"Increasing stereotypes threaten European unity" by Don Melvin | Associated Press, August 12, 2012
BRUSSELS — Maybe the problem is those southerners lolling in the Mediterranean sun who overspent and tax-dodged their way to ruin. Or maybe it’s the northerners, rigid beyond reason, so gloomy in their own lives that they’re determined to see the southerners suffer.
Such, at least, are the resentful stereotypes that are increasingly jumping from pub conversation and tabloid pages into the mainstream political discourse.
It’s all a sign that a psychological fissure between northern and southern countries in the European Union is deepening under the strain of the financial crisis. Analysts say the rift threatens Europe’s currency union every bit as much as interest rates and deficits.
(Blog editor is just beside himself at another divisive agenda-pushing attempt by the banker's mouthpiece I call a newspaper. It's immigrants, it's parochial attitudes, it's the veil, it's ANYTHING but the LOOTING BANKSTERS and their FRAUD!!!!!!!!!!!!)
‘‘National resentments in Europe are rising to dramatic levels,’’ said Vincent Forest, a London-based economist with the Economist Intelligence Unit. ‘‘By taking so much time in solving the economic crisis, the Europeans are creating a political and social crisis.’’
The 17 countries that use the euro have been struggling for the past three years with the problem of debt: Some countries can’t cope while others have plenty of demands about how best to manage it. Economies across the region face deepening recessions. Spain and Italy, the two chief trouble spots, are threatened with a financial collapse that could tear the 13-year-old currency union apart and rock the global economy.
Fears are mounting that Spain may be the next to seek a bailout, following Ireland, Greece, Portugal, and Cyprus. Italy faces the daunting task of keeping a handle on its huge debt load while fighting a recession.
I thought Spain already got a bailout.
Also see: Gasping at Portugal Piece
Cyprus Seeks Bailout
EU Getting Rid of Greece
Could be the best thing for Greece.
In Greece, which has been in recession for five years, Germany is seen as the unbending force that has insisted on a diet of ever-increasing budget cuts that have thrown more and more Greeks out of work. Politicians and journalists have even alluded to the Third Reich — the Nazi regime — fueling public anger against the Germans.
Related: Germany to Reoccupy Greece
In Italy, cartoonists have made German Chancellor Angela Merkel the subject of vulgar humor. And last week, the respected La Stampa newspaper ran an article that used a derogatory term for Germans. The article cited an adage that says that Germans love Italians but don’t admire them, while Italians admire Germans but don’t love them.
Of all the euro countries, the Germans have been the most insistent on enforcing austerity, warning of the ‘‘moral hazard’’ of bailing out countries that have not suffered enough for their sins — and therefore may be tempted to lapse again.
Or Germany just doesn't want to get stuck bailing them all out and destroying itself.
German condescension toward southern culture is not limited to the economy.
In January, the influential German weekly Der Spiegel ran a commentary on the capsized Concordia cruise liner, whose Italian captain is being investigated for manslaughter and abandoning ship while passengers were still aboard.
‘‘Does it surprise you that the captain was Italian?’’ the columnist wrote, asking readers if they could imagine a German or British captain abandoning ship.
Related: Shipping Out of Italy
The column sparked outrage in Italy.
German attitudes toward European unity have a special historical significance. The prime motive for working toward a united Europe was a desire to contain Germany after the two world wars. A generation ago, West Germans were great champions of unity because it gave them a respectability — the ability to say ‘‘We are Europeans’’ — that had been squandered.
But now it is primarily Germany that is blocking the idea of the eurozone pooling resources to issue joint debt — ‘‘Eurobonds’’ — which would deepen European integration while easing the crisis.
Oh, ONCE AGAIN GERMANY STANDS in the way of the NEW WORLD ORDER!
German citizens opposed to more help for Greece are quick to jump on the fact that the government fudged its budget figures, playing on stereotypes of Mediterranean dishonesty. Putting up more money ‘‘would be the biggest mistake Germany could make,’’ said Andreas Fey, a railway worker from Frankfurt who stopped to talk in front of the European Central Bank headquarters. ‘‘They ran up deficits and debts upon debts, made a complete mess, and then lied about it, faked the books. I would stop it immediately, and throw them out.’’
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Btw, did anyone mention the great German economic engine is sputtering?
"Germany’s finances pressured, Moody’s warns" July 25, 2012
FRANKFURT — “Europe is sleepwalking toward a disaster of incalculable proportions,’’ the Institute for New Economic Thinking, a group of prominent economists funded largely by the billionaire financier George Soros, wrote in a report. The report urged countries with stronger economies, like Germany, to accept greater short-term ‘‘burden sharing’’ for the good of all. ‘‘Absent this collective constructive response, the euro will disintegrate,’’ the group wrote.
In issuing a ‘‘negative’’ outlook for Germany, the Netherlands, and Luxembourg Monday, Moody’s Investors Service cited an increased risk those triple-A countries will have to bear the cost of propping up Spain and possibly Italy....
Madrid will be pushed to seek a bailout for more than just its shaky banks....
Spanish leaders have pleaded with the European Central Bank to intervene in the bond market to take off some of the pressure. But the ECB said Monday that it did not buy any government bonds last week, disappointing those who hoped it might reactivate a dormant debt-purchasing program.
Didn't work the first time so why would it now?
A European Commission spokesman said there had been no request to activate bond purchases by the bailout fund. Still, such a move seems the most likely scenario, Antonio Barroso, a Europe analyst at Eurasia Group in London, wrote in a note.
Chancellor Angela Merkel in Germany could face even more trouble getting members of her party, the Christian Democrats, to support measures intended to prevent a disintegration of the eurozone.
Last week, Merkel struggled to rally a majority of her own governing coalition to support a program to rescue Spanish banks.
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"Vow to rescue the euro raises pressure to act" July 30, 2012
NEW YORK — Mario Draghi demonstrated last week how a few choice words from a central bank chief can make or break fortunes, even those of whole nations.
Related: Draghi the Dictator
Now the president of the European Central Bank faces the much more complicated task of delivering on last week’s promise to do ‘‘whatever it takes to preserve the euro.’’
He will have a chance to give substance to that bold statement Thursday when the bank’s governing council meets. With expectations so high, anything short of a decisive display of financial firepower could send financial markets back to the panicky behavior of only a week ago, when the thin trading of summer was exaggerating stock market gloom and bond investors were bidding up the borrowing costs of Spain and Italy to potentially destructive levels.
Draghi’s vow last week and his assurance that ‘‘it will be enough’’ sent stocks up worldwide and drove Spanish borrowing costs down from their lofty levels. Investors concluded that Draghi was signaling a major policy action, like huge purchases of government bonds to raise demand for debt from Spain and Italy and keep their borrowing costs at sustainable levels.
Nearly identical statements by Chancellor Angela Merkel of Germany, President Francois Hollande of France, and Prime Minister Mario Monti of Italy in recent days further raised expectations, though it was unclear if they all had the same policies in mind.
Controlling the bond market may not be as simple as it sounds, though, even for an institution that has the power to print money. Nor, analysts said, are there many other easy or effective options for the European Central Bank, which serves the 17 European Union nations that use the euro.
Under its charter, the ECB faces more restrictions on its ability to buy government bonds and stimulate the economy than the Federal Reserve does. Although the ECB is supposed to defend price stability above all else and is barred from financing governments, the Fed’s mandate puts more emphasis on promoting employment, and it has bought hundreds of billions of dollars’ worth of Treasury securities.
Oh, is that what the Feds mandate is? Could have fooled me.
But even the Fed, whose policy making committee meets Tuesday and Wednesday, is struggling to find ways to help the economy when its main tool, managing a benchmark interest rate, is close to zero. And the ECB’s benchmark interest rate, which has been cut three times since Draghi took his post last fall, is at a record low, at 0.75 percent. But in Europe, those low rates have not been passed on to businesses and consumers in countries like Spain and Italy because their banking systems are dysfunctional....
And that tool is out of bullets. They can't lower them anymore.
In theory, the ECB could cap bond prices simply by declaring that it would not tolerate market interest rates for Spain above, say, 7 percent. Any speculator who might want to bet against Spanish debt would confront the risk of big losses if the ECB bought bonds in grand style on the open market to drive down yields, the effective interest rates.
If the threat was credible enough, the bank might not actually have to carry it out.
That, however, is where the task becomes more tangled. For the ECB to be sufficiently intimidating, it would have to violate some existing taboos.
For example, it would have to abandon its practice of offsetting its bond purchases by taking in equal amounts in commercial bank deposits. By absorbing deposits, the bank takes as much cash out of the system as it puts in via bond purchases. By keeping the supply of money in the economy approximately even, it tries to avoid the appearance that it is printing money.
But the bank has struggled some weeks to attract enough interest-earning deposits from commercial banks to cover the bond purchases it has made, valued at $260.7 billion.
The European Central Bank would also probably have to stop treating itself as a privileged creditor, something it did this year during the Greek bailout. By refusing to absorb losses on Greek bonds, as private creditors were forced to, it may have unintentionally raised borrowing costs for other troubled countries. Investors concluded that if any country could not meet its obligations, private creditors would once again bear all the pain.
I'm wondering how unintentional it was.
A decision to accept losses on the bank’s holdings of Greek bonds would be a significant policy shift, though, and raise other difficult questions.
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"European bank signals possibility of buying bonds" by Jack Ewing | New York Times, August 03, 2012
FRANKFURT — In what seemed a rare communications blunder by one of Europe’s most politically polished technocrats, the president of the European Central Bank, Mario Draghi, set off a market backlash Thursday by investors who were apparently hoping for a bold euro rescue plan but instead heard a general statement of good intentions.
Draghi signaled that the ECB, in what would be a marked departure from current policy, was willing to start buying government bonds to hold down the borrowing costs of troubled eurozone countries like Spain.
But the bank put the onus on political leaders to move first, and left open some crucial questions about how quickly and forcefully it would seek to tame unruly financial markets.
Coming almost a week after Draghi incited a market rally by pledging to ‘‘do whatever it takes to preserve the eurozone,’’ his admission Thursday that whatever it takes might take weeks or months resulted in a Draghi rout.
Stock indexes started falling quickly and deeply in Europe almost as soon as Draghi began speaking at a news conference. And the downdraft carried over to Wall Street after the US markets opened. Borrowing costs for Spain and Italy, as measured by the yields on their bonds, spiked back up almost to the levels they were at before the rally started a week earlier.
“From a communication point of view, he misguided the markets,’’ said Joerg Kraemer, chief economist at Commerzbank in Frankfurt. ‘‘He raised expectations which he could not fulfill.’’
Kraemer and other economists had warned in recent days that market expectations were too high following Draghi’s vow in London last week and his assurance that whatever the ECB might be hatching, ‘‘it will be enough.’’
The ECB is prepared to ‘‘undertake outright open-market operations of a size adequate to reach its objective,’’ Draghi said Thursday. Interest rates demanded by investors ‘‘that are related to fears of the reversibility of the euro are unacceptable,’’ Draghi said, ‘‘and they need to be addressed in a fundamental manner.’’
“It’s up to the politicians — the same old story we've heard the last two years,’’ said Carsten Brzeski, a senior economist for the Dutch bank ING.
Investors may also be facing the reality that ECB attempts to lower borrowing costs for Spain and Italy could be constrained by continuing German opposition to bond buying. On Thursday, Draghi acknowledged that Jens Weidmann, president of the German central bank, opposed the general statement on bond purchases that the other 22 members of the ECB’s governing council had agreed to earlier in the day....
Germany standing up to the bankers, huh? No wonder the word Nazi is being tossed around my newspaper so much.
