The Curious Timing of S&P Putting EU Nations on Watch for Possible Downgrade

Standard & Poor's has put 15 European Union nations on watch for a possible downgrade of their credit ratings, including Germany and France.

What convenient timing.

The heads of state of the EU members meet on December 9 to consider changing the EU treaty to bring about a more centrally planned European "fiscal union." The S&P announcement provides further cover for the heads of state to agree to treaty changes. It's all to save the EU, you see.

In truth, a bankruptcy of countries who can't afford to pay their bills would be a good start to bringing sanity to EU nations. However, the banksters will have none of that. Led by German Chancellor Angela Merkel, the EU is about to create an even greater monster that is sure to eventually make a mess of freedom through out the eurozone.

Soros Lashes Out Against German Fiscal Responsibility

It's obvious that George Soros has some heavy inflation bets and he is going to lash out at any country that attempts fiscal responsibility.

"German policy is a danger for Europe, it could destroy the European project," he told German weekly Die Zeit.

"If the Germans don't change their policy, their exit from the currency union would be helpful for the rest of Europe," he said.

Now what can this possibly mean other than that Soros wants more inflation in the EU? If the Germans attempt to bring fiscal responsibility to the "European project", then throw them the hell out, appears to be the Soros advice to the EU.

Bank Run in Spain and Its Destabilizing Ramifications for the Entire EU

Spanish banks are borrowing record amounts from the European Central Bank.

According to FT, Spanish banks borrowed €85.6bn ($105.7bn) from the ECB last month. This was double the amount lent to them before the collapse of Lehman Brothers in September 2008 and 16.5 per cent of net eurozone loans offered by the central bank.

“If the suspicion that funding markets are being closed down to Spanish banks and corporations is correct, then you can reasonably expect the share of ECB liquidity accounted for by the country to have risen further this month,” said Nick Matthews, European economist at RBS.

Bottom line: This is nothing but a sign of a run on Spanish banks. They can't get funding in the markets and there is a steady withdrawal of funds from the banks. For all practical purposes, the ECB is supporting the Spanish banking system with life support measures. This means that the ECB will have to drain funds from elsewhere in the system to sterilize this rescue operation. Without sterilization the effort becomes very inflationary, with sterilization the effort distorts the entire EU economy. It's all destabilizing.

The only reasonable alternative is to allow the Spanish banks to go into bankruptcy and restructure.

A Message to EU Countries: Don't Make the Mistake South Carolina Did

By Ron Holland

The state of South Carolina has been an independent republic and nation twice in history, first in March of 1776 and again in December of 1860. History here certainly shows how it is far easier to get into a political union than to get out again. In South Carolina, we have found that once in a voluntary union, the open door slams shut as political and monetary elites who benefit from this arrangement seldom give up their power to tax, inflate the currency, protect special interest monopoly rights and engage in mercantilism without fighting to retain their distant dictatorial controls.

The photos above aren't of terror bombing of London, Berlin or Dresden but rather Columbia, SC on the top and Charleston on the bottom. There were no land battles fought in either city but rather Columbia was burned at the end of the war by union forces and the civilian areas of Charleston were targeted by a union naval bombardment which lasted longer than the World War Two German siege of Leningrad (St. Petersburg) Russia.

“They who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety.” ~ Benjamin Franklin

The corrupt, power-hungry EU elites like politicians here in America are always ready to use a crisis to advance their agenda of accumulating power, increasing taxes and controls over local governments and independent citizens. Contrary to their false promises that a political and monetary union would guarantee economic safety and monetary security, here in the US, the very opposite has been the case with our exploding national debt and long-term downtrend in the dollar.

The call for a political and monetary union in Europe to counter the sovereign debt crisis is the dominate elite theme of the week from Europe to the United States echoed hourly on cable channels and in editorial written comments. Just a few minutes ago, one of the beautiful woman de jure reporters on a financial channel, again repeated the message with something to the effect, "what Europe needs is what we have here in the United States, one fiscal system, one political system and one country." Since Germany is the titular head of the EU, this subliminal message has a frightening historic ring to an earlier "One People, One Nation, One Leader" refrain repeated ad nauseam during another time in Germany.

“We can’t have a monetary union without some form of economic and – er – political union.” ~ EU president Herman van Rompuy

“It seems that the sovereign debt crisis could be acting as a catalyst for an ever closer union of European countries. The decisions taken this weekend first by European leaders and then by finance ministers mark a big leap towards a fiscal union in the euro area, we think.” ~ Elga Bartsch, European Chief Economist for Morgan Stanley

To Europe we say, don't move from a failed monetary union to a failed political union to solve the problems created by your local and supra-national EU politicians. The world meltdown and now sovereign debt crisis was predominately caused by our Wall Street firms which offered your politicians sovereign debt scams guaranteed to fail. We have found giving politicians short-term debt financing to buy re-election is like giving unlimited heroine to a heroine addict as a solution to their addiction problem. This only works as long as the drugs are available. When the drug or credit ends, these power or drug addicts will do absolutely anything to maintain their addiction. Looking through the past false war propaganda, all too much of European and American history is made up of wars and economic dislocation created by politicians to advance their agenda and addiction to power and wealth.

Read the rest here.
 

Ron Holland is a contributing editor to the Swiss Mountain Vision Newsletter and Swiss Confidential published by Appenzeller Business Press.

Will Great Britain Ditch the EU?

Ambrose Evans-Pritchard explains why it should:

Just when you thought the EU could not go any further down the road towards authoritarian excess, it gets worse.

The European Commission is calling for EU powers to vet budgets of the 27 member states before the draft laws have been presented to the House of Commons, the Tweede Kamer, the Folketing, the Bundestag, the Assemblee Nationale, or other national parliaments. It applies to Britain even though we are not in EMU.

Fonctionnaires and EU finance ministers will pass judgement on the British (or Dutch, or Danish, or French) budgets before the elected bodies of these ancient and sovereign nations have seen the proposals. Did we not we not fight the English Civil War and kill a king over such a prerogative?

Yet again we are discovering the trick played on our democracies by Europe’s insiders when they charged ahead with EMU, brushing aside warnings by their own staff economists that monetary union was unworkable without fiscal union. Jacques Delors knew perfectly well that this would lead inevitably to a crisis, but it would be the “beneficial crisis” that would force sovereign parliaments to submit to demands that they would never otherwise accept.

This is now playing out before our eyes. Club Med governments have built up €7 trillion sovereign debt under the cover of monetary union, which shut down the warning signals for borrowers and creditors alike. We are now near – or beyond – the point of no return. Eurozone states must go along with this cynical entrapment, or risk economic catastrophe. The conspirators have succeeded. The €750bn shock and awe package agreed over the weekend clearly alters the character of the European Project, crossing the line towards an EU debt union and an EU Treasury. How long will it be now before the EU acquires direct tax-raising powers?....

The moment of definition is fast arriving from Britain. The measures now being demanded to save monetary union cannot and will not be accepted by this Government, Nick Clegg notwithstanding. The most eurosceptic people I have ever met are those who have actually worked for the European Commission, though it takes a while – and liberation from Brussels – for these views to ferment.

The outcome – une véritable gouvernement économique – will put Britain and the eurozone on such separate courses that it will amount to separation in all but name. The sooner we get the nastiness of divorce behind us, the better.

It's a Crisis of the PIIGS, Not Just Greece

That's the verdict from markets, overnight.

The IMF/EU bluff does not appear to be calming markets. WSJ has the details:

...investors were focused on Europe, where worries about sovereign debt weighed on European equities and sent the euro 0.5% lower. The unease stemmed from concerns over Greece's aid package and speculation over the possibility of another debt downgrade for Spain. The Stoxx Europe 600 slid 1% in late morning trade.

The Greece aid package "as it now stands is certainly to be welcomed and may have assuaged market concerns had it been announced three to four months ago," said Michael Hart, a strategist at Citi. "But at this point, the situation has developed from a mere Greece-crisis into a full blown euro-zone sovereign crisis. And European policy makers continue to trail events in formulating their response," he said.

"Talk about Spain is weighing on the market, given that banks would be most exposed since they hold government bonds," said a London-based analyst, referring to what he said was market speculation that Spain could ask for an aid package. "Any news on sovereign debt reflects directly on bank stocks."

It's Time for the Greek Riots

Prime Minister George Papandreou is trying to sell Greeks on the idea of a tighter government budget, in order to get IMF/EU bailout money.

Here's the response of Spyros Papaspyros, head of the ADEDY civil servants union, after meeting with Papandreou:

We find ourselves before the most savage, unprovoked and unjust attack. The answer will be given in the street.

EU and the IMF want Greek budget cuts of around 24 billion euros ($32 billion). Greek unions want cuts of 0.

Retailers plan to shut their stores on May 5, joining a strike organized by the GSEE, another union, the country’s largest.

Sixty-five percent of Greek voters polled by researcher Alco for the Proto Thema newspaper last week said Papandreou must reject any measures that lead to more wage and pension cuts, according to Bloomberg.

Clueless at the EU

Jerzy Buzek, the former Prime Minister of Poland and current President of the European Parliament is in Washington D.C. His goal is to push for a stronger partnership between the United States and the EU.

He gave a briefing this afternoon at the National Press Club on what he would like to see. A stronger commitment to the climate and global stability, he said, was his goal.

He reported that he met with House Majority Leader Nancy Pelosi and then, separately with Secretary of State Hillary Clinton. He explained that eventually he would like to see the partnership expanded beyond just the United States. He said that among others he would like to see partnerships with were Russia, Brazil and even Saudi Arabia.

I sat there listening to this guy talk about expanding the EU partnerships to virtually the entire planet and thinking to myself, "Is this guy aware that the EU is on the verge of major crisis?"

"Never mind partnership with Russia, Brazil and Saudi Arabia, is the EU itself going to remain intact?"

It was Q&A time, so I asked him, "There are many people, particularly in the financial arena, who are wondering if the EU survives given the current financial crisis. The markets clearly don't believe a bailout is coming, or at  least question that it will succeed. Debt of Greece, Portugal and Spain were hit hard again today. Could you comment?"

He said the bailout announced yesterday would help Greece get financing that is lower than the current market rate of 7%  to 8%. I told him it didn't appear the markets believed that was going to work and  that Greece short-term paper was trading near 15%, today. He then stated he wasn't familiar with the financial area.

The next question came from a reporter working for a Spanish newspaper, who asked if he feared the crisis would spread to Spain. He said no that things would be resolved.

At this point, the moderator stepped in and changed the subject.  The rest of the questions were about climatology, which Buzek somehow mysteriously appeared to be much more of an expert than on EU finances. His main climatological comment was wherever he travels in the U.S. water is served with ice, which, he said, is not the case in Europe. But he was sure that much more needed to be done about the climate. Indeed, he reported that the EU is opening a climate office in the United States.

Mohamed El-Erian: Greece Is a Serious Problem

Joe Weisenthal is watching TV and reports on what he sees and hears:

PIMCO co-chief Mohammad El-Erian is on CNBC this afternoon talking to Maria Bartiromo.

His first point: unlike US equity investors, he is concerned about Greece, and says that if Greece isn't solved very fast, then this is a problem that will become a [big] problem soon.

He says there's nothing to feel good about until you see creditors step up to make concessions, and until some body step up to manage the bailout.

As for where he is investing client money, he's looking for quality -- so Germany and high-grade corporates.

He reiterated a point he's been making recently that Greece is Europe's subprime -- tiny, but with the potential to metastasize.

If the EU cracks, remember this is about the PIIGS, not just Greece, then a flight to German debt could occur. If there is a complete crack-up (a 20% possibility), where it becomes every EU country for itself, currency-wise, then a new German mark becomes the European gold standard of currencies. If you  own the German debt, you will own the new German currency.