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Gasping at the highest possible
speed of standstill in Euro bailout negotiations, we have entered the
finger-tapping phase.
Only political denial of the inevitable breakdown and official hopes for a
breakthrough on the unsolvable question of a Eurozone bailout with Germany as
the main contributor at the umpteenth emergency meeting will hold up markets
another 2 days.
It can be safely expected that the Troika experts visit in Athens will not
yield any news other than that EU, ECB and the IMF want to roll on with their
plans of Eurobonds. This will not work as 80% of Germans are against a
bailout.
Market expectations of the future of European banks reflect the futility of
long dead-locked discussion on the political level best, this chart of 600 banks shows, which is back to levels last
seen at the beginning of the biggest debt bubble in history in the early
1990s.
Connect this with widespread layoffs in
the financial industry where even Goldman Sachs cuts the bacon and this is a
strong indicator that the coming system collapse is an accident waiting to
happen, despite or because of zero interest rate policies.
Here is the latest daily digest on the non-progress of the Eurozone bailout
from openeurope.
The FT reports that, according to
senior European officials, splits are opening up between eurozone
leaders over whether to revise the second Greek bailout package. Germany and
the Netherlands, along with up to five other eurozone
members, are leading the calls for bondholders to take bigger write downs on
their holdings of Greek debt, while France and the ECB are fiercely resisting
such a move.
German
government privately expects a Greek default by December
The news is likely to dampen the
recent market rally in Europe, especially for European banks. Reuters reports
on concerns that the completion of the EU/IMF/ECB review mission in Greece
will reveal higher funding needs than estimated under the second Greek
bailout plan. German Chancellor Angela Merkel said to Greek state TV NET,
"We have to wait and see what the troika...finds and what it will tell
us [whether] we will have to renegotiate or not." Bild
reports that the German government privately expects a Greek default by
December. According to an unnamed source, Merkel told CDU MPs in a meeting
recently, "We are trying to avoid a Greek insolvency. I can however not
exclude this any longer.”
The Greek parliament yesterday voted to approve the new property tax aimed at
raising an extra €2bn a year, although reports suggest the vote sparked
riots in Athens. The move will allow the EU/IMF/ECB review mission to return
to Greece today, with a final decision on whether to release the next tranche
of Greek bailout funds not expected until mid-October.
Meanwhile, the Bundestag will vote to
approve the expanded EFSF tomorrow and although the proposal should pass with
opposition support, it is still unsure whether Merkel will gain the majority
support from her governing coalition which she has demanded. The coalition
can stand to lose up 19 votes and still maintain a majority, however, with
the number of junior coalition FDP MPs planning to abstain or vote no still
uncertain, the outcome is yet to be assured. Handelsblattreports
that the Slovakian parliament vote on the expanded EFSF may be delayed until
22 October or later, and is not guaranteed to pass, with the parties again
failing to reach a compromise on the topic last night. Finland will vote on
the issue today, and is expected to approve the proposal, while Slovenia
passed the plan yesterday.
Debate continued over the state of an
increased eurozone bailout fund, with a clear
proposal yet to emerge. French Finance Minister Francois Baroin
said, “It is out of the question to put forward, three days from the
Bundestag vote, the issue of whether we should increase the
fund…Let’s not open Pandora’s box on something that is a
red flag for Germany.”
German Finance Minister Wolfgang Schaeuble also termed proposals to increase the fund or
even leverage it as “stupid”, according to the Telegraph.
Markets will widely swing or not until
then, but the ultimate direction is down, due to the weak economic outlook in
all worldwide regions. It will now be finger-tapping until the default of
Greece or a cross-border bank that will stand at the beginning of the domino
called European debt.
The situation does not improve by throwing smoke bombs like renewed EU talks
on a financial transaction tax (FTT) - that will go nowhere due to UK
opposition - or the recent six-pack enablement of more centralized economic
governance under Eurocrat guidance. Forget about
it; this is just a diversion from the real debt mountain that grows with
every minute.
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