By John Galt
October 24, 2011 – 11:10 ET
The French newspaper La Tribune, reports today (see: Recapitalisation : les banques françaises n’auront pas besoin de l’aide de l’État ) that there is no need for external or state help for recapitalization of their banks per Christian Noyer, Governor of the Banque de France. He stipulated that the need was around €10 billion and would not require assistance from the national government and could be handled without help from the ECB or IMF. Thus begs the question:
Why the calls for a “bazooka” one size fits all final solution?
If the French banks can handle the issues involved with a potential Greek default, the German banks should be in an even better position to recapitalize and avoid causing problems within the greater European economy. What is bizarre are the numerous reports and estimates that there is a need for €110 to €140 billion Euros to recapitalize the banks that are deficient within the Europen Union yet the claim that the situation is containable. Of course the same claims were made in 2010 and look where we are today.
Thus why Wednesday could be a big day, one where as the German paper Der Speigel puts it, solves nothing but per the headline:
Oops. Yet the Euro is being bid up on rumors and promises of announcements that the situation will be cured once and for all. The calls and claims that the recent meetings were just there for laying the groundwork for the big decisions to be achieved on Wednesday. The Germans seem to have a more realistic approach to the upcoming meeting on Wednesday as per the article:
European Union leaders battling to solve the euro crisis made some progress on Sunday at the first of their two summits — there will be a second one on Wednesday — but German commentators doubt that they will come up with the “big bang” solution everyone is clamouring for.
After 12 hours of at times ill-tempered talks that once again highlighted gaping divisions on how to rescue the currency, the leaders got closer to agreement on bank recapitalization and on how to leverage their rescue fund to try to avoid bond market turmoil following a Greek debt cut. Final decisions were put off until Wednesday’s summit and it remains unclear how much of a hit banks will have to take on a Greek haircut — 40, 50 or 60 percent.
The major issue is just how hard the French and Germans wish to crush the banksters and retirees of Greece where the Prime Minister is claiming that the banks can handle the crisis while the industry itself is screaming bloody murder. The article progresses further with a dire statement quoted from a left of center publication:
The center-left Süddeutsche Zeitung writes:
“It is crystal clear now that the historic task of saving the world’s second-biggest currency can’t succeed with the bit-by-bit approach of politicians taking their own national interests into account.”
“The report by the inspectors of the troika of International Monetary Fund, European Commission and European Central Bank reads like a horror story. It calls into question all the the previous rescue attempts launched by the Europeans.”
“Beyond Greece, far greater problems are emerging, posing the fundamental question of who remains in a position to help whom, and how.”
“The EFSF might as well give up unless it is fundamentally rebuilt. The fund is too fragile in its construction and too slow because the decisions on its use are political. Every euro country can veto decisions, and the rating agencies have tremendous influence. If they take the triple-A rating away from heavyweights like Germany, the fund itself would see its creditworthiness downgraded, which would in turn deter investors. Many of them don’t even understand the complex structure to begin with.”
In other words, they have no plan.
There is no bazooka.
There is no alternative but to let Greece default and prepare the rest of the world for Ireland, Italy, Portugal, and Spain to follow. While the airplane known as the European Union is spiraling out of control and about to crater into the earth, the pilot and co-pilot are fighting over the last bag of peanuts on the snack tray.
Prepare for impact.