Has Super Mario Draghi Met His Match?

And this might become a problem for the Fed.
ECB President Mario Draghi wields more power than just about any other public official in Europe, perhaps even including Angela Merkel. The organization he heads not only controls the monetary policy levers of the entire Eurozone, it also supervises the region’s 130 biggest banks. As we’ve seen in recent weeks, it even has the power to decide which of Europe’s struggling banks get to live and which don’t.
Yet it is answerable to virtually no one. Until now.
Emily O’Reilly, the EU Ombudsman, an arbiter for the public’s complaints about EU-institutions, has just sent Draghi a letter asking him to explain his role in the potentially compromising Group of Thirty (G30) and how he makes sure that he does not divulge insider information or runs into conflicts of interest. The tenor, tone and direction of O’Reilly’s inquiries make it clear that she means business.
The Washington-based G30 was founded in the late seventies at the initiative of the Rockefeller Foundation, which also provided start-up funding for the organization. Its current membership reads like a Who’s Who of the world of global finance. It includes current and former central bankers, many of whom now work or worked in the past for major financial corporations, such as:

This post was published at Wolf Street on Jul 10, 2017.

80,000 Catalans Gather Demanding Independence From Spain

After Brexit in the UK and Donald Trump’s election in the US, the political elites of the world are slowly waking up to the inevitability that the will of the people can not be ignored forever. In Northern Europe, the electorate has rebelled against political elites, like Angela Merkel, who have embraced “open borders” and the influx of refugees from war-torn areas in the mid-east that have brought with them increasing violence and terror attacks. In the U. S., the rebellion is the direct result of Americans being fed up with a federal government that is defined by cronyism and complete dysfunction.
Now, the latest demonstration of an electorate fighting back against its elected officials comes from Spain as 80,000 people rallied in Barcelona on Sunday in a show of support for Catalan leaders locked in a political battle with Madrid over an independence referendum. In Catalonia, separatists complain their relatively wealthy region is overtaxed by an oppressive central government in Madrid to subsidize poorer regions of the country.

This post was published at Zero Hedge on Nov 14, 2016.

Five Things You Should Know About the Deutsche Bank Train Wreck

Too big to fail is about to get tested once again.
Deutsche Bank – Germany’s largest, and in many ways the embodiment of the global financial system – as you may have heard, is in a spot of bother.
The U. S. government is considering imposing a fine of around $14 billion on the bank for selling faulty mortgage-backed securities in the run up to the financial crisis. That’s on top of the fact that Deutsche and other European banks have been struggling with negative interest rates, which are squeezing profits. In all, Deutsche Bank’s DB 6.79% market cap has now shrunk to nearly its proposed fine, provoking fears that the bank might have to be helped out the German government, or be wiped out. So far, Germany’s Chancellor Angela Merkel has said that there will be no bailouts for Deutsche Bank.
But while Germany says it won’t stop a Deutsche bank failure, how worried should the U. S., and investors, be about it? Ultimately, the new regulations put in place since 2008 to contain Too-Big-To-Fail banks should mean that there will be no direct impact on the average American. But here are a few reasons why you should still keep an eye on it.
Too Big to Fail was always a bit of a misnomer. What really makes a bank a risk to the financial system as a whole is the degree to which it is interconnected with other institutions, i.e., its ability to spark chain reactions of non-payment if it should ever default. By this measure, Deutsche is frighteningly indispensable. It’s a counterparty to virtually every major bank in the world, in virtually all asset classes. This illustration from an IMF report in June gives you some idea. This is why I argued yesterday that the German government, which together with the European Central Bank is responsible for supervising Deutsche, would be highly unlikely to let it fail in a disorderly manner la Lehman Brothers.

This post was published at David Stockmans Contra Corner on September 30, 2016.

The New Iron Curtain – – A Monument To Washington’s Imperial Folly

A foreign army consisting of 31,000 soldiers from an anti-American alliance are conducting military ‘exercises’ a few miles from San Diego. Hundreds of tanks converge on the Rio Grande, while jets from 24 countries converge in attack formation, darting through Mexican skies.
It isn’t hard to imagine Washington’s response.
Yet that’s precisely what has been happening on Russia’s border with the NATO alliance, as the cold war returns. Economic sanctions aimed at sinking Russia’s fragile economy, plus a propaganda campaign designed to characterize Russian President Vladimir Putin as the second coming of Stalin – or, in Hillary Clinton’s view, Hitler – have history running in reverse. Once again, an iron curtain is descending across Europe – only this time it’s the West’s doing.
The European Union renewed sanctions against Crimea on Friday: their ‘crime’ – holding a referendum in which the overwhelming majority of voters opted for union with Russia, restoring what had been the status quo since the days of Catherine the Great. And the EU is slated to extend sanctions against the Russian Federation later this week.
Yet dissent against this revival of the cold war is rising in Europe, notably in Germany, where Foreign Minister Frank-Walter Steinmeier is calling for the ‘gradual’ lifting of sanctions to reflect progress in the implementation of theMinsk accords, which call for the demilitarization of Ukraine and elections in rebel-held territory. This reflects a division within Germany’s left-right coalition government: Angela Merkel’s Christian Democrats are holding out for ‘full’ implementation of the accords. Yet it is the government in Kiev – held hostage by far-right crazies – that has been dragging its feet over Minsk, refusing to grant autonomy to east Ukraine and vowing to continue the war against the rebels in spite of Kiev’s lack of success in pacifying the rebellious region.

This post was published at David Stockmans Contra Corner on June 20, 2016.

Europe is Now Drowning Under the Cost of Welfare Bills

When she isn’t shipping in more Syrian refugees, or trying to find new ways to destroy the Greek economy, the German Chancellor Angela Merkel is fond of quoting an alarming statistic: Europe accounts for just 7pc of the world’s population, and 25pc of its GDP, and yet it also accounts for a massive 50pc of its welfare spending.
The point is an important one. Europe’s welfare spending is out of control, and is on a scale that is both lavish and unaffordable compared with the rest of the world. There is a problem, however. Neither she, nor any other political leader in Europe, has the will to do anything about it.
Eurostat, the statistical agency of the European Union, has this week published updated figures on the total welfare bill across Europe. It is rising, and in some countries is getting up to a quarter of national output. Meanwhile, the percentage of spending on stuff like infrastructure or education, which increase an economy’s potential output, is falling.
So long as that is true, it is very hard to see anything other than a bleak future for any of Europe’s economies.

This post was published at David Stockmans Contra Corner on March 25, 2016.

This Is The Scariest Chart For Angela Merkel

Having won Time’s “Person of the Year” award, German chancellor Angela Merkel may have little time, or cause, for celebration.
The reason for that is that, as we noted yesterday when commenting on Donald Trump’s snub of Time in which he said that it “picked person who is ruining Germany”, is that according to increasingly more Germans, Trump just may be – in his trademark politically incorrect way – right.
Recall:
In past years, Angela Merkel has been feted like a superstar at annual meetings of her Christian Democratic Union (CDU) party, earning thunderous ovations for defending German interests in the euro crisis and facing down Vladimir Putin over Ukraine. But a CDU congress in the southwestern city of Karlsruhe next week is shaping up to be a very different affair. Under intense pressure from conservative allies to reduce the flood of refugees into Germany, the 61-year-old chancellor faces the biggest test of her authority from within the party in years.
Her Bavarian allies, the Christian Social Union (CSU), have been pressing for a cap for months, and even some of Merkel’s own ministers are lobbying openly for a tougher stance from the chancellor, who marked 10 years in office last month and must decide by next autumn whether she will seek a fourth term in 2017.
“Merkel has never endured such sharp criticism from within her own ranks since becoming chancellor,” read a front-page editorial in conservative daily newspaper Frankfurter Allgemeine Zeitung on Monday. “Under no circumstances can she allow the congress to approve a resolution on refugee policy that includes the word ‘Obergrenze’.”
“The mood among conservative members of parliament is really catastrophic right now,” said one senior CDU lawmaker, declining to be named. “Merkel is totally isolated.” “She needs to wake up,” said another top ranking party member.
Why this dramatic shift in opinion about a chancellor who until recently was seen as untouchable and simply indestructable, and suddenly appears to be all too fragile? The answer is shown in the simple chart below, which shows the soaring numbers of migrant arrivals in Germany.

This post was published at Zero Hedge on 12/10/2015.

Turkey-NATO Crisis Sets Scene For Europe’s New ‘EU Army’

They say there are no coincidences in politics and foreign affairs.
Less than 72 hours after Turkey shot down a Russian fighter inside of Syrian airspace, moves are already afoot to increase the role of Europe in Syria. The Russian plane’s downing has already frozen Russian-Turkish relations, and neither side shows any sign of backing down on this issue.
Germany has now joined the party this week by revealing its intention to deploy ground troops in the fight against ISIS. Angela Merkel’s government announced its plan to send 100Bundeswehr Special Forces into Northern Iraq to support of the Kurdish Peshmerga forces.
Britain is not far behind either, as David Cameron intensifies his lobbying efforts to get his country into the war in Syria.
Is this part of a defacto NATO action now, or NATO by fiat? If only it were that simple…
There is much more going on here than meets the eye. With Germany now entering the fray, this brings a total of at least FIVE major NATO member states who are either actively involved in the fight, or about to enter the combat theater. The most important point here is that each and every one of these countries is in the conflict in clear violation of international law. Neither has the backing of the UN Security Council, or has an invitation from the legal and internationally recognized (including by the UN) government in Damascus. In addition, none of these actors is acting under NATO Article 5, in other words, none has been attacked by another internationally recognized nation-state of entity (although it’s curious why the western governments have insisted on referring to a brutal terrorist group as a ‘State’, unless of course, they recognize it as such, which somehow gives them the color of law in Article 5).

This post was published at 21st Century Wire on NOVEMBER 28, 2015.

Bargaining With the Devil: Germany Bribes Turkey With Aid Package, EU Sidelines Highly Critical Report on Turkey’s Free Speech Record

If it takes bribes and turning a blind eye to blatant corruption to get a needed favor, then one can expect bribes and two blind eyes.
The Bribes
In order to slow Syrian refugees entering Europe, Merkel Backs Multibillion-Euro Refugee Package for Turkey.
German chancellor Angela Merkel has backed giving Turkey a multibillion-euro aid package to cope with refugees, giving impetus to a provisional EU deal with Ankara that aims to slow the flow of migrants to the EU.
Commission officials briefed EU ambassadors on Thursday on the Turkish requirements for completing the terms of the action plan, including 3bn in fresh funds; unblocking about five chapters in Turkey’s EU membership negotiations; and visa-free access for 75m Turks to the Schengen border-free area from as soon as 2016. Mr Erdogan also made clear that Turkey would expect to be included in an EU ‘safe list’, which would make it easier to reject Turkish asylum seekers.
In return, Turkey pledges strengthen its border controls – including greater co-operation with Greece, which has seen a massive influx of refugees from the region.

This post was published at Global Economic Analysis on October 16, 2015.

Spanish Banks Warn of Financial Meltdown if Catalonia Votes for Independence

But bluffs can backfire.
In Spain’s north eastern region of Catalonia, the fear-mongering and doom-saying is reaching a deafening crescendo. If voters return a majority of pro-independence politicians in next Sunday’s regional elections, all manner of economic disaster will befall the region – according to the defenders of Spain’s established political and economic order.
The doomsayers include the Spanish government, the main opposition party, PSOE, Angela Merkel, David Cameron, Barack Obama, John Kerry, the spokesperson of the president of the European Commission, Margaritis Schinas, and just about every business lobby representative in Spain. Some Catalan business leaders have evenurged their employees to vote against independence, warning that a yes-vote on Sunday could lead to them losing their jobs – a major threat in a nation with over 20% official unemployment!
Warning of a Crisis
The latest chorus of doom and gloom came from Spain’s two biggest banking associations AEB and CECA, whose members include Banco Santander, BBVA, Banco Popular, and Bankia. They warn that the exclusion of Catalonia from the Eurozone will trigger ‘serious problems of legal insecurity’ for banks based in the region. Those banks include Caixabank and Banc de Sabadell, Spain’s third and fifth largest banks respectively, both of whom are also members of AEB and CECA.
In their joint communiqu the two lobbying groups urge the people of Catalonia to honor Spain’s current constitutional order and safeguard the region’s membership of the Eurozone. Failure to do so, they warn, could jeopardize the ability of local financial entities to ‘protect depositors’ (ha!) and ‘maintain the flow of funds to families, SMEs, and to the country’s productive sectors and job creators’ (ha ha!):

This post was published at Wolf Street on September 20, 2015.

The Curse Of The Euro: Money Corrupted, Democracy Busted

The preposterous Gong Show in Brussels over the weekend was the financial ‘Ben Tre’ moment for the Euro and ECB. That is, it was the moment when the Germans – – imitating the American military on that ghastly morning in February 1968 – – set fire to the Eurozone in order to save it.
Some day history will judge good riddance……..but that get’s ahead of the story.
According to an American soldier’s first hand recollection of the Vietnam event, it was a Major Booris who infamously told reporter Peter Arnett, ‘It became necessary to destroy the town to save it’.
After the massacre of Greek democracy in the wee hours Monday morning, Angela Merkel said the same thing – even if her language was a tad less graphic:
It reflects the basic principles which we’ve followed in rescuing the euro. It now hinges on step-by-step implementation of what we agreed tonight.’
Now no one in their right mind could think that lending another $96 billion to an utterly bankrupt country makes any sense whatsoever. After all, the Greek economy has shrunk by 30% since 2008 and is wreathing under what is objectively a $400 billion public debt already in place today.
That figure follows from the fact that on top of Greece’s acknowledged $360 billion of general government debt there’s at least another $25 billion loan embedded in the ELA advances to the Greek banking system. The latter is deeply insolvent, meaning that some considerable portion of the $100 billion ELA currently outstanding is not an advance against good collateral in any plausible banking sense of the word, but merely a backdoor fiscal transfer from the ECB to keep Greece’s financial shipwreck afloat.

This post was published at David Stockmans Contra Corner by David Stockman ‘ July 14, 2015.

Out Of The Cradle Of Democracy – – Here Come Brussels’ Legislative Page-Boys

Prime Minister Alexis Tsipras was given three days to push new austerity measures through parliament and keep alive Greece’s chances of staying in the euro.
Finance ministers meeting in Brussels demanded Greece enact economic reforms before opening detailed negotiations on an aid package of at least 74 billion euros ($83 billion). They left it to the region’s leaders, who started their own session a few hours later, to pin down how far those measures should go. If Tsipras misses that deadline, Greece may be suspended from the currency union, Finnish Finance Minister Alexander Stubb said.
‘Greece is being given exactly two choices,’ Stubb said. ‘It’s a rather black-and-white choice.’
Riled by six months of personal attacks and contradictory messages from Athens, euro-area policy makers are forcing Tsipras to overcome the credibility gap they said was a key hurdle to more loans. They’re no longer willing to take him at his word.
‘The situation is extremely difficult if you consider the economic situation in Greece and the worsening in the last few months, but what has been lost also in terms of trust and reliability,’ German Chancellor Angela Merkel told reporters.

This post was published at David Stockmans Contra Corner on July 13, 2015.

Out Of The Cradle Of Democracy: Here Come The Legislative Page-Boys For Brussels

Prime Minister Alexis Tsipras was given three days to push new austerity measures through parliament and keep alive Greece’s chances of staying in the euro.
Finance ministers meeting in Brussels demanded Greece enact economic reforms before opening detailed negotiations on an aid package of at least 74 billion euros ($83 billion). They left it to the region’s leaders, who started their own session a few hours later, to pin down how far those measures should go. If Tsipras misses that deadline, Greece may be suspended from the currency union, Finnish Finance Minister Alexander Stubb said.
‘Greece is being given exactly two choices,’ Stubb said. ‘It’s a rather black-and-white choice.’
Riled by six months of personal attacks and contradictory messages from Athens, euro-area policy makers are forcing Tsipras to overcome the credibility gap they said was a key hurdle to more loans. They’re no longer willing to take him at his word. ‘The situation is extremely difficult if you consider the economic situation in Greece and the worsening in the last few months, but what has been lost also in terms of trust and reliability,’ German Chancellor Angela Merkel told reporters.

This post was published at David Stockmans Contra Corner on July 12, 2015.

Grexit Is On – – Germany Prepares 5-Year Greek ‘Time-Out’ From Euro

By Mehreen Khan at The Telegraph
The German government has begun preparations for Greece to be ejected from the eurozone, as the European Union faces 24 hours to rescue the single currency project from the brink of collapse.
Finance ministers failed to break the deadlock with Greece over a new bail-out package, after nine hours of acrimonious talks as creditors accusedAthens of destroying their trust. It leaves the future of the eurozone in tatters only 15 years after its inception.
In a weekend billed as Europe’s last chance to save the monetary union, ministers will now reconvene on Sunday morning ahead of an EU leaders’ summit later in the evening, to thrash out an agreement or decide to eject Greece from the eurozone.
Should no deal be forthcoming, the German government has made preparations to negotiate a temporary five-year euro exit, providing Greece with humanitarian aid while it makes the transition.
An incendiary plan drafted by Berlin’s finance ministry, with the backing of Angela Merkel, laid out two stark options for Greece: either the government submits to drastic measures such as placing 50bn of its assets in a trust fund to pay off its debts, and have Brussels take over its public administration, or agree to a ‘time-out’ solution where it would be expelled from the eurozone.

This post was published at David Stockmans Contra Corner by David Stockman ‘ July 12, 2015.

Message To Merkel: Shut-Up Und Setzen Sie Sich!

Angela Merkel may be a hero to some conservatives because she has stood up for fiscal rectitude and resisted the G-7′s relentless importuning to betray Germany’s taxpayers and join the ‘stimulus’ brigade. But that’s as far as it goes.
The truth of the matter is that she is actually a power-hungry statist menace who is an abysmal ignoramus when it comes to the fundamentals of money and finance. That is on display once again as she drives the rickety machinery of the misbegotten eurozone superstate toward ‘a solution before the markets open on Monday’.
Those eight words are the heart of the statist catastrophe which is now engulfing the world economy.
They harken back through countless weekends of crisis and jerry-rigged bailouts in an unbroken line to Hank Paulson’s bazooka. That’s when the hideous $5 trillion disaster known as Freddie Mac and Fannie Mae – -erected by politicians over decades – – first broke out in July 2008 and prompted those very same clueless politicians to launch an era of financial governance by Gong Show.
So let’s make it loud and clear. Angela Merkel, you are the head of a government that’s supposed to provide autobahns, public schools, state forests and even social insurance, if you must, within the borders of Germany. But it is none of your damn business what happens when ‘the markets open on Monday’.

This post was published at David Stockmans Contra Corner by David Stockman ‘ June 26, 2015.

Looks Like Germany May Have To Pay Up

German magazine Der Spiegel digs deep(er) into the ‘Greece question’ this weekend, and does so with a few noteworthy reports. First, its German paper issue has Angela Merkel on the cover, inserted on a 1940′s photograph that shows Nazi commanders against the backdrop of the Acropolis in Athens. The headline is ‘The German Supremacy: How Europeans see (the) Germans’. The editorial staff has already come under a lot of fire for the cover, and I’ve seen little that could be labeled a valid defense for further antagonizing both Germans AND Greeks (and other Europeans) this way. Oh, and it’s also complete nonsense, nobody sees modern day Germans this way. It’s just that their government after 70 years is still skirting its obligations towards the victims. That’s what people, the Greeks in particular, don’t like.
Second: Spiegel’s German online edition has a sorry that claims Greek paper To Vima will come with revelations on Sunday accusing Georgios Katrougalos, Syriza’s deputy minister for Policy Reform and Public Service (I’m translating on the fly) of corruption in the case of the reinstallment of public workers that had been fired under the Samaras government under pressure from the Troika.
Allegedly, Katrougalos’ law firm (in which he has had no active role since becoming a member of the European parliament last year) has a contract with these workers that will pay it 12% of whatever they receive in back pay. Predictably, the opposition has called for Katrougalos’ firing, but Tsipras has said he talked to him and is satisfied with the explanation he was given..
It smells a bit like something Bild Zeitung (Germany’s yellow rag) would write, but there you are. Which makes the following perhaps somewhat surprising. Because:
Third: Spiegel English online edition has a long article on a report just out by a special Greek commission, instated by former governments, on the German war reparations that Tsipras has repeatedly talked about, and that German FinMin Schuble has famously high handedly tried to sweep off the table. That may not be so easy anymore now. There are already increasingly voices in Germany itself that want Berlin to change its approach to the matter, and the report will only make that call louder. Let’s see if I can get this properly summarized:

This post was published at Zero Hedge on 03/22/2015.

Europe’s Greek Showdown: The Sum Of All Statist Errors

The politicians of Europe are plunging into a form of ideological fratricide as they battle over Greece. And ‘fratricide’ is precisely the right descriptor because in this battle there are no white hats or black hits – -just statists.
Accordingly, all the combatants – the German, Greek and other national politicians and the apparatchiks of Brussels and Frankfurt – – are fundamentally on the wrong path, albeit for different reasons. Yet by collectively indulging in the sum of all statist errors they may ultimately do a service. Namely, discredit and destroy the whole bailout state and central bank driven financialization model that threatens political democracy and capitalist prosperity in Europe – – and the rest of the world, too.
The most difficult case is that of the German fiscal disciplinarians. Praise be to Angela Merkel and her resolute opposition to Keynesian fiscal profligacy and her stiff-lipped resistance to the relentless demands for ‘more stimulus’ from the likes Summers, Geithner, Lew, the IMF and the pundits of the FT, among countless others. At least the Germans recognize that if the EU nations are going devote 49% of GDP to state spending, including nearly a quarter of national income to social transfers, as was the case in 2014, then they bloody well can’t borrow it.
Notwithstanding the alleged German led austerity regime, however, that’s exactly what they are doing. Germany has managed to swim against the surging tide of EU public debt, lowering its leverage ratio from 80% to 76% of GDP in the last four years. Yet the overall debt ratio for the EU-19 has continued to soar – meaning that the rest of the EU drifts ever closer to fiscal disaster.

This post was published at David Stockmans Contra Corner by David Stockman ‘ February 9, 2015.