Replies to post #318841 on $Stock*Shop*Charts*News*Option$

[Stock Lobster]

DM.uk: Could Germany quit euro over Greece crisis?

By Karl West
Last updated at 10:45 PM on 16th

Germany may be poised to quit the euro to set up a smaller monetary union because of the Greek crisis, according to a leading City economist.

Athens was yesterday edging closer to activating a bailout from fellow European Union countries and the International Monetary Fund, which is due to send teams to the country on Monday.

But Joachim Fels, co-chief global economist at investment bank Morgan Stanley in London, warned the Greek rescue proposal sets a 'bad precedent' for eurozone member states and makes it more likely that the euro area 'degenerates into a zone of fiscal profligacy, currency weakness and higher inflationary pressures'.

Mr Fels suggested Berlin may be 'better off with a harder but smaller currency union'.

He added that 'recent developments significantly raise the long-term risk of a euro break-up' and that a 'scenario where a country or a group of countries want to leave to introduce a stronger currency is more likely than a scenario where a country, like Greece, wants to leave to devalue'.

Though Germany has not officially considered the proposal, Mr Fels' comments reflect the radical options being considered by EU member states as the situation in Greece worsens.

Yesterday Greek Prime Minister George Papandreou told his parliament that he was pushing through a painful austerity plan of public sector cost-cutting in order to prevent the country sinking. Athens needs to refinance about £46.4billion of sovereign debt this year, with a big chunk of that due before May 19.

David Mackie, head of European economics at JP Morgan, said: 'Being part of the euro area complicates the situation significantly. We would never underestimate the euro area's inclination to keep kicking the can down the road for as long as possible.'


http://www.dailymail.co.uk/news/worldnews/article-1266659/Could-Germany-quit-euro-Greece-crisis.html

[Stock Lobster]

Breaking News, Rumor Germany to Leave the Euro This Weekend?

Currencies / Euro
May 13, 2010 - 04:39 AM
By: Mac_Slavo

The internet, and especially gold forums, are getting excited over the possibility of very big news from Germany this Friday.

As reported by a Zero Hedge contributor, a forum post at GoldLikeProductions from a user identifying himself as a Deutsche Bank employee, suggests that the big news to be announced this Friday as stated by German politician Gregor Gysi at a recent press conference may be that Germany will announce a return to the Deutsche Mark, eliminating the Euro as their country’s currency:

From a forum post by an Anonymous user:

I’m working at the Deutsche Bank in Germany. Today we delivered 1 container with new Deutsche Mark notes and new coins. I will present a photo from the new banknotes tomorrow morning. The curencychange will be the night from Saturday to Sunday 5/16/2010. On Friday, 19.00 GMT Angela Merkel the germany chancelor, will speach to the german nation.

This forum post, coupled with a page identified at Kitco.com (screenshot), one of the leading precious metals dealers in the world, that looks like it is being built to price gold/silver/platinum in Marks, has gold bugs around the world buzzing.

If Germany were to announce that they are pulling out of the Euro and switching back to Marks, there would be serious implications around the world. The European crisis would likely accelerate and last Thursday’s stock market crash would just be an appetizer for what we can expect around the globe come Monday morning. Gold would likely make a serious move to the upside as a result.

Dispelling the Rumor
We warn our readers that this may very well be nothing more than a rumor, and recent gold price action in the upward direction may be partly attributed to the aforementioned forum post and Kitco page.

Regarding the Kitco.com web page, the SHTF Plan research team utilized Archive.org, an internet archival web site that tracks web site pages over the course of the last 15 or so years.

The very same page which is being listed at Kitco with the following URL: http://www.kitco.com/market/dm_charts.html is NOT A NEWLY CREATED PAGE and has existed at Kitco.com for quite some time.

The page has existed at the exact URL address since before the Euro was accepted by Germany.

According to Archive.org, the Web Archive’s earliest listing for this specific URL dates back to August 12, 2000 and the oldest available instance of this page can be viewed here: http://web.archive.org/..

Thus, this is not a new development and the page was simply never taken down by Kitco.com after the Deutsche Mark was removed from circulation.

The fact that the only available news about the new Deutche Mark comes from an anonymous poster at an internet forum should further dispel this rumor.

How likely is it that Germany would drop the Euro?
While we do believe in the eventual destruction of the Euro and breakup of the European Union, Germany announcing that it will be dropping out of the monetary union and introducing a new currency over the weekend is unlikely.

However, for inquiring minds, we direct readers to a Financial Sense University article from April 2010 titled German Windfall Profits From Exiting The Euro:

Germany is a nation that fears inflation for good historical reason, and among the nations of the world, Germany places a particularly high priority on price stability. Yet, so long as Germany remains in the European Economic and Monetary Union (EMU) with the euro as its currency, Germany may not be in control of German inflation. In particular, the current crisis with Greece, and the crises that may follow with other nations such as Portugal, Italy, Spain and Ireland may prove disastrous for German investors and taxpayers. For so long as it is in the EMU, Germany may have no effective choice but to bail out countries that have been running up huge deficits – despite Germany itself not having the economic capacity to do this for all of Europe on an indefinite basis, let alone the political will to do so. These are among the reasons why in a letter to clients late last week, Morgan Stanley warned that Germany may leave the euro and the EMU and that investors should be prepared for this event.

If this event happens, it may create an enormous financial windfall for millions of individual Germans, as well as German companies, not to mention the German government. While leaving the monetary union is still far from certain as Germany also has strong economic and political incentives to stay in the EMU, in this article we will say “what if” and explore some of the startling benefits for nations and individuals of quickly exiting a failing monetary union – as well as the many perils.

It is not completely out of the question that Germany will decide to leave the European Monetary Union but remain an EU member. Obviously, if the German people (The #2 exporters in the world) are going to be strapped with bailing out Greece, the rest of the PIIGS and Eastern Europe, they may be much better off just cutting their losses and getting out now.

Friday will be an interesting day, but we’re not holding our breath. At this point, the world economic and financial systems are such a mess that even if Germany announces a switch back to the Mark, the end result globally will be similar to what will happen at some point in the near future anyway - panic, collapse and all the goodies that go along with that.

By Mac Slavo
http://www.shtfplan.com/

Mac Slavo is a small business owner and independent investor focusing on global strategies to protect, preserve and increase wealth during times of economic distress and uncertainty. To read our commentary, news reports and strategies, please visit www.SHTFplan.com

© 2010 Copyright Mac Slavo - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.



© 2005-2010 http://www.MarketOracle.co.uk

http://beforeitsnews.com/news/43/872/Breaking_News,Rumor_Circulating_Germany_to_Leave_the_Euro_This_Weekend.html

http://www.marketoracle.co.uk/Article19447.html

[Stock Lobster]

AEP, from Telegraph.uk, was wondering Should Germany bail out Club Med or leave the euro altogether?

Germany faces a terrible dilemma. Either Europe's paymaster agrees to underwrite a Greek bail-out and drops its vehement opposition to a de facto EU economic government, treasury, and debt union, or the euro will start to unravel, and with it Germany's strategic investment in the post-war order.

By Ambrose Evans-Pritchard
Published: 7:00PM GMT 31 Jan 2010

The spike in yields on 10-year Greek bonds to 400 basis points above German Bunds has been shockingly swift – a warning to Britain, too, that markets can suddenly strike any country that takes creditors for granted.

We can argue over whether Greece, Portugal, or Spain are at risk of being forced out of the euro. But there is another nagging question: whether events will cause Germany and its satellites to withdraw, bequeathing the legal carcass of EMU to the Club Med bloc.

This is the only break-up scenario that makes much sense. A German exit would allow Club Med to uphold contracts in euros and devalue with least havoc to internal debt markets. The German bloc would enjoy a windfall gain. The D-Mark II would be stronger. Borrowing costs would fall. The North-South gap in competitiveness could be bridged with less disruption for both sides.

To be sure, Germany is happily placed in the current EMU system. By compressing wages for a decade it has stolen a march on EMU. Critics unfairly call this a beggar-thy-neighbour policy. It is simply the way Lutheran society operates, in deep contrast to the way Latin society operates – a cultural clash that should have given pause for thought before Europe's elites launched headlong into their adventure.

German goods are flooding the South. In the 12 months to November, Germany-Benelux had a current account surplus of $211bn: Spain had a deficit of $82bn, Italy $74bn, France $57bn, and Greece $37bn. German industry will not give up this edge lightly. However, the matter will in the end be decided by democracy. German citizens were given a pledge by their leaders in the 1990s that loss of the D-Mark would not lead to monetary disorder, or leave them liable for Club Med debt. That is the sacred contract of EMU.

"Politically," said Bundesbank chief Axel Weber, "it's not possible to tell voters that they are bailing out another country so that it can avoid painful austerity measures that they themselves have gone through. Such aid, whether conditional, or – even worse – unconditional, is counterproductive."

Dr Weber is right on both counts. Fresh loans for Greece can achieve nothing useful at this stage. Greece already has a public debt hurtling towards 138pc of GDP by 2012 (Standard & Poor's). It is already in a debt compound spiral. The EU elites have yet to acknowledge that Greece and much of Club Med need gifts – not loans – akin to transfers paid to East Germany after unification, or North Italian perma-subsidies to the Mezzogiorno.

Athens has promised to slash the budget deficit by 10pc of GDP over three years, though the country is sliding deeper into slump, faces 20pc unemployment by the year's end, has a tottering banking system, and has already lost control of its streets before spending cuts have even begun. Such a policy is economically self-defeating – since it risks tipping the country into depression, and causing tax revenues to collapse – but will it be tolerated by Greek society?

The Papandreou government has craftily invited the European Commission to set up a vice-regal inspectorate in Athens, to become the focus of popular fury. The media talks of "guardianship". Ta Nea, an Athens newspaper, writes of "ultimatums" and "suffocating deadlines" for wage and pension cuts. "Either we obey the commands of unprecedented austerity and face the risk of widespread social unrest or we refuse to implement the orders."

Spain's troubles are less immediate, but it lost as much competitiveness during the early EMU boom, that debt trap of negative real interest rates. External corporate debt is dangerously high. The budget deficit was 11.3pc of GDP last year. Madrid has drawn up €50bn of cuts to sweeten the markets, even though unemployment is already 19pc. The jobless typically receive 50pc to 60pc of former earnings for around 18 months, then the axe falls. The social distress hits with a lag. How much more tightening can Spain endure before Catalan, Basque, and Galician seperatism rocks the Spanish state?

Fiscal austerity in these circumstances without monetary and exchange stimulus to offer a lifeline is incoherent. These policies must fail because they are based on EU wishful thinking that high-debt nations can regain competitiveness within EMU against a zero-inflation Germany. Such a strategy will drive them into a debt-deflation spiral.

Europe will have to embrace "fiscal federalism" if it is to hold monetary union together. That is when we will probe the limits of EMU solidarity. Hedge funds are betting that Berlin will pay to ensure stability. No doubt Chancellor Angela Merkel is of that mind, but the Free Democrats are not, nor are Bavaria's Social Christians, or the Bundestag's finance committee. Economy minister Rainer Bruderle said last week that there would be "no bail-outs" regardless of risks to EMU. Is that just brinkmanship?

EMU architects were warned in the early 1990s that monetary union would prove unworkable as constructed. They scoffed, sure that any crisis could be exploited to force the pace of economic union. Commission chief Romano Prodi later admitted as much. "The euro will oblige us to introduce a new set of economic policy instruments. It is politically impossible now. But some day there will be a crisis and new instruments will be created."

We will soon learn if this gamble will pay off, or prove catastrophically wrong

http://www.telegraph.co.uk/finance/comment/7119986/Should-Germany-bail-out-Club-Med-or-leave-the-euro-altogether.html

'Europe will have to embrace "fiscal federalism" if it is to hold monetary union together.'

Robin the Taxpayer
on February 02, 2010
at 09:52 PM

And that, in a nutshell, has been Germany's aim all along.

_________________________________

archimbaud
on February 02, 2010
at 03:56 PM

The euro could go all the way down to 0.8$. Been there, done that. The germans won't go out on the streets because of that. The greeks and pretty much all southern and eastern Europe may have gone on a borrowing binge taking advantage of low interest rates, but then again there were lenders willing to lend them the money. Who were the greater fools? Greece can default and the euro and the world will keep running. In Europe we've had a monetary union for centuries. Gold, silver and copper ensured that. The real experiment is floating exchange rates. My hunch is that it's coming to an end.