20 Oct 2011
Comment: from Stephen Pope
On Sunday, 9th October, in Berlin, President Sarkozy of France told the world's press that he and Chancellor Angela Merkel of Germany, "Agreed on everything". It was an incredible statement at the time and developments in the recent hours illustrate once and for all that the leadership of the Euro Zone cannot be relied upon to speak plainly or honestly.
At the time of the Berlin bi-lateral meeting the 2 nations differed as to who, when and how much of the EFSF should be given to ailing banks.
Now we have a wider French-German split as finance ministers prepare to meet in Brussels tomorrow amid mounting pressure to fashion a solution to the Euro Zone debt crisis.
Of course it isn't Europe unless there is a summit and such an event is scheduled for 2 days later. It is charged with nothing less than delivering the "Panacea" to the debt crisis and re-capitalising the banks. At the heart of the issue lies the leveraging of the EFSF. Already there is disagreement over the ECB’s role and unless more firepower is generated for the EFSF either by insurance guarantees, or colleral asset guarantees, then the Euro, and the regions banks are going to meltdown.
Even as Euro Zone leaders gathered to bid a fond farewell to Jean Claude Trichet side meetings put together on the hoof failed to navigate a passage through the dispute.
Whilst we have JCT in mind, to illustrate further what a pile of PC tripe is spoken in Euro Zone circles I ask you to consider what was said by the President of the European Union... Herman Van Rompuy. He praised Trichet for taking “unconventional” steps and not being beholden to dogma.
I am sorry, but JCT was dogmatic in his approach to one thing...controlling inflation. He raised rates twice when it was unwarranted, and he never stepped into a QE route willingly, his main extra activity was through immunised covered bond purchases. JCT is opposed to deeper haircut on junk debt because he knows the ECB is at breakeven on a 32% reduction, but at 50% the CB loses EUR35Bn. Mr Trichet was the very model of dogma and shortsightedness.
President Van Rompuy has shown he is a fully fledged member of the incompetent club.
Why is it always the French that have to grandstand? So it was last night as Francois Baron, the French Finance Minister disclosed the depth of the disagreement over the ECB and Germany re the EFSF. Germany endorsed enabling the EFSF to insure a portion of cash-strapped nations’ bond sales, however, Baroin said France wants to turn it into a bank that could tap the ECB. This is because the French banks are in dire straights and need a massive dose of financial assistance, even though they and the Banque de France have continued to deny such a situation. Similarly, the French state is under pressure and will struggle to manage its budget let alone bail out its "national banking champions" once the AAA status is gone.
Despite all the smiles and high hopes exuded by the French and German leaders on 9th October it is clear we are being prepared for a major let down as Merkel has used this week to lower expectations that the crisis-fighting effort would climax at the Sunday summit in Brussels.
Once again we will have sold a pup! Oh, by the way ... if you hadn't noticed it is mobs on the streets day in Athens...again!
On Sunday, 9th October, in Berlin, President Sarkozy of France told the world's press that he and Chancellor Angela Merkel of Germany, "Agreed on everything". It was an incredible statement at the time and developments in the recent hours illustrate once and for all that the leadership of the Euro Zone cannot be relied upon to speak plainly or honestly.
At the time of the Berlin bi-lateral meeting the 2 nations differed as to who, when and how much of the EFSF should be given to ailing banks.
Now we have a wider French-German split as finance ministers prepare to meet in Brussels tomorrow amid mounting pressure to fashion a solution to the Euro Zone debt crisis.
Of course it isn't Europe unless there is a summit and such an event is scheduled for 2 days later. It is charged with nothing less than delivering the "Panacea" to the debt crisis and re-capitalising the banks. At the heart of the issue lies the leveraging of the EFSF. Already there is disagreement over the ECB’s role and unless more firepower is generated for the EFSF either by insurance guarantees, or colleral asset guarantees, then the Euro, and the regions banks are going to meltdown.
Even as Euro Zone leaders gathered to bid a fond farewell to Jean Claude Trichet side meetings put together on the hoof failed to navigate a passage through the dispute.
Whilst we have JCT in mind, to illustrate further what a pile of PC tripe is spoken in Euro Zone circles I ask you to consider what was said by the President of the European Union... Herman Van Rompuy. He praised Trichet for taking “unconventional” steps and not being beholden to dogma.
I am sorry, but JCT was dogmatic in his approach to one thing...controlling inflation. He raised rates twice when it was unwarranted, and he never stepped into a QE route willingly, his main extra activity was through immunised covered bond purchases. JCT is opposed to deeper haircut on junk debt because he knows the ECB is at breakeven on a 32% reduction, but at 50% the CB loses EUR35Bn. Mr Trichet was the very model of dogma and shortsightedness.
President Van Rompuy has shown he is a fully fledged member of the incompetent club.
Why is it always the French that have to grandstand? So it was last night as Francois Baron, the French Finance Minister disclosed the depth of the disagreement over the ECB and Germany re the EFSF. Germany endorsed enabling the EFSF to insure a portion of cash-strapped nations’ bond sales, however, Baroin said France wants to turn it into a bank that could tap the ECB. This is because the French banks are in dire straights and need a massive dose of financial assistance, even though they and the Banque de France have continued to deny such a situation. Similarly, the French state is under pressure and will struggle to manage its budget let alone bail out its "national banking champions" once the AAA status is gone.
Despite all the smiles and high hopes exuded by the French and German leaders on 9th October it is clear we are being prepared for a major let down as Merkel has used this week to lower expectations that the crisis-fighting effort would climax at the Sunday summit in Brussels.
Once again we will have sold a pup! Oh, by the way ... if you hadn't noticed it is mobs on the streets day in Athens...again!
