160 German Economists Denounce Summit Results
The San Francisco Gate reports German Economists Denounce Summit Decisions
A group of German economists has denounced decisions made during last week's European Union summit, arguing Thursday that they risk increasing the exposure of taxpayers, retirees and savers to the debts of struggling banks.Disingenuous Response by Merkel
In an open letter published by the daily Frankfurter Allgemeine Zeitung, a group of 160 economists wrote that German Chancellor Angela Merkel found herself forced to make "wrong" decisions during the gathering. The economists said they "view the step toward a banking union, which means collective liability for the debts of the banks of the eurosystem, with great concern."
"Banks' debts are nearly three times higher than government debts ... the taxpayers, retirees and savers in the so-far solid countries of Europe must not be made liable for backing these debts, particularly since gigantic losses are foreseeable from financing the southern countries' inflationary economic bubbles," they added.
The economists include Hans-Werner Sinn, the head of the prominent Ifo think-tank and a vocal critic of European leaders' rescue policies. They argued that "banks must be allowed to fail," with creditors who knowingly took investment risks bearing the burden.
Merkel rejected the criticism.
"First of all, this is about better banking supervision, and one can only say that that is urgently necessary," she told reporters.
Please note the disingenuous response (if not direct lie) by Merkel who says "this is about better banking supervision".
Of course this is about bailouts. It is also about the need to allow banks to fail. Let that happen, punish the bondholders, and kill fractional reserve lending and the situation will take care of itself.
Merkel also stated "This is absolutely not about any additional liability." That too is disingenuous. The amount of money may not have risen, but the odds of losses have increased.
I happen to believe that Merkel would sell her soul to save the euro but can't. She also cannot step over lines in the sand by the constitutional court. Otherwise she would have caved in far more than she has.
Tempers Flare Over Letter From Economists
Via Google translate from El Confidencial, please consider 160 German economists against aid to Spanish banks
"It's not going to save the euro, but the creditors of the banks." "It is unacceptable that taxpayers, pensioners and savers far the strongest countries in Europe are accountable for the debts and huge losses due to inflationary bubbles of the South." "Politicians think they can limit the huge sums spent to pay these debts and misuse through the future European Banking Supervision Agency. But they will not succeed while the debtor countries have a majority in the Eurozone structural. " Three key ideas of the open letter that 160 economists renowned citizens today directed the Federal Republic not to support the creation of a European Banking Union and, of course, direct aid to Spanish banks.No Salvation Fund For Banks
The initiative is a media bomb. Hot and tempers are already with the feeling that Angela Merkel gave away too much at the last summit to pressure from Mario Monti, Francois Hollande and Mariano Rajoy, what these economists, led by Hans Werner Sinn, director of the IFO Institute Munich, and Walter Krämer, an economist statistician of the city of Dortmund, is a kick in the butt to a foreign minister that the last thing needed now is the opening of a new public debate on aid to weaker members of the Union.
Teachers and economists are not alone. The chairman of the Federal Union of German Industry, Hans-Peter Keitel, has joined the criticism: "Germany has said, has to put back the red lines. There should never be a Salvation Fund Banks".
There should not be a salvation plan for anyone, especially banks. One of the reasons this mess is so big is the repetitive moral-hazard bailouts of the financial sector by central banks and governments.
54% of Germans Believe Further Bailouts Pointless
Via Google translate from Der Spiegel, please consider Majority of Germans Believe Further Bailouts Pointless
The majority of the German population has resigned from the mammoth task of saving the common currency. 54 percent of respondents believe that Germany should not continue to fight for the euro rescue if billions more are needed. 41 percent call for further engagement in Germany, and five percent are undecided.Fourth Front Against Merkel
Skepticism Extends Through Almost All Political Parties
- 52 percent of respondents with a preference for the CDU / CSU, see "little sense" is that Germany continues to €-rescue battling, only 45 percent of union supporters have responded to another commitment, three percent is "uncertain". The situation is similar in the SPD of (54/43/3).
- Even stronger was the rejection of at supporters of the Left: There were 68 percent believe that it hardly makes sense to continue fighting for the euro rescue, they involve billions more are needed. 28 percent supported the idea , and two percent said "do not know" or gave no information.
- The largest euro-friends are apparently supporters of the Greens: 64 percent of supporters of the eco-party took the view that Germany's commitment to the euro should be continued rescue, only 30 percent were against it - six percent gave no details.
- For supporters of the FDP, the responses for statistical reasons are not shown separately, they are represented in the survey with a too small number.
The noose around Merkel's neck gets tighter, even as her own personal popularity is at an all-time high.
For details please see German Central Bank Head Warns Merkel on Repeated Weakening of Positions; Third Front Against Merkel
To that we can add safely add the 4th front - voters, and if you like, a 5th front of 160 economists.
Realistically, there is little more Merkel can do but bluff. Her magic hat has no rabbits left in it.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List
