The world markets have all sold off and the word on the Street seems to be this: "these proposals aren't fiscal union at all."
http://www.cnbc.com/id/45638887
"In and of itself these proposals aren't fiscal union at all," said Megan Greene, senior economist at Roubini Global Economics. "They just really institutionalize the asymmetric adjustment that's been occurring in the euro zone already with the peripheral countries making all of the adjustment, (and) the core countries making none of it."
Well hey, the world markets don't like it but the German press does representing this as a victory for Angela Merkel and a defeat for Britain. Strange as it seems while it is a defeat for Britain-Cameron never even needed to get involved in this as it wasn't binging on Britain anyway-it is also a defeat for the EU and Germany itself though they're too clueless to understand that.
The Wall Street Journal today represented this deal as having two aspects on pg. A15 today: a fiscal rules aspect and a bailout money aspect. The bailout money aspect has no beef, None, It represents a rise of about 100 billion euros, that's all and it tries to make even this come from the IMF as if this is the world's responsibility rather than Europe. Sure maybe the IMF will do the job that you wont do. Or maybe the Federal Reserve. Or maybe China will. Anything but the ECB, not that. The agreement actually specifically rules out greater ECB particpation.
Meanwhile the Austerity that the EU thinks is so vital: "The austerity measures will have a profoundly negative impact on economic growth and will make 2012 a very challenging year in economic terms," said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets. "
Europe you've done it again!
The message seems to be, austerity will continue until morale improves. When, not if, the EU unravels it will be primarily the result of Germany. Haven't we seen this movie before? You can't run a country without a printing press. (Lender of last resort.) Not only is the latest proposal a failure, it demands that the bondholders of current EU countries obligations are paid in full. As noted yesterday at Nick Rowe's place, the latest "agreement" calls for a limit on structural deficits in excess of .5% of GDP. See: http://worthwhile.typepad.com/worthwhile_canadian_initi/2011/12/what-is-a-eurozone-structural-deficit-again.html
ReplyDeleteThanks for the link. This new thing that bondholders can't take haricuts muddies things even further.
ReplyDeleteBasicaly they want to square the circle