German President Gauch catches Merkel out of position again ! is first move was the side step involving the German Constitution Court review of Fiscal Pact and ESM. This move can't be simply passed off as Gauck taking a required step - this is a call for Merkel to justify herself .... and while we on subjects German , note DB now in the Lie-bor Gate mess !

http://www.telegraph.co.uk/finance/financialcrisis/9385231/German-president-tells-Angela-Merkel-to-come-clean-on-EU-debt-deal.html

By Ambrose Evans-Pritchard

9:00PM BST 08 Jul 2012

101 Comments

German president Joachim Gauck has ordered Chancellor Angela Merkel to clarify exactly what she agreed behind closed doors at the EU crisis summit ten days ago, lending a powerful voice to critics dismayed by the surging costs of euro bail-outs.

"She has a duty to explain in great detail what it means, and what it means fiscally. There seems to be a lack of energy in telling the people what is really happening," he told ZDF television.

President Gauck's broadside came as markets wait anxiously for a crucial hearing this Tuesday by Germany's constitutional court on the legality of the European Stability Mechanism (ESM), the EU's €500bn (£397bn) bail-out fund. A clear ruling against the ESM would throw into doubt Germany's ability to backstop the euro and risk a dramatic escalation of the debt crisis.

Legal challenges to the ESM have been filed by a range of private citizens and lawmakers, mostly arguing that the fund violates the Bundestag's sovereign control over budgets, and eviscerates democracy. Mr Gauck will not sign the ESM into law until the court has ruled, probably later this month.

There is deep confusion over the summit deal after Mrs Merkel claimed that it "changed nothing" and that the small print made in it clear that there would be "no further liabilities".

Mrs Merkel's attempt to row back from the accord has undercut efforts of the French, Italian, and Spanish leaders to claim a major breakthrough - chiefly moves towards an EU "banking union" and green light for bond rescues on easier terms. Yields on Spanish 10-year bonds punched back up to crisis levels of nearly 6.9pc on Friday as post-summit optimism drained away.

Eurozone finance ministers will meet on Monday to flesh out details on use of the ESM to backstop sovereign debt. The summit deal tweaked the terms of any ESM bond purchases, allowing states to tap the fund without facing a harsh "Troika regime" provided they comply with EU fiscal rules.

However, it remains unclear whether the fund has the firepower to defend the system since Germany refused to grant the ESM a banking licence enabling it to borrow from the European Central Bank.

Ignazio Visco, the Bank of Italy's governor, said over the weekend that the ESM's resources were "insufficient" to tackle the crisis. He warned that monetary union had become deeply dysfunctional, with booming Germany able to borrow four times more cheaply than prostrate Italy. "This is creating a serious centrifugal force in the eurozone," he told Corriere Della Sera.

Mr Visco said most of 470 basis point spread in Italian 10-year debt over German Bunds has nothing to do with errors by Italy itself. He expects Italy's economy to contract by 2pc this year.

Chancellor Merkel has finessed the EMU crisis over the last two years behind a screen of calculated ambiguity, hinting at fiscal union at EU summits while insisting later that there had been no actual move towards joint liability.

Critics say this strategy has run its course. The crisis is nearing the point where Germany must either cross the Rubicon towards shared budgets and debts or make clear that it will go no further to save the euro.

Anti-euro protest within Germany is becoming louder as potential costs escalate, with Bundesbank "loans" to other EMU central banks under the `Target2' payments system reaching €729bn in June.

A group of 170 economists from the "German-speaking" zone published a joint letter last week warning that an EU banking union would pool bank debts worth three times total sovereign debt -- €23 trillion by some estimates - and expose northern creditor states to ruinous liabilities.

They said such a move would lead to bitter discord between countries and ultimately poison the European Project. The group called for the losses to be imposed on banks and creditors, claiming the EU's current bail-out policies amount to a rescue for "Wall Street and the City of London".

Pro bail-out economists in Germany said such arguments are reckless and echo the sort of "liquidationist" thinking that allowed the US and Central European banking systems to collapse in 1931, with dire consequences.

and....


http://www.zerohedge.com/news/german-president-demands-merkel-explain-why-germany-needs-save-euro

German President Demands Merkel Explain 'Why Germany Needs To Save The Euro'

Submitted by Tyler Durden on 07/08/2012 17:34 -0400

• Creditors
 
• Germany

While we have been surprised by the lack of public consternation within Germany at the real levels of servitude that an ungrateful Europe is trying to shove down the German taxpayer's throats; this week it appears the rubber is starting to meet the road. As Europe Online reports, German President Joachim Gauck called for Chancellor Angela Merkel to explain why Germany needs save the euro - at great expense to the country‘s taxpayers - and what will be necessary. In a TV interview, Gauck (having no doubt read our recent explanations of the TARGET2 ticking time-bomb and the real cost of GRExit) said that Merkel "has the duty to describe in great detail what it means [to stay in the Euro], including what it means for the budget". In a somewhat shockingly honest (for a European leader) comment he said that the political establishment has struggled to explain why it is vital for Germany to do its part to save Europe's currency union. Perhaps reflecting Juncker's Modus operandi, Gauck added that "sometimes it‘s hard to explain what this is all about. And,sometimes, there‘s a lack of effort to openly tell the populace what is actually happening."

The Telegraph adds, anti-euro protest within Germany is becoming louder as potential costs escalate (as we noted here) and a group of 170 economists from the 'German-speaking' zone published a warning -letter that a banking-union aggregating EUR23 trillion of bank debt would expose northern creditor states to ruinous liabilities (quite notable given theWSJ's report tonight that the overarching banking supervisorory body is getting close - more rumors).

They said such a move would lead to bitter discord between countries and ultimately poison the European Project. The group called for the losses to be imposed on banks and creditors, claiming the EU's current bail-out policies amount to a rescue for "Wall Street and the City of London".

Pro bail-out economists in Germany said such arguments are reckless and echo the sort of "liquidationist" thinking that allowed the US and Central European banking systems to collapse in 1931, with dire consequences.

and now we see why the spanish auditors review was pushed back until September because that's when the ESM is hoped to finally be in place...........

http://www.zerohedge.com/news/horror-horror-european-july-august-sovereign-bond-issuance-calendar

The Horror... The Horror: European July, August Sovereign Bond Issuance Calendar

Submitted by Tyler Durden on 07/08/2012 20:16 -0400

• Bond
 
• Deutsche Bank
 
• Estonia
 
• Germany
 
• Greece
• Italy
 
• Reuters

Well at least Spanish 10 Year bonds aren't above 7% and Italy is safely below 6%. Wait... what's that? Oh... uh uh... uh uh... Oh... Really... Oh ok...

Scratch that.

As a reminder 7% is and has always been a very magic number for Europe:

Full forward bond issuance:

July

• 10 July: Greece auction. Bills.
• 12 July: Italy auction. Bills.
• 13 July: Italy auction. Bonds.
• 17 July: Spain auction. Bills.
• 17 July: Greece auction. Bills.
• 19 July: Spain auction. Bonds.
• 24 July: Spain auction. Bills.
• 26 July: Italy auction. Bonds.
• 27 July: Italy auction. Bills.
• 30 July: Italy auction. Bonds.

Other events:

• 20 July: Eurogroup meeting (tentative). According to Reuters, the MoU on Spanish bank recap has been delayed to allow more time for negotiations and a new Eurogroup meeting has been pencilled in for 20 July. The MoU is due to specify the terms of the European loans – duration and interest rates. Again according to Reuters the first tranche of the loan will be sent to Spain’s bank restructuring fund  (FROB) on time for the
  • state rescued banks.
  
  
  August:
  • 2 August: Spain auction. Bonds
  • 13 August: Italy auction. Bills
  • 14 August: Italy auction. Bonds
  • 16 August: Spain auction. Bonds
  • 21 August: Spain auction. Bills
  • 28 August: Spain auction. Bills
  • 28 August: Italy auction. Bonds
  • 29 August: Italy auction. Bills
  • 30 August: Italy auction. Bonds
  Other events:
  20 August: ESM to become operational (Tentative). The following euro-area countries have not ratified the ESM yet: Estonia, Italy and Germany. We think they will all do by the first week of August. Then the first installment of the capital has to be paid by each ESM member within 15 days of the ESM treaty entering into force. Hence, the ESM will not be in a position to lend money until the last 10 days of August.
  and....

http://www.zerohedge.com/news/german-target2-claims-soar-%E2%82%AC729-billion

German TARGET2 Claims Soar To €729 Billion

Submitted by Tyler Durden on 07/06/2012 16:38 -0400

• Convexity
 
• Eurozone
 
• Negative Convexity

We have some good news for our German readers: in the month of June, your implicit cost of preserving the Eurozone (read the PIIGS) via TARGET2 funding of current account and various other public sector deficits and imbalances amounted to only €1 billion/day, down from €2 billion in June. We also have some bad news, which is that Europe's negative convexity ticking inflationary timebomb (why inflationary:Why Germany's TARGET2-Based Eurozone Preservation Mechanism Is Merely A Ticking Inflationary Timebomb), which guarantees that with every month in which nothing is done to undo the Buba's onboarding of liquidity risk, the risk for an out of control implosion of German, and implicitrly all European monetary institutions, rises exponentially, and just hit an all time high of €729 billion. To everyone who naively believes that a deus ex can come out of stage left and somehow reverse this guaranteed loss to German taxpayers (sorry: no free lunch) in the form of even more guaranteed inflation down the road, we suggest you short the chart below, somehow (and when you figure out how, let us know, so we can do the opposite).

and.....

http://www.zerohedge.com/news/worlds-biggst-bank-just-got-thrown-lieborgate-mess

The World's Biggest Bank Just Got Thrown Into The Lieborgate Mess

Submitted by Tyler Durden on 07/08/2012 15:16 -0400

• Barclays
 
• Deutsche Bank
 
• Jamie Dimon
 
• Japan
• LIBOR
 
• Reuters
 
• The Economist

When on Friday news broke that German regulator BAFIN (which is just like the SEC except that it also regulates, investigates and actually prosecutes, instead of just watching porn all day) was launching a probe of the biggest bank in Europe, and actually, make that the world, Germany's Deutsche Bank, the shares took a quick, brisk hit, sliding 5% with everyone anxiously expecting to find out just which bank will follow Barclays into the scapegoat abattoir (because nobody had any clue Liebor manipulation was going on until a week ago). Yet while external inquiry into banks is to be expected (everywhere but in the US of course, because in the US no banks manipulated anything. Ever) as a proactive act on behalf of regulators to cover their back, things get a little more tricky when the bank itself admits there was an obvious supervision problem. From Reuters: "Two Deutsche Bank employees have been suspended after it used external auditors to examine whether staff were involved in manipulating interbank lending rates, German magazine Der Spiegel reported, citing no sources." Now what can possibly go wrong if the biggest bank in the world, with just shy of $3 trillion in "assets", which just happens to have a 1.68% Core Tier 1 ratio, is suddenly thrust smack in the middle of the scandal that the Economist just aptly named the finance industry's "tobacco moment"?

From Reuters:

A spokesman for Deutsche Bank on Sunday declined to comment on the article, referring to its quarterly report, which said it has received subpoenas and requests for information from U.S. and European authorities in connection with setting interbank rates.

On Friday, people familiar with the matter told Reuters that Germany's markets regulator has launched a special probe into Deutsche Bank over suspected manipulation of interbank lending rates.

Investigators in the United States, Europe and Japan are examining more than a dozen big banks over suspected rigging of the London Interbank Offered Rate (Libor).

Britain's Barclays has been the only bank to admit wrongdoing, agreeing last week to pay a fine of more than $450 million.

The Libor rates, compiled from estimates by large banks of how much they believe they have to pay to borrow from each other, are used to determine interest rates on trillions of dollars worth of contracts around the world.

A spokesman for Frankfurt-based private bank Metzler said one of its investment companies has joined a number of class action suits in New York against banks accused of manipulating Libor rates.

"This is a standard procedure," he said.

And while all of that is fun and stuff, can we just fast forward to the moment where Jamie Dimon once again tells his Congressional muppets that LIeBOR is meaningless, and to look for their Christmas Libor-adjusted donation checks in the next few months.