get back on its feet economically. I expect the court will establish parameters in order to limit the economic nonsense.

SPIEGEL ONLINE: What exactly do you mean by that?

Starbatty: The aid will remain, but the German parliament will in the future have to approve every further credit tranche .

SPIEGEL ONLINE: Some representatives from Chancellor Merkel’s conservative Christian Democrats and from her coalition partners, the business-friendly Free Democrats, are demanding the same thing. But is the idea at all practicable? Such a requirement wouldn’t exactly strengthen faith in the euro zone within the financial markets.

Starbatty: It is much more important that citizens regain their faith in the political process and in the common currency. If the political process is reliable, the financial markets will also react positively.

SPIEGEL ONLINE: Is there an alternative to providing financial assistance to Greece, Portugal and Ireland?


Starbatty: The euro backstop only buys time — time which is not being used. The Greeks would be well advised to exit the currency union of their own volition and to devalue their national currency, the drachma. That way, they could forcibly reduce their debt. If we continue down the path we are on, billions and billions more will become necessary. That is also true of Portugal and Ireland — and maybe even for Spain.

For those of a more optimistic bent,  here is a report by Simon Tilford of the Centre for European Reform, a pro- EU think tank based in the UK on How to save the euro.

Story: Ken Pottinger

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