European Central Bank will decide to become — or not — The Bank of the Euro

By LUIS MIRANDA | THE REAL AGENDA | SEPTEMBER 3, 2012

September promises to be a decisive month for the Euro zone. It is expected that the European Central Bank will decide to become the Euro’s grand daddy and it also may be the time when Spain will be handed over to the bankers. At this point, the second outcome seems a sure thing, while the first has found significant opposition. Until now, the German Central Bank — The Bundesbank — rejects that monetary policy be put at the service of fiscal policy to reduce their financing costs. Germany doesn’t want to deal with everyone else’s debt.

This week alone will be decisive in trying to solve the disaster created with the poor management of the sovereign debt crisis in the euro zone. As most people know, the banks have made it clear that the way they’ll solve the problem will be by creating more debt in order to buy up the independent nations in perpetuity.

The ECB has reacted rather strongly, at least in public, regarding its intention to go all the way to save the Euro zone. The bank’s president, Mario Draghi, said back in July he would do “everything necessary to preserve the euro. And believe me, it will be enough.” By saving he meant saving it for the bankers who intend to become sole owners of the region.

Germany, it seems, still remembers the trauma the country experienced due to hyperinflation last century, so the president of the  Bundesbank, Jens Weidmann, has not hesitated to manipulate the main German taboo: buying government debt amounts to starting up the machine to print money and set a ceiling to the types of Spain and Italy in the secondary market. This would cause anyone’s stomach to ache.

This confrontation between Draghi and Weidmann sums up the complexity in the form and substance of what is at stake. The situation is much more complicated than, for example, the American crisis of 1987, where the U.S. Federal Reserve open the lending window and encouraged anyone in need to borrow.

The same scenario was seen after 2008 when the crisis got worse in the United States. In reality, the policy of lending cash fresh from the printing press has not stopped since the FED’s creation in 1913. The discount window for the big banks and large corporations remains open until today and as a consequence, the American currency has lost over 90% of its real value.

In the case of the Euro, the situation is completely different but also similar to the United States. How’s that? Well, the Federal Reserve Bank is a private institution, that does not belong to the US government, but that does determine what monetary policies are adopted and implemented. The FED, just as the ECB work for the international banking cartel now in power anywhere there is a Central Bank scheme, which utilizes the directives from the IMF and World Bank. The difference between the ECB and the FED, is that its members represent countries — 17 in total — while the FED is governed by Governors who are spread around the US territory.

Now who is staking its credibility is Mario Draghi. As part of the public was on vacation in August, three committees with senior officials from each of the seventeen members of the ECB central banks worked like ants preparing a document with all the options (and objections).

The French Prime Minister Jean-Marc Ayrault, said yesterday in support of Draghi “It is not fair that Spain or Italy, which make considerable efforts are paying such high interest rates on its debt” and therefore deemed it necessary to address deep reforms in the lending and payment system. How about the bankers renounced to all the payments that the countries have to make on a debt that is not theirs, but that was created illegally by the politicians in those countries and the bankers that dictate the policies they follow?

The question now is whether the ECB will use its first to last shot by reducing its rate from 0.75% to 0.50%, as it is expected to do in  October, according to European analysts. It is expected the more actions are taken by the ECB once the bailout account is approved by the German Constitutional Court on 12 September.

Merkel and Hollande want Greece Destruction to Remain on Schedule

Both Merkel’s and Holland’s stances are that Greece must suffer the pain related to being owned by European banksters. The PM’s have said they won’t move a muscle to easy the destruction and consolidation of the mediterranean country.

By STEPHEN BROWN | REUTERS | AUGUST 24, 2012

Angela Merkel and Francois Hollande presented a united front towards Greece on Thursday, telling Athens it should not expect leeway on its bailout agreement unless it sticks to tough reform targets.

The German and French leaders met in Berlin to fine-tune their message to Prime Minister Antonis Samaras, who begins a charm offensive in Berlin and Paris this week in the hope of persuading Europe’s big powers that Greece deserves patience.

Merkel stuck to her policy of deferring to a report due in September on Athens’ progress by the “troika” of international lenders before discussing flexibility on the bailout terms, but said it was vital “that we all stay true to our commitments”.

“But we will, and I will, encourage Greece to continue on its path to reform, which has demanded a lot of the Greek people,” she told reporters before a dinner with Hollande set to be dominated by Greece.

“We want, I want, Greece to be in the euro zone, it’s a desire we have expressed since the start of the crisis. It’s up to the Greeks to make the effort that is essential for that goal to be met,” said France’s Socialist president, standing alongside Merkel.

German sources who attended the working dinner later told Reuters the two leaders had vowed to work “together and with resolve” to overcome the euro zone crisis and had also agreed that “credibility” was the key to rescuing Greece.

A source close to the French presidency said the two leaders had wanted to have a “straightforward” talk on a host of hot-button topics, from the euro zone to Syria.

Hollande plans to visit Spain on August 31 and Italy in early September, the source said. Both countries have seen their borrowing costs shoot up this summer amid market fears that the euro zone may start to unravel.

Samaras has given interviews to German media stressing that while Athens may seek more time to meet its fiscal targets, it is not asking for more money. But German Finance Minister Wolfgang Schaeuble and others seemed unconvinced.

“More time is not a solution to the problems,” Schaeuble said, addressing Samaras’ hopes that his country might be given four years instead of two to push through painful economic reforms, to alleviate the impact on the Greek people.

Schaeuble said more time could also mean “more money” and Europe’s help for Greece had already “gone to the limits of what is economically viable”.

From the sidelines, Dutch Finance Minister Jan Kees De Jager – a staunch ally of Berlin – urged Germany to “stick with its strict position” and giving Greece more time would not help.

European leaders say any decisions on Greece will depend on the report by inspectors from the “troika” – the European Commission, the European Central Bank and the International Monetary Fund.

Samaras is seeking what he calls “a bit of air to breathe” at a moment of rare optimism on financial markets that the EU and ECB are poised for decisive action on the euro debt crisis.

Behind their stern public message, Berlin and Paris may have little choice but to show some flexibility, with little appetite in either capital for forcing Greece out of the euro zone.

AFTER MERKOZY

In talks that also touched on banking supervision in Europe and the role of the ECB, as well as civil war in Syria, Merkel and Hollande hoped to replicate the “Merkozy” alliance that gave the euro zone some semblance of unified leadership under Hollande’s predecessor Nicolas Sarkozy.

The German sources described the atmosphere at Thursday’s dinner as good.

The Franco-German axis has been strained by Hollande’s calls for more measures to stimulate growth, a rebuff to Merkel’s strict agenda of austerity. Some German officials say the relationship with Hollande is off to a rocky start.

As Merkel prepares to campaign for a third term in 2013, in a country where the media is taking an increasingly tough line with Greece, she cannot cede too much to Samaras – or to the French Socialist government, which is allied with her main domestic opponents, the Social Democrats.

With German patience wearing thin after repeated requests for financial help from Greece, Spain, Portugal and Ireland, Merkel is under pressure to defend taxpayers’ interests while also upholding the stability of the currency.

Merkel will be watching Hollande’s attempts to meet his own deficit targets with spending cuts and tax measures in the 2013 budget, German officials say.

“If Hollande gives up on his targets because of rising domestic political resistance, we can hardly expect more painful reforms from states like Italy or Spain,” said one government source in Berlin, speaking on condition of anonymity.

There are signs that Merkel’s conservatives, if not ready to postpone Greek reform targets, may also find ways to be flexible if the troika finds Athens is broadly in compliance.

“With Greece, we cannot change the cornerstones of the aid package or tamper with the principle of conditionality. But I can imagine we could adapt certain things within that framework such as interest rates or maturities on credit, like we already did with the first package,” said Norbert Barthle, a member of parliament from Merkel’s ruling center-right coalition.

Jean-Claude Juncker, head of the Eurogroup of euro zone finance ministers, said Greece was staring at its “last chance” to avoid bankruptcy.

Spain: Tax us all to Save the Euro

The government in Madrid officially calls for bailout, but refrains from calling it so.

By IAN TRAYNOR | UK GUARDIAN | JUNE 7, 2012

Spain is warning that Europe‘s single currency will unravel unless its leaders decide within weeks to centralise budget and tax policies in the eurozone and agree on a strategy to pool responsibility for failing banks.

As Spain’s prime minister, Mariano Rajoy, came under mounting international pressure to accept the eurozone’s fourth national bailout in two years, the government in Madrid angrily rejected the demands, insisting that it did not need rescuing. With fears of a euro meltdown having rapidly shifted from Greece to Spain, Rajoy is pleading for a direct eurozone rescue of his country’s banks, to avoid the humiliation attached to requesting a national bailout.

Sources familiar with the Spanish government’s thinking said its negotiating position was that the fundamental quandary facing the eurozone was not Spain, but a European failure of leadership in persuading the financial markets that the euro would be defended at all costs.

A Brussels summit at the end of the month would have to remedy that by agreeing to establish a eurozone banking and fiscal union – major federalising steps certain to be fought over. Without that commitment, Spain fears the single currency would be finished in months.

The Spanish government believes that the eurozone’s fourth-biggest economy is too big to rescue and that the consequences of abandoning Spain to the markets without a pledge of major European reform could be so ferocious that the single currency would not survive.

The current rules governing eurozone bailouts stipulate that a government has to request help and that the money may only be channelled via governments – increasing the national debt burden.

But Spain is stalling until key euro group meetings, the G20 summit and the Greek election later this month. Some analysts believe that if Spain is finally forced to request a full-scale EU/IMF bailout it is likely to come around 20 June.

Sources in Brussels confirmed that a rescue plan was being hatched for Spain – but it could be limited to desperately-needed banking aid, rather than a full national bailout.

Luis de Guindos, the Spanish finance minister, said  his government would wait until the results of an independent audit of Spanish banks was completed later this month before pondering its options.

The IMF is to deliver its verdict on the condition of the Spanish banks on Monday, followed a week later by the Spanish audit. “From that basis, the Spanish government will decide what measures must be taken to recapitalise banks,” said De Guindos. Madrid was joined by Washington and London in calling on the eurozone, principally Angela Merkel, the German chancellor, to deliver a persuasive new plan quickly for saving the euro. They fear the crisis might inflict immense damage on the US and UK economies.

A big move towards reform could immediately ease market pressure on Spain’s borrowing costs, though the European Central Bank might still have to supply some funding while details of the new union were thrashed out.

Sources familiar with the Spanish government’s thinking believe the country’s banking crisis could be fixed much more cheaply than the €50bn bill currently estimated by analysts. In Brussels the signs are that a deal is being considered that would be more palatable for Rajoy by explicitly linking the rescue money to the banking problem and not to his government’s stewardship of Spain’s finances.

As the ECB left eurozone interest rates unchanged at 1%, ignoring calls for a slight reduction, its head, Mario Draghi, dismissed the criticism from Washington and London – but he also urged eurozone leaders get their act together.

Berlin is pushing the fiscal union, but on its own terms. It wants to force common rules and targets but avoid any early commitment to sharing liability for the debt or bank savings of individual countries. David Cameron is to go to Berlin   on Thursdayto try to push Merkel into a more protective stance on the euro, which would entail German pledges to underwrite struggling countries’ debt. Following a telephone conversation with Barack Obama, the British prime minister will tell Merkel the US and the UK are insisting on “an immediate plan” on the euro, Downing Street said. The prime minister will tell Merkel the eurozone has no more than weeks to act to shore up the single currency.

Cameron’s spokeswoman said the pair “agreed on the need for an immediate plan to tackle the crisis and to restore market confidence”.  Cameron’s regular interventions from the sidelines of the euro crisis irritate Berlin and Brussels and Merkel is unlikely to be swayed, although Germany is showing some signs of greater flexibility.

The White House, fearing the impact of a European disaster on Barack Obama’s re-election campaign, is becoming more trenchant in its criticism of the eurozone and its demands of the Germans.

In Brussels, the signs are that the sides were inching towards a deal that would be made more palatable for Rajoy by explicitly linking the rescue money solely to the banking problem – and not to his government’s stewardship of Spain’s public finances.

German politicians dropped any pretence that they were not pressing Rajoy to ask for a bailout, but said the rescue could come without very tight strings attached. “I do think that Spain has to come under the rescue shield,” said Volker Kauder, the parliamentary leader of Merkel’s Christian Democrats in Berlin. “Not because of the country, but because of the banks.”

Tristan Cooper, sovereign credit analyst at Fidelity Worldwide Investment said: “The willingness to support Spain is there. The difficulty is designing a method that can satisfy Germany and the market.

Although sick banks are Spain’s most acute ailment, there are more chronic ones. These include the highest unemployment and the third widest fiscal deficit in Europe in a deep recession.

Markets would react positively to an adequate bank recap solution. A structural change in investor sentiment requires the prospect of a sustainable economic recovery and a credible plan for achieving it.”

The expectation is that any decisions will be delayed until after the Greek election on 17 June. Eurozone finance ministers are to meet on 21 June. The next day Rajoy is due in Rome for a summit with the leaders of Germany, France, and Italy  before the Brussels summit a week later.

If the result of this risky round of brinkmanship and bargaining is an agreed “road-map” towards the medium-term aim of a eurozone federation, the Spanish hope the heat will be off, pressure from the financial markets will subside, their borrowing costs will sink and recapitalising their banking sector will become more feasible.

Global Banking Authority will Open for Business in Europe

Just as advertised, the all mighty global bank has now been announced by European nations in order to save the Eurozone

By JUERGEN BAETZ | AP | JUNE 5, 2012

German Chancellor Angela Merkel said Monday that she is open to establishing a European banking authority as a long-term solution to the continent’s financial crisis. Her support as leader of the EU’s biggest economy could be crucial for the concept, which aims to strengthen the eurozone and calm jittery markets.

Europe’s worsening debt crisis is raising concerns well beyond the continent. Finance ministers and central bank presidents of the world’s seven wealthiest countries – which includes Germany – were expected to hold an emergency conference call on Tuesday to discuss the situation.

The proposal to create a Europe-wide authority overseeing and ultimately guaranteeing the banks’ stability was first floated last week by the European Commission, the executive body of the EU. But rich countries such as Germany have been lukewarm about the idea because of fears it could eventually lead to them bailing out other countries’ banks.

Merkel told reporters ahead of a private session with EU Commission President Jose Manuel Barroso that the pair “will also talk about to what extent we have to put systemically (important) banks under a specific European oversight.”

And while she expressed willingness to consider the concept, she stressed that a banking union cannot be set forth as a quick fix, but rather as a more long-term goal.

The European Central Bank is the joint monetary authority for the 17 nations who use the euro currency, but each country is responsible for overseeing its own banks. So when things go wrong, each country has to decide whether or not to bail its banks.

For instance, Spain – already under market pressure due to its debt burden and declining economy – needs to provide (EURO)19 billion ($23.6 billion) in government aid to rescue its most ailing lender. And although the Spanish government has promised to help Bankia S.A., it has yet to explain where the bulk of the money will come from.

Spanish officials have called for Europe’s new permanent rescue fund to be able to recapitalize banks directly, but German officials, among others, have ruled that out, noting that Europe cannot bail out national banks if it has no supervision over them.

Barroso maintained that a “banking union with more integrated financial supervision and deposit guarantees” was the necessary step to complete the monetary union with an economic union.

Europeans must do “whatever is necessary to ensure the stability of our currency,” he added.

European Central Bank President Mario Draghi last week warned the ECB cannot “fill the vacuum of the lack of action by national governments,” calling the monetary union’s current structure “unsustainable unless further steps are taken.”

He strongly endorsed the Commission’s proposal to create a Europe-wide banking regulator.

Merkel reiterated her conviction that the short-term priority in tackling the continent’s financial crisis must be combining fiscal consolidation with fostering economic growth through reforms and better use of existing funds.

Still, she echoed Barroso’s call to strengthen European integration. “It is completely obvious, and I have often said that: In the eurozone we need at minimum more Europe and not less Europe,” she said.

Merkel said Europe’s institutions, such as the Commission need more powers, “otherwise a currency union cannot work.” Europe’s new treaty, which enshrines fiscal discipline and creates a more centralized oversight, is “a first step” in that direction, she added.

Merkel and Barroso were set to discuss their ideas on reforming Europe over a dinner of veal cutlet with asparagus from the Berlin region, preparing the ground for a full EU summit late next month.

The intensified debate on policy ideas to strengthen the bloc’s political union comes as the eurozone enters another tumultuous period of financial and political instability.

Investors are worried that Spain will be unable to prop up its banks that are burdened by toxic bad loans – and that it will follow Greece, Portugal and Ireland in asking for an international bailout the eurozone can ill afford. These jitters have sent Spain’s borrowing costs soaring and stock markets plummeting.

And in two weeks Greece returns to the polls with the real possibility that it might elect a government that rejects the terms of its multibillion-dollar bailout. This could force the country out of the euro, fracturing the eurozone and further roiling markets.

Perhaps the clearest sign of danger is the state of the euro itself: It is trading around two-year lows against the dollar as investors pull money out of euro countries.

Canadian Finance Minister James Flaherty told reporters Monday that he would raise Europe’s troubles with his Group of Seven colleagues during Tuesday’s emergency conference call. The G-7 includes the United States, Japan, Germany, France, Britain, Italy and Canada.

Flaherty did not give a time for the conference call, which is confidential and not open to reporters.

The U.S. Treasury Department wouldn’t comment on the call. But officials said the United States expects more action to strengthen the European banking system in the next two weeks in advance of a meeting of the Group of 20 major economies in Los Cabos, Mexico, later this month.

Banks Can No Longer Hide the Collapse

By LUIS MIRANDA | THE REAL AGENDA | MAY 16, 2012

It’s been at least four years since the current financial collapse began. Back in 2008, when the crisis was already taking shape, the banks supported by international financial institutions such as the IMF, World Bank, Bank of Europe, Bank of England and the US Federal Reserve did not hesitate to calm everyone down saying that the earliest signs of a global financial collapse were nothing to worry about. It was all a minor cough, they said. But as time went by, those who warned about the coming depression were proven correct. The forecasts of local, regional and global crisis were unfortunately true.

Today, four years after the banks recognized the existence of a ‘difficult situation’ due to the accumulation of sovereign debt, we have confirmed, over and over, that the threat of a global financial collapse is greater than ever, and that it is just a matter of time before more countries declare bankruptcy. The crisis did not begin with Greece, as many would have us believe. It did not start with Iceland either. In fact, Iceland did what it had to do in order to clean its own house. The collapse began from the moment the bankers were set free to gamble away investments into fake financial products they invented to lure nations into fast and easy returns on their savings.

The signs of the crisis have been so alarming, that in the past few weeks the same entities that once said there was no crisis, and that the economy would begin to pick up, started to warn that the world was getting to edge of the precipice. Their acceptance of the inevitable did not come easy. It was only after reality made it impossible to hide the current financial collapse that the bankers had to come out and publicly accept that their debt based business model came to an end. However, this acceptance was not a clear ‘it is our fault’ kind of thing. Instead, the bankers sought to blame countries for their irresponsible management of savings and investments which the bankers themselves had helped to carry out by swindling politicians and bureaucrats to divest their people’s monies to put it all in one single bag; the banker’s bag.

The collapse couldn’t have happened without the help of accomplice politicians who opened their country’s doors to powerful financial institutions by deregulating their activity, permitting investment banks to fuse their operations with savings banks. Those banks then offered toxic financial products which countries around the world invested their monies in under the premise that their cash would be returned fast and multiplied many times over.

As we now know, in the case of Greece and Iceland deregulation brought about more debt rather than a healthy recovery. The difference is that Iceland decided to face their debt problem the right way, liquidating what needed to be liquidated instead of bailing out their banks and other institutions that had used their money to buy credit default swaps. Greece on the other hand decided to bend over to the bankers’ demands and began accept supposed financial aid provided by other European nations. As a result, the country is in a financial comma from where it will probably not wake up unless it exits the Euro zone and goes back to the drachma, its former currency. Greece’s exit from the Euro will not only allow it to start fresh, but also will free the country from the chains attached to it by powerful European bankers in command of the fraudulent Euro scheme. Greece’s only possible change of survival as a nation is to reject the payment of a gigantic illegally incurred debt acquired by corrupt politicians on behalf of their people, who were not consulted about it. Most of that debt, as it happened in the case of Iceland, does not belong to the Greek, but to banks themselves.

As we reported before, people have begun to realize that their trusted leaders defrauded them and one by one they’ve been voted out of office. Greece’s former Prime Minister was outed, France’s Sarkozy was also kicked out of office and Angela Merkel had giant loses in the latest state elections in Germany. Meanwhile, in the United States, the man who came with change written all over himself will most likely be changed next november. Any and all efforts made by the bankers to provide a rosy picture of reality has failed because reality has shown the dark side they didn’t want people to see.

World stocks and the euro have fallen in value as nations become less capable of paying their debt. Banks all over the Eurozone continue to be downgraded and borrowing rates for eurozone countries continue to go up as none of the nations are trusted to pay their dues. Attempts by Greece’s President to form a new government which he openly called to be composed by technocrats failed Tuesday and new elections will have to take place. The rejection by Greek politicians to form a government led by their president comes during a time when the country is incapable of paying the interests on its debt and with it the likelihood of Greece abandoning the Eurozone becomes more real than before.

The shaky conditions in the Mediterranean nation has prompted people to take their money out of the banks. In the last week, depositors have withdrawn at least 1 billion out of Greece’s banks and the trend is expected to continue. Meanwhile, the Bank of England has cut down its forecast for economic growth for Britain as it warned that the debt crisis was the biggest threat to the financial recovery. Suddenly the organizations that promoted indebtedness are now portraying themselves as the speakers of truth. In its announcement, the BoE says that growth will be limited to just 1 percent, as supposed to just over 1 percent, a number given by the bank in a previous financial report. The BoE also cut down its growth estimate for 2013. It now sets it at 2 percent, as supposed to 3 percent from its previous estimations in February.

The financial crisis’ effects have been augmented by the interconnectedness of the global economy, composed by economic blocks as supposed to independent nation-states. Nowadays, a sneeze in Italy will carry its waves to all the European Union. A protectionist measure in Argentina will impact the whole Mercosur. Another trend that shows the reach of the current financial crisis is the movement of large amounts of cash from one country to another. Investors seem to trust Germany more than Greece as they’ve bet their assets will be safer there. The interest rate which Germany must pay to borrow money for 10 years fell to the lowest level ever in early trading on Wednesday, which is a reflection of the growing concern about the need for Greece to carry out elections. “New elections are risky because they could confirm the population’s support for anti-austerity parties and lead eventually to a eurozone exit”, said bond strategist Jean-Francois Robin to AFP.

The latest voice of alarm came from the International Monetary Fund’s President, Christine Lagarde, who said that when it comes to Greece she is prepared for anything, and that she believes that a Greek exit from the Eurozone must be done in an orderly fashion. Both Angela Merkel and Greece’s President, Karolos Papoulias, have gone out fear mongering on the public they most make the right decision in the coming election, of face a “threat to our national existence”. According to the UK Telegraph European shares and the euro itself fell again. The stock markets, such as the Eurostoxx 600 fell 0.7 per cent to a year-low; Germany’s Dax dropped 0.8 percent and Spain’s Ibex was down 1.6 per cent. In London the FTSE100 slid 0.5 per cent. These are clear signs that not even the banks believe that a solution to the Greek crisis will emerge, or that a recovery will take place anytime soon.

Elsewhere in Europe, the worrisome situation in Spain, for example, further accelerates the collapse of the Euro system. The rate of borrowing for debtor nations which are seen as riskier borrowers jumped sharply this week. In Spain, the market rate on 10-year bonds increased to 6.49 percent, exactly .4 above the levels that analysts consider safe to sustain in the long run. Despite its decision to once again bailout commercial banks, Spain continues to struggle to keep its head over the water. The banks that the country is trying to ‘rescue’ from their knowingly bad investments are feeling their loses from their loans to the real-estate sector, which collapsed in 2008. Local media reported today that Moody’s, an entity created by the banks themselves, was ready to once again cut down the ratings of some 20 spanish banks just a couple of days after it cut down the ratings of 26 Italian banks.

Italy, Spain and Portugal are said to be the next countries that will join Greece in the financial bankruptcy wagon; a process that will only be delayed if the European bankers decide to continue with their policies to force the hand of countries which they are in complete control of to bailout more local banks that invested in heavily toxic financial products. This process is set to go on for as long as the bankers need in order to further consolidate power in Europe and the United States. The final implosion will occur after the banks have absorbed the largest and most important nations of the troubled European Union zone, which is originally composed by 17 countries.