Crisis escalates as insurrection breaks German control of Europe

"The political dam has broken in Europe. German Chancellor Angela Merkel no longer has enough allies in the club of EU prime ministers to impose her hairshirt agenda. Her methodical plans are disintegrating on every front..."

at http://ausbullion.blogspot.com/2012/05/crisis-escalates-as-insurrection-breaks.html

NETHERLANDS – JUST THE FIRST DOMINO?

"If you’re still trying to piece together the events of the last 48 hours this note from Nomura might help.  They describe how the collapse of the government in the Netherlands could put increasing pressure on Germany to abandon support for the periphery.  A negative trend here is not far fetched at all.  If Sarkozy loses his re-election campaign the core will likely see increasing support for those who don’t want to continue bailing out the periphery countries.  I still think Germany will hold the line no matter what the costs, but the risks can’t be ignored as they grow.  Anyhow, here’s the Nomura commentary:

“As we reflected in our 13 April report EU: Now is the second summer of our discontent – Act 2, the PvdA has also signalled that it does not support the eurozone’s fiscal compact, Dutch ratification of which is now, we believe, seriously in jeopardy. Although failure by the Netherlands alone to ratify would not in theory spell the compact’s demise – only 12 out of 17 eurozone members need to ratify for it to come into force – it would at best significantly damage the compact’s credibility and at worst encourage other members to follow suit.

at  http://pragcap.com/netherlands-just-the-first-domino

AS THE PERIPHERY SINKS, THE CORE FOLLOWS….

"Now this is starting to get really interesting.   Today’s flash PMI in Europe was a disaster.  Not only are the periphery countries predictably weak, but we’re seeing the weakness seep into the core.  The following from the Markit report summarizes the situation:

“The Markit Eurozone PMI Composite Output Index fell to a five-month low in April, according to the preliminary ‘flash’ reading which is based on around 85% of usual monthly replies. The index fell
for the third month in a row to 47.4, down from 49.1 in March, to signal a faster rate of decline of private sector economic activity. Output has fallen seven times in the past eight months.

Output fell at the fastest rates for five months in both manufacturing and services, with the former
seeing the steeper rate of decline.

By country, growth slowed to only a very modest pace in Germany, showing the weakest expansion
in the current five-month sequence as weak service sector growth was offset by a sharp decline in manufacturing output. France meanwhile saw output fall for the second month in a row, with the
rate of decline accelerating to the fastest since October. Falling manufacturing output was
accompanied by a steep deterioration in service sector activity.

at  http://pragcap.com/as-the-periphery-sinks-the-core-follows

New "Temporary" Border Controls a Vote of No Confidence in Europe; In France, Old Protectionist Idea Reawakened; Disastrous Global Trade Wars Coming Up

"New border controls are another sign of increasing protectionism in European states. It was not supposed to be this way, yet these controls represent a Vote of No Confidence in Europe

Germany and France are serious this time. During next week's meeting of European Union interior ministers, the two countries plan to start a discussion about reintroducing national border controls within the Schengen zone. According to the German daily Süddeutsche Zeitung, German Interior Minister Hans-Peter Friedrich and his French counterpart, Claude Guéant, have formulated a letter to their colleagues in which they call for governments to once again be allowed to control their borders as "an ultima ratio" -- that is, measure of last resort -- "and for a limited period of time." They reportedly go on to recommend 30-days for the period.

Of course, using catchphrases like "ultima ratio" and "limited period of time" is supposed to make such policies sound reasonable and proportionate. After all, the reasoning goes, it's just a few occasional border controls for up to 30 days. What's the big deal, right?

But the proposal is far from harmless and would throw Europe back decades. Since 1995, the citizens of Schengen-zone countries have gotten used to freely traveling within Continental Europe. Next to the euro common currency, free movement is probably the strongest symbol of European unity. Indeed, for many people, it's what makes this abstract idea tangible in the first place..."

at http://globaleconomicanalysis.blogspot.com/2012/04/new-temporary-border-controls-a-vote-of.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MishsGlobalEconomicTrendAnalysis+%28Mish%27s+Global+Economic+Trend+Analysis%29

George Soros: Eurozone Crisis Has Entered “A Less Volatile but Potentially More Lethal Phase”

"As the next INET conference begins in Germany, one topic of conversation is sure to be George Soros’s piece discussing the Eurozone crisis. He points out that the Eurozone has been quietly restructuring its financial arrangements along national lines, ending an era of co-mingled assets and liabilities across national borders. This is something I hadn’t realized, but it presents, as he shows, other dangers.

At the onset of the crisis, the eurozone’s breakup was inconceivable: the assets and liabilities denominated in the common currency were so intermingled that a breakup would cause an uncontrollable meltdown. But, as the crisis has progressed, the eurozone financial system has been progressively reoriented along national lines.

This trend has gathered momentum in recent months. The LTRO enabled Spanish and Italian banks to engage in very profitable and low-risk arbitrage in their own countries’ bonds. And the preferential treatment received by the ECB on its Greek bonds will discourage other investors from holding sovereign debt. If this continues for a few more years, a eurozone breakup would become possible without a meltdown – the omelet could be unscrambled – but it would leave the creditor countries’ central banks holding large, difficult-to-enforce claims against the debtor countries’ central banks.

The big problem, Soros says, is Germany. The Bundesbank doesn’t want to be left with credit losses or the remote possibility of inflation, so it is seeking to reduce aggregate demand in Germany..."

at http://www.nakedcapitalism.com/2012/04/george-soros-eurozone-crisis-has-entered-a-less-volatile-but-potentially-more-lethal-phase.html

IT’S THE EUROZONE THAT’S TURNING JAPANESE…OR MAYBE WE ALL ARE

"Earlier today the headline *GERMAN TWO-YEAR NOTE YIELD DROPS BELOW JAPAN’S FOR FIRST TIME* hit the wires and, yes currently sitting at below 0.1%, it is indeed very close to turing negative. As illustrated below it took 20 years for the German Bund to go Japanese so forgive me for trying to make a comparison.

German 2 year yield drops below Japan’s for the first time

Much has been written about the US Economy going Japanese and there are indeed some worrying signs. And for all the Bernanke bashing, that is one thing he really understands and will fight aggressively.
Unfortunately, Euro zone policymakers and the German’s inflation phobias are making all they can for Europe to get into an entrenched deflationary spiral..."

at http://pragcap.com/its-the-eurozone-thats-turning-japanese-or-maybe-we-all-are

Greyerz - Gold Bottom, $25 Trillion in Debt, ECB & Swiss Franc

"Today Egon von Greyerz told King World News that around the world, the average debt to GDP is at a staggering 350%. Egon von Greyerz is founder and managing partner at Matterhorn Asset Management out of Switzerland. Von Greyerz also stated that even if the number was cut in half, to 175% debt to GDP, it would require the elimination of $25 trillion of debt. But first, here is what Greyerz had to say about what is happening in Europe: “Yesterday the Swiss franc came very close to the 1.20 level versus the euro. This is happening because bad economic news is coming out of Europe. Industrial production is falling and Spanish rates versus German rates, there is now a 4% gap, now people are getting worried about that again. So they are buying the Swiss franc.”

at http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/4/6_Greyerz_-_Gold_Bottom,_$25_Trillion_in_Debt,_ECB_%26_Swiss_Franc.html

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German Manufacturing PMI Back in Contraction, New Orders Plunge, Price Inflation Up

"As expected (by me anyway), the Markit/BME Germany Manufacturing PMI® shows Germany is back in contraction.

Weaker new order intakes lead to deteriorating manufacturing business conditions in March.

Key Points:

• Output growth slows to only marginal pace
• Sharpest fall in new work for three months
• Cost inflation highest since July 2011..."

at  http://globaleconomicanalysis.blogspot.com/2012/04/german-manufacturing-pmi-back-in.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MishsGlobalEconomicTrendAnalysis+%28Mish%27s+Global+Economic+Trend+Analysis%29

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The Flaw In Europe’s Austerity Plan: Elections

"Getting Europe’s mainstream politicians and appointed technocrats to agree to bailouts and austerity was actually the easy part. The real challenge for these guys will be holding onto their jobs — and preserving the deals they’ve cut — in upcoming elections.
Voters, it seems, aren’t convinced that that a depression is the only solution to the euro’s design flaws. Faced with the immediate reality of poverty, they’re listening to formerly fringe voices calling for a better deal, either in the form of more help from Germany (via the European Central Bank) or a quick exit from the euro zone and a return to national monetary sovereignty. Greece, of course, is first in line:

Greece’s Fringe Parties Surge Amid Bailout Ire
ATHENS—Weeks after agreeing to an agonizing bailout deal with Europe, Greece is splintering politically ahead of national elections, raising the risk that it won’t be able to make the economic sacrifices still needed to keep it in the euro.
The election, not yet scheduled but expected in April or May, is shaping up as a public revolt against Greece’s political establishment, which has backed the austerity policies that are the price of financial life support from Europe and the International Monetary Fund. Mainstream politicians are increasingly painted as leading Greece into a debt trap, then impoverishing it in trying to escape..."

at  http://dollarcollapse.com/euro-2/the-flaw-in-europes-austerity-plan-elections/

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Spiegel Says "Even a 1-Trillion Euro Firewall Wouldn't Be Enough"; Mish Says "The Bigger the Bazooka, the More Money Will be Lost"

"Eurozone bureaucrats keep upping the ante as to how big a "firewall" is needed. And at every critical juncture, German Chancellor Angela Merkel has proven she is nothing but a liar. With every demand for additional firepower, comes an inevitable cave-in from Merkel supporting the move, no matter what she says in advance.

Meanwhile, the entire idea that firewalls can accomplish anything is ludicrous, given the key point that no currency unions in the absence of fiscal unions cannot and will not work.

I suspect Merkel understands this, merely wanting to get Germany so deep into bailouts step by step, that it will be reluctant to leave the Eurozone.

It is high time the German Supreme court step in and stop this nonsense.

However, nothing can stop Greece, Portugal, and Spain from leaving, and eventually they will. In the meantime, rest assured that every increase in firepower will be additional money of German citizens' pockets. The end-game will be a currency or banking crisis at the worst possible time.

For now, please consider 'Even a 1-Trillion Euro Firewall Wouldn't Be Enough'

European finance ministers meeting in Copenhagen on Friday agreed to boost the euro-zone firewall to over 800 billion euros. The move marks another U-turn on the part of the Merkel administration, which recently dropped its opposition to increasing the fund. German commentators warn that even the new firewall may still be too small..."

at  http://globaleconomicanalysis.blogspot.com/2012/03/spiegel-says-even-1-trillion-euro.html

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Sinclair - Is the Fed Selling Europe’s Gold During Interventions

"Today legendary trader and investor Jim Sinclair told King World News that a number of European countries are beginning to ask themselves where the gold is coming from which is being used for interventions in the gold market. Sinclair also said some European countries are beginning to think it’s their gold, stored by the US Fed, which is being used for these interventions. But first, here is what Sinclair had to say about the recent plunge in gold: “Eric, this has been going on since $248 in gold. Any idea or concern that this kind of intervention is going to cause the gold bull market to cease or shorten or even contain where it will potentially go is simply wrong."

Jim Sinclair continues:

“Every time you intervene in any market or any time you intervene economically, it’s the same as using a controlled drug. The first application gives you the best high you’ll ever have. After that you have to do more and more just to near duplicate what you expected.

The selling down of the gold, what this means now is time....

“If in fact they can’t bring the market under the $1,600 level, then the demand here is beyond the willingness for intervention. That means that if the demand is greater than the supply, the price is going to rise. 

If gold does go through $1,764 and stabilizes there, you are beginning an unwind in terms of gold cooperating with the management of perspective economics (MOPE). (Central planners) would want gold to be very soft at a time when a credit event takes place in Greece, that very few of the participants and even bondholders knows yet exactly what happened.”

Jim Sinclair had predicted many European countries would want their gold back, which is being stored by the Fed in the US. This movement is beginning to take hold in Switzerland and Germany as well as other countries. When asked about his prediction beginning to take place, Sinclair responded, “It had to happen because we all ask ourselves the question, ‘Where does the gold come from on these attempts at intervention?’ Because it’s not simply paper gold, it’s also in the cash market. There is a concern that the gold that’s being used to intervene might not be our (US) gold. 

Basically they (Germany, Switzerland and other countries) are now asking the question, where is the gold coming from? There are two possibilities, Fort Knox or the Federal Reserve seller, in the cash sense. Fort Knox, nobody knows what’s there.

Everybody knows what’s at the Fed, other people’s gold. The trend that we discussed a long time ago which is really turning into a modest torrent, is to take back gold. I mean the truth is what do the Germans need the Fed to store their gold for? Are they afraid France will invade? It doesn’t make any sense.” 

at  http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/3/15_Sinclair_-_Is_the_Fed_Selling_Europes_Gold_During_Interventions.html

Germany's Geopolitical Strategy

"...Germany's current strategy is to preserve the European Union and its relationship with France while drawing Russia closer into Europe. The difficulty of this strategy is that Germany's trade policies are difficult for other European countries to manage, including France. If Germany faces an impossible situation with the European Union, the second strategic option would be a three-way alliance, with a modified European Union or perhaps outside of the EU structure. If France decides it has other interests, such as its idea of a Mediterranean Union, then a German-Russian relationship becomes a real possibility.
A German-Russian relationship would have the potential to tilt the balance of power in the world. The United States is currently the dominant power, but the combination of German technology and Russian resources -- an idea dreamt of by many in the past -- would become a challenge on a global basis. Of course, there are bad memories on both sides, and trust in the deepest sense would be hard to come by. But although alliances rely on trust, it does not necessarily have to be deep-seated trust.
Germany's strategy, therefore, is still locked in the EU paradigm. However, if the EU paradigm becomes unsupportable, then other strategies will have to be found. The Russo-German relationship already exists and is deepening. Germany thinks of it in the context of the European Union, but if the European Union weakens, Russia becomes Germany's natural alternative."

at http://www.marketoracle.co.uk/Article33581.html

Is Germany Actually Preparing To Leave The Euro?

"For a long time, most analysts have believed that if someone was going to leave the euro, it would be a weak nation such as Greece or Portugal. But the truth is that financially troubled nations such as Greece and Portugal don't want to leave the euro. The leaders of those nations understand that if they leave the euro their economies will totally collapse and nobody will be there to bail them out. And at this point there really is not a formal mechanism which would enable other members of the eurozone to kick financially troubled nations such as Greece or Portugal out of the euro. But there is one possibility that is becoming increasingly likely that could actually cause the break up of the euro. Germany could leave the euro. Yes, it might actually happen. Germany is faced with a very difficult problem right now. It is looking at a future where it will be essentially forced to bail out most of the rest of the nations in the eurozone for many years to come, and those bailouts will be extremely expensive. Meanwhile, the mood in much of the rest of Europe is becoming decidedly anti-German. In Greece, Angela Merkel and the German government are being openly portrayed as Nazis. Financially troubled nations such as Greece want German bailout money, but they are getting sick and tired of the requirements that Germany is imposing upon them in order to get that money. Increasingly, other nations in Europe are simply ignoring what Germany is asking them to do or are openly defying Germany. In the end, Germany will need to decide whether it is worth it to continue to pour billions upon billions of euros into countries that don't appreciate it and that are not doing what Germany has asked them to do.
German Chancellor Angela Merkel’s Christian Democratic Union party recently approved a resolution that would allow a country to leave the euro without leaving the European Union.

Many thought that the resolution was aimed at countries like Greece or Portugal, but the truth is that this resolution may be setting the stage for a German exit from the euro.

The following is an excerpt from that resolution....

"Should a member [of the euro zone] be unable or unwilling to permanently obey the rules connected to the common currency he will be able to voluntarily–according to the rules of the Lisbon Treaty for leaving the European Union–leave the euro zone without leaving the European Union. He would receive the same status as those member states that do not have the euro."

So was that paragraph written for Greece?

Or was it written for Germany?

That is a very interesting question.

What is clear is that the status quo cannot last much longer..."

at http://theeconomiccollapseblog.com/archives/is-germany-actually-preparing-to-leave-the-euro