Greece is balking at surrendering its sovereignty as the Merkel-led European elite is shouting for more austerity from the “profligates” in an effort to insure the large continental banks against the ravages of default. As one reader e-mailed today, IT IS AS IF THE GERMANS ARE PLACING THE ENTIRE NATION OF GREECE INTO DEBTORS PRISON. Life was much easier when a country could send in its gunboats to collect its loans.
Tonight the Czechs have purportedly joined the Brits in opposing the fiscal straitjacket being demanded by Berlin. The official vote on the fiscal treaty won’t take place until March and it seems that France won’t move to approve it until after the French elections. Is there anybody more duplicitous or full of crap than President Sarkozy?
Okay, Jean Claude Trichet, who in an interview with the queen of SYCOPHANCY, Maria Bartiromo, openly lauded the recent action by Mario Draghi and the ECB. Trichet is the arrogant ex-President of the ECB who had the audacity to raise interest rates twice in 2011. Now he his praising the efforts of his successor for undoing all the damage that Trichet’s reign of terror created. And, of course, Ms. Bartiromo left all references to the rate rises on her teleprompter.
Anyway, the situation in Europe is best followed by observing the movements in the credit markets. In an ominous development, the PORTUGESE 2/10 yield curve has gone from a positive slope to being inverted by -160 basis points. The real threat to Portugal is being revealed in the 2-YEAR NOTE as its rate has risen by 400 basis points during the last week and is now at 17.41%. This is the pattern of stress in the GIIPS: The 2-year yields rise as credit buyers abandon the shorter instruments. All eyes have been on the Greek and Italians but the recent move in Portugal is going to test the resolve of the ECB and Mario Draghi and will probably result in the next LTRO program as being at the upper end of the liquidity add.
Making matters more difficult was last Friday’s release of the Spanish unemployment data, which showed almost 23% unemployment. The SPIN from the Spanish government was that the raw number was not as bad as the statistics show because many people work in the underground economy but lie about employment so as to collect benefits. When thinking this through, the spin is actually worse than the statistical data. If people are working in the underground economy, not paying TAXES and collecting unemployment compensation, the negative effect on the SPANISH BUDGET is magnified.
Spanish unemployment is a very serious issue in a country loaded with private sector debt. Spain is also a country in which HOUSING IS A RECOURSE LOAN,therefore no JINGLE MAIL. The projections of Spanish economic growth will prove to be pure fantasy, thus the Germans will soon be sending FISCAL OVERLORDS TO SPAIN. YES, NO WONDER WHY IRISH EYES ARE SMILING. As Ho CHI MINH would advise, one, two, three many referenda.