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MOSLER'S LAW: There is no financial crisis so deep that a sufficiently large tax cut or spending increase cannot deal with it.

Sarkozy Yields on ECB Crisis Role

Posted by WARREN MOSLER on October 24th, 2011

He’ll be back…The way things are going there is no alternative, a point market forces continue to make.

And no amount of tea from China, at any price, would be sufficient given current institutional structure and policy.

And more discussion on whether Greece should be allowed to default, even as haircut talk rises to 60%, and as the notion of ‘voluntary’ comes under further discussion. After all, if they don’t have to pay their debts, why should any other member nation have to pay its debts? etc.

Sarkozy yields on ECB crisis role, pressure on Italy

By Julien Toyer and Andreas Rinke

October 24 (Reuters) — European Union leaders made some progress towards a strategy to fight the euro zone’s sovereign debt crisis on Sunday, nearing agreement on bank recapitalization and on how to leverage their rescue fund to try to stop bond market contagion.

But final decisions were deferred until a second summit on Wednesday and sharp differences remain over the size of losses private holders of Greek government bonds will have to accept.

French President Nicolas Sarkozy backed down in the face of implacable German opposition to his desire to use unlimited European Central Bank funds to fight the crisis.

Instead, the euro zone may turn to emerging economies such as China and Brazil for help in underpinning its sickly bond market.

7 Responses to “Sarkozy Yields on ECB Crisis Role”

  1. PG Says:

    The EMU is the product of sheer European “smartness” with sheer European “squareness”.

    If there was a prize for the most stupid “political” structure in human history, the EMU would be the first candidate to consider.

    Reply

  2. Walter Says:

    Warren,

    France wanted the EFSF to become a bank with access to the ECB.
    They did not want to make it a principle matter (‘also France wants the ECB to be independent’). They cared about what will work.
    It seems France stepped back, but waits till the German proposal will fail. Personally I do not think France is going to watch their interest rates explode. Not even an Italian or Spanish position they will accept. As you stated ‘He’ll be back’ and my guess is pretty soon.

    Germany wants it to be kind of an insurance company, giving insurance against a first 20% loss on SP and IT bonds issued from now on.
    This insurance idea comes from German insurer Allianz, parent company of PIMCO.
    As far as I understand PIMCO thought this a viable option. I wonder if this means that PIMCO will buy these bonds.

    Main problems seem to be:
    1. It’s not likely to stop at SP and IT.
    2. The 20% is probably too low.

    How do you see this Allianz / PIMCO insurance concept?

    Reply

    WARREN MOSLER Reply:

    the proposals change so quickly I try not to look at them for a bit to see if they are going to persist,
    rather than go through a bunch of proposals that don’t last more than a few hours anyway

    Reply

  3. Mario Says:

    After all, if they don’t have to pay their debts, why should any other member nation have to pay its debts? etc.

    that’s so true and I think really highlights how much a “child’s game” this EU project really comes down to. They don’t HAVE to put themselves between this rock and a hard place.

    It’s like a group of adults that started playing the board game monopoly and then all of a sudden signed “treaties” that this game would “tie-in” to their actual bank accounts. And then when the board game starts to get “weird” and “hairy” the adults keep hanging in there for it to somehow turn around in their favor when all they really have to do is just CUT THE CORD and release their personal bank accounts! It’s just a board game!!!!! Get free and get back to your REAL LIFE that involves your country, your people, your resources, etc.!! The solutions are so simple it’s almost pathetic to watch all of this cascade further and further. These people are so deeply entrenched in their egos that they are completely blind-sided. It’s like being in a trade gone bad but ABSOLUTELY REFUSING to go flat…in fact they keep doubling down!!! Sheesh!!

    Reply

  4. Alex Says:

    Why would anyone lend money to a member state without collateral?

    Why would anyone paid back a loan that has not collateral requirement and is simply paper?

    Why would an investor purchase paper without collateral behind it?

    Follow those questions and you will learn the Greece is correct to default and not pay a penny to bondholders.

    Reply

    WARREN MOSLER Reply:

    except it’a treaty violation that carries expulsion as a penalty

    Reply

    Neil Wilson Reply:

    @WARREN MOSLER,

    And expulsion would be a bad thing!?

    Reply

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