2011 will decide euro’s fate: Germany under pressure

As the current capital flight to Switzerland shows, the eurozone debt crisis has reached Germany, setting the stage for a turbulent year in 2011.

The German government will no longer be able to postpone key decisions about whether the eurozone should break up or not.

The Swiss franc surged this week to record levels against the euro as investors shunned the single currency. The interest rate that Germany has to pay on its national debt has also been rising since October in another signal that troubling even for the eurozone’s strongest economy is brewing.

Andrew Bosoworth from Pimco, the world’s largest souvereign bond investor, said in an interview with Germany’s Die Welt that investors will only return to the European countries once confidence in their long-term growth has returned.

In an interview with the Die Welt, he said that investors doubt that countries such as Ireland, Greece and Portugal will be able to pay back debt. This is because the fiscal austerity measures to pay th gigantic, fractinal reserve, private bank debt are driving their economies deeper into debt, choking growth.

“The result: Investors are trying to sell their bonds from the problem countries, but can’t find any buyers other than the European Central Bank…The interest rates are continuing to climb as a result — for Spain, Italy and Belgium as well. That makes it more expensive for them to borrow, their debt increases and so does the threat of insolvency.”

The ECB has also refused to buy bonds on a large scale or effectively print money like the Federal Reserve for fears of inflation.

In addition,  many economies have lost competitiveness due to the euro strait jacket, and cannot restore that competitiveness unless they can adopt their own currencies and devalue.

Bosomworth said the only workable solution would be for Greece, Ireland and Portugal to  leave the euro.

But the latest German government ministry draft poposal produced on Thursday  foresees a “European Stability and Growth Investment Fund” which would do nothing  to address the underlying problems of debt and a lack of competitiveness and so restore long term confidence.

http://online.wsj.com/article/SB10001424052748704278404576037040905054916.html

This proposal is, in fact, just yet another mechanism for the banks to strip assets and suck money out of the eurozone  under the pretext of interest payment on souvereign, paper debts under authoritarian regimes. Countries are to lose their souvereignty.

The fund should be called the „Big Bank Stability and Growth Investment Fund“ because the banks are the only ones who will benefit from this mechanism. They continue to be able to scalp the eurozone economies.

A European bond or or rescue fund or mechanism for banks will lead to ruin.

The Germans simply don’t have enough cash for all these „bailouts“ or rescue mechanisms – and they are the ones who will have to pay as countries become insolvent. The result: the IMF will take over their economy too in the end.

Germans who have seen their real wages sink by 4.5% since 2000 (the median income is now only about 1,400 euros) are also highly likely not going to accept cuts just to bail out big banks throughout the eurozone.  So, there are political risks associated with this approach too.

The euro is deeply unpopular. The idea that maintaining the euro is vital for peace and democracy in Europe is widely recognised to be propaganda by the political and financial elite and the media they control. People see the euro has led to a decline in living standards and an erosion of democracy.

Economists like Peter Bofinger who think people have any wish to preserve the euro and will sacrifice their incomes and future for it are deluding themselves. People can grasp the facts, and the facts speak for themselves. The euro is the tool of a corrupt elite.

Whether counties leave the eurozone or stay, 2011 is sure to be a dramatic year as the debt crisis reaches a climax and the people either have to be forced to give their last shirts or the financial sector has to be brought under control.