‘As long time readers know, a central
theme to my analysis regarding Europe is that politics, not economics, rule
This is at the core of the “welfare
state” mentality that permeates
As a result of this, EU voters, who determine EU elections, don’t take action until what has promised to them comes under threat.
For this reason, EU political leaders will maintain their agendas regardless of whether said agendas go against financial or economic realities (or common sense for that matter) until these agendas begin to have real negative consequences for their political careers.
With that in mind, we must consider
German tempers boil over back-door euro rescues
Professor Hans-Werner Sinn, head of Germany’s
IFO Institute, said German taxpayers are facing a dangerous rise in credit risk
from a plethora of bail-out schemes. “The euro-system is near explosion,” he
Dr Sinn said
“It is a horror scenario,” he said, warning that the euro system is splitting friendly countries into blocs of mutually hostile creditors and debtors, exactly the opposite of what was hoped.
Earlier this week, the Foundation for
Family Business in
This is the last thing Angela Merkel needs right now. She’s already about to lose her primary ally in pushing for fiscal reform in the EU (Nicolas Sarkozy will very likely lose the second round of the French elections).
For her to now appear to be a
complete hypocrite who talked of austerity in public while the Bundesbank was secretly signing
Remember, Merkel has been riding a wave of popularity not seen since her re-election in 2009 courtesy of her decision to play hardball with Greece and the other PIIGS: her agenda there was to offer bailout funds under fiscal requirements that were so onerous that it made it highly unlikely the troubled PIIGS would go for them.
So for Merkel to appear two-faced
So what’s next? Merkel’s reputation as a hardliner for fiscal reform just went out the window… she’s about to lose her #1 ally in pushing for fiscal austerity in Europe (Nicolas Sarkozy)… and all of this is happening while inflation is rising in Germany and Germans are openly outraged regarding the EU bailouts.
In simple terms, Angela Merkel is now
at the point at which she is facing potentially very serious political consequences for her
policies. Which prompts the question… is it be time for her to start floating
Remember, in the last six months
1) Passed legislation
that would permit
2) Reinstated its Special Financial Market Stabilization Funds, (or SoFFin for short)
It is the second of these items (the
reinstatement of the SoFFIN) that the western media
and 99% of investors have missed entirely. In short,
1) €400 billion to be used as guarantees for German banks.
2) €80 billion to be used for the recapitalization of German banks
3) Legislation that would permit German banks to dump their euro-zone government bonds if needed.
That is correct. Any German bank, if
it so chooses, will have the option to dump its EU
sovereign bonds into the SoFFIN during a Crisis. So
in simple terms,
Now, I’m not suggesting that Merkel
will suddenly opt to do pull
However, I wouldn’t be surprised to see Merkel start threatening this in the coming weeks as German outrage grows regarding their exposure to back-door EU bailouts. Remember, her political popularity is largely due to her appearing tough on the PIIGS. She has to regain that appearance as quickly as possible in order not to face serious political consequences.
On that note, I fully believe the EU
in its current form is in its final chapters. Whether it’s through
With that in mind, I’m already positioning subscribers of Private Wealth Advisory for the upcoming EU collapse…’