According to FAZ, the German parliament, which made it all too clear wants to be heard in all future European bailout instances courtesy of the constitutional court decision in early September, has just announced it wants to be heard, this time for real, and decide, on any EFSF expansion facility and specifically the usage of more leverage to fight already unbearable systemic leverage.
Sarkozy says euro zone talks stuck, flies to Germany | Top News | Reuters
France has argued the most effective way of leveraging the European Financial Stability Facility is to turn it into a bank which could then access funding from the ECB, but both the central bank and the German government have opposed this.
“In Germany, the coalition is divided on this issue. It is not just Angela Merkel who we need to convince,” [French President Nicolas Sarkozy] told the parliamentarians at a lunch meeting, according to Charles de Courson, one of the legislators present.
His comments fueled doubts about whether euro zone leaders will be able to agree a clear and convincing plan when they meet on Sunday.
via Sarkozy says euro zone talks stuck, flies to Germany | Top News | Reuters.
Jürgen Stark: Hearing at the Committee on Economic and Monetary Affairs of the European Parliament
“Given that one of the root causes of the current sovereign debt
crisis are unsustainable fiscal policies, I want to emphasise that this calls for a clear strengthening of incentives for prudent and sustainable fiscal policies. The introduction of common bonds in the euro area would, however, clearly weaken such incentives without
offering a long-term crisis resolution.”
via Jürgen Stark: Hearing at the Committee on Economic and Monetary Affairs of the European Parliament.
Forget Greece, EUROPE is Finished | ZeroHedge
Merkel and Sarkozy claim they’ve got everything under control. They’re lying. Anyone who uses common sense can tell this. The reason…
They’ve never considered the true price tag for the leveraged EFSF. I’m not talking about money, I’m talking about funding costs for France and Germany when they lose their AAA rated status as a result of backing up Greece. First off, while France and Germany are the most solvent members of the EU, they’re not exactly models of fiscal austerity. Consider that both countries officially have Debt to GDP ratios of roughly 80% (Germany’s is 78% and France’s is 84%).
China & HongKong retreat
Dow Jones Shanghai Index fell sharply on Tuesday, signaling a test of the lower trend channel. Declining 63-Day Twiggs Momentum below zero indicates a strong primary down-trend.
The Hang Seng Index retreated to 18000 Tuesday. Respect of both resistance at 19000 and the descending trendline warn of another test of primary support at 16000. Declining 13-week Twiggs Money Flow indicates long-term selling pressure. Failure of primary support would offer a target of 13000*.
* Target calculation: 16 – ( 19 – 16 ) = 13
ASX 200 hits ceiling
The ASX 200 index encountered both the declining trendline (from April 2011) and resistance at 4300. Low volume indicates a lack of enthusiasm from buyers. The strong red candle warns of another test of 3850; follow-through below Tuesday’s low would confirm.
* Target calculation: 4000 – ( 4500 – 4000 ) = 3500
Japan & South Korea buying pressure
Japan’s Nikkei 225 Index retreated Tuesday, but has completed a small double bottom, indicating a test of 9000. Bullish divergence on 13-week Twiggs Money Flow flags strong buying pressure. Breakout above 9000 would indicate an advance to 10000.
* Target calculation: 9000 + ( 9000 – 8400 ) = 9600
The Seoul Composite Index shows a weaker divergence on 13-week Twiggs Money Flow. Breakout above 1900 would offer a target of 2150, while respect would re-test primary support at 1650.
* Target calculation: 1900 + ( 1900 – 1650 ) = 2150
South Africa & Brazil
The JSE Overall Index is testing both resistance and the descending trendline at 31500. Breakout would test the 2008/2011 high of 33000, but respect would warn of a test of 30000. Reversal below 30000 would signal a primary decline to 26000. 13-Week Twiggs Money Flow indicates medium-term buying support but long-term selling pressure.
* Target calculation: 28500 – ( 31500 – 28500 ) = 25500
Brazil’s Bovespa index also shows medium-term buying support but long-term selling pressure. Respect of resistance at 58000 would indicate another test of primary support at 50000. Breakout above 58000 is unlikely, given global market conditions and falling iron ore prices, but would signal reversal to a primary up-trend.
* Target calculation: 50 – ( 58 – 50 ) = 42
Southern Europe Could Learn From Ireland – WSJ.com
Efforts to cut the deficits in these [EU Mediterranean] countries are not failing because of different reasons in each nation, although there are some such. They are failing because of misguided austerity plans.
Spending cuts and tax increases drive GDP down faster than the deficit, causing the deficit:GDP ratio to rise rather than fall. These measures are being imposed on economies with rigid labor markets, no history of entrepreneurial innovation, high taxes, and regulations that strangle their private sectors. That is not to say that the roles played by governments should not be reduced: They should. But without growth-inducing reforms, all the cutting will continue to be for naught.
US Stock Market: Bulls vs. Bears; Historians vs. Risk Takers? | The Big Picture
Very negative pictures can be painted on the outcomes of the European sovereign debt crisis. Other negatives can point to more deteriorating factors in the United States, such as the weak housing market and the high unemployment rate. In our view, all of these factors are known. They have been established for some time. They have been mixed into the pricing expectations in markets. In essence, they are “old news”.
via US Stock Market: Bulls vs. Bears; Historians vs. Risk Takers? | The Big Picture.
I have heard this often of late: “all of these risks are already priced into the market”. Isn’t that the same old Efficient Market Hypothesis that failed so spectacularly? The market will price the risk, but there is no guarantee that the risk is correctly calculated. Look no further than June 2007 to May 2008 for an example of how the market priced risk at the start of the sub-prime crisis.