It looks as if Mrs Merkel is trying to neuter the German Constitutional court on matters relating to the euro zone financial issues – possibly without a referendum, report German newspapers. All part of the Machiavellian plan, I set out the other day. The Constitutional Court is to opine on a number of issues in coming day.
This manoeuvre, if true – likely – makes me more and more certain that a grand plan is being hatched, quite possibly along the lines I suggested over the weekend. Should be bullish, boys and girls;
The FT reports that European banks have raised just under 2/3rds of their required debt financing requirements of US650bn for the current year – the ECB will have to cough up the rest – some balance sheet the ECB is building. The ECB will, we know from the wink, wink, nod, nod comments, provide at least 2 year (quite likely even 3 year) financing for European banks.
In addition, expect interest rate cuts – below the previous 1.0% floor effectively established by that clown Trichet. A reduction in interest rates in December is very likely;
The EFSF is indeed a “dead duck” – it is unlikely to be leveraged more than 2 1/2 times, if that. The plan, based on yet more hint, hint stuff, seems to be to involve the IMF, and 3rd parties (through the IMF)’ together with the EU – does that mean the ECB lending to the IMF, who ten on lends to the relevant Euro Zone countries. If the ECB is involved in this way, it will be most convoluted scheme I’ve seen for some time but hey, I think we’ll take anything, given the diet of complete rubbish we have had to date from the Euro Zone/EU/ECB;
Even more intriguing – Draghi is being summoned to the Ecofin meeting and news reports suggest he will also attend the EU heads of State meeting on the 9 th December. A deal where Germany forces through fiscal measures, followed by the “independent” ECB buying bonds/ embarking on QE, looks like the deal that is being attempted/ organised. Great note by Credit Suisse – Mr Wilmot setting out the scenario. I totally agree with his assessment;
UK Chancellor downgraded the countries GDP forecasts to 0.7% next year (0.9% this year), though warned of a possible – unfortunately likely – 2012 recession. Borrowing would be higher than initially expected and overall debt to GDP higher. However, the international community still believes in the UK – sterling rose, even against the US dollar;
Basically, signs are that Germany has finally got it and is coming up with a plan. Bitter experience has taught me to be uber cautious, but surely this time………The fact that Germany has recognised that even it may well be in the sights of those nasty Anglo Saxon’s well, it may be playing a part. Germany’s banks are also an issue, together with the realisation that it’s allies are getting worried.
Either way, let’s hope for some sensible resolution – I would really like to move on to something else. Indeed, there are huge issues around.