A Modern Day Labor Camp: Magdalene Laundries

By DAISY LUTHER | ORGANICPREPPER | FEBRUARY 19, 2013

If you have ever brushed off the idea of FEMA work camps as a myth, a fantasy of an overactive Patriot imagination, then you must not have heard about the Magdalene Laundries in Ireland, where young women were incarcerated, often without trial, without a definitive sentence, and sometimes, without even committing a crime worse then being “too pretty” and therefore, tempting men.

Does this remind anyone else of the NDAA?  Indefinite detention? No trial?  No cause?  These girls were simply locked up and forced to work until those in power saw fit to release them.

Magdalene Laundries were in operation as recently as 1996 – that’s right – 16 years ago, young women were enslaved indefinitely in a colluded effort between the Catholic Church and the Irish government.

Between 1922-1996, Irish women were put to work in “laundries” that were run by Roman Catholic nuns.  There is some discrepancy on the number of women so incarcerated.  Between 10,000-30,000 women were put to forced labor for the financial benefit of the church, however.

Less than 1000 women who endured the laundries are still alive today.  Survivors maintain that the doors and windows were locked, and that if they escaped, they were brought back by the police.

This week an Irish government report was made public on the laundries, confirming the government’s complicity with the Catholic Church in running the workhouses.  17 survivors met with Irish Prime Minister Enda Kenny, requesting an apology and restitution from the government, after the same requests were ignored by the Catholic Church.

The BBC reports:

  • Envisaged as short-term refuges for ‘fallen women’ they became long-term institutions and penitents were required to work, mostly in laundries on the premises.
  • They extended to take in unmarried mothers, women with learning difficulties and girls who had been abused.
  • The facilities were self-supporting and the money generated by the laundries paid for them.
  • Between 1922 and 1996 there were 10 such laundries in the Republic of Ireland.
  • Many Irish institutions, such as the army, government departments, hotels and even Guinness had contracts with Magdalene laundries.
  • The women toiled behind locked doors unable to leave after being admitted and while the laundries were paid, they received no wages.
  • The congregations which ran them were the Sisters of Our Lady of Charity, the Congregation of the Sisters of Mercy, the Religious Sisters of Charity and the Sisters of the Good Shepherd.

Most of the women were under the age of 23.  The youngest girl admitted was 9, and the oldest was 89.  Singer Sinead O’Connor is one survivor of the Magdalene Laundries.  She wrote an editorial for the Washington Post in 2010 about her experience and her opinion on the priorities of the Church:

When I was a young girl, my mother — an abusive, less-than-perfect parent — encouraged me to shoplift. After being caught once too often, I spent 18 months in An Grianán Training Centre, an institution in Dublin for girls with behavioral problems, at the recommendation of a social worker. An Grianán was one of the now-infamous church-sponsored “Magdalene laundries,” which housed pregnant teenagers and uncooperative young women. We worked in the basement, washing priests’ clothes in sinks with cold water and bars of soap. We studied math and typing. We had limited contact with our families. We earned no wages. One of the nuns, at least, was kind to me and gave me my first guitar….

An Grianán was a product of the Irish government’s relationship with the Vatican — the church had a “special position” codified in our constitution until 1972. As recently as 2007, 98 percent of Irish schools were run by the Catholic Church. But schools for troubled youth have been rife with barbaric corporal punishments, psychological abuse and sexual abuse. In October 2005, a report sponsored by the Irish government identifiedmore than 100 allegations of sexual abuseby priests in Ferns, a small town 70 miles south of Dublin, between 1962 and 2002. Accused priests weren’t investigated by police; they were deemed to be suffering a “moral” problem. In 2009, a similar report implicated Dublin archbishops in hiding sexual abuse scandals between 1975 and 2004.

Why was such criminal behavior tolerated? The “very prominent role which the Church has played in Irish life is the very reason why abuses by a minority of its members were allowed to go unchecked,” the 2009 report said.

Survivors have shared many horror stories.  When the women arrived, most had their long hair cut short, or even shaved off, which was the beginning of the humiliating enslavement.  Strict silence was enforced, and infractions resulted in corporal punishment.  There are reports of physical, psychological, sexual and emotional abuse.  The laundries started out as homes for “fallen women” – prostitutes, but soon, the doors were opened to incarcerate the mentally retarded, those with learning problems, abused women and girls, and unwed mothers.  Females who committed crimes like shoplifting or not paying for a train ticket were sent to the laundries and eventually, even promiscuity, flirtatiousness, or being  “too beautiful” were crimes punishable by enslavement in the workhouses.

agdalene LaundriesMeanwhile, the Church was making money from paid contracts for the women’s labor.  The contracts demanded the legally required “fair wages” for the women’s work, but the women did not get paid a single penny of that money.  All the revenue went to the Church.

Prominent Irish businesses, government agencies, and the Church itself  were listed in the ledgers as clients of the laundries:   Áras an Uachtaráin, Guinness, Clerys, the Gaiety Theatre, Dr Steevens’ Hospital, the Bank of Ireland, the Department of Defence, the Departments of Agriculture and Fisheries, CIÉ, Portmarnock Golf Club, Clontarf Golf Club and several leading hotels

Notable to the current day is first, the recent existence of these work camps.  During our adult lives, women were being treated as slave labor – not in some distant third world hellhole, but in Europe, part of the so-called “civilized” Western world.  This isn’t something that happened many centuries ago – the doors closed less than 20 years ago.

As well, this could be considered a case study in the incremental enslavement of a group of people.  The laundries went from a reformatory for prostitutes to a voluntary respite for unwed mothers to a prison for women who had only committed petty crimes, to those whose only crime was being prettier than others.  Is it a stretch that one of the many empty FEMA camps might start out housing the victims of a natural disaster, then overreach to keep them there, involuntarily?  Could the reach of those camps then stretch to encompass those who believe differently, behave differently, learn differently or look differently?  Remember, the Magdalene Laundries grew to encompass more and more “crimes” as time went on – including some things that were only crimes from the perspective of the church or a bitter judge.

This demonstrates clearly how those in “power” seem to feel that the laws and mores that confine the rest of the world do not apply to them.  The Catholic Church has a long history of covering for the sexual predators in their ranks. (How often have you read about priests who commit the grave sin of molesting the children of their congregation simply sent to be the wolf among a different flock?) In this case the Church knowingly profited from slavery for close to a century.  Governments in general are rife with corruption, no matter what part of the world they are in.  In Ireland, women who were outside the norm were the targets.  Is it hard to imagine that a group that vocally disagrees with the government could not be likewise targeted, especially considering the facilities in which to house them already exist?

Finally, the Magdalene Laundries were publicly allowed free reign in enslaving and abusing the inmates, granted by the Catholic Church and the Irish government.  (The combination of Church and government has never boded well for those under the thumb of the two. )  This occurred right under the noses of “good people”, who were brainwashed by Church and media to believe that it was acceptable.  The entire society didn’t have to be overthrown to allow this to happen – they just had to be convinced (read:  programmed) to believe that this was for the safety and moral well-being of the community.  It is not farfetched to imagine the same thing happening right now as the media paints Patriots, preppers, gun owners, and survivalists as domestic terrorists and loose cannons from whom the public needs to be protected.

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Spanish public debt reaches 77.4% of GDP

By LUIS MIRANDA | THE REAL AGENDA | DECEMBER 14, 2012

Government debt in Spain grew another 1.55% in the third quarter with respect to the second quarter to reach 817.164 million euros, or the equivalent to 77.4% of GDP. This is the highest level ever since the cork popped out of the crisis bottle in 2008.

According to data released by the Bank of Spain, the rise is a result of the increased debt of the central government, which has added 2.24% more to the total reached before this quarter, 695.519 million euros, and that represented 65.9% of the gross domestic product (GDP).

Meanwhile, state government debt declined by 0.48% to 167,460 million euros, or the equivalent to 15.9% of GDP, while the debt of municipalities fell 2.65%, to 43.802 million euros, which is equal to 4.1% of GDP.

Along with the release of data for the third quarter, the Bank of Spain has also updated the second to include the impact of the debt payment plan to Spanish lenders, although the changes do not affect the total amount.

Thus, at the end of the second quarter sovereign debt had grown by 14.9%, placing the burden of debt on GDP at 15.9%, the highest in history and two points over the previous quarter.

Additionally, local businesses increased their debt by 22% in the second quarter, raising the ceiling to 4.3% of its debt to GDP margin, a level that had not been seen before. When it comes to autonomous communities, Catalonia is the most indebted in absolute terms, with 45.754 million euros of debt at the end of the third quarter, followed by Valencia with 25,574,000 million and Andalusia with 18,495,000 million.

In relative terms, Castilla-La Mancha ranks first as an indebted community, with a debt equivalent to 5.7% of GDP, and is followed by Valencia (25%), Catalonia (23%) and Baleares (20.3 %). At the end of the third quarter, public companies owed 55.973 million euros or 5.3% of GDP, which means 0.81% more than in the previous quarter.

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Key lesson from Iceland crisis is ‘let banks fail’

AFP – Three years after Iceland’s banks collapsed and the country teetered on the brink, its economy is recovering, proof that governments should let failing lenders go bust and protect taxpayers, analysts say.

The North Atlantic island saw its three biggest banks go belly-up in the October 2008 as its overstretched financial sector collapsed under the weight of the global crisis sparked by the crash of US investment giant Lehman Brothers.

The banks became insolvent within a matter of weeks and Reykjavik was forced to let them fail and seek a $2.25 billion bailout from the International Monetary Fund.

After three years of harsh austerity measures, the country’s economy is now showing signs of health despite the current global financial and economic crisis that has Greece verging on default and other eurozone states under pressure.

“The lesson that could be learned from Iceland’s way of handling its crisis is that it is important to shield taxpayers and government finances from bearing the cost of a financial crisis to the extent possible,” Islandsbanki analyst Jon Bjarki Bentsson told AFP.

“Even if our way of dealing with the crisis was not by choice but due to the inability of the government to support the banks back in 2008 due to their size relative to the economy, this has turned out relatively well for us,” Bentsson said.

Iceland’s banking sector had assets worth 11 times the country’s total gross domestic product (GDP) at their peak.

Nobel Prize-winning US economist Paul Krugman echoed Bentsson.

“Where everyone else bailed out the bankers and made the public pay the price, Iceland let the banks go bust and actually expanded its social safety net,” he wrote in a recent commentary in the New York Times.

“Where everyone else was fixated on trying to placate international investors, Iceland imposed temporary controls on the movement of capital to give itself room to maneuver,” he said.

During a visit to Reykjavik last week, Krugman also said Iceland has the krona to thank for its recovery, warning against the notion that adopting the euro can protect against economic imbalances.

“Iceland’s economic rebound shows the advantages of being outside the euro. This notion that by joining the euro you would be safe would come as news to the Spaniards,” he said, referring to one of the key eurozone states struggling to put its public finances in order.

Iceland’s example cannot be directly compared to the dramatic problems currently seen in Greece or Italy, however.

“The big difference between Greece, Italy, etc at the moment and Iceland back in 2008 is that the latter was a banking crisis caused by the collapse of an oversized banking sector while the former is the result of a sovereign debt crisis that has spilled over into the European banking sector,” Bentsson said.

“In Iceland, the government was actually in a sound position debt-wise before the crisis.”

Iceland’s former prime minister Geir Haarde, in power during the 2008 meltdown and currently facing trial over his handling of the crisis, has insisted his government did the right thing early on by letting the banks fail and making creditors carry the losses.

“We saved the country from going bankrupt,” Haarde, 68, told AFP in an interview in July.

“That is evident if you look at our situation now and you compare it to Ireland or not to mention Greece,” he said, adding that the two debt-wracked EU countries “made mistakes that we did not make … We did not guarantee the external debts of the banking system.”

Like Ireland and Latvia, also rescued by international bailout packages and now in recovery, Iceland implemented strict austerity measures and is now reaping the fruits of its efforts.

So much so that its central bank on Wednesday raised its key interest rate by a quarter point to 4.75 percent, in sharp contrast to most other developed countries which have slashed their borrowing costs amid the current crises.

It said economic growth in the first half of 2011 was 2.5 percent and was forecast to be just over 3.0 percent for the year as a whole.

David Stefansson, a research analyst at Arion Bank, told AFP Iceland hiked its rates because it “is in a different place in the economic (cycle) than other countries.

“The central bank thinks that other central banks in similar circumstances can afford to keep interest rates low, and even lower them, because expected inflation abroad is in general quite (a bit) lower,” he said.

The Next Stage of the European Debt Crisis; Towards Global Financial Collapse?

Bob Chapman
International Forecaster
November 3, 2011

Those who believe the European crisis is over are mistaken. The dislocation will continue as their economies slow and political, social and economic events converge into further crisis. The most glaring problem is the banks only taking a 50% loss on Greek bonds. The loss should have been 75% or even 80%. There is absolutely no way Greece can overcome that burden in a slowing European economy and an enraged population. They are still striking and demonstrating and they will continue even under a new government.

Some of the best economists in the world have been saying for almost as long as we have been saying that the weaker and smaller countries have to leave the euro at least temporarily. In our eyes that really means permanently. If Italy falls out it will take France with it and the euro edifice will fall. Very quickly it will be found that Greece cannot and will not recover. It is one thing to set recovery in motion in good times, but it is another to attempt to do so under austerity. These politicians in Europe have been self-serving. They are quickly going to find what they have done is not going to work. Greece should have never been saved, as we said from the beginning. They will need more and more money just to exist and you cannot have perpetual funding. Then you have the overriding social factor. It is simply impossible and once Greece goes, the other 5 will have to cut loose as well. Again, it will be called temporary, but their exists will be permanent. It simply cannot be any other way. Political hot air is not going to change anything. We have no details and bankers who refuse to face the music, and what is attempted to be achieved is impossible.

The concept of a tighter union with a new constitution won’t work either. We can go back to 1991 when these issues came forth and we stated the Europeans are doing this backwards. You need a strong constitution first, only nations involved that can meet the criteria of public debt of 3% GDP. Smaller nations cannot be allowed to falsify their balance sheets and above all you cannot use one interest rate for all. Just about everything that has been done has been done incorrectly. Unfortunately, the US and world economy hang in the balance as well. This euro, European and UK problem is not going to go away. By February it will again be front page news. There is an 80% chance that Greece will leave the euro in the next six months.

If Ireland and Portugal do not receive equal treatment, followed by Belgium, Spain and Italy, then they will all be forced to leave the euro. If you think for one minute that these nations can stand more than a year or two of austerity you are mistaken. The whole approach is wrong. They should all be allowed to leave the euro. The only reason Greece has been temporarily saved is to keep Greece in the euro. These one-worlders cannot bear to see their dream of world government fail. It has already failed. Do you really think Germans are going to give up their sovereignty? Wait for the next German election. You are going to see a house cleaning in the Bundestag that will be staggering. The German people are outraged at what these politicians have done to them. If anything the move in the EU’s strongest economy will be away from further consolidation, not toward it.

The magic number to keep the euro from collapsing over the next two years is $6 trillion that solvent European countries do not have, and using derivatives in place of cash is a prescription for disaster. Debt may be addressed, but the core economic and financial problems that were responsible for these problems are still not being addressed. That is a glaring lack of economic progress. Where is the capital needed for growth? Countries in the EU are going to have to increase money and credit and suffer the incumbent inflation; that is if they can even raise those funds and rollover old debt. Either that or China will lend $3 to $500 billion and we don’t think they are willing to do that. If China prints the money to lend, the value of the yuan will fall, the Chinese will take more market share and there will be more inflation. Their goods sold to Europe, the US and elsewhere will rise in cost as well. The Chinese will have to use cash euros or sell euro bonds. Such moves could be really upsetting to China. If aid comes it will be in much smaller amounts.

This past week the swaps association said the failure on 50% of Greek debt does not constitute failure, because it was voluntary, so the NYC legacy banks do not have to pay up on their derivative bet. That could all change, because Fitch says it does constitute default. We will now have to await the decisions of S&P and Moody’s.

What Europe has done is pull a page from US bailouts, which reduce debt starting in a few years, which would extend over 10 or 20 years. It reminds us of the two sets of books banks are currently keeping. They intend to write off bad debt over 50 years, like it really didn’t exist. This plan allows further current increases in debt over the short term. That is no solution at all. Again, it only throws the debt and service into a future that could include deflationary depression. Recovery is not a given.

Fitch has really opened a large can of worms in calling a 50% debt default a payable derivative event. We are talking about hundreds of billions of CD’s, credit default swaps OTC derivatives, which just happens to be an unregulated market. Our view is Fitch is correct and the ISDA, the derivatives information agency is wrong. What isn’t made an issue of is that banks have been asked to raise $150 billion they are offside on this issue. We projected this number long ago. The official number is $3.7 billion, which is laughable. About a month ago the players admitted to $75 billion, so we are making progress toward truth and reality. We wonder what the French bankers are saying, who bought the insurance? If NYC banks do not pay off the ECB will have to create the $150 billion and lend it to the banks in France, so they can survive. Could this be a renege? We think so, and that would ultimately allow citizens of the EU to pay the debt. These bankers are crafty buggers they are.

We also question why banks are writing off 50% of their debt and the sovereigns are not. Isn’t this strange? Why are they not writing off 50%? Could it be that if they did they would be insolvent? Could it be to deceive their taxpaying citizens and pop the question several years from now? Could this be they are just trying to extend the timeline into the future? Time has a way of revealing everything. Incidentally, none of that Greek debt will probably ever be paid off. It should also be noted that of the $140 billion lent by the IMF, US taxpayers are on the hook for about 30%, or $42 billion. We are sure that will make Americans very happy.

The difference between $516 billion allocated by EU members, half of which comes from Germany, and $1.4 trillion will come from the sale of bonds by the EFSF, the European Financial Stabilization Fund. The question is who is going to buy this tranche of some $900 billion in bonds? Nations will receive greater taxes from a phantom recovery and buy the bonds. How can this be when those economies barely have even GDP growth? All this in the midst of austerity. We do not get it. We must be missing something. Does Italy really believe that raising the retirement age from 65 to 67 is going to bring any real immediate relief? As you can see the case is terminal.

The whole plan is absurd, stupid and unworkable. These problems are going to last for years as Europe, the UK and US wallow in negative growth and eventually in deflationary depression. Greece will collapse; it is only a question of when. The ECB will continue to create money and credit, just as the US and UK are doing. It won’t take long for investors to figure out they have been bamboozled again. They will flee stock markets probably just after the Fed’s latest QE 3 is announced. Some will buy US Treasuries and lose about 10% of their purchasing power annually. Some will flee to commodities and many will use the flight to quality to purchase gold and silver coins, bullion and shares. Modes of investments are going to change dramatically, so you had best participate, or you may end up losing most of your wealth.

What you are witnessing is financial chicanery at its best. Wait until the citizens of Europe discover they are going to have to pay all these bills, just so they can be enslaved in a one-world government. They are not going to be happy.

We always tend to be ahead of the curve and the crowd. This time the time frame for discovery may be very short, because once investors understand what we have written here they will want to get out. Gold, silver and commodities will rise for different reasons, along with the flight to quality. Incidentally, this time the gold and silver mining shares will soar.

Reflecting back on our comments the second Greek bailout does not solve the EMU’s fundamental problem, which is the 30% competitiveness gap between the northern and southern countries and Germany’s giant-EMU trade surplus at the expense of the south. Unless a way can be found to rectify that there cannot be a recovery. The south has been forced into austerity, which limits their chances of being competitive. As we pointed out over and over again the end product will be a deflationary spiral and eventually deflationary depression. What the IMF and EU members are imposing on the six countries is very destructive.

A fiscal union would perhaps work, but that means the end of individual country sovereignty, which would eventually lead to authoritarianism, which would not like to see. The entire union is unnatural and should be ended. It has been a failure and just leave it at that.

All this program is going to do is buy time. It is not a long-term solution. Current debt holders are going to be incensed, as they will be forced in before sovereigns, but will banks really take a 50% haircut? We don’t really know. Is this really a fig leaf, a wholly inadequate alternative to the ECB, which cannot provide endless liquidity?

This rescue effort is really too dependent on high-risk deals, such as what caused this crisis. Four times leverage is outrageous. In the end the European public could get caught holding the bag.
At the same time we are seeing monetary contraction in Portugal, which mirrors that of Greece as it spiraled out of control. Bank deposits are off 21% over the past six months and that could well be a precursor of a weak economy and monetary trouble.

Another question that arises is due to the treatment accorded to NYC legacy, money center banks. Will those using credit default swaps continue to do so. There is a default and because it was voluntary the derivative writers do not have to pay off. Give us a break. It looks like contract law no longer exists.
In very late breaking news we find something we warned about is happening. The German High Court, the Bundesgerichtshof, has issued an express order that the nine-member committee dealing with dispersing the rescue funds is not allowed to do so. The plug has been pulled on the EU and German politicians on money releases. If the Germans and the EU are lucky they’ll have a constitutional decision by Christmas. We predicted this would happen.

Uncertainty revolves around the deal reached with Greek bondholders to face a 50% haircut on the face value of their bonds. This has not been negotiated as yet.

At the same time France needs to raise $11.2 billion to keep its AAA rating. Sarkozy says 2012 GDP growth will be about 1%, about the same as Germany, but no one mentions it would be -2% with inflation.

Switzerland’s State Secretariat for International Financial Matters said the Swiss were interested in investing in a special investment vehicle proposed by the euro zone bailout fund, but we see a real fight brewing. The Swiss People’s Party, which was against franc devaluation and the sale of Swiss gold, will be after this move by the Swiss government. They do not want closer ties to the EU.

This past summer we warned that European banks would have to increase their reserve position to 9%, because both the BIS and IMF said it was absolutely necessary. You might call the EU’s laxity of not forcing Greece to implement its austerity agreement as part of a socialist mindset. There was no way to move Greece into line. For not living up to their commitment they could have cut Greece off, because then they would default and leave the euro. Thus, they continued to fund Greece. The truth is they have to do so irrespective of what Greece does or doesn’t do.

The heart of the problem was banking incompetence followed by sovereign stupidity. Banks and solvent sovereigns never should have made the loans in the first place. All the greedy bankers, politicians and bureaucrats could think of was the euro zone and the euro being the template for one-world government. The interconnectivity of banks within nations with banks of other nations is the lynchpin that will eventually take all of them down. It’s caused by central control such as that embodied in the European Central Bank. The bottom line is if a state like Greece, partially defaults, then the banks within Greece default as well because these banks are holding large amounts of federal bonds and loans. Thus, the edifice collapses. This relationship exists all over Europe and as we are seeing six countries are in trouble and if the European economy continues to slip into recession or depression other countries will join the six. In addition in many countries supervision is all but non-existent. A perfect example of such a relationship was with France, Belgium, and the Dexia bank, which they created. As a result the taxpayers of Belgium and France have acquired all the bad assets of Dexia.

Adding to such problems is that usually half of the debt of any country is held by foreign banks and sovereigns, which means failure becomes contagion. France’s holding of 8.5% of GDP of debt from these six countries will eventually cause France to lose its AAA rating. If that is the case we venture to ask how can France be party to a commitment to bail out Greece or anyone else? They simply cannot and they are the number 2 player. You would think French citizens would elect someone who was not involved in such stupidities, such as Marine LePen of the National Party. The banks and business interests, such as the Rothschilds, couldn’t have that – could they? If France financially fails we could see 1789 all over again. This sovereign debt is widely held by other nations including the US, UK and Japan. European banks have controlled European society for a long, long time and they are the catalyst for the new world order.

We hear over and over again there will be recovery, we will grow our way out of it. That won’t be possible for Europe, the UK and the US. The number of young people who do the largest part of consumer spending in their 20s and 30s today have a hard time making ends meet, never mind spending. On top of that many are unemployed and may be for some time to come. If you have noticed unemployment has risen or stayed the same in the regions we have spoken of. Accumulation has only occurred among the upper-middle class and the wealthy. This also means borrowing has fallen and the ability to access loans and capital are limited, because so many prime age borrowers do not qualify.

One of the reasons Germany does as well as it does is because they have an abundancy of inexpensive capital available for loans and credit, which allows expansion, creates jobs and brings profits. The cost of labor is low or in the form of growing productivity and people pay their bills.

One interest rate fits all became a disaster. The weak participants borrowed at 4% instead of 8% and the result was an orgy of spending that ended up in today’s insolvencies. We said 12 years ago this would destroy the euro zone and it has. These low rates also allowed a massive influx of imports into the six problem countries, which caused major balance of trade deficits. This also brought about borrowing in foreign currencies, which turned into a nightmare, particularly in Eastern Europe.

European banking and politics are very closely intertwined. In other words the banks overtly run these countries. The same is true in the UK, but in the US it has been subtler due to ignorance of how the banking system works and that has been deliberate. In Europe the stress test used 5% as a guideline, instead of the normal 10%. This shows you the power and control banking has over EU government making the margin for error extremely thin. Considering the exposure cash reserves were increased to 9%. This means capital has to be raised and that is not easy in today’s recessionary environment. Two-thirds of European banks are currently under 9%. The worst exposed are RBS, Deutsche Bank, Unicredit, Bank Paribas, Barclays and Societ General. Hundreds of billions of euros are needed and the question is where will they come from? In addition how many banks are shuffling assets between trading, deposit, and banking sectors, such as Dexia had been doing until they had to be taken over by the French and Belgium governments? The banks need $270 billion that is readily available. If funds are not available then that means governments will have to supply the capital from out of thin air, which is very inflationary.

The EFSF, the European Financial Stability Facility, which was set up to aid Greece, Ireland and Portugal, now aids banks and European governments, such as the Fed does. An EFSF if allowed to dispense $1.4 trillion based on a $900 billion derivative structure would take months to move into action. Then there is the question will the German High court allow leveraging. We do not think so. The Court had already told the Bundestage you cannot do that, but they did it anyway.

As we can say is stay tuned for the next episode in this saga. It could end up taking down the entire world’s financial system.

Italian Senate adopts Auterity Package

by Philip Pullella
Reuters
July 14, 2011

Italy’s austerity budget passed its first parliamentary hurdle Thursday but the opposition says Prime Minister Silvio Berlusconi’s government is in a shambles and should resign after it is finally approved.

The four-year package, which has been increased to 48 billion euros ($68 billion) from 40 billion euros in the last 24 hours, is aimed at balancing the budget by 2014.

The upper house approved it by a margin of 161-135. It is due to be approved by the lower house Chamber of Deputies on Friday and signed into law several hours later.

Italy has avoided the worst of the financial crisis thanks to strong controls on public spending, a conservative banking system and a high level of private savings.

But with Greece and Ireland both in trouble, markets have been unnerved by a public debt level that is among the highest in the world at 120 percent of gross domestic product.

Italy’s delicate position was underscored by a bond auction hours before the vote in which the Treasury managed to sell 4.97 billion euros of long-term paper but only by offering high yields, that analysts said were unsustainable.

Addressing the Senate shortly before the vote, Economy Minister Giulio Tremonti said Europe needed a political solution to the unraveling debt crisis because no country would be spared dire consequences.

“No-one should have any illusions of individual salvation. Just like on the Titanic, not even the first class passengers will be saved,” he said, referring to Europe’s stronger economies.

The opposition voted against the measure but did not present amendments or carry out any filibustering tactics — it hopes to show voters it is acting responsibly to overcome the crisis.

To underscore its resolve, the government called a confidence vote on the measure to streamline its passage.

Bond traders have targeted Italy, the euro zone’s third-largest economy, because of doubts about its ability to sustain one of the world’s heaviest debt burdens and fears it is getting sucked into a widening debt crisis.

COSTS UNSUSTAINABLE

Thursday’s auction was seen as a vital test of Italy’s ability to tap into the bond markets and keep refinancing a debt mountain equivalent to 120 percent of gross domestic product, second only to Greece in the euro zone.

But while nearly all of the bonds were sold, analysts said the rise in borrowing costs would be unsustainable in the long term.

The political consensus on debt-cutting measures earlier this week helped calm nervous markets, which picked up after suffering heavy losses last week and early this week.

The Democratic Party (PD), the largest opposition group, has demanded the resignation of Berlusconi’s government, saying it is too weak to face up to the storm on financial markets.

But instead of aiming for potentially traumatic early elections immediately, the PD and other opposition forces have floated the idea of a transitional government to lead the country to the scheduled elections in 2013.

Berlusconi, who has steadfastly refused to resign despite a sex scandal and corruption trials, has emerged bruised from this week’s financial crisis during which he has kept a low profile.

After attacking Tremonti in a newspaper interview last week which highlighted persistent cabinet divisions, he has not appeared in public to speak about the market turmoil. He only issued a written statement Tuesday.

Seen by international investors as a guarantor of Italy’s financial stability, Tremonti’s position appears to have been strengthened since the market turmoil, despite his tense relations with Berlusconi.

The opposition has demanded Berlusconi play no role in any transitional government and Tremonti has been touted by some as a possible key member, perhaps even as prime minister.

Massimo D’Alema, a former prime minister and currently an opposition leader, told the business newspaper Il Sole 24 Ore on Thursday the PD was willing to support a transitional government whose aim would be to weather the financial crisis, spur growth and make changes in the county’s electoral laws.

Many observers say already tense relations between Berlusconi’s People of Freedom party and its coalition partner the Northern League may develop into a full-blown government crisis, perhaps as early as September.