Eurozone Out Of Recession?

The media and Europhiles are hugely excited at the headlines today that proclaim that the eurozone is out of recession.

As per the BBC, the eurozone has emerged from recession after a record 18 months of economic contraction.

GDP grew by 0.3% in the second quarter of 2013, slightly ahead of forecasts. Germany and France dragged the eurozone out of the recession with growth of 0.7% and 0.5% respectively. However, Spain experienced contraction of 0.1% on the quarter, and Italy and the Netherlands both saw output drop by 0.2%.

The eurozone cannot survive in its present form where the rich Northern countries prosper whilst the poor Southern ones collapse, just ask the good people of Greece (with close to 65% youth unemployment) if they feel that they are now out of the recession.

Greece Imploding

Greece is continuing on its downward spiral to financial implosion.

To add to the woes of the good people of Greece, on top of last week's truly shocking youth unemployment statistics (close to 65%), Reuters reports that Greece's economy shrank at annual pace of 4.6% in the second quarter, contributing to a slump of more than 20% in real terms since 2008.

Ironically, in the delusional world of economists, these figures were slightly better than the 5% contraction forecast.

Delusions aside, Der Spiegel has blown the whole charade of bailing out the Greek economy wide open. It quoted an internal document prepared by the Bundesbank as saying that Europe "will certainly agree a new aid programme for Greece" by early next year at the latest.

The Bundesbank also described the risks associated with the existing aid package for Greece as "extremely high", and said the approval last month of a 5.8 billion euro aid instalment to Athens had been "politically motivated".

As I have noted many times before, in order to survive as a democracy and civilised society Greece needs to exit the Eurozone now; others such as Cyprus need also to consider their positions. 

German Banks After Russian Money

It seems that, having more or less destroyed the Cypriot banking sector, Germany (in the spirit of Eurozone "fraternity") is seeking to get its hands on all the Russian money that will take flight from Cyprus.

Faisal Islam has tweeted:

"German banks in Cyprus are offering bonuses to accountants with Russian clients to divert savings to Germany, a Cypriot businessman tells me."

So much for the Eurozone being a "band of brothers" who support each other when times are hard!

Greece - The Never Ending Story

Despite Eurozone hyperbole that the Greek crisis has been "solved", via a debt write down, bond buyback and probable gifting of the next tranche of bailout money, it appears that this is not the end of the story.

German Finance Minister Wolfgang Schaeuble has in fact warned that Greece may need additional help.

As per ekathimerini.com, Euro-area governments may provide additional funding through the European Union structural fund and further interest payment reduction as long as Greece meets all its obligations under the agreement.

In other words there is an open ended commitment to prop Greece up.

Greece Faces D Day - Again

Today Euro of Greek bonds mature, next Friday 16th November a further Euro4BN mature.

Greece has issued, as it often does, a warning that if it dopes not receive bailout money by then it may default on those bonds.

However, Wolfgang Schaeuble, Germany's finance minister, is not so easily cowed by these threats; he told reporters yesterday that a decision on Greece next week "would be too soon".

Thus, as ever, the Eurozone crisis drags on as the politicians and bureaucrats dither over whether to continue to fund Greece or expel it.

Das Rheingold - The Funeral of Siegfried?

Germany, the economic "powerhouse" of Europe, is experiencing a crisis of confidence; so much so that in order to assuage some of the more extreme doubters, the Bundesbank audited its gold held in Frankfurt (lest people doubt that it had been sold off) and even allowed MPs to visit it to check for themselves.

So far so wunderbar!

Unfortunately, Germany also holds gold deposits abroad. The FT reports that Suddeutsche estimates about 1500 tonnes are held by the Fed, and about 800 tonnes by the central banks of England and France. The total value being approximately €133BN.

The German court of auditors has, not unreasonably, demanded regular audits of Germany's gold reserves abroad.

Fair enough, and perfectly reasonable, were it not for one "small" problem.

The last audits in New York were in 1979/80, and since then whilst the Bundesbank has been allowed into vault it has not been allowed to open the boxes in which the gold is allegedly stored.

As we all know markets are driven sentiment, and sentiment is affected by fear and doubt. Unless a full audit is conducted in the near future, the fear and doubt will grow to a critical mass and Siegfried may well meet his end.

Rumour has it that the US gold reserves in Fort Knox haven't been audited either, maybe the US needs to do the same as Germany and lance the boil of doubt?

Merkel Frets About Greece's Schneckentempo

Chancellor Merkel is, not unsurprisingly, becoming a tad peeved at the schneckentempo (snail's pace) of economic reforms in Greece. So peeved in fact that she told the German Lower House of Parliament so this morning, ahead of today's EU summit on the ongoing Eurocrisis.

Sadly, the only ones who will benefit from today's summit are the caterers!

Heil Our EU Overlords!

Germany has demanded an EU “currency commissioner” with sweeping powers to strike down national budgets; a “large step towards fiscal union”; and yet another EU treaty.

Hollande Leads Eurozone Breakaway Movement

For reasons that are unclear President Francois Hollande appears intent on destroying the French economy.

Why does he want to do that?

Could it be that he wants to lock in France's fate fully with Greece, Portugal, Spain et al thereby creating a level of economic failure so great (a form of critical mass) that the Eurozone cannot afford to expel these countries without an economic implosion, and using this as an opportunity to lead a breakaway movement from German dominance of the Eurozone?

Frau Merkel Goes To Athens

German Chancellor Angela Merkel has arrived in Athens, this is her first visit there since the Eurozone crisis began.

Samaras Likens Greece To Weimer Republic

In February I wrote the following:

"Let us be clear that the 50 page "agreement" (written in English) that the Greek political establishment has to agree, in order to receive Euro 130BN, will (if it is accepted) have the same consequences for Greece as the Treaty of Versailles did for the Weimer Republic."

Today, Greek Prime Minister Antonis Samaras told Handelsblatt:

"The cohesion of Greek society was the "endangered rising unemployment, as towards the end of the Weimar Republic in Germany was".

Evidently he has been reading this site!

Merkel's Bleeding Heart

Doubtless the people of Greece who are facing destitution, courtesy of their country's ill fated and suicidal dalliance with the Eurozone, will be heartened to learn that Chancellor Angela Merkel's "heart bleeds" for the Greeks who are facing hardship.

Does this mean that she will lighten up on the Eurozone's austerity package?

No.

German Court Approves Fiscal Pact With Cap

The German Constitutional Court has cleared the way for the fiscal pact and the eurozone's permanent rescue fund to be implemented.

However, and there is always a "however", the court has limited German liability to the ESM to a maximum of Euro190BN.

Any excess over and above that figure must first be approved by the German parliament.

Merkel's Grexit U-Turn?

Chancellor Angela Merkel has, apparently, made a U-turn wrt her policy on Greece.

Faced with the political fallout from a Greek exit before German national elections in 2013, she now wants to stop Athens from leaving the euro zone at all costs (even if it means massaging the figures in the upcoming troika report).

That at least is the theory according to Der Spiegel.

However, I remain unconvinced. The elections are not new or a surprise, and Merkel would have been well aware of the potential political fallout from a Grexit. Indeed, if anything, a Grexit may enhance her standing more than if she were to be seen to prop up Greece at the cost of German financial stability.

Don't Believe The ECB Hype

The markets and some commentators are trying to delude themselves that the ECB will finally do something tangible to "save" the Euro.

ECB President, Mario Draghi, has managed to con some people who should know better into believing that the ECB will conduct a major bond purchasing campaign. In theory the bond buying campaign will reduce the interest rates of Spain and Italy (note Greece is not included, because it has been thrown to the wolves) and thus save the Euro.

However, people are ignoring the two very large elephants in the room:

1 Any such decision and action to buy bonds will not occur until after 12 September, when Germany’s top court rules on the ratification of the ESM. This being over a month away means that Spain and Italy, because of crippling interest rates, will most likely have imploded by them.

2 Germany’s top court may well not ratify the ESM. Even if it does, all 17 eurozone members would need to agree to it as well. Fat chance!

Therefore, don't believe the ECB hype.

The Euro, in its present form, is finished!

#Grexit

"Now is not the time for any kind of discounts to Greece"
 German deputy government spokesman Georg Streiter.

Source Zerohedge.

Germany Ups The Ante On Greece

In the never ending game of chicken between Greece and Germany (the Eurozone's paymasters), Germany has just upped the ante by threatening to withhold the next tranche of bailout many.

The "threat" was of course "subtle", as per the use of the phrase "not problematic":

Russian Market ‏@russian_market

"German finance ministry spokesman says not problematic if the next Greek aid tranche is delayed beyond the end of June"

Greeks To Have Their Cake and Eat It?

It seems that, according to The Slog, despite all public statement to the contrary Berlin (ie Chancellor Merkel) has drawn up a plan to keep Greece in the Eurozone at all costs:

"Merkel has decided to go all out for her Fiskal Pakt and keep France on board by bribing Greece to vote yes to the Eurozone and the Troika."

In other words the Greeks will have their cake and eat it.

We shall see!

The New Greek Treaty of Versailles

Gregor Gysi (parliamentary group leader of the Left Party) has just addressed the Bundestag, during the debate about the Greek bailout plan, and has compared the Greek bailout plan to the Treaty of Versailles:

"Bei der Krise in Europa greifen wir zu Versailles anstatt zu Marshall...."

"The crisis in Europe, we resort to Versailles instead of Marshall.."
 
Evidently he has been reading this site, as I said much the same thing two weeks ago:

"Let us be clear that the 50 page "agreement" (written in English) that the Greek political establishment has to agree, in order to receive Euro 130BN, will (if it is accepted) have the same consequences for Greece as the Treaty of Versailles did for the Weimer Republic"

Germany Trying To Sabotage Greek Bailout

I noted last week that "the IMF regards the EFSF as a busted flush, and has no intention of throwing any more money into the doomed project".

Unsurprisingly, the G20 have now stated categorically in their end of summit communique that no money will be forthcoming until the Eurozone puts more of its own money in, and that it is "essential" that the Eurozone boosts its own firewall first.

Meanwhile, as if deliberately trying to further humiliate and antagonise the Greeks, the German Finance Ministry has announced that more than 160 German tax collectors have volunteered for possible assignments in Greece.

Anyone would think that the Germans were deliberately trying to sabotage the bailout, and force the Greeks to walk away from it!

Given that German Finance Minister Wolfgang Schaeuble doesn't believe that the bailout will succeed, it is in Germany's interests that time and money are not wasted on it.