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When Will the EU Be Honest with Itself?

Posted by Larry Doyle on October 24, 2011 8:23 AM |

What does the future hold for the economies within the European Union and by extension the global economic landscape?

I have not written much about the situation within the EU over the last few months for the very simple reason that I have no trust or confidence in the parties involved. Do you?

Over the last few years we have witnessed various and sundry charades by private and public European entities to determine a path forward.

What has been a consistent theme within the charades played out on market participants?  A lack of meaningful transparency and integrity in dealing with the overall debt burden within selected EU nations and the value of sovereign bonds held by European banks. Time and again plans laid out by individual nations and the EU as a whole have fallen far short on both these fronts.

Once again we see just today an acknowledgment by the EU that the grand plans laid out this past summer were woefully insufficient.  The Wall Street Journal highlights this reality in writing, European Leaders Debate Severe Options for Accord,

European leaders took their first steps toward a new plan to stem the euro crisis, admitting that their last grand plan, agreed to only three months ago, has failed.

The new effort, which leaders hope to finalize at another summit on Wednesday, involves a sweeping recapitalization of European banks, a substantial restructuring of Greece’s debts, a bigger bailout fund, and even possibly fresh efforts to entice sovereign-wealth funds in China and elsewhere to come to Europe’s aid.

European leaders said at a summit on Sunday in Brussels they are confident that they will find a definitive solution to the European financial crisis but that there is still work to do.

The package remained in flux Sunday, and lower-level officials will toil on it for two more days before leaders reconvene this week. Euro-zone leaders insisted that a deal would be done on Wednesday, and that there was no more time to be lost, after months of delay and denial.

Months of delay and denial? Try years if not decades. Now the charlatans in Europe with prodding certainly from their counterparts elsewhere are going to get this done within the next two days? Challenge!!

The one consistent theme at play within the EU over the last few years and truthfully much longer than that is a lack of full and honest cooperation and honesty amongst nations. This reality has been a central tendency within the EU literally from its founding fifty plus years ago.

Where is this all headed? More and more economists project a likely recession within the EU, not that I believe it ever came out of recession from a few years ago.

Beyond that, there are already strong signs of a new round of quantitative easing emanating from Ben Bernanke and his cronies within the Federal Reserve. The question begs whether Ben and the boys and girls would actually provide another backdoor bailout of selected European financial institutions overwhelmed by holdings of Greek and other sovereign debt.

Who is keeping an eye on the Fed these days? How would we learn if the Fed actually did provide this backdoor bailout?

The more things change, the more they stay the same.

Navigate accordingly.

Larry Doyle

Isn’t it time to  subscribe to all my work via e-mail, an RSS feed, on Twitter or Facebook? Do your friends, family, and colleagues a favor and get them to do the same. Thanks!!

I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets, our economy, and our political realm so that meaningful investor confidence and investor protection can be achieved.

  • fred

    This is all just an extended game of musical chairs, with the US taxpayer ultimately the one who will be left scrambling for a chair, probably for decades to come.

    The reason banks aren’t lending is because rates are artificially low and long term debt, whether mortgage or sovereign, will decline in value when rates rise or defaults or restructuring occurs.

    Why is it that the ‘collective wisdom’ of banks isn’t willing to take that risk by lending more but the Fed is more than glad to? Are the keys to the printing press both ‘that powerful and that harmless’ at the same time?

    Is the ‘Twist’ just an exercise in pump priming with domestic bank treasury debt swaps soon to be replaced by domestic and foreign bank mortgage and sovereign debt swaps. Shouldn’t Congressional approval be required when the Fed exercises extraordinary or unusual monetary policy measures? How about those TARP repayments, were they used to reduce our national debt or will they be redeployed in the upcoming election cycle?

    Is the only potential consequence of expansionary monetary policy somewhat manageable ST inflation spikes that ultimately give way to longer term deflationary forces or will our preoccupation with these activities limit are ability to respond to other more significant future economic events? Or, assuming we are able to continue to muddle through, how long will our foreign creditors allow us to determine our own economic future w/o demanding even minimal austerity measures and a higher rate of return?

  • LD

    EU Finance Ministers Meeting Tomorrow Cancelled

    But officials tell Brussels Blog the so-called “Ecofin” council meeting is now likely off, and in a letter to Jean-Claude Juncker, the Luxembourg prime minister who chairs the group of 17 eurozone finance ministers, Rostowski makes it appear the cancellation is due to a failure to agree on outstanding issues.

    Failure to agree?

    Still not able to be honest with each other…

    • fred


      I was always skeptical of the Feds intention reguarding its new found belief in ‘transparency’. Rather than using ‘transparency’ to provide incite into Fed policy, it appears the Fed is now using ‘transparency’ to manipulate markets and influence public opinion.

      It seems, every time public opinion turns non-supportive of Fed policy, or the markets react negatively to economic developments, either Bernanke or some other ‘fed head’ comes out and makes a statement to provide incite into into Fed policy in the name of ‘transparency’.

      The latest example being the Feds reconsideration of a policy initiative to purchase mtg securiites or foreign sovereign debt.

      LD, what are your thoughts on the use of ‘transparency’ by government officials in efforts to manipulate markets, change public opinion, or launch trial balloons for future potential policy initiatives?

      • LD


        It is ALL politics…our markets are currently not a reflection of free market capitalism. Capitalism was abused by those in Washington and on Wall Street and now the recuperative efforts for the abuse are nothing more than manipulation, which is akin to further abuse.

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