Spain, which is now at the forefront of the Great Western Debt Default Collapse, has opted to seek funding from the mega-bailout fund, the European Stability Mechanism (ESM) rather than going directly to the ECB or the IMF.
The reasons for this are clear: the IMF doesn’t have the funds (nor will it as the US won’t fund a European bailout during a Presidential election year). And the ECB is now backed into a political corner with Germany.
However, Spain is discovering that even ESM funding doesn’t come without strings attached:
Germany Rejects Spain Banks Tapping Bailout Fund, Meister Says
Spain’s rating downgrade at Standard & Poor’s doesn’t alter Germany’s stance that banks can’t have direct access to Europe’s financial backstops, a senior lawmaker from Chancellor Angela Merkel’s party said.
“The German position is absolutely strict,” Michael Meister, the deputy caucus chairman of Merkel’s Christian Democrats, said in a phone interview in Berlin. “And since such aid programs require unanimity, there’s not going to be any change. All sorts of people can try to set things in motion, but Germany won’t vote for it.”
The ESM funding idea is really just Spain playing for time (the ESM doesn’t actually have the funds to bail Spain out). But the fact that Germany is now making the ESM a political issue indicates the degree to which political relationships are breaking down in the EU. And once the political relationships break down… so will the Euro.
Indeed, Germany has no choice. If it decides to prop up Spain it will receive a ratings downgrade (something which France is about to experience anyway). Europe with a downgraded Germany is not a pretty sight.
Moreover, Germany’s decision to prop up the Euro is finally beginning to arouse furor from the German population. In particular, the below story which reveals that Germany has in fact put German taxpayers on the hook for over €2 trillion in back-door EU rescue measures could be the proverbial tipping point that sends German voters over the edge.
German tempers boil over back-door euro rescues
Professor Hans-Werner Sinn, head of Germany’s IFO Institute, said German taxpayers are facing a dangerous rise in credit risk from a plethora of bail-out schemes. “The euro-system is near explosion,” he told Austria’s Economics Academy on Thursday.
Dr Sinn said Germany is on the hook for much of the €2.1 trillion (£1.72 trillion) in rescue measures for EMU debtors – often by the back-door – that will saddle Germans with ruinous losses one day.
“It is a horror scenario,” he said, warning that the euro system is splitting friendly countries into blocs of mutually hostile creditors and debtors, exactly the opposite of what was hoped.
Earlier this week, the Foundation for Family Business in Munich filed a criminal lawsuit against the Bundesbank, accusing the board of disguising the true scale of risk born by German citizens.
This is the last thing Angela Merkel needs right now. Between this and inflation arising in Germany she’s in major political hot water. So expect Germany to push even harder when it comes to fiscal austerity in the future…
On that note, I fully believe the EU in its current form is in its final chapters. Whether it’s through Spain imploding or Germany ultimately pulling out of the Euro, we’ve now reached the point of no return: the problems facing the EU (Spain and Italy) are too large to be bailed out. There simply aren’t any funds or entities large enough to handle these issues.
With that in mind, I’m already positioning subscribers of Private Wealth Advisory for the upcoming EU collapse. Already we’ve seen gains of 6%, 9%, 10%, even 12% in less than two weeks by placing well-targeted shorts on a number of European financials.
And we’re just getting started. Indeed, we just opened five new trades a few weeks ago Friday. Already we’ve closed out three of them for gains of 6%, 6%, and 9%.
So if you’re looking for the means of profiting from what’s coming, I highly suggest you consider a subscription to Private Wealth Advisory. We’ve locked in 49 straight winning trades since late July (thanks to the timing of our trades), and haven’t closed a single losing trade since that time.
Because of the level of my analysis as well as my track record, my work has been featured in Fox Business, CNN Money, Crain’s New York Business, Rollingstone Magazine, and more. Which is why we’re raising the price of Private Wealth Advisory from $249 to $399. The reason? This is a premium quality newsletter than commands a premium price.
So this is the last day during which you can subscribe Private Wealth Advisory at the soon to be old price of $249. This is literally the last call (today by noon… technically it was last night at midnight, but I’m giving those in different time zones an extra 12 hours to take advantage of this deal).
To do so…
Chief Market Strategist
Phoenix Capital Research