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Germany’s secret plans to derail a British referendum on the EU

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Germany is reported in the Telegraph to scupper plans by the British on a referendum to overhaul the EU. It goes a little deeper than this as a leaked memo from the German foreign office to outline plans for an intrusive new European body that will be able to take over the economies of beleaguered eurozone countries.

It discloses that the EU’s largest economy is also preparing for other European countries, which are too large to be bailed out, to default on their debts — effectively going bankrupt. It will prompt fears that German plans to deal with the eurozone crisis involve an erosion of national sovereignty that could pave the way for a European “super state” with its own tax and spending plans set in Brussels.

so more power to Germany again 😉

The six-page German foreign ministry paper sets out plans for the creation of a European Monetary Fund with a transfer of sovereignty away from member states.

The fund will have the power to take ailing countries into receivership and run their economies. Even more controversially, the document, entitled The future of the EU: required integration policy improvements for the creation of a Stability Union, declares that the treaty changes are a first stage “in which the EU will develop into a political union”. “The debate on the way towards a political union must begin as soon as the course toward stability union is charted,” it concludes.

The negotiating document also explicitly examines ways to limit treaty changes to speed up the reforms. It indicates that Mrs Merkel will tell Mr Cameron to rule out a popular EU vote in Britain.

It was reported in the Guardian

Documents seen by the Guardian, including a green paper on stability bonds (eurobonds), show Brussels envisages a huge transfer of national sovereignty to the centre in order to ensure there is no repeat of the sovereign debt crisis – and guarantee a solution to the current one. The aim is to regain the confidence of financial markets by tying any current bailouts or future loan programmes for distressed countries to improved economic governance and competitiveness sanctioned by a “stability commissar”.

they go on to say

The commission’s plans include monitoring of national economies going beyond that meted out to Greece, Portugal and Ireland. In effect, unelected officials would have power to veto national budgets of eurozone members. This follows the furore in Ireland when the government’s draft budget was leaked first to the Bundestag in Berlin.

Even though the loss of national sovereignty would be extensive, some Brussels officials argue they do not require treaty change, let alone referendums.

Eurozone governments would also be urged to enshrine fiscal rectitude in their constitutions – on the lines of the German “debt brake” – and to draw up budgets on advice proffered by a UK-style independent office for budget responsibility.

A 40-page green paper on stability bonds, meanwhile, outlines proposals for pooling sovereign risks via a central European treasury or debt management office. This and enhanced budgetary surveillance are required, it says, to minimise “moral hazard” among countries in financial distress.

In order to ensure that the EU sticks to its “no bailout clause”, the paper talks of granting “extensive intrusive powers at EU level”, including putting a country into administration or imposing seniority of debt service over all other forms of public spending.

Max Keiser gets in on the act. An article with Acitve Investor Max Keiser says

“With the eurozone breaking up, you have a reunified Germany, you have people talking about bringing back the Deutsche Mark, they have the Bundesbank ready to go. So you could see, either Germany breaks out and you have the emergence of a superpower, Germany 4.0 as I call it. Or they’re within the eurozone but there calling all the shots and everything is going through Berlin and effectively they’re running the show in Europe.”

It sounds like some country is getting to big for its jack boots.

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Germanys war on the pound, You’ll join euro sooner than you think

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An article in the Daily Mail claims that German finance minister Wolfgang Schauble has suggested that the UK would have to join the euro.

Germany last night declared that Britain would be forced to scrap the pound and join the euro – as David Cameron returned home empty-handed from crisis talks in Berlin.

In a highly-provocative intervention, German finance minister Wolfgang Schauble suggested the UK’s struggling economy meant the pound was doomed, and urged the Prime Minister to back Europe’s ailing single currency.

Mr Schauble said the euro would emerge stronger from the current crisis – leaving Britain on the sidelines unless it signed up. He said Britain would be forced to join ‘faster than some people on the British island think’ – despite a pledge by Mr Cameron never to do so.

 

But Jean-Claude Juncker, head of the powerful Euro Group of eurozone finance ministers, said Britain was in no position to comment on the crisis as its deficit was twice the European average.

Mr Schauble’s comments came as Mr Cameron arrived to a hostile reception in Berlin for talks on the eurozone crisis with German Chancellor Angela Merkel. Senior members of Mrs Merkel’s ruling coalition voiced their irritation at London’s ‘lecturing’ over the crisis.

Leading German magazine  Der Spiegel ran a prominent feature describing Britain as the ‘dis- eased empire’.

Berlin has drawn up secret plans designed to bypass the threat of a British referendum on treaty reforms.

A leaked German memo stated: ‘Limiting the effect of the treaty changes to the eurozone states would make ratification easier, which would nevertheless be required by all EU member states (thereby less referenda could be necessary, which could also affect the UK).’ The memo will add to fears that Germany wants to use the eurozone crisis to create a European ‘super state’ with its own tax and spend policies.
Mrs Merkel is determined to establish a new European Monetary Fund with powers to intervene directly in the economies of member states.

Are the Stock Markets About to Crash? Great Depression 2.0

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In a very interesting article from BusinessInsider, Joe Weisenthal writes about Wall St analysts coming to similar conclusions that US and Europe are at the point of no return.

First up was Bob Janjuah

It started off with Nomura’s Bob Janjuah. He said that any talk of the ECB saving Europe was a mere pipedream, and that if the ECB did go whole-hog buying up peripheral debt to suppress yields, then that would prompt a German departure from the the Eurozone.

Next analyst is Jim Reid

But then there was Deutsche Bank’s Jim Reid, who is always sober, but not usually wildly negative. He offered up one of the most bearish lines in history in regards to German opposition to ECB debt monetization:

If you don’t think Merkel’s tone will change then our investment advice is to dig a hole in the ground and hide.

then

But it got even wilder with the latest from SocGen’s Dylan Grice. Again, he’s always pretty negative, but he cranked it up a notch, comparing Germany’s policy today against the policies that enabled the rise of Hitler. Specifically, he said that post-Weimar, Germany became too aggressive about fighting inflation, thus prompting deflation, thus prompting more unemployment, thus enabling the rise of the Nazis.

finally

we just received the latest note from Nomura rates guru George Goncalves, which is titled: US and Europe: At the Point of No Return?He writes:

…we were wrong in assuming one could be optimistic around the EU policy process and have learned our lesson not to accept apathy as a sign that all is factored in as its clear downside risks remain. In fact, we could be approaching the point of no return for the fate of the euro, the European financial system and more broadly the concept of a singular economic zone for Europe; this obviously would change the path for the US and the global economy in a heartbeat too. We still believe there is time to prevent worst-case scenarios, but these sort of watershed moments reveal one thing, that market practitioners are ill-equipped to navigate the political process, especially one that is driven by 17 different governments.

If you like that article, here is another from BusinessInsider titled
All a bit gloomy but better the truth than normalcy bias (i.e head up your arse)

Jim Rogers Says 100% Chance of Crash

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Jim Rogers as reported in investmentweek.co.uk has said

he is 100% sure the world will face another financial crash prompted by the eurozone debt crisis, adding this time it will be worse than 2008’s collapse.

The interview was given to CNBC and Jim went on to say:

the upcoming crisis could be worse than the Lehman Brothers collapse three years ago due to astronomically higher debt levels in economies.“In 2002 it was bad, in 2008 it was worse and 2012 or 2013 is going to be worse still – be careful,” he warned.

“The world has been spending staggering amounts of money it does not have for a few decades now, and it is all coming home to roost.

“We are certainly going to have more crises coming out of Europe and America; the world is in trouble.” said Rogers.

He said borrowing more cash to fix the problem was no longer a solution for indebted nations.

“Last time, America quadrupled its debt. The system is much more extended now, and America cannot quadruple its debt again. Greece cannot double its debt again. The next time around is going to be much worse,” he said.

Rogers told CNBC he believed the only solution to the global financial crisis was to allow “everyone to go bankrupt”.

“Get everyone in a room and decide you will go bankrupt. You will survive and we are going to ring-fence you. We will make sure your cheques clear. Everyone’s deposits are going to be ok, the system is going to survive,” he said.

However, he warned letting Greece leave the euro would be a disastrous decision because the country would go back to its “same old ways”.

“They would start printing money, no one would lend them money and inflation would go through the roof. The Greek economy would get worse and worse. That is not good for Greece and it is not good for the world.

“It would be better off if we can hold the euro together and reorganise. People are bankrupt and when people are bankrupt you might as well face reality.”

IMF package damaging Irish Economy

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If ever there was proof the austerity and raising taxes which is being enforced on the Irish doesn’t work, it’s the fact that Ireland is about to raise VAT by 2% and everyone is lining up to go shopping in Northern Ireland instead. The people in the Republic of Ireland regularly take advantage of exchange rates and VAT increases to go shopping across the border. When the economy is on the ropes, does it make sense to raise VAT when you can predict there will be a flood of money going straight to Newry and Enniskillen in Northern Ireland.

Its predictable the result especially when the VAT gap between Ireland and the UK will now be 3%.  As reported in the Independent today business groups are very unhappy of the damage this will do to the economy.

  A business group that represents the retail sector said the planned VAT increase was a further blow to shopkeepers in addition to the collapse in consumer spending. ‘Worst’ Retail Ireland chairman Frank Gleeson said it would undermine the domestic recovery. “The run-up to the busy Christmas trading period is the worst possible time of year to make these announcements,” he added.

Of course Ireland being a vassal state is no longer in control of its own affairs takes its orders from the IMF and must get approval for its budget from the Germans.

The document outlining the VAT hike was an update on the bailout sent by the Government to the European Commission. From there it was passed to each of the EU governments. The German finance ministry gave it to the lower house of the Bundestag because all bailout payments have to be signed off on by the parliament.

So the bankers and technocrats run Greece and Italy and the Germans have the final say on the Irish budgets. All to keep the show on the road, to asset strip countries, to extend our working lives through increased pension ages. Let the banks fall and run its course.

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