Category: UK & Europe

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NEIN, NEIN, NEIN, and the death of EU Fiscal Union – Telegraph Blogs

Bundestag president Norbert Lammert said yesterday, lawmakers had a nasty feeling that they had been “bounced” into backing far-reaching demands. This can never be allowed to happen again. He warned too that Germany’s legislature would not give up its fiscal sovereignty to any EU body.

…..Something profound has changed. Germans have begun to sense that the preservation of their own democracy and rule of law is in conflict with demands from Europe. They must choose one or the other.

via NEIN, NEIN, NEIN, and the death of EU Fiscal Union – Telegraph Blogs.

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The “Muddle Through” Has Failed: BCG Says “There May Be Only Painful Ways Out Of The Crisis” | ZeroHedge

According to [Boston Consulting Group], the amount of developed world debt between household, corporate and government that needs to be eliminated is just over $21 trillion. Which unfortunately means that there is an equity shortfall that will have to be funded with incremental cash which will have to come from somewhere.

via The “Muddle Through” Has Failed: BCG Says “There May Be Only Painful Ways Out Of The Crisis” | ZeroHedge.

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German Parliament Approves EFSF’s Expansion – WSJ.com

German Chancellor Angela Merkel’s fractious coalition won a brief reprieve on Thursday, as lawmakers from the center-right ruling parties closed ranks and passed legislation to expand the euro-zone’s bailout fund.

……A total of 523 lawmakers voted in favor of the EFSF reform bill; 85 voted against, with three abstentions. The overall result includes the votes of the opposition Social Democrats and the environmentalist Greens, who unanimously backed the bill in stark contrast to Ms. Merkel’s unruly coalition.

……The 17 euro-zone governments agreed in March and July to expand and reform the EFSF, boosting the lending capacity of the fund to €440 billion ($596 billion) from €250 billion. The fund also will receive additional powers, such as the ability to extend credit lines to banks and buy bonds on the secondary market.

…….The temporary EFSF is set to expire in 2013 and to be replaced by a permanent European Stability Mechanism.

via German Parliament Approves EFSF’s Expansion – WSJ.com.

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Frau Merkel, it really is a euro crisis – Ambrose Evans-Pritchard

The reason this crisis keeps grinding ever deeper is because the euro itself is a machine for perpetual destruction. The currency is fundamentally warped and misaligned. It spans a 30pc gap in competitiveness between North and South. Intra-EMU current account deficits have become vast, chronic, and corrosive. Monetary Union is inherently poisonous.

The countries in trouble no longer have the policy tools — interest rates, QE, liquidity, and exchange rates — to lift themselves out of debt-deflation. Just as they had few tools to prevent a catastrophic credit bubble during the boom. Their travails were caused in great part by negative real interest rates set by the ECB (irresponsibly) for German needs.

via Frau Merkel, it really is a euro crisis – Telegraph Blogs.

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Euro-Zone Bailout Plan Progresses – WSJ.com

While German officials say they are open in principle to using the EFSF’s limited war chest “as efficiently as possible,” they say these ideas are unlikely to work well unless the ECB cooperates. So far, the ECB has rejected calls to team up with the bailout fund.

Political resistance to such a “leveraging” of the EFSF is high in Germany’s parliament, which would have to approve such a move. Ms. Merkel’s government has tried to reassure its lawmakers this week that it has no plans to make German taxpayers shoulder even bigger risks.

via Euro-Zone Bailout Plan Progresses – WSJ.com.

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Dollar rise as euro falls

The euro is testing short-term support against the greenback at $1.35/1.34. 63-Day Momentum (declining below zero) reminds we are in a primary down-trend. Failure of support would signal a decline to $1.30*.

EURUSD

* Target calculation: 1.40 – ( 1.50 – 1.40 ) = 1.30

The dollar has benefited from safe haven demand, commencing a primary advance as the euro falls. 63-Day Twiggs Momentum crossed to above zero, confirming the primary up-trend. Further retracement to test the new support level at 76.00 is likely, but respect would demonstrate strong buying support.

US Dollar Index

* Target calculation: 76 + ( 76 – 73 ) = 79

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Europe: DAX and Footsie jump on bailout hopes

Germany’s DAX Index gapped above its secondary trend channel (or large flag) on hopes that the EFSF bailout rumor will materialize. The index is due for a secondary reaction, with bullish divergence on 21-day Twiggs Money Flow indicating medium-term buying pressure. Expect resistance at 6100. The bear market continues, however, and reversal below 5000 would offer a target of 4000*.

DAX Index

* Target calculation: 5000 – ( 6000 – 5000 ) = 4000

The FTSE 100 continues its narrow line between 5000 and 5450, with divergence on 21-day Twiggs Money Flow indicating (medium-term) buying pressure. Again, the bear market is likely to continue and failure of support at 5000 would signal another down-swing — with a target of 4400*.

FTSE 100 Index

* Target calculation: 5000 – ( 5600 – 5000 ) = 4400

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EU Super-Bailout Option Slips Away – WSJ

Financial markets rallied around the globe Monday as investors saw the first glimpse of real hope for containing the European debt crisis. Problem was that the lead advocates of the deal, the IMF’s Christine Lagarde and the European Commission’s Olli Rehn, are bureaucrats who don’t have to answer to electorates every few years.

Decidedly not on board were the actual governments of the 17 euro-zone nations. Euro-zone finance ministers came home from Washington doubting they could sell more risk to voters already grumbling at past and present tax money being put behind insolvent state treasuries in Greece, Portugal and Ireland.

via EU Super-Bailout Option Slips Away – The Source – WSJ.

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European Crisis Primer: Where Things Stand – WSJ

The crucial talks between the European Union-European Central Bank-International Monetary Fund “Troika” with the Greek government remain on hold as Greece pulls together another six billion euros in cuts and taxes to hit its promised 2011 target. At stake is the next eight-billion-euro bailout payment, without which Greece goes broke within weeks.

via European Crisis Primer: Where Things Stand – Real Time Economics – WSJ.

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