Thursday, March 1, 2012

Verbatim: "Germany May Exit Soon"

See ya!
"Europe has now reached the point where: 1) Germany will not put up more money unless Greece essentially gives up its fiscal sovereignty. 2) The G20 will not give more money to Europe via the International Monetary Fund unless Germany and other EU nations create a "firewall" by putting more capital into the European Stability Mechanism mega-fund. 3) The European Central Bank has announced Greek bonds are not eligible collateral for its Long Term Refinancing Operations, so if banks need more liquidity, they need to go to national central banks (read Germany). This is quite a turn of events. The ECB is increasingly going to make Europe's problems Germany's problems. Both have a lot to lose. Over 25% of the ECB's balance sheet is made up of PIIGS debt. And German banks have plenty of exposure as well. However, it is Germany that appears to have grasped the reality of the situation more clearly: there is no "good" way out of this mess, that austerity measures only cripple economic growth and make defaults even more likely. This is obvious in the fact that Germany doesn't want to commit more funds to the ESM. It's also illustrated by Germany's intense demands of Greece, demands it knows Greece won't possibly accept. After all, Germany has its own problems to deal with. German banks are some of the most highly leveraged in Europe, German Debt-to-GDP is north of 200% including unfunded liabilities, plus you have an increasingly outraged German populace. Germany is in a squeeze. On one side the ECB and G20 want Germany to step up with more money, while German CEOs, voters, and even the courts, are increasingly wanting out of the Euro. It is my view Germany is going to do all it can to force Greece out of the Euro before March 20th (the date that the next round of Greek debt is due) or will simply pull out of the Euro itself." - Graham Summers, Chief Market Strategist, Phoenix Capital Research