“Spain and Italy cannot be contained”
Incompetent mendacity still a la mode throughout Europe
As ECB President Mario Draghi declared the eurozone out of the woods yesterdays, The Slog’s Bankfurt Maulwurf offered a diametrically opposed opinion. And more details emerged of how French security services botched the monitoring of scooter-killer Mohammed Merah.
A brief thank you to Trolls throughout the Globe who emailed and threaded at The Slog to relish me “being wrong about” the Greek default planned for today. We still have some time to go before 7 pm GMT guys and gals, but just to reiterate for the zillionth time, I was informed about a plan in the US financial Establishment to work with eurozone leaders on the fast-track amputation of Greece. It appears the plan failed or was abandoned – as I have suggested several times over the last ten days. I would maintain that a lack of European balls and probably deranged American hubris ensured its demise. But that hardly makes me ‘wrong’.
What it does suggest is incompetent indecision and double-cross on a massive scale, and there is yet more ample evidence of that from the last 24 hours.
“The worst is now over,” proclaimed Mario Draghi yesterday. An excellent comment thread here suggested that this was a misunderstanding, in that Signor Draghi is fond of German sausages, and as he swallowed the last of his snack, said “the wurst is now over”.
But The Slog’s Frankfurt Mole is of a different opinion.
“What we are now seeing,” he began, “is instability in the larger [EU] sovereigns. We always knew this was going to happen, and it is coming to pass. Spain has clearly decided to kick back, and there is an interdependence between Iberia and Italy that is not well understood. We are also going to see massive losses throughout all EU and US banks this time. Further obligations and so forth will then emerge, and for the eurozone it will be the end. Signor Dragi could try and print his way through further bailouts, but we hold all the cards now. Berlin simply will not allow it. It doesn’t matter any more that the [EU] Central Bank is legally beyond the law….it is not beyond reality. The eurozone will shatter once this impasse is reached. In my estimation the situation will be critical before the winter comes.”
Readers new to this saga need to realise that our Maulwurf represents the archetypal hawkish Frankfurt/Bundesbank view of life. But at the same time, their view is gradually gaining ground in Germany….and equally, the evidence for the accuracy of their predictions grows apace.
A stream of bollocks emanated from Madrid yesterday, led by the Spanish finance minister, who called comparisons between Spain and Greece ‘completely ridiculous’. He’s right, too: this time it’s going to be much, much worse. But it is happening: Spanish yields on 10-year bonds are up to 5.47% after rising all week (in March, the yield was below 5 percent) and the 10-year Italian bond yield climbed 12 basis points to 5%. German bund yields, on the other hand, are falling as the safe haven factor kicks in again. The inherent bond spreads problem in the ezone is just as marked as it ever was.
Portugal is the one ClubMed that has been literally running on empty for some three months now. Yesteday, it emerged that town halls there face default amid 9 billion euros of debt unless the government provides aid soon. So said Fernando Ruas, president of the nation’s association of municipalities…but I’m afraid the last train to San Fernado left ages ago: there simply is no money left.
But most of the news media flocked to Toulouse in order to witness another Islamist leave en route for the 77 virgins. After the bloke jumped from a bathroom window while still firing his sten gun, French interior minister Claude Guéant revealed that Mohammed Merah had been on the radar of the DCRI — France’s domestic intelligence agency — “for years”. It has also since transpired that Merah was questioned by the intelligence service as recently as November 2011, after being summoned to explain trips he had made to Afghanistan and Pakistan. Astonishingly, Merah was reportedly granted freedom to leave by his French intelligence questioners after providing them with photographs supporting his claims of having merely been on an innocent tourist holiday.
The conspiracy theories about the positive effect on Sarkozy