Thread: The coming failure of the euro zone bailout deal

Two weeks until failure. Then what?

October 30, 2011

The coming failure of the euro zone bailout deal

Rick Moran
4 Comments

Liam Halligan writing at the Telegraph is not at all convinced that European leaders have made progress in solving the debt crisis.

In fact, he's downright pessimistic:

Last week's eurozone "agreement", for all the related fanfare, was a case in point. Far from making the situation clearer, allowing investors to make considered assessments, this latest announcement made Western Europe's grotesque debt crisis even more acute, sowing further infectious spores of confusion.

The deal itself, unveiled dramatically in the early hours of Thursday, was met with the now obligatory "relief rally". The FTSE All-World equity index soared 4.1pc, helped by signs of renewed US economic growth. European bank shares spiked no less than 12pc on Thursday, as traders recognised, for all the official obfuscation, the latest dollop of government largesse.

By late Thursday, though, and certainly on Friday, the warning signs were there. Global bond markets, by character more sober and smarter than the excitable equity guys, were voting against the deal. This is alarming. For it is only by selling more bonds that the eurozone's deeply indebted governments can roll-over their enormous liabilities and keep the show on the road.

Some say Western governments shouldn't "accept" what the market says. "Who do these trading people think they are," I hear from the lips of the educated but financially-illiterate political elite. Let's be clear - if global bond markets stop lending to a number of large Western economies, we are in the realms of unpaid state wages and pensions, transport chaos and closures of schools and hospitals - sparking the prospect of serious civil unrest. Forgive my intemperate tone, but these are the dangers we face. And I'm afraid the only rational response to Thursday's announcement is that the probability of such undesirable outcomes has just been increased.

Halligan recommends - as most non political analysts have been doing for months - a managed default for Greece as well as Portugal:

What is needed, urgently, is a clean, transparent Greek default - allowing this flailing semi-developed economy to leave the eurozone, re-establish a weaker drachma and regain its self-respect. Portugal should leave too, its membership of the same currency bloc as Germany is as absurd, and self-defeating, as that of Greece. There would be further market turmoil, yes, but a few more months of volatility, leading to an ultimately more stable outcome, is surely better than the current situation where the entire world is living in fear of a massive "euroquake".

The eurocrats, of course, lack the guts to trim back monetary union to a more manageable size. Too much face would be lost. So "euroquake" fears, once viewed as outlandish, are gaining pace. Despite Thursday's deal, and all the reassurances of a "durable solution", the Italian government on Friday paid 6.06pc for 10-year money, up from just 5.86pc a month ago and a euro-era high. Such borrowing costs are disastrous, given that Rome must roll-over €300bn of its €1,900bn debt in 2012 alone. A default by Italy, the eurozone's third-biggest economy, and the eighth-largest on earth, would make Lehman look like a picnic.

Halligan notes that even the bailout mechanism - the EFSF - might not have enough cash simply because the leverage required by the EFSF to bulk up would come from already cash strapped countries that might see bailouts as too risky to use taxpayer monies to buy the bonds.

It''s why Halligan believes this current deal will survive about two weeks.

http://www.americanthinker.com/blog/201 ... _deal.html

Janet Daley of the Sunday Telegraph gives the latest EU bail-out plan both barrels. Bully for her.

October 30, 2011

The Euro: Oh, Snap!

James G. Wiles

Over the last year, AT has highlighted the transparently anti-democratic, oligarchic nature of the European Project.

Now, that lack of democratic legitimacy is on display for all to see.

The European Union, the European Parliament, the Brussels bureaucracy and the Euro currency do not rely on the consent of the governed for their legitimacy and efficacy. Rather, they rely on the will of the transnational European elite to sustain them in the face of popular opposition. Because the Euro and the EU itself largely exist in defiance of the will of the European electorate, the result is a profound illegitimacy in Europe's governing institutions.

This illegitimacy is being reflected in popular and sometimes violent street demonstrations and in the steady rise of nationalist and neo-fascist political parties. Switzerland's recent election was only the latest evidence of this. Coupled with popular alarm over native population declines, the ebbing of Christian Europe and creeping Islamization as a result of Muslim immigration into the EU, the next year's round of national elections promises to be an important bellwether for the future of Europe.

The UK never joined the Eurozone. Yet, the disease of the European ruling class has taken hold there as well. Last week, British Prime Minister David Cameron faced down a rebellion by his own Conservative back-benchers demanding that the UK's ambivalent involvement in the EU be put to a popular referendum. The Conservative-Liberal Democratic coalition prevailed in Parliament.

For now, the British people have once again been denied the opportunity to express their will.

Yet the stark fact is that the extraordinarily high levels of unemployment and a massive sovereign debt crisis across the EU (especially in Ireland and Southern Europe) threaten a real possibility of total societal collapse in certain EU countries. Faced with this reality, what has been the EU elite's response to the popular outrage?

More of the same. And a refusal to let the people vote or let their elected representatives control

their nation's own financial and fiscal affairs.

Janet Daley of London's Sunday Telegraph explains it all to you in her important, front-page column today. Her title: "This Was the Week That European Democracy Died." She gives the Germans all the worst of it, too. http://www.telegraph.co.uk/finance/fina ... -died.html

Stay tuned. This ain't over.

http://www.americanthinker.com/blog/201 ... _snap.html

This was the week that European democracy died

The plan to tackle the eurozone crisis will only render ordinary people more powerless.


Protesters in Athens demonstrate against German plans for their economy Photo: EPA/ORESTIS PANAGIOTOU

By Janet Daley
9:00PM BST 29 Oct 2011
1031 Comments

Democracy went down in a blaze of glory last week. Both the German Bundestag and our own House of Commons put up one hell of a fight against the dying of the light. Maybe history will record that fact in an elegy on the demise of the great 18th-century experiment in government by the people: they were eloquent to the end. Because at the end, eloquence was all they had.

Trying to hold back the resurgence of oligarchy – the final dismantling of democratic responsibility in the governing of Europe – has been looking pretty hopeless for a long time. That eruption of excellent rhetoric and faultless argument which sprang to the defence of the rights of the governed (and in Germany’s case, of constitutional legality) made the loss seem all the more tragic, but no less inevitable.

So this is where we are. The agreed EU “stability unionâ€