German central bank chief threatens to block IMF boost plan

Xinghua
December 15, 2011

German central bank chief on Wednesday threatened to block plans to finance troubled eurozone partners through the International Monetary Fund (IMF), unless countries outside the eurozone are allowed to join the rescue operation.

Speaking in Frankfurt, President of the Bundesbank Jens Weidmann said, “If the conditions are not met, then we can not agree with this line of credit too.”

His words came just days after EU leaders pledged at a summit meeting last week to pump 200 billion euros (267 billion U.S. dollars) into IMF coffers to help the eurozone, which is struggling to boost its own rescue fund to one trillion euros.

“If the U.S. and other major donors say they do not step up, then we also think that the public financing program will become problematic,” Weidmann said.

He said that at the moment the Bundesbank was in principle willing to transfer up to 45 billion euros to the IMF. However, it must be ensured that the burden is shared fairly among the euro member countries.

New ‘scary’ predictions for the Eurozone to justify loss of Sovereignty

‘Deep Depression’  is the new term used in main stream media to justify another bank bailout and the surrender of political and economic sovereignty.

AFP
November 29, 2011

Europe is reeling from warnings it faces a “deep depression” if the eurozone collapses and that every EU nation’s credit rating could be hit without firm action to resolve the debt crisis.

An updated growth report from the OECD on Monday said the crisis was now just one step away from plunging advanced economies into an abyss of recession and could trigger waves of bankruptcies.

And Moody’s, one of the three main ratings agencies, warned that even solid economies such as Germany might have to have their credit status revised — a move which would force them to pay higher borrowing costs.

Italy meanwhile, under pressure from Germany and France who have warned Rome that it could wreck the eurozone if it fails to master its debt problem, launched a patriotic drive to encourage people to buy bonds.

And while Belgium managed to raise 2.0 billion euros ($2.66 billion) in a bond auction, it had to agree to investor demands for a 5.65 percent return for benchmark 10-year bonds compared to 4.37 percent less than a month ago.

Meanwhile in Washington, US President Barack Obama told top European officials they must act now, with decisive force, to fix the debt crisis which threatens to damage the fragile US recovery.

“This is of huge importance to our own economy,” Obama said after hosting EU representatives at the White House.

“The United States stands ready to do our part to help them resolve this issue.”

Despite the bad news, European stocks and the euro rebounded sharply on Monday after days of sustained heavy losses. Investors reacted positively to a report saying Italy was to get an International Monetary Fund bailout — later flatly denied.

The Organisation for Economic Cooperation and Development report forecast that the United States faced a period of slow growth, Japan’s economy would shrink 0.3 percent this year and developing nations would also see a slowdown.

But its starkest warning was reserved for the 17-nation eurozone, which it said was set for growth of 1.6 percent and next year just 0.2 percent.

The OECD said there was still time for decisive action by policymakers to avert a far worse outlook, urging the European Central Bank to buy up devalued government debt bonds in huge quantities.

But Germany has been holding out against that idea, arguing that the priority is for countries in trouble to reform their economies.

Polish Foreign Minister Radek Sikorski nevertheless on Monday called on Germany to do more, saying the eurozone’s collapse would result in an “apocalyptic” crisis.

The OECD spoke also broached the possibility of a eurozone break-up.

An exit by one or more countries “would most likely result in a deep depression in both the exiting and remaining euro area countries as well as in the world economy,” it said.

“The euro area crisis represents the key risk to the world economy at present,” it said. “A large negative event would… most likely send the OECD area as a whole into recession.”

Moody’s considered the same scenario, saying “the probability of multiple defaults… is no longer negligible” and that would “significantly increase” the likelihood of one or more members dumping the currency.

“Moody’s believes that any multiple-exit scenario — in other words, a fragmentation of the euro — would have negative repercussions for the credit standing of all euro area and EU sovereigns,” the ratings agency added.

“The continued rapid escalation of the euro area sovereign and banking credit crisis is threatening the credit standing of all European sovereigns.”

The European Union’s three biggest economies — Germany, France and Britain — have so far maintained their triple A credit rating.

But countries such as Italy, Spain, Greece, Ireland, Portugal and most recently Belgium have all suffered rating downgrades that have accelerated unsustainable rises in their borrowing costs over the past two years.

A report on the website of the French paper La Tribune, citing several sources, suggested Standard & Poor’s might downgrade France in the next few days. A spokesman for the ratings agency refused to comment.

IMF chief Christine Lagarde also dismissed a report in La Stampa that suggested the International Monetary Fund was preparing a bailout package for Italy worth up to 600 billion euros.

La Stampa said the IMF would guarantee rates of 4.0 percent or 5.0 percent on the loan — far better than the borrowing costs on commercial markets.

But Lagarde said Monday: “The IMF does not invest, the IMF lends. And it lends when it is requested by a country that needs assistance.

“At this point in time, we have not received any request from Italy, nor are we negotiating with either Italy or Spain.”

Italy’s 1.9-trillion euro public debt and low growth rate have spooked the markets in recent weeks.

But analysts said the markets were unconvinced by the denial.

Greece, Portugal and Ireland have all received bailouts but a rescue of Italy, the eurozone’s third-biggest economy, would be on a totally different scale.

£500bn package to save Italy, Spain

by Robert Winnett
The Telegraph
November 28, 2011

Reports in Italy suggested that the IMF is drawing up plans for a €600 billion (£517 billion) assistance package for the country. Spain may be offered access to IMF credit, rather than a rescue package, to avoid it being “picked off” by the markets in the coming weeks.

Any IMF involvement in European rescue packages would be partly underwritten by British taxpayers, which could leave this country liable if Italy and Spain did not repay any international loan.

Britain provides 4.5 per cent of the IMF’s funding and would, therefore, face a potential liability to an Italian package of up to €27 billion (£23 billion).

An IMF rescue package involves a country being offered hundreds of billions of euros in return for agreeing to launch a major austerity programme to cut spending. A credit line is a more flexible arrangement which gives countries short term access to international finance.

Italy and Spain are likely to be forced to accept some international help as the cost of their debts has risen to unsustainable levels of about seven per cent.

The reports of an IMF rescue package being prepared – which was denied on Monday by an IMF spokesman who said there were “no discussions with Italian authorities” – come as European finance ministers meet tomorrow to discuss draft plans for a bail-out scheme.

Under the scheme set to be discussed, the euro area’s European Financial Stability Facility (EFSF), would have to “insure” bonds of troubled countries by covering the first 30 per cent of any unpaid debts.

To offer this guarantee, the European bail-out fund would have to be able to raise €1.4 trillion – a threefold increase compared to the current size of the scheme.

Last night, it was not clear if or how this money could be raised, although the EFSF may itself sell bonds to international investors.

At the weekend, European finance ministers from Germany and the Netherlands met and disclosed that IMF involvement was under discussion. Wolfgang Schauble, the German finance minister, said yesterday he was confident that the euro would be saved – and go on to become the most stable currency in the world.

The next fortnight is now seen as one of the final opportunities to resolve the crisis because European leaders will meet on December 9 for crunch talks on the package and changes to EU treaties.

‘Zombie bankers’ to drag Europe into ‘banker hell’

Russia Today
November 15, 2011

It seems bankers are taking over politics in Europe, financial analyst Max Keiser told RT, adding that this trend could lead to global banking domination.

Investigative reporter and news presenter, Max Keiser

­“We cannot get rid of these zombie bankers, we can’t kill them,” said Keiser, host of RT’s Keiser Report. “Iceland thought they had killed off their zombie terrorist bankers, but they have risen again and are now sticking Iceland. They are a plague around the world, and certainly in Europe. There are no elections, but they are putting bankers in charge to bring back total banking domination as the world goes down the slippery slope into banker hell.”

Keiser told RT these former bankers’ main agenda is to create more debt.

“In the eurozone they have an opportunity to bring all the balance sheets of all the countries together and create new lending facilities like EFSF which is a new 5 trillion euro lending facility, and they want to build on that to create 10-20 trillion euro lending facilities, because bankers get paid on how much debt they create. More austerity measures bring about more debt, and that brings more fees for bankers and more financial terrorism,” he explained.

According to Keiser a very small elite continues to benefit from the disastrous situation in the eurozone, which continues these same ploys that it has carried out over the last few years.

“There used to be a thing called moral hazard where if banks took risk, they would be at some point penalized by the system, but now the more risk they take the greater the rewards they get,” he pointed out. “JP Morgan is now going to step in front of the allocated accounts of customers and actually steal money from their accounts. We haven’t seen this level of larceny and theft since the Nazis stole assets from people in Germany in the 30s. This is outrageous, this has not been done in decades. There are no regulations in place at all! Interest rates are zero per cent, so I expect more of the same,” he added.

According to Keiser, this means the financial elite work together with the European Central Bank and keep interest rates near zero per cent, because this allows them to fund their speculative investments at zero cost.

“They don’t want to spend any money to borrow money and put outrageous bets on the table. Every time they lose a bet, then they impose more austerity measures. Every time they win a bet, they keep 100 per cent of the profit,” he claimed.

He also stressed that putting bankers in political positions resembles the behavior of someone who has been a victim of crime.

“People keep saying the bankers know best. But the bankers are the ones who have stolen all the money, so are we going to give them more ability to steal more money and impose more austerity measures? But that is insane,” Keiser concluded.

­Paolo Raffone, founder of a Brussels-based non-profit organization, the Chipi network, told RT the eurozone has been pushed too quickly as part of the European project.

“The original idea was to have a monetary union pushing a political union. But as we see the political union has never been built because it was not the will of the people to build it. And the monetary union is shaking,” he explained.

He also added the eurozone will have a new setup in future, even if all the current EU and eurozone members get together again.

“The way the union is functioning will be different, otherwise it may split up,” he added.

Merkel and Sarkozy in Talks to End Eurozone

Fears that Italy’s fall may drag the whole region down, prompted the ‘strongest’ economies to think about doing away with the current shape of the Eurozone.

Guardian.co.uk
November 10, 2011

Fears that Europe’s sovereign debt crisis was spiralling out of control have intensified as political chaos in Athens and Rome, and looming recession, created panic on world markets.

Reports emerging from Brussels said that Germany and France had begun preliminary talks on a break-up of the eurozone, amid fears that Italy would be too big to rescue.

Despite Silvio Berlusconi‘s announcement that he would step down as prime minister once austerity measures were pushed through parliament, a collapse of investor confidence in the eurozone’s third-biggest economy sent interest rates in Italy to the levels that triggered bailouts in Portugal, Greece and Ireland.

Italian bond yields surged through the critical 7% mark, at one point hitting 7.5%, amid concern that the deteriorating situation had moved the crisis into a dangerous new phase.

In Athens talks to appoint a prime minister to succeed George Papandreou were in deadlock, and will resume on Thursday morning. The Italian president, Giorgio Napolitano, sought to reassure the markets by promising that Berlusconi would be leaving office soon.

Angela Merkel, the German chancellor, said the situation had become “unpleasant”, and called for eurozone members to accelerate plans for closer political integration. “It is time for a breakthrough to a new Europe,” she said. “Because the world is changing so much, we must be prepared to answer the challenges. That will mean more Europe, not less Europe.”

The president of the European commission, José Manuel Barroso, issued a new call for the EU to “unite or face irrelevance” in the face of the mounting economic crisis in Italy. “We are witnessing fundamental changes to the economic and geopolitical order that have convinced me that Europe needs to advance now together or risk fragmentation. Europe must either transform itself or it will decline. We are in a defining moment where we either unite or face irrelevance,” he said.

Senior policymakers in Paris, Berlin and Brussels are reported to have discussed the possibility of one or more countries leaving the eurozone, while the remaining core pushes on toward deeper economic integration, including on tax and fiscal policy. “France and Germany have had intense consultations on this issue over the last months, at all levels,” a senior EU official in Brussels told Reuters, speaking on condition of anonymity because of the sensitivity of the discussions.

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