Stuck on Stupid : NYT thinks Europe can still avert a crisis

I received this in my mail today and wanted to share this gem with my readers. I had to take another sip of coffee and adjust my seat, and look again, it was not a mistake it was still there The New York Times headline read :Even if Europe Averts Crisis-Growth May Lag for Years

“We have to adjust to lower growth,” said Thomas Mirow, president of the European Bank for Reconstruction and Development, referring to both Europe and America. “It is of course going to be very painful. But leaders have to speak frankly to their populations.”

The uncertainty about Europe’s future has been driving the gyrations of financial markets since the summer. Earlier this week, stocks rallied on euphoria that a new, more powerful bailout was near, but the rally fizzled Wednesday when cracks began to appear among European nations over the terms of money being given to Greece.

On Thursday, markets were mostly up again after the German approval of the 440 billion euro ($600 billion) bailout fund, intended to keep the crisis from spreading beyond Greece and Portugal to other European countries. Several other nations still have to ratify the agreement, but it now looks likely to be in place by the end of October.

Even this fund, however, is already seen as inadequate. Some worry that it still fails to fully address one of Europe’s most pressing needs: fully recapitalizing its banks.

Coming from the the NYT home of the Keynesian clown Paul Krugman this may not have been a total surprise. But it does point the insanity that the Keynesian clowns live with. I am wondering exactly when they do consider something a crisis ?

Europe is in a crisis and "fully recapitalizing it's banks" is political class doublespeak for passing the losses off onto the taxpayers.

With the lack of leadership both in Europe and in the U.S. and the politicians and bankers continuing to steal money from the taxpayers to cover their risky financial behavior, I agree things will only get worse, but it is already a crisis.

A crisis they are only making worse. when bankers and politicians start saying we all have to share the pain, while only they share in the profits - Things can only get worse.

Germany Approves Expansion of Euro Bailout Fund

Germany Approves Expansion of Euro Bailout Fund

The German Parliament approved the expansion of the bailout fund for heavily indebted European countries Thursday, the most important step in a tortuous process that has rattled markets and raised long-term doubts about the ability of governments to react to the expanding debt crisis.

The vote in Germany, Europe’s largest economy and the only country with the fiscal wherewithal to pull fellow countries in the euro currency zone out of trouble, moved the struggling rescue forward. But analysts said it likely would offer only momentary relief rather than anything like a permanent solution.

And for Angela Merkel, Germany’s chancellor, the victory merely provided breathing room after a divisive debate within her own parliamentary bloc that has weakened her grip on power at a critical moment. Opposition politicians argue that the vocal opposition within her ranks meant that Mrs. Merkel had lost control of her coalition and needed to dissolve the government.

Read More Here from the NYT

Polls show 75% of Germans disapprove of more bailouts

Even more telling is the increasing isolation sentiment in Germany. Polls show shows three-quarters of Germans are against the expanded European rescue fund that's subject to Thursday's vote. So, who is it that politicians represent?

The Wall Street Journal reports Germans Reconsider Ties to Europe

When German lawmakers vote Thursday on whether to put more money into Europe's bailout fund—a step many investors see as essential to prevent a market panic—several conservative deputies, including Wolfgang Bosbach, a prominent champion of European integration, are expected to vote "no." Mr. Bosbach, a high-ranking conservative in Ms. Merkel's Christian Democratic Union, has recently become an outspoken critic of the bailout strategy.

"The first medicine didn't work, and now we are simply doubling the dose," said the lanky Mr. Bosbach of the Greek debt crisis. "My fear is that when the big bang happens, it won't just be us who will have to pay but generations hereafter."

The lawmaker rebellion underscores a broader shift among Germans about their nation's role in Europe since the crisis erupted nearly two years ago. While the Thursday vote is expected to pass, and a vast majority of Germans continue to feel a strong, historical commitment to Europe, with a common currency as its anchor, many have grown doubtful of whether it's worth the ever-growing cost of saving the euro.

A poll for national German broadcaster ZDF earlier this month shows three-quarters of Germans are against the expanded European rescue fund that's subject to Thursday's vote.

The measures before German parliament today would nearly double the main euro-zone's bailout fund's lending capacity to €440 billion ($595 billion) and allow the fund to buy sovereign bonds in the open market.

Germany's contribution to the new, expanded rescue loan package is €211 billion, still less than half the €500 billion it pledged to bail out its banks in 2008. But many see the European Central Bank's moves to buy billions of euros in low-grade government bonds of southern European countries as another sign that European institutions are slipping away from them.

Even more unpalatable is the prospect of making the euro zone collectively liable for its members' debts, as a growing chorus of European officials have recently urged. Many argue so-called euro bonds, which Ms. Merkel has steadfastly opposed, are the bulwark to relieve financial pressure on debt-ridden members and underpin the euro zone's full fiscal union.

But to Germans, it would mean relinquishing their hard-won low borrowing rates to pay for the largess of more free-wheeling members.

"Ultimately the euro-bond issue will come to a head, and Ms. Merkel will have an impossible dilemma," says one senior German coalition lawmaker. "If she goes back to the German people with [euro bonds], she is out. If she doesn't, she will be a very lonely person in Europe."

This will probably be the end for Merkel. She is taking a stance 75% of the nation does not agree with, and that stance is guaranteed not to work.

Greece is going to need more than anyone has to give. Time and more bailouts will not improve this situation, they are just spoon feeding Greece to death.

Geithner Lectures Europe on Fiscal Responsibilty - Really, he did

Our financial wizard extraordinaire, US Treasury Secretary Timothy Geithner, showed up in Europe for what he expected to be a love in between himself and the European Welfare Zone. Instead he got bitch slapped for chastising European leaders on "loose talk" and infighting. Austria's finance minister put Geithner in his place.

Geithner warns EU against infighting over Greece

"Speaking at a closed meeting of eurozone finance ministers in Poland, he is reported to have told them that the divisions were "very damaging".Some eurozone ministers seemed unhappy with Mr Geithner's comments.They have also delayed a decision over Greece's next bailout loan.

Mr Geithner reportedly said: "What's very damaging is not just seeing the divisiveness in the debate over strategy in Europe but the ongoing conflict between countries and the [European] central bank." He said that "governments and central banks need to take out the catastrophic risk to markets".

His presence at the meeting was measure of how concerned the US is about the danger of economic contagion from Europe's government debt and banking crisis.But his comments about ending divisions seemed to open up some new ones.

Austria's Finance Minister Maria Fekter was one eurozone politician at the meeting who voiced her objection to Mr Geithner's comments.

She said: "I found it peculiar that even though the Americans have significantly worse fundamental [economic] data than the eurozone, that they tell us what we should do."

Mish's Gobal Economic Trends: Geithner Believes "Woods Populated by Pixies"

The quote of the day goes to Jamie Robertson of BBC World News:

"There may be a few people who still believe Greece will not default on its debt, but my suspicion is most of them also believe elephants can fly and the woods are populated by pixies."

In a sense, Geithner is correct. Infighting should stop. However, needs to with the bus in a logical spot, not in woods populated by Geithner loving Pixies. The logical spot is default, with further talk of a Eurozone breakup, not with everyone bowing to Geithner and Pixies.

There is still a sizable amount of people in America that belive Obama, Geithner, and Bernake know what they are doing. This stunt should prove beyond any doubt Geithner is as clueless as Bernake was when he disagreed that we were about to have a recession, and housing crash - We should be very worried.

Foe more on the reasons a Euro breakup is inevitable, please see Eurozone Breakup Logistics (Never Believe Anything Until It's Officially Denied)