Thursday, June 14, 2012
Europe’s New Fascism: As the Bureaucrats March Blindfolded Into the Minefield of Unintended Consequences, is Germany Playing a Game of Third Time’s the Charm?
In the wake of the failed elections in Greece the spotlight of economic instability moved to the other end of the Mediterranean and Spain. After weeks of mergers, consolidations and outright nationalization the pronouncements coming out of Madrid were that there would be no need for any outside support or bailouts for the collapsing Spanish banks.
Nobody really believed the propaganda, Spanish bond yields and CDS rates soared and its stock market fell like a stone. Faced with these realities the official story began to change. As the negotiations dragged out the numbers grew exponentially. First it was the banks might need €10 billion. That soon became €18 billion and then €40 billion and then €80 billion and now it stands at €100 billion ($125 billion). Never mind that the actual liabilities arising out of both a collapsed housing market and a complete failure of the government’s massive investment in a so-called green energy sector is more likely closer to €400 billion.
The negotiations between the Spanish government and the European Commission revolved around several factors. Firstly, were the loans to be made directly to the banks and Spain and it taxpayers only liable for that percentage of the banks that had been nationalized or would they be made entirely to the State and then disbursed to the banks putting the Spanish taxpayers on the hook for the entire amount in any subsequent failure? In the end what was agreed to was to loan through as quasi-governmental bank stabilization commission so that who exactly is on the hook for this €100 billion remains nebulous at best. Secondly and more controversially, was Spain’s refusal to agree to any budgetary controls; i.e. austerity. On this point Spain appears to have won a pyric victory at best. Even before the agreement was announced rumblings and complaints were heard from Ireland about wanting to renegotiate their bailout deal to do away with the onerous austerity provisions. In other words “We want the same deal Spain got.”
So how was Spain able to make a deal absent the austerity demands imposed upon Greece, Ireland and Portugal? Quite simply, blackmail. Behind closed doors the Spanish no doubt told the European Commission (EC), European Central Bank (ECB) and International Monetary Fund (IMF) representatives, “we are just to damn big to fail and if we don’t get the deal we want it will crash not only Europe and the Euro but the entire global ponzi scheme.” Even a cursory examination of the deal revels its patent insanity. For example, look at the requirement that Italy loan Spain €20 billion at a 3% interest rate. The problem for Italy is that Italy doesn’t have €20 billion to lend, so they have to go onto the open market and borrow that €20 billion at a 7% interest rate. They might as well be draining blood from one arm and pouring a good percentage on the floor before transfusing it into the other arm.
The EC, ECB and IMF folded and Spain got the deal. The Spanish deal will very likely move the coming Greek and Irish elections firmly into the camp of the “no austerity” parties. Just what Europe needs, political chaos piled on top of economic chaos.
Running in parallel to these negotiations has been a constant propaganda operation coming out of the EC, the ECB and IMF calling for so-called “Eurobonds.” Any such bonds would be issued against the assets of the European Economic Union member states as a whole. The drumbeat continues in spite of Germany’s stated steadfast opposition.
In spite of there being a growing discontent among the German population for being used as Europe’s cash cow, as reflected in recent local elections, Chancellor Merkel’s government is playing power games behind the scenes. While stating opposition out of one side of her mouth out the other side comes possible consideration if any future loans are backed by the sovereign gold holdings of the central banks of the troubled nations coupled with calls for those nations to surrender control of their budgets to the un-elected EC and the ECB.
So much for democracy, so much for National self-determination. In other words accept austerity imposed and controlled by Germany. Germany failed in two wars to impose control over Europe, so now are they seeking to economically colonize the PIIGS and possibly even France through the EC and the banks?