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June 14th, 2012 
FAKE NEWS for the Zionist agenda
By Clive Crook | Bloomberg.com
Europes latest initiative to subdue its financial crisis fell apart in less than a day.
The instant response to the plan for supporting Spanish banks had been euphoric. Even as bond markets pushed the cost of Spanish public borrowing even higher, in effect declaring the country insolvent, politicians were still applauding themselves.
European Union leaders thought the plan would impress the markets because the sum committed to support Spains banks, 100 billion euros ($125 billion), looked adequate — bigger, in fact, than investors expected. The EU thought it was getting ahead of events for once.
It wasnt. Mistakes in the deals design made the plan self-defeating. These errors are worth noting, because they lie at the core of the EUs larger strategy.
The crucial thing is that the EU gave its support not directly to Spains banks but to Spains government, which would then lend it on. This had two fatal consequences. First, it added to Spains public debt, making its government less creditworthy. Second, depending on how the loans are structured — a detail left vague as the rescue was announced — Spains new debt to the EU might subordinate existing bondholders. Curbing the risk of a faster run on Spains banks was good, investors presumably calculated, but not good enough.
Merkels Mess
Both dangers were recognized before the deal was put together. Why then did the EU design the rescue this way? Why not simply extend direct EU support to Spains banks? The answer is Germany.
Video from: YouTube.com
Chancellor Angela Merkel and her parliamentary allies insisted that Spains government should bear responsibility for the rescue. German taxpayers should not be directly exposed to the costs of helping Spains banks. On the same reasoning, Merkel has said that the Spanish rescue funds should come from Europes new permanent lending facility, the European Stability Mechanism, on terms that would make the new debt senior.
Its of a piece with Germanys whole approach. The overarching fact in this crisis is that German taxpayers feel cheated. They didnt want the euro in the first place, suspecting it would become a transfer system that would put them on the hook for other countries profligacy. That, of course, is exactly what happened. To blunt this resistance, Germanys leaders promised at the outset there would be no bailouts, and they insisted on lots of rules and mechanisms to back this up. The crisis has blown that structure to pieces, but Merkel is still trying to keep the promise — even if the EU, and the German economy along with it, collapses as a result.
Germanys government is in a horrible political bind. Even allowing for this, the countrys response to the crisis now borders on the unintelligible.
On a small scale, the policy simply wont work. Spain and the other distressed economies cant manage this crisis without help from their EU partners. The absurdity in Germanys approach is that it concedes this — in practice though not in principle. It has already committed its taxpayers to many semidisguised channels of support. The biggest is the commitment that the ECB has made through liquidity support to euro-area banks and the balancing operations of national central banks. If the euro system doesnt survive, enormous losses will find their way back to German taxpayers.
Faulty Design
The choice is no longer between bailouts and no bailouts. It is between bailouts that work and bailouts that fail. The Spanish fiasco is one example. Germany has just put its taxpayers on the line to help Spanish banks. To cloak that commitment, it built failure into the design of the rescue. The politics may be understandable. That doesnt make the policy defensible.
Seen from a higher altitude, Germanys strategy is even more perplexing. Merkel, echoing the line of previous German chancellors, says she wants closer European union. With the EU at its present state of integration, she argues, transfers to overspending governments are unacceptable. National governments need to surrender sovereignty to the European center, she says, so that democratic accountability is restored and proper standards of governance can be maintained.
Meaning what? Perhaps she imagines that this new political union would put Germany in command. Lets call that an idiosyncratic view of political integration. Assuming non- Germans would be allowed to vote, Germany would be less in command than now. Its the profligate whose political clout would increase. Deeper union would overwhelm the German anomaly of prudent public finance.
Merkel and her northern European allies are right that the EUs member nations have different views and traditions on taxes, public services, redistribution, risk-sharing, public borrowing and every other aspect of public finance. They are right that these differences put limits on the scope for fiscal cooperation. It wouldnt be fair, lets say, to ask German taxpayers to help pay for Frances more generous health-care benefits.
On the other hand, its insane — dangerously insane — to see full political union as the solution to that problem. Does anybody think that political union would gently smooth away those differences? Far-right nationalism is already resurgent in many EU countries. Theres no demand anywhere, including Germany, for the kind of European Union that Merkel keeps advocating as the price for fuller cooperation. Germanys policy on the crisis boils down to this: We cant confront our economic calamity until weve agreed on a future for Europe that none of us wants.
Closer Union
In previous columns Ive said what I think needs to happen: Limited, conditional and explicit debt mutualization to restore confidence, combined with a renewed emphasis on the accountability of national governments to their voters. The first, with the emphasis on explicit, is the minimum requirement for avoiding a European economic catastrophe. The second accepts that the basis for a United States of Europe doesnt exist, and thats why the debt pooling should be limited and conditional.
The tension between the two parts is obvious. Theres no alternative but to manage it. Union where necessary, sovereignty where possible. Its Germanys least-cost choice, and thats what Merkel should be telling her voters.
Article from: bloomberg.com
Image: Source
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