Wonder why Draghi is disgusted with Euroland leaders ? Spain sums it up - great pieces from Mish !

http://globaleconomicanalysis.blogspot.com/2012/06/edge-of-precipice-doublethink.html

Friday, June 01, 2012 1:20 PM

Edge of a Precipice; Doublethink Extraordinaire; Spain in Discussions With US Regarding Bank Aid; Gold Soars; Geithner to the Rescue?

George Orwell coined the term doublethink in his classic book 1984. Doublethink is the power of holding two contradictory beliefs in one's mind simultaneously, and accepting both of them.

Have you listened to the conflicted beliefs coming from Spain lately?

Conflicted Beliefs

1. “I don’t know if we are on the edge of a precipice, but we are in a very, very difficult situation”  said Spain's finance minister, Luis de Guindos, at a conference on Thursday night.  "Madrid needs assistance, no strings attached" says Spain’s deputy prime minister, Soraya Sáenz de Santamaria. Meanwhile, Guindos has made overtures to the ECB, EU, and now US treasury secretary Tim Geithner to help capitalize Spanish banks.
 
2. Guindos, Santamaria, and prime minister Mariano Rajoy insist Spanish banks are sound and Spain does not need any international assistance
3. Geithner to the Rescue?
   
   The Financial Times reports Spain and US hold talks on bank aid 
   

    Madrid has begun openly discussing outside assistance for its troubled banking sector, with a top Spanish official saying she had raised the issue with Tim Geithner, the US Treasury secretary, who urged the EU to “find a solution” to stabilise Spain’s banks.
   
   Soraya Sáenz de Santamaria, Spain’s deputy prime minister, said after a meeting with Mr Geithner that the two had discussed proposals to recapitalise Spanish and other European banks “without state intervention and without conditions,” a clear reference to Madrid’s wish to get EU bailout assistance without strings attached.
   
   “It’s something in the debate, and we’ve been discussing that possibility,” Ms Santamaria said. “Treasury secretary [Geithner] has indicated that we are working in the same direction and that we must find a solution to the banks, because the problem is not just a problem in Spain as a nation, but our financial system.”
   
   Madrid has insisted it will not need an international rescue, with the government in complete opposition to any form of externally imposed programme as seen in Greece, Portugal and Ireland.
   
   

   Luis de Guindos, Spain’s finance minister, travelled to Germany earlier this week to meet his counterpart, but received no compromise from Berlin on its opposition to European funds being injected directly into troubled banks.
   
   
   “I don’t know if we are on the edge of a precipice, but we are in a very, very difficult situation,” Mr De Guindos said at a conference on Thursday night.

   De Guindos is globe-trotting the world, holding meetings with the EU in Brussels, with French president Hollande in France, with Germany's finance minister in Berlin, with treasury secretary Tim Geithner and the IMF in the US, asking for "assistance with no strings attached" while insisting "Spain does not need a rescue and its banks are not in trouble".
   
   This is exactly the kind of Orwellian story that is nearly impossible to make up.
   
   In response, gold is bucking the overall market trend as is the $HUI unhedged miner index up nearly 7% on the day as of 1:30 central while the overall market is down 3.3%.
   
   So what can Geithner really do? Nothing is the answer. What did Geithner say? Undoubtedly something along the lines and as pertinent as "Rah! Rah! Rah! Ciscoom Bah!"

   
   
   and........
   
   
   http://globaleconomicanalysis.blogspot.com/2012/06/spains-prime-minister-begs-for-european.html
   
   
   
   
   
   

   Saturday, June 02, 2012 11:33 AM

   
   

   Spain's Prime Minister Begs for European Fiscal NannyZone and Banking Union; Obama Seeks End to "Crisis Cloud"; Merkel Immediately Rejects Proposal; Cloud? What Cloud?

   
   

   On Saturday, Spain's prime minister Mariano Rajoy Asked For a Eurozone Fiscal Authority, in effect the "Fiscal Nannyzone" that I have spoken about on numerous occasions.

    Spain on Saturday proposed the set up a new fiscal authority in the euro zone which would control and harmonize national budgets and manage the European debts.
   
   Prime Minister Mariano Rajoy said the authority was the answer to the European debt crisis and would go a long way in alleviating Spain's woes as it would send a clear signal to investors that the single currency is an irreversible project.
   
   "The European Union needs to reinforce its architecture," Rajoy said at an event in Sitges, in the north-eastern province of Catalonia. "This entails moving towards more integration, transferring more sovereignty, especially in the fiscal field.

   "And this means a compromise to create a new European fiscal authority which would guide the fiscal policy in the euro zone, harmonize the fiscal policy of member states and enable a centralized control of (public) finances," he added.
   
   He also said the authority would be in charge of managing European debts and should be constituted by countries of the euro zone meeting strict conditions.

   Obama Seeks End to "Crisis Cloud"
   
   Bloomberg reports Merkel Rejects Debt Sharing as Obama Urges End to Crisis Cloud
   

    German Chancellor Angela Merkel hardened her opposition to joint debt sharing in the euro region as President Barack Obama singled out Europe’s leaders for not doing enough to stop the financial crisis.
   
   With Europe’s debt crisis cited last week for canceled IPOs, weaker-than-expected Chinese manufacturing figures and a rise in the U.S. jobless rate, Merkel rejected joint debt issuance in the 17-nation euro area as a solution, saying “under no circumstances” would she agree to Germany-backed euro bonds.
   
   

   Now, some “come along and ask for euro bonds, saying all we need are equal interest rates and everything will turn out all right,” Merkel said in a speech to members of her Christian Democratic Union in Berlin today. Instead, what’s needed is an economic overhaul to tackle the lack of competitiveness in Europe, she said.
   
   
   European ‘Cloud’
   
   
   Obama, speaking at a Chicago fundraiser yesterday as he bids for re-election in November, said that a report showing the slowest month of U.S. employment growth in a year was in large part “attributable to Europe and the cloud that’s coming over from the Atlantic.” The “whole world economy has been weakened by it,” he said.

   Cloud? What Cloud?
   
   Clouds are imaginary. The markets have cast a clear sunshine vote that the euro is a failure.
   
   Since the euro itself is the problem, the only clouds anyone can see stem from nannyzone proponents insisting at any and all costs to hold this untenable structure together.
   
   Recall that when the economies of Spain and Ireland were artificially booming fueled by two of the biggest property bubbles in the entire world, the IMF, eurocrats in Brussels, and misguided economic fools everywhere were cheering the growth in those countries.Contagion-Causing Policies

   
   Nannycrats did not see this coming last time and they will not see the mess coming the next time either. Heck, they cannot even see the mess the LTRO has made now. Nor can they see just how counterproductive and contagion-causing their own policies have been.
   
   Somehow these nannycrats are supposed to prevent messes?! Please be serious.
   
   The only thing nannycrats will do, were the idea ever to gain traction, would be to sink all of Europe into a permanent mess.
   
   Nannycrat Flashback
   
   For my original post on the Nannyzone written June 2, 2011, precisely one year ago today, please see Trichet Calls for Creation of European "Nanny-State" and Fiscal "Nanny-Zone"
   
   Even if such a proposal were possible, it would require a whole new treaty, and a constitutional vote in Germany, Ireland, and other countries.
   
   Fortunately, Rajoy's proposal is dead-on-arrival.
   
   Thus, it is time to focus on reality, instead of imaginary clouds. The reality is the eurozone is going to bust up and nannycrats better get used to the idea or the markets will impose that break-up in their own messy way.Addendum on the Nannycrats and the Nannyzone

   
   Reader Stan says .. 
   

    Rajoy says he wants this "Nannyzone", but would he actually obey the dictates of the Nannycrats if they ordered Spain to live within it's means? I doubt it. He wants the Nannycrats to tell Germans they must subsidize the PIIGS, but he wouldn't care for Nannycrats telling PIIGS to balance their budgets.

   Exactly!
   
   
   and.....
   
   
   
   
   http://globaleconomicanalysis.blogspot.com/2012/06/german-finance-minister-pressures-spain.html
   
   
   
   

   Saturday, June 02, 2012 4:42 PM

   
   

   
   

   German Finance Minister Pressures Spain to Accept Bailout; Germany Says €50 Billion to €90 Billion Needed; More Doublespeak

   
   

   Germany and Spain are both digging in their heels. Courtesy of el Economista and Google Translate, please consider Germany pressed for Spain to resort to bailout fund.

    German Finance Minister, Wolfgang Schäuble, have pressured the Spanish owner of Economy, Luis de Guindos, for Spain to resort to European rescue fund, fearing that fails to stay afloat on its own.
   
   
   According to reports advanced by the weekly Der Spiegel, Chancellor Angela Merkel and her minister chose this route earlier this week.
   
   
   Schäuble would have raised the possibility to de Guindos at their last meeting held in Berlin on Wednesday, which the Spanish minister refused, arguing that Spain will be able to fend for themselves.

   Der Spiegel says, without specifying sources, Merkel and Schäuble pressure on Spain to resort to European Financial Stability Fund (EFSF), to the growing threat of contagion to other countries of southern Europe, if possible abandonment of Greece in the euro area.
   
   
   According to that publication, the German government estimates that Spanish banks will require a capital injection of between 50,000 and 90,000 million euros.
   
   
   Berlin flatly rejected the possibility of direct aid to rescue fund banks, bypassing governments, in this case Spanish, contrary to the views expressed in that direction from the International Monetary Fund (IMF) and the European Commission (CE).
   
   
   Both Merkel and Schäuble repeatedly this week expressed confidence in the measures taken by the government of Mariano Rajoy.

   More Doublespeak

   
   

   Who the hell do Merkel and Schäuble think they are fooling? How can one express confidence in Spain while simultaneously pressuring Spain to accept a bailout?

   
   

   For more on Orwellian doublespeak, please see Edge of a Precipice; Doublethink Extraordinaire; Spain in Discussions With US Regarding Bank Aid; Gold Soars; 

   Geithner to the Rescue?

   
   

   
   

   and........

   
   

   http://www.testosteronepit.com/home/2012/5/31/germany-on-the-verge-dispel-this-fog-begs-mario-draghi.html
   
   
   GERMANY ON THE VERGE :  " DISPEL THIS FOG " ,  BEGS DRAGHI
   
   
   
   

   THURSDAY, MAY 31, 2012 AT 8:03PM

   
   

   Not a day goes by when the German government isn't under heavy fire from outside interests, including Barak Obama who is facing a tough reelection campaign; and the last thing he wants is any crap flying across the Atlantic and messing up his campaign speeches. They all want Germany to agree to pick up whatever the tab might be for bailing out the Eurozone, beyond the hundreds of billions of euros it has already agreed to pick up. And Thursday it was a loud crescendo that turned into a cacophony.

   Yet May has taken the sheen of what Germans have come to call their “success recipe” that has led to phenomenal growth, by German standards, from the trough of the financial crisis through the Eurozone’s current and apparently eternal debt crisis. The DAX suffered its worst May since the index was founded in 1987—it was down about 7%—after a series of economic data that have made a sharp turn for the worse.

   The latest came Thursday when the Statistical Agency reported that rail cargo in the first quarter had dropped 2.7% from prior year. While cargo transported to neighboring countries rose by 1.8%, cargo shipped between locations in Germany dropped 2.3%, cargo received from other countries dropped 5%, and transit cargo, a measure of the broader economy in the region, dropped a stunning 12.2%. The trend is even worse: March was particularly nasty with an overall decline of 6.4%. In the same breath, the agency announced that retail sales had dropped 3.8% in April from prior year. Analysts were hoping for an increase of 0.2%.

   And turmoil continued to spread: Euler Hermes, a subsidiary of German mega insurer Allianz, and Coface, a French credit insurer, announced that they would no longer insure exports to Greece, fearing the unpredictable consequences if Greece reverts to the drachma. A first in the history of the EU that insurers backed away from a member country. One more item in the litany of signs that the Eurozone is bogging down in its own mire.

   Meanwhile, the astounding wave of central bankers’ unleashing hard truths continued: Thursday it was ECB President Mario Draghi who, in discussing the travails of the Eurozone, let slip that “The configuration we had for 10 years, which was considered sustainable, has been shown now to be unsustainable....”

   
   

   Gasp! He was following in the footsteps of Thomas Jordan, President of the Swiss National Bank and long-time euro-skeptic, who’d discussed the consequence of a collapse of the euro. Read.... Bracing for a Euro Crash and Creating a Housing Bubble.

   And before him, it was Jens Weidmann, President of the German Bundesbank and member of the ECB Council, who’d slammed French President François Hollande, the ECB, anything reeking of a transfer union, and even Paul Krugman. Read.... The President of the Bundesbank Lashes Out.

   Draghi was pushing for dramatic action, where German taxpayers (and those of a few other countries) would be stuck with the bill. He called for the establishment of a Eurozone-wide centrally supervised (by him, presumably) banking union with a resolution fund and a deposit insurance fund to put an end to the quiet bank runs before they turn into panic. But he forgot an inconvenient fact: banks would normally be required to pay into such a fund for years to benefit from it during some distant crisis; but the fund doesn’t exist yet, and banks haven't paid into it, and so the entire amount of the deposit insurance needed for the current crisis would have to be born not by banks and their investors, but by taxpayers, and particularly taxpayers still able to do so, mostly those in Germany.

   “It is better to err by too much in the very beginning rather than by too little,” he said. The former Goldman Sachs banker was talking his book. It’s bailout mania all over again. Crony capitalism at the expense of taxpayers in other countries.

   “The next step is for our leaders to clarify what the vision is for a certain number of years from now,” he said. “Dispel this fog.” Again, stunning clarity. “Greater centralization of supervision is essential,” he added, on the principle that national democratic processes and institutions should be usurped for the sake of the euro, and that holders of government and bank debt shouldn’t ever lose their shirts—forgetting that defaults and bankruptcies are the cleansing processes of debt-fueled capitalism.

   Of course, Germany and a handful of other countries could agree to bail out first Spanish banks, then Spain, and then Italy, if they even could, along with some other countries and a slew of banks, including their own banks, to save the euro. The sums are so vast that taxpayers couldn’t actually do this. It would require the ECB to print these bailout trillions. A treaty change would allow that in no time. Hollande, Obama, et al. would be ecstatic. It would solve the Eurozone debt crisis in one fell swoop.

   The ECB would turn into the Fed or the Bank of Japan. It would eventually debase the currency and permanently free governments from the arduous and painful task of getting their budgets in order. Instead, politicians would follow the Japanese model, where debt amounts to 230% of GDP, and where utter fiscal gloom is pervading the lives of the young. The US, with its ballooning debt and out-of-control deficits, is already on that track. It may be OK for Greece or Italy. But is it wise for Germany? It seems the first decisions in that respect have already been made. Read...  Germany Walks Away From Greece.