The "details" of a soap bubble ...

European Central Bank president Mario Draghi is expected to announce the details of a bond-buying programme to help keep down borrowing costs of crisis-hit countries later on Thursday. Leaks suggest it will involve unlimited purchases of government debt that will be "sterilised" to assuage concerns about printing money. The bond-buying scheme is rumoured to be called the "outright monetary transactions", with a shorthand title of OMT.

 

Maturity

The life of a bond, at the end of which it will be repaid in full. A bond's maturity can be as short as a year to as long as 100 years.

Seniority

This refers to how likely you are to be repaid if a bond issuer goes bankrupt. Bondholders with seniority over others will be paid back before other bondholders. There was some concern that the ECB would demand seniority over other bondholders when it undertook the bond-buying scheme, but leaks now suggest otherwise.

Unanimity

Was the ECB governing council united in backing Thursday's decision, or was there opposition? Bundesbank head Jens Weidmann has spoken out against a bond-buying programme before – is he now onside? Was the ECB split over interest rate levels, or were the decisions unanimous? Draghi's answer to these questions (which will surely come up) could be crucial.

Pari passu

A Latin phrase meaning "equal footing". In the bond markets, this means bondholders will be treated the same if a bond issuer goes bankrupt. Any purchases the ECB makes as part of its bond-buying programme are expected to be pari passu with other bondholders.

Collateral requirements

The ECB asks banks for collateral in return for taking out cheap loans. If they relax collateral requirements, they can accept a wider range of assets as collateral from banks. They have already relaxed these requirements, and can now accept everything from bundles of car loans to mortgage-backed securities.

Conditionality

This is the way the ECB would keep the Germans happy, by imposing conditions on receiving assistance from the ECB; so, if the ECB helps keep a country's borrowing costs low by buying up its bonds, that country may have to agree to some strict austerity. Without conditionality it would be easier for the ECB to unilaterally intervene.

Convertibility risk

This refers to the risk that you will buy bonds denominated in euros but could ultimately be paid back in lire or drachma (or deutschmarks) if the country taking out the debt leaves the eurozone before the end of the bond's life.

Unlimited intervention

Exactly what it says on the tin. Expectations are that the ECB will not put a limit on its bond buying. This is seen to be an improvement on the previous bond-buying programme, which was limited in size and therefore lacked credibility in the markets. If other traders do not believe the ECB has the firepower (or inclination) to buy enough bonds to bring down yields, they may continue to bet on them rising.

Sterilisation

This makes sure the money supply does not increase as a result of the bond-buying programme. When the ECB buys bonds, it is injecting liquidity into the financial system, effectively creating new money. To counteract that, the ECB has in the past followed bond purchases by subsequently draining an equal amount of liquidity from the system. It does this at the weekly deposit tender by increasing the rates it will pay commercial banks to deposit money with the ECB. The idea is that this will encourage banks to deposit more money with the ECB, thereby taking it out of the system.

Yield cap

Rumour had it that the ECB would set a yield cap on certain countries' government bonds. This would mean if the yield looked like it would break through that level, the ECB would start buying bonds to push prices higher and bring yields back down.

Draghi's expanding battery of weapons for combating the euro crisis is to be strengthened immensely on Wednesday when the European Commission unveils new draft legislation putting the ECB in charge of supervising the eurozone's 6,000 banks, with the power to grant and withdraw licences. Within a month of taking office last November, Draghi delivered a coup, launching a trillion-euro programme of cheap loans for Europe's banks. Last Thursday he went much further, announcing a new policy of limitless purchasing of eurozone government bonds known as OMT — outright monetary transactions. The markets went quiet, Spain, Italy, and Ireland rejoiced, as Draghi emphasised for the third time in six weeks that the euro is irreversible. He framed his bold intervention as solidly within his remit to defend the embattled currency. But German monetary purists erupted in howls of protest, although it was the German on the ECB's six-strong executive, Jörg Asmussen, who played a key role in drafting the new policy. "Only a currency whose existence is out of the question can be stable," Asmussen told the Guardian in an interview. "What for us is clearly within our mandate is to guarantee the stability of the euro." Extreme times generate extreme moves. There is no doubt that the eurozone's exhausted political leaders are quietly relieved that Draghi is taking some of the heat out of the crisis. While Merkel, the central actor in the euro drama, could never say so publicly, her aides have been known to concede that Draghi is the only person who can rescue the euro – so let him get on with it. And since the stakes could hardly be higher, for Asmussen the end would appear to justify the means.

Well....as far as Spain goes :

Option 1 :
a country like Spain asks for a bailout and has its budget (and therefore its entire legislative programme) subject to the oversight of the ECB. Death of democracy.
Option 2 :
a country like Spain asks for a bailout but refuses the oversight of the ECB on its legislature ; spurned by the ECB and the markets it crashes out of the Eurozone. Death of the Euro.

...54% of Germans are in favour of the court blocking the legislation,

Fate of eurozone rests in the hands of German judges. The decision is likely to give financial rescue fund the go-ahead against a background of German disillusion with single currency. They have the potential to throw the stock exchange into turmoil, trigger frenzy on bond markets and bring down the German government. So the eyes and ears of the eurozone will be on the eight red-robed judges of Germany's highest court this week when they deliver a long-awaited verdict over whether a financial rescue fund considered crucial to the future of the euro gets the green light.

The constitutional court is under international pressure to rule in favour of the European stability mechanism and fiscal pact. A dissenting ruling from the court, based in Karlsruhe, southwestern Germany, would probably cause havoc on money markets and cast doubt on the future of Europe's single currency.  "The German constitutional court cannot afford to be seen as not being independent, but it also cannot afford to be seen as the court that brought down the government," said Constanze Stelzenmüller, a senior transatlantic fellow at the German Marshall Fund in Berlin. "They're going to have to try to square the circle; in other words, not bring down the government at the same time as asserting their independence."

The ruling, due on Wednesday, is expected to give the go-ahead to the ESM, a permanent bailout mechanism, and the fiscal pact, but with caveats such as constraints on future decision-making or a ruling that Germany's basic law has to be rewritten if there is to be further EU integration.

A government insider told the Observer, on condition of anonymity, that the court "is very independent and always good for a surprise. Nobody knows what will happen on 12 September." A poll published on Friday on Spiegel Online showed that 54% of Germans were in favour of the court blocking the legislation, reflecting the degree to which public opposition to bailouts is increasing.

German MP makes new bid to stop eurozone rescue fund

Last night one of Angela Merkel's MPs launched another legal challenge to Europe's new bailout fund (the ESM), on the back of the European Central bank's bond-buying plan announced last week.

Peter Gauweiler, a CDU backbencher, argues that the Outright Monetary Transactions programme (in which the ECB would buy up government debt under certain conditions) violates German law.

He has asked Germany's constitutional court to consider this issue alongside the existing challenge to the ESM.

Gauweiler's office argued that the unlimited bond-buying programme announced by Mario Draghi last Thursday had "created a completely new situation"r regarding the ESM, making the impact on Germany's taxpayers "completely incalculable".

In a statement, Gauweiler said:

The ESM -- insofar as it is constitutionally viable at all -- should only come into force when the ECB has taken back its self-awarded power as a hyper rescue-shield.

It's not immediately clear if the Constitutional Court has accepted Gauweiler's complaint, or if it will affect the decision due on Wednesday.

German vice-chancellor Philipp Rösler urged calm last night, saying he couldn't see that the two issues were particularly linked.

...the decision to unleash the new action...

The president of the ECB said the decision to unleash the new action, which will be called Outright Monetary Transactions (OMT), had not been unanimous. He refused to confirm that the “one dissenter” on the ECB’s Governing Council was Jens Weidmann, head of the Bundesbank, but repeatedly told reporters that both he and the bank were “independent”. “I am who I am,” he said. As I understand it the ECB will only buy on the secondary market therefore it won't be taking part in national bond auctions. It will also only buy the bonds of countries which have been bailed out. So currently this only applies to Greece, it doesn't solve the problem for Spain or Italy unless they ask for a bailout and get one. It is of course unclear where the money would come from for a Spanish or Italian bail out. So I really can't see how this would help Spain get away its bond auctions, the ECB can't buy at the auction ( someone else would have to buy first) and they can't buy unless a bailout is requested. Also Greece as far as I know doesn't issue new debt, it relies on bailout funding and no newly bailed out country would issue new debt either. So I can't quite see how getting involved in the secondary market will help those countries. Finally of course this doesn't do anything to either write off debts or deficits. Countries are going to have to keep cutting , cutting , cutting, their economies will continue to shrink and their debts ( via bailout funds) will continue to grow...... unless a solution is found to the deficit problem we won't find a solution to the debt problem. I'm afraid I really can't see this helping much at all in a practical sense although obviously the announcement has news value and therefore excites the market. Putting something in place that allows debt ridden nations in deficit to potentially get further into debt and further behind the funding curve is hardly something to get excited about. 'Unleashed' was it? You can't unleash something you leaked the day before. The EU propaganda machinery is in overdrive at the moment - leaking one minute and then unleashing the next. I can't wait to see Draghi doing a 'Putin' beating his beared chest to emphasise the ferocity of the whimpering mouse he has set upon the financial markets. Draghi is Merkel's puppy. He was her nominee and when she barks he whimpers. If they ever have a real conflict he would not last a second. "I am who I am" "I Am that I Am is a common English translation of the response God used in the Hebrew Bible when Moses asked for his name." It's also a gay anthem. he's off his trolley, probably because he must find a new anthem and something else to unleash next week.,,,I wait in bemused anticipation.

The Chineese?..Just wait till they ask for their money back...

This is what happens when there is structural imbalance for far too many economies. Unfortunately there are no good economists and consequently nobody knows how to get the world's economies back into equilibrium. One thing is for sure though, those with more than their fair share of manufacturing production and employment, like Germany and China, will need to come to terms with supporting the other economies. Only then will a softer landing be able to be negotiated for everyone.... "Unfortunately there are no good economists and consequently nobody knows how to get the world's economies back into equilibrium" But the West has gobbled all the Nobel Prizes in Economic year after year. They can land a hand, can't they? Btw, Paul Klugman is giving advice free on New York Times daily. Me as an 'economist' without proper training suggest to the westerners, to start, spending less and save more. The equilibrium will come, someday and somehow....Well...It would be interesting to see what the USA would do if the Chinese decided to buy massive amounts of Gold on comex options and decide they want physical delivery at the end of the contract period rather than the profit/loss in yet more dollars. The Fed would not be happy at all that the physical gold gets shipped off to China....They have in the past made it illegal to own physical gold. I say :...Well...China's growth bubble is slowing down very quickly.  They naturally want to protect their own industries and investments and are wary of risk now. They have bought over 2 trillion of European and US debt to prop up those economies and to encourage world trade supporting Chinese exports worldwide for years. Now the party may be over....or is it ???..Just wait till they ask for their money back...

'If Germany goes under then the Titanic really hits the iceberg'

The Chinese are worried that Europe is going to collapse. The Europeans are worried that China is going to Collapse. Actually both are headed for Collapse. European demand comes from the north europeans lending to south europeans to consume in the hope that because they are in Eurozone, they will get repaid. Not going to happen, all that is lent will be written off one way or another.

Chinese demand is based on construction of empty cities, empty skyscrapers, trains on which nobody rides, highways and bridges to nowhere, municipal offices that look like palaces and factories to produce this malinvestment.

There is a saying in Chinese, A day comes when the yellow river clears. Well, the Chinese have run out of money, construction has halted across china, steel is piling up, iron ore is piling up. Dealers are choking on unsold cars. Nobody is taking delivery of ships the shipbuilders are building. Don't expect the chinese to keep buying German cars, French wine , Italian leather or Swiss watches. The south europeans have run out of money, don't expect them to buy chinese toys or electronics....Money supply numbers may be just based on channel stuffing. Don't expect it to put food on your table. Inventory liquidation will start soon, then we will find out who has been swimming without clothes

Isay : Merkel desperately sucking up to the Chinese, hoping that they can take up the slack for the increasing effect of falling demand in the Eurozone, to paraphrase a pundit on RT today, 'If Germany goes under then the Titanic really hits the iceberg'

The Bundesbank remains critical of the purchase of euro system sovereign bonds

Europe's most powerful central bank kept up its opposition even after Germany's political leaders voiced some support for ECB President Mario Draghi's plan to resume buying bonds. "The Bundesbank remains critical of the purchase of euro system sovereign bonds, which comes with considerable risks for stability," the Bundesbank wrote in its monthly report. "Decisions about a possible broader mutualisation of solvency risks should be... with the governments and parliaments, and should not occur via central bank balances."Mr Draghi indicated earlier this month the ECB could intervene in debt markets but he held back from announcing concrete steps. The Bundesbank retains substantial influence within Germany and across financial markets due to its inflation fighting credentials, but it is unlikely it could scupper Draghi's plan, given the German central bank is only one of 17 constituents at the ECB. This will have the same effect like Eurobonds - No safe haven any more, borrowing costs for Germany (and the UK) will rise and the costs for Italy and Spain will be lower, as investors start already now buying their bonds.

Menwhile, an interview being published today with Asmussen from the ECB...."Greek exit manageable but not preferable (reuters)"

1. He indicates support for Draghi's dual-path bond-buying program, in contrast to the Bundesbank's Weidmann. (From Handelsblatt) He considers it firmly within the ECB's mandate, as "only a currency whose existence is not in doubt, is monetarily stable. "Precisely this doubt in the Euro's continuing existence is what we want to remove from the market" ...The other German on the ECB sides with Draghi.

2. On Greece. Staying in the Euro is his preference, but a Grexit would be "manageable".

3. On the costs of a Grexit. "It would be associated with a loss of growth and higher unemployment and it would be very expensive - in Greece, Europe as a whole and even in Germany.". Handelsblatt adds: the ECB is worried about the effects on other countries. One shouldn't act "as if one knows with certainty what would happen the day after". That's relevant because Asmussen, according to persistent German media reports, is the ECB board member responsible for contingency planning for a Grexit - although it's something he refuses to discuss with the media.

Spain wil fall under the German boot as well...

Prime Minister Mariano Rajoy has said he would not take a decision on whether to apply for a new aid package, on top of a €100bn loan for the country's banks, until he knew what conditions would be attached. Possible options would be for Spain to apply for a precautionary credit line or to petition the European rescue fund to buy Spanish sovereign bonds to force down yields. European Central Bank President Mario Draghi earlier this month laid out plans. The yield on Spain's benchmark 10-year government bond , dropped on Friday to 6.49 percent, its lowest level since early July, as banks took the bonds for use as collateral to raise funds. Rajoy has slashed public spending and hiked taxes in an effort to deflate one of the euro zone's largest public deficits and convince nervous markets, which have pushed borrowing costs to 14-year highs, he can control the country's finances. Botella was made mayor after the conservatives came to power in December and her predecessor was named to Rajoy's cabinet. She said she blamed the previous Socialist government for leaving the country with a massive public account shortfall and leaving Rajoy no choice but to seek international aid. Source: Reuters

I have yet to meet any French or Germans who want to keep the Euro.

Germany led the way with regard to the Euro, due mainly to the enormous financial benefits it would reap. There is no problem with that if we accept that nation states should act in their own best interest...."Bundestag president Norbert Lammert said parliament’s integrity cannot be subordinated to the ups and downs of the markets. Free Democrat (FDP) leaders said Italy’s unelected prime minister is playing with political fire by trying to circumvent democratic legitimacy.

The dispute comes as relations between Germany and Italy touch the lowest ebb since the Second World War, with Il Giornale publishing a front-page picture of Chancellor Angela Merkel under the headline “Fourth Reich”. "..This is funny... the Germans complaining about Mr Monti not being elected... He was elected... by Merkel and Sarkozy!!! and their puppy Barroso...Wait for Berlusconi to come back with a proper election in Italy and see where you are with your Euro! However, Germany now insists that there must be financial union to support this currency; but on Germany's terms, and with no risk to their financial systems. It is not good enough to state that they are paying for the bailouts - the idea of the EU is that all are equal and it is their DUTY to give this support. If they believe differently then they can hardly be called "good europeans".The euro, as predicted from the very beginning, has proved to be in nobody's long-term interests; it gave a short term limited boost to to weaker economies but has ended up being the agent of destruction for their economies. It was only ever the zealot's attempt to create the EUSSR as a single country. Well, hell mend them. Let it go and stop pouring good money after bad keeping it up. I've yet to meet any French or Germans who want to keep the Euro.

TRUTH IS : Private sector activity shrank for the tenth time in 11 months

Who on earth is investing to raise these stock markets so high? If I were Warren Buffet I would say this is a typical bubble Companies are not making real profits Banks aren't either so who is doing the investing????...Bond yields are down, oil prices high, USA crops are devastated by drought, housing in USA is still very much wasted. So are "the powers that be" simply doing what analysts do talking up the benefits of share ownership until even "my mate Joe Blw" decides that investing in stocks beats keeping his money under the mattresse ? I have had it with markets banks and politicians lies and deceits. I am closing all my banking accounts and simply paying in earwigs from now on.We are living in the Alice of Wonderland World. The more bad economic data we gets, the more the worlds stock markets rise..... Hopes that Europe’s leaders will act decisively drowned out weak data showing the eurozone endured another torrid month in July. Private sector activity shrank for the tenth time in 11 months and pointed to a 0.6pc rate of quarterly contraction, according to the purchasing managers index. Offsetting that was the strong US jobs data. July saw 163,000 people find work in the world’s largest economy, beating forecasts of 100,000. The sense of relief was sharpened because almost all the recent US data have pointed to a deterioration since the first quarter of the year. “It will alleviate fears that the US might be tipping back into recession,” said Nigel Gault, an economist at IHS Global Insight. The utterly repellent EU freak show stumbles from crisis to crisis, a crisis which conveniently gives the bureaucrats an excuse to force member countries into a fiscal union with budget control being handed over to Brussels, effectively crushing the last breath of democracy of the nation state in favor of an EU super state, but the light of freedom, sovereignty, cultural identity and the ability to decide one owns destiny will not be extinguished whilst the euro sceptics still have a voice. The common market worked well, that is where Europe should be heading not more Europe.....However : While U.S. employers hired an additional 163,000 "human resources" they also sacked an additional 195,000 "human resources" last month, including a decrease of 228k full-time jobs which was only partially offset by a 31k rise in part-time jobs (defined as 1 to 34 hrs/wk). Furthermore, a new group of 199,000 Americans joined the "Working-Age" pool last month and will need jobs as well. Not only is the U.S. economy in such a severe situation as reported, it is, in fact, in a worse one. Currently some 87 million Americans, or about 36% of the working-age population of the U.S., are no longer even looking for work and are considered "out of the labor force." If it were not for workers who dropped out of the labor force, the real UE rate would be far north of 11%. All of this MSM "rah-rah" reporting and "growth and recovery" hopium smoking needs a reality check.

I bet even the IMF has no idea how much the game is going to change.

President Mario Draghi admitted his eurozone rescue plan was a work in progress. ... First there was light at the end of the tunnel - now there is just work in progress meaning that they are thinking of trying to locate where they are in the tunnel but they haven't got a clue what to do. Euro is just a shamble the biggest political failure of all times, the biggest wealth destroyer the humanity has ever known. Congratulations to the europhiles for making the world a poorer place. You're in a big hole and you're still digging.... There is a need for the europhiles for an apology for all the misery they piled onto the people and start urgent negotiations on how to get rid of the euro. We will forget all your sins. It is up to you to put your hands up and say sorry. wELL :The elephant in the room is losing it's grip on the ceiling light flex? Stand by for the mass stampede through doors and windows and walls. The IMF is as informed as manuel as to the whole picture, the truth is nobody can know the extent of the desolation bankers and financial whizzkids have visited upon us and anyone who can be convinced otherwise has little appreciation of the shortcomings of human nature. It's likely that from top to bottom they were all behaving with the mindset of the shoplifters during the riots, driven mad in their bonus rush, many also under the influence of cocaine?
Over four years some of the known truth has been drip fed out, it's rumsfeldt's unknown unknowns (as it were) that will lock in the longest depression yet, as we especially seem stuck with the present establishment using the austerity argument totally dishonestly for dogmatic gains and repression.... I SAY : The economic shock from the eurozone crisis has not yet hit said the IMF- AND That's because it ISN'T a "eurozone crisis", it's a crisis of western consumer 'growth' capitalism, mainly caused by a bubble stoked by profligate bank lending activities, reckless and stupid corporate borrowing and a disastrous corporate 'globalisation' process which saw the biggest transfer of wealth across the globe in human history - oh, and diminishing conventional oil reserves.

Top bankers messed up, top business leaders gave away the wealth of the west for short term profit and dumb politicians didn't understand what was going on. Those that did, were easily 'persuaded'.  They're all sliding down the mountain side, using ice picks for brakes but kicking the Eurozone ahead of themselves, so that they have someone to blame....it called for a "policy game changer"

I bet even the IMF has no idea how much the game is going to change.

Germany, the Netherlands and Luxembourg had the outlooks for their AAA credit ratings lowered to negative by Moody’s Investors Service in past week, citing “rising uncertainty” about Europe’s debt crisis, the risk of Greece leaving the eurozone, and the growing likelihood of massive bailout bills in Spain and Italy. On the whole, they seem like pretty sound reasons to me.

The IMF has, as I predicted, written off Greece. The Greek elite is, in turn, not even trying to hide how little effort they’re exerting to put their own public sector feathered-nest in order. The managements of Greek state-run enterprises seem to be so forgetful, they forgot to implement government decisions concerning wages cuts for thousands of employees at state-run enterprises (DEKO) and other state bodies and organizations. And the Coalition itself omitted to pass the legislation forcing them to do it.

The Troika arrived in Athens this week, to be vociferous in pointing out the non-compliance. (I doubt if they’ll bother to mention that all the forgotten public sector cuts have been dumped onto the already flatlining private sector). It is just possible that the Troikanauts will say “That’s it, no more money”, but unlikely: with Spain and Italy in bond-yield intensive care, this would be bad timing.

Spain’s two-year bond yield saw its biggest one-day move since the eurozone debt crisis broke out in early 2010, closing at 6.53 per cent. “Spain is close to losing access to markets entirely,” said John Stopford, a senior fund manager at Investec Asset Management. “It’s not sustainable to borrow at these levels for very long.” He’s not wrong: Spain is entering the Greek Twilight Zone --- An association representing German banks has called for an extra year to implement tougher rules that would force them to hold more cash as a buffer against possible financial crises. The BVR group of private and public banks called for a delay until January 1, 2014 for the entry into force of the so-called Basel III regulations due to the "enormous technical restructuring and implementation work" needed. The planned implementation at the beginning of 2013 was "no longer realistic" said the group.

The East provides a mirror

Since Brussels is quite happy to ignore referendum results it doesn't like, it's hardly n a good position to lecture others about democracy.

People in Eastern Europe have a healthy attachement to actual results. That's why they get impatient with the endless process-driven talk and de facto status quo and paralysis in most of the West (perfectly represented by EU institutions themselves). So it is more likely to get radical ideas and non-standard politicians in the East than in the West. East embraced nationalism, clericalism, fascism, socialism, communism, capitalism, whatever came along as long as the perception by people was that things might get better.

People in the east go for the jugular, game the systems, and in general act in self-serving ways. This can be annoying, but is is also more honest and authentic. Capitalism in the east very quickly disintagrated into plutocracy, abuse of labor rights, tunneling of companies, and a general kleptocracy - things that took a lot longer in the West, although it is clearly happening in the West right now.

People in the West need to understand that abstract "systems" that don't deliver results are just that: empty verbiage surrounding well-hidden and self-serving power. The East provides a mirror: there can be no truly free media that is owned by private interests, there can be no general prosperity in dog-eats-dog capitalism, there is no such thing as "meritocracy" any more in the West than there is one in the East, and maybe there is no such thing as "liberal democracy", only better and worse ways to run a society.

The ugly truth is that without self-restraint by the powerful, without growing wealth, and without external unifying threats, all these pathologies from th East are appearing the West. The political threat of communism made the prosperity and balanced societies the West possible (maybe inevitable). That's gone, how are we going to do the right thing without this external threat?

Spanish debt is in the £trillions - Italy's debt is in the £trillions

A former head of the IMF ran a Spanish bank and is being hauled in to a Spanish court because he is accused of fiddling the figures to claim his Bankia bank made a 309 million euro profit - when in fact, after the government siezed the bank two months ago it was found the bank made a 3 billion euro LOSS

And what is the result - the bank is begging for £19billion (why it only made a £3billion loss)....Who has to borrow the money ?: - The Spanish People. What guarantee have they got on the Loan - none - Merkel and co have voted to take away taxpayer protection on the funds. They have created a great money laundering scam where they pretend the government is not borrowing money at all and that magically the ESM gives the money without any protection -- But the reality is - taxpayers are still borrowing the money and liable for the repayment of the loans - the governments borrow - they give it to the ESM and the ESM gives it to the banks instead --- But - here's the killer - Merkel agreed there is no protection for the funds - so currently if things go wrong (and the bankers diddle the books again) - taxpayers lose the lot - but still have to repay the banking debt....The emperors new clothes - look at the banks - they will be fine - the ESM gives money (let's pretend its not taxpayers )....And the moral of the story - if you were a head of the IMF or a banker - you can fiddle the books as much as you want and taxpayers will borrow money and bail you out. If a bank in Spain is fiddling the books 4 years in to this Euro crisis - what is the real state of the banks. Exactly how many £trillions of banking debt is being transferred to taxpayers- well it is a great big black hole - with absolutely no end in site

Spanish debt is in the £trillions - Italy's debt is in the £trillions

So let's set up the ESM and pretend taxpayers are not borrowing the money - well we are.....Time to stop borrowing....Let the banks and the bankers face austerity - Iceland let their banks collapse - time for Europe to do the same....We pay tax for services - not to service banking debt.....These people are transferring so much debt from banks to taxpayers it will take 100 years to clear it off - so your great great great great grandchildren will be paying tax - not for services - but to pay for the sins of bankers and politicians now. Since when did taxpayers become liable for private investor debt - they never shared the profits so let them share the losses. --- NO MORE BORROWING TO GIVE MONEY TO CORRUPT BANKERS

Matters are worse in the banking sector. Each country's banking system is backed by its own government; if the government's ability to support the banks erodes, so will confidence in the banks. Even well-managed banking systems would face problems in an economic downturn of Greek and Spanish magnitude; with the collapse of Spain's real-estate bubble, its banks are even more at risk. In their enthusiasm for creating a "single market", European leaders did not recognise that governments provide an implicit subsidy to their banking systems. It is confidence that if trouble arises the government will support the banks that gives confidence in the banks; and, when some governments are in a much stronger position than others, the implicit subsidy is larger for those countries.

In the absence of a level playing field, why shouldn't money flee the weaker countries, going to the financial institutions in the stronger? Indeed, it is remarkable that there has not been more capital flight. Europe's leaders did not recognise this rising danger, which could easily be averted by a common guarantee, which would simultaneously correct the market distortion arising from the differential implicit subsidy.  The euro was flawed from the outset, but it was clear that the consequences would become apparent only in a crisis. Politically and economically, it came with the best intentions. The single-market principle was supposed to promote the efficient allocation of capital and labor. But details matter. Tax competition means that capital may go not to where its social return is highest, but to where it can find the best deal. The implicit subsidy to banks means that German banks have an advantage over those of other countries. Workers may leave Ireland or Greece not because their productivity there is lower, but because, by leaving, they can escape the debt burden incurred by their parents. The European Central Bank's mandate is to ensure price stability, but inflation is far from Europe's most important macroeconomic problem today.
AP - The European Parliament has overwhelmingly defeated the international ACTA anti-piracy agreement, after fears that it would limit Internet freedom mobilized broad opposition across Europe.
The vote Wednesday was 39 in favor, 478 against, with 165 abstentions.
The defeat means that, as far as the EU is concerned, the treaty is dead - at least for the moment - though other countries may participate.
A spokesman for the European Commission, the EU’s executive arm, said it may try again after it obtains a court ruling on whether the agreement violates fundamental EU rights.
Supporters said ACTA - the Anti-Counterfeiting Trade Agreement - was needed to standardize international laws that protect the intellectual property rights.
Opponents feared it would lead to censorship and a loss of privacy on the Internet

...fulcrum of Merkels German Dream - to rule Europe without a shot being fired

The reason that the Euro will NOT be put to the sword is that it is the (well they can't can they because they are not allowed guns anymore). Merkel is a typical Prussian - NEVER WRONG - and that will soon lead to the impoverishment of most of the less powerful in Europe, which in turn will lead to massive civil unrest. And who will "take charge", or "come to the rescue"?...Why the very person who caused it - Angela Merkel.

Ring any bells Greek people?".... Meanwhile, The Greek coalition seeks two extra years to NOT meet bailout deficit targets!""The general target is for there to be no further reductions in wages or pensions and no more taxes"  A good target for a country with budget in red for years and still in red and it seems has no intention getting out of red and asking basically EU taxpayers to cover its unbalanced budget for next two years or more probably forever . "They ask extra two years' grace to meet the tough deficit targets laid down in the bailout deal, and was hoping to reverse cuts in the minimum wage and cancel planned civil service layoffs."....So,minimum wages upwards, regardless of the fact that even now with all the "cuts" their minimum wage is higher than in Spain. Promised excess state administration lay-offs to be cancelled,actually they have not even started with the cuts, and is still only a promise to IMF, EU of 150,000 out of 1 milion public sector workers. ... And, aaa, taxes, not to be forgotten, Please, no more taxes!!!....Is it only me, or it just doesnt really makes sense? I mean how do they plan to run their country like this? Who do they think should foot the difference between their overspending and taxes they (dont) collect??? To whom they think they can go and make this "case" with straight face??? To EU taxpayers??? I somehow dont think their "argument" will work.

Merkel faced trouble at home as opposition politicians joined Mr Hollande in his bid to make the austerity pact more flexible. They complain that the "one-size-fits-all" rules do not suit Germany's individual states and municipalities. The question of how to address the eurozone's debt burden is toppling governments across Europe. The three-month-old Romanian government fell on Friday as it lost a no-confidence vote over state asset sales. Against a backdrop of rising concerns, the pound hit a two-and-half-year high against a basket of currencies tracked by the Bank of England. Italy, the eurozone's third largest economy, paid more to get auctions of its government debt away on Friday morning. It paid yields, or implied interest rates, of 5.84pc on its 10-year bonds, up from 5.24pc last month. Separately, Ireland slashed its growth forecast for this year from 1.3pc to 0.7pc.

MADRID - Spanish officials moved to shore up confidence in the ailing local economy after new data showed unemployment at an 18-year high, after credit-ratings firm Standard & Poor's slapped Spanish government debt with a two-notch downgrade. Spain's statistics bureau Friday said the country's jobless rate rose to 24.4% in the first quarter, from 22.9% in the fourth quarter of last year, inching toward its highest level on record. More than half of workers under 25 years old were without jobs. In the first quarter of 1994, Spanish unemployment reached 24.6%. Spain's government said its program of economic reform will benefit the country after it was hit by a credit rating downgrade by Standard & Poor's and figures showed unemployment had hit an 18-year high. "The figures are terrible for everyone and terrible for the government," Foreign Minister José Manuel Garcia-Margallo said in a radio interview. "Spain has been, and is, in a crisis of huge proportions." Spain's labor market has been hard hit by the collapse of a decadelong housing boom and by budget cuts that are removing tens of billions of euros from the economy. In addition, rigid labor laws make it easier to dismiss workers than to adjust their wages or change their duties. Spain's unemployment rate is more than double the 10.7% euro-zone average, and now totals about 5.6 million people.

AMSTERDAM—Weeks-long negotiations among the Netherlands' ruling coalition parties on budget cuts collapsed Saturday, making early elections an inevitable step and raising the prospect of a downgrade of the country's triple-A credit rating. The center-right coalition government, led by Prime Minister Mark Rutte's liberal party VVD, had been in talks for seven weeks with its right-wing ally, the Freedom Party, or PVV, on a package of measures to bring the deficit below the European Union limit of 3% of gross domestic product in 2013. The negotiations, over budget cuts of €14 billion ($18.5 billion), had been in final stages, Mr. Rutte said at a news conference Saturday, but the PVV "lacked of political will, therefore we are standing here empty-handed." "Early elections are now obvious," said Mr. Rutte, who informed the Queen about the situation. Dutch economic minister Maxime Verhagen of governing Christian democratic CDA party blamed Geert Wilders, the head of the populist, anti-Islam and anti-euro PVV, for "not taking responsibility." Mr. Wilders said after the collapse of the talks that his party will no longer support Mr. Rutte's center-right minority government, and called for elections "as soon as possible." Earlier this week, Fitch Ratings threatened to strip the Dutch of their cherished AAA credit score if they failed to take action to cut their budget deficit and stop their debt from rising. The rating firm will consider its rating of the Netherlands in June, and placing it on negative outlook is a possible first step toward an eventual downgrade, it said. The Netherlands is one of the four remaining triple-A-rated countries in the euro zone, along with Germany, Finland and Luxembourg. Klaas Knot, Dutch central bank chief and ECB governing council member, has said the government's borrowing costs could rise significantly if it lost its top rating. Without extra measures, the Netherlands will breach the budget rules that it has been fiercely advocating as one of the euro's founding nations. This has fueled a debate on whether the country still belongs to the group of "core" euro-zone states with solid public finances.

The chief executive of market analysts RANsquawk :"The eurozone is being skewered by stubbornly high inflation and rising unemployment. Even ignoring the small matter of the debt crisis, the eurozone's fundamentals are once again looking increasingly sketchy. While in Spain there is a growing danger of unrest as popular frustration boils over at the new conservative government, even in buoyant eurozone economies, inflation is eating away at purchasing power. Any hope of consumers spending their way out of the dip has just faded further. In many of the 17, the numbers are conspiring to make economic output stagnate or contract. The increase in unemployment had been expected, and there was a sense of grim inevitability about these numbers". Unemployment figures like any stats are only as good as the accuracy of the source data. For instance, the figure in the UK is apparently 2.8 million with 29.12 million in work. That is out of an official 62 million population which is important because those not retired or at school etc not included in the 62 million are in effect unaccounted for. This is serious all over Europe because the population according to the people who really know through footfall count and accurate essential sales such as national food retailers like Sainsburys said that in 2007 (The Independent) they estimated the UK population at 78-80 million. Which means that there are not 2.8 million unemployed in the UK today at all, there could actually be in the region of 20 million technically. Whether unemployed or unaccounted for its a deeply worrying thought when one thinks this could be typical of what's happened all over Europe. What is alarming is that the natural self-sustaining model of capitalism has been severely undermined by the socialist ideology of make believe. And if all those unaccounted for people were found and ejected from all European countries there would be no unemployment, no housing shortages, no strain on infrastructure and so on. There would also be no internal threat of cultural destruction from Islam, no African ghettos in our cities, less crime, less strain on social services, more resources for indigenous populations etc. And most importantly if people were given their country's back again they might begin to believe in them, themselves and work and fight for their own futures. Isn't it a shame that the EU Technocrats can't 'fix' unemployment figures like that have the debt crisis, and for every Euro they print and create on a computer they repatriate an ill-suited / illegal immigrant. But our leaders know best I suppose, they know what they are doing. 17 million unemployed - yes a direct result of the EUSSR policies that kill off any competitive edge we could have, whilst at the same time paying the EU elite massive amounts and pensions the rest of us could not even dream off.

Meanwhile some European banks have indicated an intention to repay their LTRO money. The pundits on CNBC were baffled. ...Obvious really.... What these banks so desperately need is not limitless credit which they don't want to pass on anyway (except of course to their own sovereigns, in so far as they are pressured to do that) but real money invested in them from outside Europe. In other words it's a ploy to lure in some Asian/American/South American cash. The repayments are presumably being made from the profits they have generated from gambling with the ECB credits on spreads/commodities etc. Just as we all knew they would.http://www.scribd.com/arbitraj/