European Union finance ministers agreed an emergency loan package on Monday that with IMF support could reach 750 billion euros ($1,000 billion) to prevent a sovereign debt crisis spreading through the euro zone.This morning Dutch finance minster Jan-Kees de Jager made a point of insisting the 440 billion are guarantees and will not be used, thus costing us taxpayers nothing. What a pity he ended his soothing reassurances with an added '..., als het goed is...'. That bit is the Dutch equivalent of "If everything goes according to plan", which pretty much negated all of the soothing noises he was producing only moments before.
The European Central Bank also announced steps to contain Greece's debt crisis, saying it would buy euro zone government and private debt and abandoning resistance to full-scale bond purchases. (...)
The EU finance ministers announced a package consisting of a special-purpose vehicle via which euro area states would guarantee on a pro rata basis up to 440 billion euros, plus a European instrument worth 60 billion euros.
Of the 440 billion, 24 billion is the Dutch part. This sum easily equals in size the amount of budget cuts envisioned by economists to balance the government budget to within a 3% deficit even before the Euro crisis hit the EUnion. It is quite unfathomable why de Jager (and any other North-European finance minister) agreed with this insanity. Mind you, Herr Schäuble, Germany's FM, was apparently so stressed out he collapsed and was taken to a Brussels hospital late last night. And who can blame him? He knows how the German public reacted to the Greek loans. These new plans dwarf the German commitment to Greece.
Deceit all over again
All of minister de Jagers insistence that these are mere guarantees and will cost nothing do sound a bit hollow after this same de Jager insisted the loans offered to Greece would never be taken and hence would cost us, tax-payers, nothing. One is tempted to say (as I did yelling at the TV screen this morning): "You LIE, sir".
The EUnion process has become so tediously predictable. We are started off with "This government will never... !". Then, as time goes by this morphs into "Only in the most extreme of circumstances will we...". One stage later this becomes: "We may have to...", until finally, when the 'colleagues' deem the timing right (after much scare-mongering MSM coverage) they come out and say what they had been planning all along: "This government will of course..!". One is very much under the impression that the end-game has already been decided, but is being withheld from the public in fear of its reaction to the full plans. So it was with the Greek bail-out and so it will be with the multi-billion 'guarantees'.
This deceit is vexing enough. But it gets even more gob-smacking when one realizes that this new package is a flagrant violation of the rules set out in the
What is totally unsurprising is that the "colleagues" should try to pull such a stunt. We've been saying consistently that they will do whatever it takes to protect their single currency, and this is just another example of their determination. But it is rather amusing that, on what is supposed to be Europe Day, they are having to shore up their construct, running rough-shod through their own treaty structures.In short: When in a pinch, the EUrocrats can't even show the decency to adhere to the monstrosity that is the Turnip they forced down our throats. If the Turnip is of questionable legitimacy, then the new measures taken by the 'colleagues' are devoid of any whatsoever. Yet they forge ahead. This is how little the 'colleagues' respect the citizenry. And this is how little we should trust the 'colleagues'.
Crisis as opportunity... leading to more crisis
A glimpse of the end-game can be gleaned from Ambrose Evans-Pritchard, who writes in the Telegraph:
[I]f the early reports are near true, the accord profoundly alters the character of the European Union. The walls of fiscal and economic sovereignty are being breached. The creation of an EU rescue mechanism with powers to issue bonds with Europe's AAA rating to help eurozone states in trouble -- apparently €60bn, with a separate facility that may be able to lever up to €600bn -- is to go far beyond the Lisbon Treaty. This new agency is an EU Treasury in all but name, managing an EU fiscal union where liabilities become shared. A European state is being created before our eyes.So, the EUnion is once again using a crisis to greatly expand its power, at the cost of another big slice of sovereignty of member states.
No EMU country will be allowed to default, whatever the moral hazard.
But at the same time it is sowing the seeds of the total economic ruin of the euro zone by removing moral hazard. In the name of European solidarity countries that are financially prudent will be made to pick up the tab of the countries that are not. The good shall pay for the bad. In all likelihood, this will have the effect that the good will stop being good, because that will only incur costs.
But it will likely not even have to wait for that to happen. According to Zero-Hedge the measures are doomed to failure. A failure that will become apparent in the next month or two:
The initial result will, no doubt, be a backup in many markets. The Euro will be higher, European sovereign bonds will trade higher; maybe even equities could catch a bid. But the critical question will be, “For how long?” Depending on the resolve of those in charge this could last for a bit. At least a week and more likely a month. But it is doomed to failure. Should we get to June and the benefits of these emergency steps wane there will be yet another crisis. The bonds will fall again as will the Euro. When that happens there will be no second bailout. Sometime in the next two months we will hear that great sucking noise again. And when it is heard there will be no stopping it.And when finally the house of cards is coming down, it will be you and I, ordinary citizens, taxed to the hilt and our savings depleted, who will have to bear the consequences. So much for the Euro and the EUnion bringing us prosperity...