Draft MoU for Spain

They are doing NAMA for selected banks, with the external funding lined up.

We did NAMA all by our lonesome, and for all banks.

We did BankCleanup v1.0. Never buy the version 1.0 of anything.

During the bubble years Spain was building 700,000 residential units per annum,which was greater than the combined total of Germany ,France and Italy. It was a property and constuction boom–a large oversupply.

BLTD must have gotten a draft MoU from Trichet too. Before he decided to set up NAMA.

@JC

One of the ignored aspects of the boom era is population movements. Switzerland’s economy grew by 2% last year and immigration growth meant the population also increased by 2% over the period. More immigrants mean more apartments, mean boom.
As soon as the economy contracts many immigrants leave and then you have a property crash.

Nobody is in charge anywhere. House price rises are like dopamine but the hangover is brutal.

@seafoid
+1 on the pun/analogy/metaphor….
I think it was a bit harsh to delete all of dorks contributions though in particular his point on pt 17.

So Spain ends up with full public liability for private banking losses too.

It does now seem highly probable that even if the ECB did not have to force the exact form of the bank bailout on Ireland that they would have had the need arisen.

Would it be wrong to characterize Germany and the ECB, the two dominant forces in European policy now, as differing only in how evenly spread they think public support for the financial sector should be?

What an amazing victory for private financial capital this is, even if it does take the EU with it.

@V barrett

We all like a bit of Dork but he does seem to arouse the ire of people with CDS*[1] syndrome.

[1]: Chronic scrolling difficulty

What is interesting is that the Spanish government is fighting to spare the unsecured bank creditors who have been wiped out in the Irish case. This goes against the vehement opinions of most contributors of this blog who want to wipe out everybody ,secure or unsecure ,like the Greek did.
I think this can be explained by the fact that the Spanish unsecured creditors are mostly Spanish and the Irish banks senior creditors are mostly foreign ,morality is relative.

People with the benefit of lavish pensions from current tax receipts can call for burning seniors bondholders without cost.

Bail-ins hit people in private pension funds who are already facing big cuts in benefits.

There are seldom cost-free choices.

@Seafoid
Its a Communist bullitan Board.

Lets look at the little things of this construct.
But lets not ask larger more blunt questions such as where this fiat is going.
Such as Who the hell are these Senior bond holders and how does their elimination affect the payments system and immediate domestic demand ?
Answer :it does not.
So we have taxpayers fiat injected into effective free banking systems and we(Parliamentarians at least) don’t know who owns the credit deposits !!

The banks are not producing credit anyway – like Japan they will not produce consumer credit for a long long long time.
So why keep them alive at all ?
Besides bank credit is a expression of waste.
They system is up to its tits in waste.
Thats why we have had a crisis – remember.

Its not enough to splash over the FT ohhhh those poor Grandmothers.
Where is the data on all deposits ?
This stinks to high heaven.

Remember the republicans lost the civil war because Stalin (a communist) wanted Gold as payment for armaments
Go figure.

@Michael Hennigan

“There are seldom cost-free choices.”

That’s right. That is why it is important to think about your options carefully and choose the one with the lowest cost.

Accordingly, saying that private pensions of people already under stress will suffer and there will be losses and pain is not enough. You have to demonstrate, or at least claim, that it is a higher cost than another viable alternative choice which you can identify.

Zhou
Michael H has consistently alluded to the evils of be-pensioned public servants. Its clear whom he thinks should bear the pain. Funny, for someone who clearly and well expounds the virtues of capitalism he like so many now finds that yes, asset values do go down as well as up. The clear answer therefore is to somehow punish those who dont find themselves there. Taht wont refuel his pension pot but it will make him feel better because as we all know economic and social pain is a zero sum game : give X more and you reduce Y. Its economics as a morality play when he isnt even in the game.

Isnt it becoming apparent that Spain is just a larger version of the bust in Ireland. Difficulty is that they are only at stage one…denial…how many stages did we go through before it was accepted that all our banks were bust. It’s notable that they did not bring in Blackrock to evaluate their bank exposure to property. It is probable that a multiple of the current rescue funds available will be required to make solvent a lot of Spanish banks. Interesting that they start the process by screwing the little guy…
http://ftalphaville.ft.com/blog/2012/07/11/1079441/the-pain-in-spain/

Btw, Manchau has a n interview in the FT today with Trichet where he appears to accept imposing the draconian terms on Ireland. No need now for the “smoking gun” letter (if it ever existed).

@Michael Hennigan

Most Civil Servants in their 30s and 40s do not expect to get pensions equivalent to those that went before. They know that they are dependent on the economy. Do they really have gold-plated pensions to look forward to? If not, why persist in suggesting that they have that comfort?

Zhou
“If not, why persist in suggesting that they have that comfort”
It comforts Mr H to think that somewhere there is a nasty cabal that ate his pension to fund their own. There might be but its more likely to be in NYC or London than in the offices, stations, hospitals and lecture halls of the Irish public service. That however is a thought too far for M H
Bond : even the ULA are now rowing back on that

What the MoU means is that sov bondholders get it in the nuts again. What is the point of investing in sov bonds?

@Bond
But surely in a altrustic world………….senior bond burning is the best form of deleveraging as it does not gut basic domestic demand to the same level of taxing the lower middle class drones to pay for the malinvested free banking investments.

The fact that the criteria is based on wether your funds holders are based in the city should be of no consequence right ????
London is running a very large goods defecit at the moment I gather.

@BEB

No senior debt losses is a de facto EZ/ECB policy. Some people still adjusting to this reality it seems. Yes, it’s possibly crazy, but it doesnt make it any less real.

This sounds like a re-purposing of papal infallibility for the benefit of the financial sector (and this definition of reality is eerily reminiscent of the previous disaster that the right inflicted on the world.)

The reality is that if no bondholder left behind is the wrong policy it will remain so no matter how set on it the Eurozone establishment is on it. Therefore the reality based community has to keep hammering on the issue, relentlessly, boringly, even if just to rage against the dying of the European Union light.

@MH

Procrastination hasn’t worked. It just made things worse. It is like that song by the Verve.

http://www.lyrics007.com/The%20Verve%20Lyrics/THE%20DRUGS%20DON'T%20WORK%20Lyrics.html

So let’s just get it over with. Write down what is lost, do it in one go, do it fairly . Hit all the stakeholders.

@ BEB
“No senior debt losses is a de facto EZ/ECB policy”

Price stability is the DNA of the ECB. Where is price stability if the Euro falls apart ? Sometimes de facto policies must be sacrificed to save the DNA for transmission to the next generation.

Paul Krugman also refuses to embrace the Euro reality. This is not surprising. He only exists because his grandparents got the hell away from the Euro-realists of their day.

http://krugman.blogs.nytimes.com/2012/07/11/pointless-pain-in-spain/

Excellent article by Karl Whelan.

As I previously said elsewhere, the idea of using EU taxpayers funds to bail out the senior bondholders of bust institutions is little better than using Irish taxpayers funds to do the same. It is politically and socially corrosive and it is not very effective. It also leaves the magnitude of the problem at such a level that the EU might not be able to afford it.

@ zhou_enlai

Read my post: the reference to ‘coward’ was to the individual who used the term ‘evil’.

@MH – missed that. my bad.

For nonviable banks:

Steps will be taken to minimise the cost to taxpayers of bank restructuring. After allocating losses to equity holders, the Spanish authorities will require burden sharing measures from hybrid capital holders and subordinated debt holders in banks receiving public capital, including by implementing both voluntary and, where necessary, mandatory Subordinated Liability Exercises (SLEs).

So shareholders in nonviable banks will be wiped out and various classes of bondholder will get a haircut.

Sounds very Greek to me.

@ Kevin Donoghue

There is, unfortunately, a major hole in the article by Karl Whelan which removes it from being worthy of serious consideration. What does he mean by European taxpayers?

There is no European federal budget to which European taxpayers contribute. The EU budget – 2% of overall government spending in the EU – is funded mainly by way of national contributions based on shares of GDP.

There are, on the other hand, national taxpayers who pay taxes levied by their sovereign governments and they have the opportunity, as all EU countries are democracies, to throw out any government which they think is making improper use of their hard-earned cash, including the level of contribution they are making to the EU budget and the various other ersatz instruments insisted upon by Germany to try and resolve the euro crisis.

There is not point in basing arguments on an imagined version of the EU.

Karl Whelan is tilting at windmills and, in this instance, at the wrong one.

@DOCM

for me you seem to have far too much faith in the power of democracy to be the cure for all ills….its not…we have learned that lesson in Ireland better than anywhere, where we threw out one government for what you called “making improper use of hard-earned cash” and it was replaced by one that failed to fulfill the promise to row back on that improprietary. Its too easy to say you get the government you deserve…I didn’t vote for Merkel, Amussen et al…they are now my leaders.

Furthermore, is the ESM to be funded by the EU Budget or will it be in addition to? It has the look of a federal budget to me in everything but name.

@V Barrett
To be fair to FF they did not create the money.
Most if not all were ignorent of economics with the exception of the PD wing but the average FF hick thought everything was grand.
We were rich and all….because we were so productive you see…….

Don’t blame them , pity them – as is abundantly clear now they were never in charge of this gaff.
Its like blaming a mentally retarded young fella for not doing the correct sums.
A pointless endeavor.

No goverment could have stopped this wall of money once they accepted the EMU ,EURO , Basel Dogma which they all did.

Only if all the money produced was conjured up in the Dail chamber could you make that point.
As we are not a republic in charge of domestic script.

CARTOON OF THE DAY

Eurozone
No respite
11 July 2012 Le Monde Paris

” – Aargh! Damn it! Europe is blocked again!”

” – Oh? I didn’t realise it was unblocked!”

http://www.presseurop.eu/en/content/cartoon/2333211-no-respite

@ V Barrett

Incidentally, it would have been perfectly feasible to raise the necessary cash on the basis of the EU budget. The European Financial Stability Mechanism (EFSM), which is providing part of the Irish bailout, does exactly that. But there is a limit to the overall amount that can be raised; the member states – especially the new member states – objected to seeing it swallowed up by the existing member states and, most importantly, the UK – a net contributor to the EU budget – objected.

My problem with the contributions of Karl Whelan is not that they are technically incorrect – I am in no position to judge – but that they are posited on a view of the European political landscape which bears no relation to reality.

I think the key issue of public sector pensions is being lost in the debate earlier between Michael Hennigan and Sophont. I now work in the PS but previously contributed for over 10 years to a private sector pension fund. That private fund has lost considerably and now doesn’t even cover the total amount I contributed (even after deducting the tax relief) and I cannot expect much of a payment when I do retire. In the PS, I now contribute approx. 14% of my salary (gross of tax relief) and, in effect, I am investing that in the State (Ireland Inc). If this State were a pension fund it would probably be declared insolvent. The point is that PS pensioners are drawing pensions paid out of current tax revenue and not from any separate fund. It’s great for existing retirees and they should laugh all the way to the bank. In the history of the State there has probably been no better time to be retired from the PS than in the past 15 years. I doubt if it is sustainable in the longer term although the decision-makers in Government/Civil Service are likely to be those 55yrs+ and thus impacted by any radical changes to PS pensions.

Given this is a thread on the draft MoU for Spain I’d better say something relevant: the Spanish Government should immediately offer a very large sum of money to NamaWineLake to get him to unmask himself and work as their adviser on their version of NAMA. The analysis on that blog of the workings of our NAMA and the wider economy is brilliant and always readable, thought-provoking, and incisive.

It seems Dr Merkel was behaving illegally when she agreed the ESM could recapitalize banks directly …..hence the divergence of opinion on what was agreed…

http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100018565/merkel-breaks-german-law-on-esm-rescue/

@DOCM, there is no evidence in the specific contribution you are criticising that Karl misunderstands the functioning of the EU in the ways you have suggested.

“What does [Karl Whelan] mean by European taxpayers?”

That may well be the silliest question I have ever seen on this blog, which is saying something. Consider two sets: {Taxpayers} and {Europeans}. Form their intersection. In case the idea is unfamiliar:

http://en.wikipedia.org/wiki/Venn_diagram

From the KW article:
“The European Commission has produced highly detailed bank resolution plans. However, these plans call for the bail-in tool to only be applied from 2018 onwards. ”

There must be something special about 2018 that we have to wait until then. It could be simply the anniversary of 1918-all our wars are over-that kind of thing.
It could also be that the creditors banks and countries hope to have all their money in the barn by 2018. Or as much of it as possible before the skies open.

So it looks like other European leaders can wave all the pieces of summit paper they wish. They are just pieces of paper. They contain nothing more than blobs of ink.
The bottom line is that Germany, and the ECB on their behalf, has no intention of allowing bail-ins for banks.
They will use all the muscle, deceit and guile they can muster to recover the money that their lost in bad investments.
And they will hold out until the euro breaks apart because they have already figured that it will break regardless.

@DOCM

Is it possible that you could clarify a few issues.

Is there a clause in the ESM charter that specifically disallows bank bail-ins? If so, at whose behest was it inserted?
If not, why can this rather obvious method of bank restructuring not be used?
To whose benefit is the ‘no bank bondholder get left behind’ policy being continued? And who is calling the shots in relation to its continuation?

[I am fully aware that the states may still have problems but with the banks off the back of the states most would have a fighting chance. While the banks still dangle like the sword of Damocles over the states the situation will only get worse.]

@Bunbury: re PS pensions and the age of decisions makers:
+1.
Not only in the PS.
I am aware of public companies creating new demarcations in relation to pension schemes. eg Discontinuance of defined benefit and introduction of defined contributions.
The decision makers are setting the cut off age so that they:
“pull up the ladder after themselves”.

One wonders if the Pensions Board can unslumber itself to investigate and comment on the legality of these ‘arrangements’.
Like @DOCM, I believe many of these ‘new arrangements’ would be chucked out by most courts of law.

@DOCM
“Without wishing to appear facetious, the ESM is simply a mechanism to enable debtor EU countries repay their debts to creditor countries.”

That is certainly a new one on me. However, given what has been going on in the past week, I don’t doubt your summation.

Interesting age profile of some the key players!

Spain
High price f r financial aid
11 July 2012 PresseuropEl País, El Mundo

“EU puts Spain under guardianship,” headlines Spanish daily El País following the signing of a memorandum of understanding between the government of Prime Minister Mariano Rajoy and the European Union setting the terms for the bailout of Spanish banks –

The 32 conditions contained in the memorandum could qualify as de facto, though not official, foreign intervention on the entire Spanish banking sector. Because the Eurogroup imposed a total revision of the operation of the Bank of Spain; forced the Finance Minister to transfer his power to impose sanctions to the Bank [of Spain] and demanded the creation of an independent supervisor of fiscal policy. […] There is, however, some non-negligible, good news: approval for the bank bailout, the release, at the end of the month, of 30 million euros of the 100 million allotted, a moderate re-payment schedule (14 years) and an interest rate of about 4%. The Eurogroup makes it clear that the Troika (EU Commission, European Central Bank, International Monetary Fund) will control the bailout operation.

http://www.presseurop.eu/en/content/news-brief/2332171-high-price-financial-aid

@Kevin Donoghue

That may well be the silliest question I have ever seen on this blog, which is saying something.

Ah, whenever you worry about the level of silliness on this blog have a read of the Irish Times.

This is from an article by occasional blog contributor and professor of European Law Dr Gavin Barrett in an article entitled UK engagement with EU is central to Irish interests.

It is an important topic but the article quickly veered off into a combination of breathless enthusiasm for staying the course under our European partners and bizarre contempt for anyone not entirely taken with the current direction of the EU. The best line:

…the UK’s long-term strategic error of having failed to join the euro zone, which has left it largely an outsider in negotiations that will determine the future of European integration;

That is right. The UK’s strategic error of not joining the Euro.

The UK, firmly in the grip of upper class twit policy making and with a hollowed out economy enjoys better ten year borrowing costs than any of the Eurozone countries save Germany and Finland. Imagine how improved their situation would be by higher borrowing costs and lack of control of monetary policy. The mind boggles, the mouth splutters.

The article gets steadily crazier and continues in the Dr Pangloss goes to Jonestown theme that enthusiasts for the current flavour of the European project go for. Weird and worrying.

@Shay
The irish times is excelling itself….
http://www.irishtimes.com/newspaper/frontpage/2012/0712/1224319862378.html
Dan is gone native. Trying to spin lousy GDP numbers for the first quarter.
I give up.

This was a comment I posted three weeks ago!

“I was walking around Bilbao last week and I could not help thinking that I was aboard the Titanic a few hours before it hit it’s iceberg.
People were out on the street drinking late at night happy, there was a cacophony of laughter and I was thinking “Christ do they not know that a financial tsunami is about to hit the country?” The following day, I was talking to what I first thought were ordinary indignados however, it turned out they were a group of bank employees who had been fleeced as a result of being persuaded to buy shares in Bankia. As a “gesture of confidence in the merger”. Spain is the Titanic but they are still on the sangria and 30 different types of tapas. The lack of preparedness is going to cause utter devastation.”

Spain will leave the Euro and will go back to its own currency, it has no choice. It is either that or descend downwards very fast into a Greek like death by one thousand cuts only problem is they will then still have to leave the EZ.

Why can’t they come up with some other index that would indicate growth ?

I mean 1 positive and 2 unimportant negatives (GDP & GNP) is not good is it………
A conspiracy theorist would think the CSO needed to leak the material officially so that the Pravda had a excuse to get ahead of all those guys with those negative waves so early in the morning.

http://www.youtube.com/watch?v=8nu0V5yvC94

Official Ireland at its very best. The CSO publishes the national accounts ‘by mistake’ and the guy reporting on it can’t figure out if GNP has gone up or down so he hedges and says they went up and down.

I bet the Euro will be devalued by more than 20% by the end of the year.
Even the core countries are beginning to suffer now.

@Seafoid

“the critical question of why and how the financial interests of bank bondholders have become inviolable in the Eurozone and how the general distribution of losses arising from the European component of the global financial crisis has been decided on.”
+1

This is indeed the key question.

We have essentially been told that default on senior bank debt = Armageddon. I can understand this at a superficial level because the vast bulk of money in circulation is essentially bank debt rather than legal tender.

However, this is only superficial reasoning and does not of itself justify the cost of lumping the entire problem onto the taxpayer. The real effect of bail-ins and the different options open to Governments are rarely analysed properly. What differentiations between bank creditors can be made and how different (new) classes might be treated goes unmentioned.

The trust people have in currencies and governments and their willingness to soldier on with their businesses and banking in the face of crises (what else will they do?) is ignored. The lesson of the USA leaving the gold standard is missed.

@DOCM,
No abuse intended. Simply a comment that based on the corpus of your contributions here you give the appearance of being a political operative of some sort, using sockpuppet tactics.

You attacked Karl on the basis of his past contributions with the following.
“I am simply stating that the image that Karl Whelan has of the functioning of the EU – on the evidence of his contributions – is divorced from the actual reality.”

Goose, gander etc.

A national government should have the option of deciding between bank resolution and bank bail-out. Support for the sovereign should not be conditional on banks being bailed out.

I sugggest that if a country opts to bail-out banks then the make-up of any rescue fund to be applied to banks should draw from the following
– deposit insurance fund (which needs to be strengthened),
– taxpayer funds from the political entity which was responsible for regulation,
– a levy on banks regulated by the political entity which was responsible for regulation,
– in the case of systemic crisis, quantitative easing or contributions from the taxpayers of the other countries who benefit from the bank bail-out.

However, even then there will be a massive moral hazard whereby banks will be incentivised to lend large to EZ countries, which is the problem which landed us in the mess in the first place. It also allows borrowing bank employees and directors to escape the fruits of their failures.

Therefore any solution must also punish pension funds and financial institutions which lent too much. Those guys need to be subjected to a bail-in. It also needs to ensure that banks are taken over by new banks to the effect that their senior management and board are cleared out without any compensation.

If EU funds are to be applied to banks in member states these accountability measures may follow.

@Zhou

When senior debt is untouchable and banks start failing across the continent the EZ will begin to look like a Ponzi scheme

Or Mother Hubbardesque . And when she got there the sovereign cupboard was bare.

the point of not touching senior debt we are told revolves around
a) pensioners
b) the cost of capital is going to go up

but it is really about power
and risk was mispriced for too long and the cost of capital will go up anyway

@seafoid

Indeed – those seeking to protect stability by protecting senior bondholders could indeed find the cupboard is bare. When they peek inside they make their mind up pretty rapidly.

The repeal of the ban on bank bail-ins will take place without forewarning if and when it happens. Having reflected on that, I am not sure that the reference to the ECB bank resolution paper (and the 2018 date being contained in those proposals) is really as important as KW thinks.

@Zhou

The 2 lines in the sand appear to be

– no senior bondholders lose money and
– price stability

And the way things are going neither of these are remotely feasible over the medium term if the alternative is a Euro breakup and the biggest economic shock since the 1930s.-

Guardian

“Thousands of savers were hit by one condition of the leaked MoU, which forces any bank seeking aid to write off its preferred shares and subordinated bonds, much of which, unusually, were sold to retail investors in Spain as savings products. The people who bought them, lured by 7% interest rates, are going to be clobbered.”

That is how power works. Shaft the ignorant.

@ BeeCeeTee

I am glad to note this to be the case.

On the point you make with regard to Karl Whelan, that I am indulging in the practice of ad hominem remarks when I deplore the same action in others, I would reject this. I remain of the view that he is not reflected accurately the realpolitik, for want of a better word, of the political situation with which the euro is confronted. This is not an attack on Karl Whelan, simply an opinion on the approach that he adopts.

The rule is simple. Stick to the arguments and leave aside speculation on what may be motivating contributors. It is not something that one would do openly in normal debate and it never ceases to amaze me that people indulge freely in the practice on blogs. It does much more damage to those indulging in it that to the intended target.

Thing hotting up at Karlsruhe

http://ftalphaville.ft.com/blog/2012/07/12/1081281/its-hotter-in-karlsruhe-than-you-think/

Well the story runs that Germany was pushed into the Euro in return for help with the reunification project. That is a subjective rather than an objective assessment but what is sure, is that, under Maastricht Germans were assured that the EU project would not turn into a “transfer union”.

Now they are being told, lets have “joint and several liability” for Eurobonds, when we all know, they are one of the only semi solvent countries left. They are being lined up for a massive dose of QE by other countries (Piigs and France) who want to get them in so deep, that the printing spigot will have to be opened up. Meanwhile, there is nothing more our PS, legal and political hega(monies) in Ireland would love more, than to see the Germans being railroaded into an American Federal Reserve style, based system. A system that has dismantled the financial integrity of US banking with their multiplicity of creative derivative instruments and has led to a grave diminution of all citizens rights. Notice too, how the pursuit of a fiscal, banking and monetary union in Europe has commensurately eaten into democratic processes. The more fiscal and monetary union the less democracy. Spain, Ireland and Greece will be auctioned off to hedge funds such as Pimco and other supranational bodies such as the ECB and IMF who will run these countries and pay the pensions of those whose signatures enabled the process.

Germans work hard are disciplined and, by and large, their public sector is paid less and are a hell of a lot more honest and hard working than ours. I worked in Germany and if you are entitled to something, you will get it end of story, without the Healy Rae’s or the Willie O’Dea types. You will never hear, I know sombody, who knows somebody, nod wink stuff. They are right to stand up for their country and their constitution. We are the ones who twist in the breeze whichever way it is blowing.

Finally, maybe Europe is “impotent” because Europe has pursued the wrong economic policies. The shocking thing for Europe, seems to be, that it is not being given its free lunch at cheap interest rates.

Where are all the professors of economics and their economic advisors, the less brave of whom have slinked away from this site, because their erudite thinking was being questioned, in a little too much detail. Those who lectured us in college and who were telling us, up to quite recently, that “countries could borrow and borrow and only had to ever worry about paying back interest as inflation and economic growth would do the rest”? The attitude now seems to be, Ooops! we were wrong but we still have our Phd’s and if we blog on our own we have less chance of being found out.

@ All

FYI

http://www.ft.com/intl/cms/s/0/d40f4c26-cc31-11e1-9c96-00144feabdc0.html#axzz20X30AON5

Talk about damning with faint praise!

@Robert Browne

re My views on Germany’s position:

I do stand over my point that Europe is being rendered impotent by German intransigence and the fact that members of the German Court increasingly see it as their prerogative to direct the political direction of Germany. ‘Playing to the gallery’ was I believe the phrase used in a recent article.

If I were a German I would be vehemently against an open ended transfer union but I would also have to acknowledge that the wealth of my country was dependent to some extent on the purchasers in other countries.
I would be particularly annoyed, to the point of distraction, that any of my money was being used to support the elegant lifestyles of elites in various countries, including Ireland.

My real issue with Germany is the insistence that all debts be paid in full, particularly bank debts. Some say this is not Germany’s position. Yet I do not believe that the ECB would have been able to pursue this cancerous policy were it not being supported by Germany and even demanded by Germany.

If Germany does not want a transfer union, that is fine by me. It is a perfectly legitimate stance. But the legitimacy of that stance is being undermined completely by its insistence that banks debts paid, a inherently illegitimate stance.
That stance is all the more illegitimate when placed in the historical context of German debt write offs and it unique responsibility to ensure a stable and prosperous Europe.

The bottom line is that Germany is in a position to resolve this crisis without having to implement a massive transfer union or to implode the euro because there are other less difficult choices that would resolve it.
That Germany has not moved to resolve the crisis but has stalled every attempt to resolve it, is my real difficulty with the German position.

Germany has simply to apply rationality to the problem and deal with the issues, not the prejudices of Prof Sinn or the some of those in Karlsruhe.

The events since the summit which essentially involved Germany reneging on a written communique agreed at EZ level are inexplicable to most casual observers like myself.
[Such ‘reneging’ by Greece or anybody else else would have been met with very different responses.]
It is a political reality that does not bode well for Europe.
It is hard to see how Europe can ‘stumble along’ in such circumstances.

@ Joseph Ryan

“Muddling through” rather than “stumbling along” is the appropriate term and has been the modus operandi of the EU from the beginning. It reflects the only possible manner of dealing with conflicts of interest which have to be resolved by negotiation. The great benefit of the EU is that it provides a framework for this to happen.

Germany is as divided as any other country with regard to how to proceed cf; this comment by Quentin Peel on the “war of the economists”.

http://www.ft.com/intl/cms/s/0/4684bad6-cd07-11e1-92c1-00144feabdc0.html#axzz20aIJywmS

His report reminds of a cartoon which I saw years ago of the doctors in the corner consulting on what was wrong with the patient while the the patient in question is shown sidling quietly out of his hospital bed and making for the door. With any luck, this is what will happen in relation to the European economies and their natural resilience will see them through.

@Joseph
Redirection towards investment can’t be done withen the Euro unless you starve a large section of the population.
After you starve the population there will probally be no demand for your investment anyhow unless you import more live ones.
The remaining people with large amounts of Euros can buy imports on a massive scale…however if you cut the Euro supply such as reducing Dole payments the remaining internal money supply crashes even further.

We have had a very very non optimum currency for multiple decades which makes internal commerce uncompetitive to say the least.

I really can’t describe how absurd this non sovergin construct truely is but its out there man.