Posted by AzBlueMeanie:
Here are the options being discussed by finance ministers in Europe this week: The Eurozone can begin to dissolve with countries defaulting and returning to their own currencies.
Or the Eurozone can form a "fiscal union" in which democratically elected sovereign governments cede control over budgetary matters and fiscal policy to a central authority comprised of economics technocrats drawn from the banksters of Europe who created this flawed Eurozone in the first place. This central authority may very well be unelected, thus ceding democracy and sovereignty to the banksters of Europe as well. It is a corporate globalists' wet dream -- owning Europe.
This latter choice appears to be where Europe is leaning this week.
The head of the European Central Bank signaled on Thursday that the bank may be willing to take more aggressive steps to stem the region’s debt crisis-- if, and only if -- the nations of the Euro zone first unite behind a plan to tame years of runaway spending. Head of ECB hints at more bank action if euro countries curb spending - The Washington Post:
Mario Draghi, the ECB’s president, called on the 17 nations of the euro zone to embrace a new fiscal pact that could see countries effectively forfeit independence over their budgets, and potentially give their neighbors the right to veto national spending and slap penalties on big spenders. If such a pact were struck, he hinted, the bank would be ready to play a bigger role in helping stem the crisis – a move that economists and investors say is neccessary.
* * *
A new fiscal pact is “definitely the most important element to start restoring credibility," Draghi said. "Other elements might follow, but the sequencing matters. It is first and foremost important to get a commonly shared fiscal compact right.”
As Ezra Klein describes this, Wonkbook: Europe hits its debt ceiling:
Imagine if, during the depths of the financial crisis, the Federal Reserve hadn't stepped in to save the economy . . . Imagine, in other words, that rather than save the economy during the financial crisis, the Fed had used its sudden leverage and importance to push a policy agenda on the president, Congress, and state legislatures around the country.
Seems sort of awful, right? Almost like blackmail. Like firefighters coming to your house during the blaze and keeping the hose on the truck while they told you how much they liked your jacket. But that's pretty much what's happening in Europe right now.
* * *
The Eurozone countries will agree to a fiscal union with tight, binding constraints on the deficits that individual countries can run. Then and only then, the European Central Bank will step in, turn on the hose, and end the run on Southern Europe.
Mario Draghi, head of the European Central Bank, came very close to saying outright that that's the deal in remarks before the European Parliament. He called for a fiscal compact that “would enshrine the essence of fiscal rules and the government commitments taken so far, and ensure that the latter become fully credible, individually and collectively."
* * *
While Europe's economic problems are real, what imperils the Eurozone is a mostly political crisis, in which Germany and the ECB are threatening to permit armageddon unless their policy agenda is implemented. This is, in other words, Europe's debt ceiling. The Eurozone is facing an unimaginable economic catastrophe, but the players with the power to avoid it will only do so if their demands are met.
Like the Tea-Publicans in the U.S. Congress holding the country hostage over the federal debt ceiling, a contrived political crisis that did not have to happen, the banksters of Europe are holding Europe hostage to gain leverage and power over democratically elected sovereign governments. The banksters see an opportunity to take control of democratically elected sovereign governments, and this is unacceptable. Corporations must be accountable to the governments that chartered them and allow them to exist, not the other way around.
This stark choice follows a "We Are The World" bailout of European banks on Wednesday, after the world’s major central banks unveiled a new strategy to create a wall of money to try to prevent Europe’s financial woes from undermining the stability of the global banking system. Markets surge after central banks announce move to ease credit crunch - The Washington Post:
The Federal Reserve, European Central Bank and central banks in Canada, Britain, Switzerland and Japan said in a joint announcement that they will extend the timing and lower the interest rate paid on “swaps,” arrangements that have been used intermittently since late 2007 to funnel dollars to the banking systems of countries where there is need.
The action recalls the fall of 2008, when the global central bankers took a series of coordinated actions to try to stem a worldwide financial panic. However, the impact of the latest measure might be more symbolic than substantive. The Fed already had made available unlimited dollars to other leading central banks, and $2.4 billion of such lending was outstanding as of last week (that number might increase now with the lower interest rate).
The policy does nothing to address the fundamental problems in Europe — namely a loss of confidence in the ability of Italy and other nations to repay their debts and fears that this could cause the euro currency area to break apart.
Markets in Europe and the United States surged after the news was announced.
Under the new action, the Fed, in effect, is temporarily handing over money to other global central banks in return for an equivalent amount of their own currency, now at a lower interest rate, and those central banks then lend the dollars to banks in their countries. It works like this: The Fed lends dollars to, say, the ECB, in exchange for euros of comparable value. The ECB pays interest, and lends the dollars to banks in the euro currency area that have obligations in dollars but are temporarily unable to borrow that currency to meet them.
It is a step meant to arrest a creeping crisis of confidence in the world banking system brought on by the heightening European debt crisis, which in turn threatens both major European banks and many of their counterparts elsewhere in the world.
The swap lines are a global form of the central bankers’ role as “lender of last resort,” backing the world banking system.
The swap lines themselves were introduced in December 2007, when banks were finding it harder and harder to fund themselves, and were used in vast amounts in the financial crisis in the fall of 2008. They were reintroduced in May 2010 when Europe’s financial troubles worsened.
But with the statement Wednesday, the Fed and other central banks agreed to make their terms less onerous. The global central banks must now pay the Fed a private sector overnight lending rate plus 0.5 percentage point; they previously paid the so-called overnight index swap rate plus 1 percentage point.
And the swap lines will now be in place until February 2013; they had been extended piecemeal.
The Fed also said it stands ready to back the U.S. banking system should it encounter new problems.
* * *
The swap lines pose little risk to the U.S. taxpayer, Fed officials have said, because the Fed is doing business with foreign central banks viewed as trustworthy. Those foreign central banks in turn take the risk of loss if the banks they are lending to were to go under.
In addition, European banks are appealing to the International Monetary Fund in addressing the region’s debt crisis, an acknowledgment that their efforts to date have fallen short. European ministers plan to turn to IMF for more help in debt crisis - The Washington Post:
With international investors continuing to press on weak links in the euro currency union, European finance ministers said they would turn to the IMF to help supplement their emergency bailout fund.
At the latest in a series of late-night meetings, the euro-zone ministers approved efforts to expand the financial effect of the existing bailout fund. But they recognized that it was unlikely to attract enough private investment to provide emergency financing to large countries such as Italy and Spain, which must raise hundreds of billions of dollars in coming months.
So the ministers said they would push for an increase in IMF funds available to euro-zone countries. The idea is to use the agency as a sort of conduit, allowing wealthier countries such as Germany, or perhaps the European Central Bank (ECB), to provide money that could then be directed back to Europe.
The fund would oversee how the money is used, ensuring that Italy or other possible beneficiaries adhere to specific targets for reducing government deficits or making economic changes.
* * *
Discussion of a deeper role for the IMF came as the ministers completed work on the design of the bailout fund, the European Financial Stability Facility, which was set up a year and a half ago to backstop euro-region governments that have trouble raising money on world bond markets. Funding for the bailout fund from the euro zone’s 17 nations has fallen short as larger countries, such as Italy, have run into trouble. Italy, the third-largest economy in the euro zone, has seen its borrowing costs spike and on Tuesday they remained at unsustainably high levels.
Efforts to double or triple the bailout fund’s firepower by attracting outside investors also have stumbled.
* * *
The IMF on its own would have difficulty underwriting a bailout of a major nation such as Italy. Meanwhile, the U.S. government and others have resisted any increase in IMF funding to be paid for by the agency’s 187 member nations. Bilateral loans to the IMF — for instance, those from individual countries — would skirt that problem and have been used before to boost IMF resources.
"After nearly two years of trying to battle the crisis, European leaders say their focus has now turned toward an early December summit, where they will discuss a potentially profound reordering of Europe’s economic management that would transfer power over national budget decisions to a central authority." (see above).
Recent Comments