EUROBLOWN: Stalemate spikes Draghi’s guns as Weidmann threatens to quit

Francois Hollande: Is there a point to this bloke?

Germany 1 Italy 1

(After far too much time. Penalties to be taken by Spain & Greece)

Apologies if this reads like a cross between news item and opinion-piece, but many if us here in Europe are beginning to wonder where this mutual exhibitionist onanism between Berlin, Frankfurt and Rome is going to end…and when something practical to help EU citizens might start happening.

We are now at Friday afternoon over here (early-bird Americans are just getting up) and so far there have been no big-gun interventions from Mario Draghi in terms of either serious bond-buying or – more urgently – Spanish banking and regional liquidity. There are two simple reasons for this: Jens Weidmann (the Bundesbank version of Jurgen Klinsmann) keeps threatening to fall on his sword, and Angela Merkel keeps alternately egging him on and holding him back. My apologies to Jurgen for placing him unwillingly in this parallel: he has more native intelligence in his highly-prized feet than all of these unaccountable poseurs put together.

To the understandable boredom of veteran Sloggers, let me just reiterate the eurozone’s central problem: The Franco-Italian-Spanish axis wants to take the largest shovel possible, and empty the ECB via the EFSF in order to save itself; the Germans want everyone who opposes austere nihilism to do as they’re told and starve with dignity; and Mario Draghi wants to stabilise the eurozone by reluctantly accepting that disguised debt forgiveness plus currency-printing is the only option left.

Some would call this an Eternal Triangle, but I increasingly see it as a Bermuda Triangle: into which good ideas are fired, only to disappear in a cacophony of fruitless debate between deadly moralists, dangerous pragmatists, and parachuted Goldmanists.

I spoke to market opinion-formers earlier this week. None of these guys have changed their view: Spain needs help yesterday, isn’t getting it today, and – if the politico-banking axis gets its way – next week is looking doubtful too. The markets are wavering somewhere between dashed ECB expectations, Bernankerology divining on QE3, and growing fear of the Chinese deceleration. ‘Anxious’ doesn’t begin to describe their assessment of this grand-scale abrogation of responsibility stretching from Berlin via Brussels and Paris to Madrid and Athens.

The questions that need to be addressed as of this moment are:

1. Francois Hollande has just spent time with Spain’s Rajoy: is M. Hollande going to do anything to resolve the triangular traffic-jam, or is he going to do on the European stage what he has so far achieved at home – nothing?

2. Mario Monti has vented his spleen with Merkel, and been told to calm down and see if that bailout will really be necessary after Spain’s banks and regions have been saved….always assuming Jens Weidmann doesn’t have an epi. As with Francois Hollande, is Monti just going to huff and puff, or is he going to restrain himself and, with Hollande, wake up to the fact that Draghi has far more genuine help to offer than the Merkeschäuble?

3. WTF is Berlin up to? I mean, how long does it take to make two choices: first, fall in and cooperate as an equal member of the eurozone to solve its problems; or second, accept that Germany isn’t going to get its own way – and bugger off?

Memo to the Chancellery: to keep trotting out lofty moral fables, insouciant vetoes, hypocritical spin, tabloid hysteria, and trips to Beijing isn’t going to produce a good result for anyone. As the saying goes, sh*t or get off the pot.

There is nothing the US Establishment and media would like better than to load all the blame for Congressional inaction onto its increasingly inert EU counterparts. But if nothing unblocks this zero-sum eurozone pinball game, then be it known that disaster will zoom across the Atlantic faster than Concorde in its heyday.

Here’s why: we are within a few working days of serious bank runs, and the domino effects of those runs going unchecked. This really is the Last Chance Saloon for Europe, the US, and the global economy. Blind German ambition, weak central bank action, and Washington’s puerile political games can smile benignly going into the weekend if they wish. I can guarantee, however, that next week is going to break the urbane calm of Jackson Hole bigtime unless somebody beyond Mario Draghi wakes up.

58 thoughts on “EUROBLOWN: Stalemate spikes Draghi’s guns as Weidmann threatens to quit

  1. You say “we are within a few working days of serious bank runs”, why do you think this? I agree that potentially banks runs may be not very far away, but how can you be sure about timing?

  2. Nicely put view of the EU triangle by the The Slog.

    Makes me think of the EU founders – leaders who have at various points somewhat admitted that ‘crisis’, in fact a really severe ‘crisis’, is needed to move things forward.

    So in our euro-farce EU sovereign football league, they are perhaps indeed intentionally ensuring that ‘crisis’ is what we get, with their plan this will finally justify Draghi’s proposed actions … except that crisis, as The Slog suggests, may get way, way beyond the control of anyone in Frankfurt, Brussels or Berlin.

    As with the smug USA government people who thought they had Lehman’s bankruptcy ‘contained’ … when it only took about 84 hours from the Lehman filing to the edge of a catastrophic global meltdown:

    « On Thursday (Sept 18), at 11am the Federal Reserve noticed a tremendous draw-down of money market accounts in the U.S., to the tune of $550 billion was being drawn out in the matter of an hour or two. The Treasury opened up its window to help and pumped a $105 billion in the system and quickly realized that they could not stem the tide. We were having an electronic run on the banks. They decided to close the operation, close down the money accounts and announce a guarantee of $250,000 per account so there wouldn’t be further panic out there.

    If they had not done that, their estimation is that by 2pm that afternoon, $5.5 trillion would have been drawn out of the money market system of the U.S., would have collapsed the entire economy of the U.S., and within 24 hours the world economy would have collapsed. It would have been the end of our economic system and our political system as we know it.

    We are no better off today … »

    ‘How The World Almost Came To An End At 2PM On September 18′
    http://www.zerohedge.com/article/how-world-almost-came-end-2pm-september-18

    • Too true Bru. Only difference this time being that Morgan Stanley look like favourites for gold in the bank fun run with any number of European and British banks contesting the silver and bronze medals.

  3. Funny thing about the German Chancellor is that she appears to agree with everything anyone says ath the moment, whether it be Dragi, Weidmann. Rajoy or even Hollande (who strangely seems to be disgreeing with himself about his social justice policy).Must be a new tactic to make sure that she has an escape route.

  4. You malign (?) Jesn Weidmann. He is the supreme economic physician who is determined to APPLY ADVANCES IN MONETARY MEDICINE to treat his patient’s condition – in this case severe bloating caused by scoffing too much mezes, paella and pasta. His cure? A drastic diet to clean out the system. Cold Turkey for an overheated Greece. But what if it kills the patient? Not his problem. He was not under my care when he got sick. Under his scrupulous regime, the patient will have died IN PERFECT HEALTH:

  5. Soon soup kitchens feeding MRE’s will become the norm in Southern EU…

    All will be revealed over this coming winter…

    Just how much did QE do for the economy Benny Boy?

    It weren’t kosher

  6. Take a look at the use of ‘dynamic provisioning’ by the Spanish banks,over at Zerohedge.Roll on September 12 ,if the EZ lasts that long.

  7. Jens is my personal hero at the moment. A man with principals in a position of influence. How extraordinary.

    And that speech by Bernanke is not going to make the drug addled market happy. Where’s the QE?! ;)

    Agreed John, it’s 30 seconds to midnight.

  8. ‘This really is the Last Chance Saloon for Europe, the US, and the global economy. ‘
    We have ‘been here’ before, haven’t we? Christine Lowgrade said this what, three months ago? It must be at least that by now. Nothing is hapening that isn’t planned. Fiscal and political union is just around the corner now methinks. I mean, the Sprouts are not running around panicking, are they? So close to the edge and so much calm, eerie eh? IMHO greater plans are afoot.

    • kfc
      Greater plans maybe, but my point is this: humans do linear, they don’t do exponential. There is no such thing as a gradual panic.

      • @JW; No indeed. It’s the panic constituent that’s the most interesting to me, as, the measures they take will be tempered only by the fear they can induce.

  9. “Mario Draghi wants to stabilise the eurozone by reluctantly accepting that disguised debt forgiveness plus currency-printing is the only option left.”

    To the people that say “failure is not an option” the above statement would be true. In aviation we jokingly say that there is no approach that cannot be salvaged. Pilots are known to continue with a messed up approach and crash the plane rather than ” going around” it’s a matter of pride.

  10. Pingback: John Ward – Euroblown : Stalemate Spikes Draghi’s Guns As Weidmann Threatens To Quit – 31 August 2012 | Lucas 2012 Infos

  11. “WTF is Berlin up to? ………. Blind German ambition”

    I have long come to the conclusion that in essence the whole thing is fairly simple. The initial strategy, based on the fallacy that growth is always the economic norm. interspersed with occasional, usually short term periods of recession, was simply to wait the bad times out. This is what lies behind the can kicking, Bernanke’s and Mervyn’s QE and even the apparently (to any sane person) idiotic market sentiment, hold things together and wait long enough and good old magic growth will cure everything.

    Since that strategy has failed totally with little likelihood of growth at the required minimum, sustained 5% plus level kicking in the short term, the US and UK approach has been to sit in a dark room and moan quietly hoping that ‘something will turn up’. The European approach is different. First they tried to get China et al to give them the equivalent of unsecured mortgages in order to buy their way out of the mess, didn’t work. As you point out, most of Southern, skip that, most of Europe now sees German riches, either directly or picked from the pockets of the German taxpayer, as the only viable solution. Germany disagrees. The one thing they all agree about is that no one wants to be the shot firer, bee-hive kicker or plug puller getting the blame for econogeddon, thus no one does anything bar sprinkling a few billion virtual Euros around in order to keep things more or less together and talk at great length saying how wonderful everything is really, just a little local difficulty, things aren’t really that bad, there is a solution, etc. rather than actually attempt to resolve the issues lest it becomes the final straw.

    I’ve said before, when something does happen that sparks the collapse, be it bank runs, blood on the streets, no bond buyers or whatever, Germany will cut and run, back to the DM.

    • Odd really since Germany was chief architect of its own success in the eurozone and has massively reaped the benefit of its own hard work, it will maybe leave them all having milked the cow dry.

      Not only that but they’ll go away saying it was everyone elses fault.

      • Not odd, just an example of Standard Economics 101. The Persians did it, the Romans did it and we the British did it most successfully on the grand scale, Germany has done it on a slightly smaller scale. That is how you run a successful economy. The biggest fallacy in the economic world today, or the MSM/Political Class version at any rate, is that everyone can have a trade surplus, they can’t.

  12. It`s the blame game…they`ll squat on that pot `till a a fall guy is found….
    How one is perceived in history is sooo important…
    Is it not?
    Its like the relatives gathered round the bed of a dying family member…..
    They all glance uneasily at each other and hope they don`t have to be remembered as the `plug puller`

  13. A small point, I know, but a canister of explosive often ignored in discussions of the immediate future of the eurozone (but a threat certainly not overlooked not by a worried Merkel and her courtiers) goes by the name of Silvio Berlusconi. It’s easy for non-Italians to deride Silvio and to dismiss him of being absolutely no account. And after all, his party is languishing in the Italian opinion polls – but with approval ratings of about 20 percent.

    So far, Mr B has dutifully sworn allegiance to Germany’s faithful representative Mario Monti, the Italian prime minister who was parachuted into power only weeks after after Mr B unwisely (but probably accurately) called Mrs Merkel “an unf—able lard a–e”. Berlusconi has kept an exceedingly low profile since then, and he has left an unremarkable lawyer – Alfano – to look after the day-to-day running of his party.

    But Monti has promised national elections by April 2013 at the latest, and already the main parties are beginning to gear up in preparation. This is “what if” country, I know, but what if Mr B, who has a serious score to settle with the Germans, were to seriously re-enter the fray. If he were to adopt a nationalist, anti-Euro, and anti-eurozone stance, he could garner much support – enough, even, to become Mont’s successor.

    Italians are swiftly becoming fed up to the back teeth with Monti’s remorseless root-canal economics, and a populist and anti-EU Berlusconi, with the full backing of his media empire, could do very well, provided that he were to play his cards right. Simply by standing for re-election, Mr B could cause havoc in the markets – and if he were to win, it could be good-bye eurozone. Watch this space.

    • @Houndstooth; Yes, but, the Sprouts are aware of this potential threat to their Dream, he will be ‘neutralised’ if there is any danger of him coming close to upsetting the apple cart, after all he must be ripe for a ‘DSK’ type sting surely?

      • @kfc1404 The only way to neutralise him would be for Berlin-Brussels to sack him – again – and replace him with another obedient apparatchik, but that would cause outrage in Italy and would run the risk of turning him into a martyr hero, thereby boosting his popularity at home. The DSK comparison doesn’t quite hold water. Berlusconi for some years now has made no secret of the raciness of his lifestyle, and rightly or wrongly, many Italian men rather admire his exploits with curvaceous teenage tarts.The sexual shenanigans that horrify the relatively uptight French are not seen as quite so culpable in Italy – it’s that cultural anthropology stuff again, perhaps.

  14. So it’s time to start the bank runs here early then. If we are going to go to a cash only/diamonds/gold economy I might as well bimble down to the bank on monday and get my two penneth out before they roll over and sink.. Especially since I’ve got a current account with Lloyds and one with RBS.

    Of course the big problem next month will be whether there is a bank to pay next months wages in -if there are any next months wages even.

    When we’ve all finished with this crap can we have a big bonfire and put all investment bankers that can’t run fast enough on it? Should get most of the fat, idle, useless, greedy bstards

    I’m sure you’ve seen it but there’s a fantastic little french film which explains why we are in the shit we’re in.

  15. Merkel suffers from narcissistic personality disorder. That much is clear from John’s fine profile of her.

    The Eurozone question then becomes “What course of action by Germany/Merkel” produces the required personal outcome for Madame? That outcome is Merkel über alles.

    Merkel calculates she cannot lose; If Germany stays in the European union, the price is that she becomes Empress; the alternative is Peter C’s if Germany leaves – she is fuhrer of the strongest state in the region and will pursue alliances with Russia, China or perhaps America. All she then lacks is a nuclear deterrent.

    As for the peasantry (Greece,Italy, Spain) they mean nothing to her. You are about to be astonished by her cruelty.

    • OhOh, I have been seeing many articles about gold over the last couple of weeks. I wouldn’t be surprised if the Chinese started asking for Gold. From what I have read, they have been buyins as much as they can get.

  16. Pingback: EUROBLOWN: Stalemate spikes Draghi’s guns as Weidmann threatens to quit / Ευρωκατάρρευση : Αδιέξοδο στα όπλα του Ντράγκι καθώς ο Βαίντμαν απειλεί με παραίτηση « Ελεύθερ

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  21. Pingback: EUROBLOWN: Stalemate spikes Draghi’s guns as Weidmann threatens to quit / Ευρωκατάρρευση : Αδιέξοδο στα όπλα του Ντράγκι καθώς ο Βαίντμαν απειλεί με παραίτηση « Ελεύθερ

  22. Pingback: EUROBLOWN: Stalemate spikes Draghi’s guns as Weidmann threatens to quit / Ευρωκατάρρευση : Αδιέξοδο στα όπλα του Ντράγκι καθώς ο Βαίντμαν απειλεί με παραίτηση « Ελεύθερ

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  25. Pingback: Spanish bank run: the evidence mounts | A diary of deception and distortion

  26. Pingback: John Ward – Spanish Bank Run : The Evidence Mounts – 3 September 2012 | Lucas 2012 Infos

  27. Pingback: Infowars Wexford | CIF collapse: this is going to be a bank-run, not a fun-run

  28. Pingback: Spanish Bank Run: the Evidence Mounts – We Know the Secrets of the Federal Reserve

  29. Pingback: CIF collapse: this is going to be a bank-run, not a fun-run [The Slog] « Mktgeist blog

  30. Pingback: EUROBLOWN: Spain’s banks are basket cajas | A diary of deception and distortion

  31. Pingback: John Ward – Euroblown : Spain’s Banks Are Basket Cajas – 23 September 2012 | Lucas 2012 Infos

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