It has been an onslaught. Eurozone heads of state, top politicians, unelected kingpins, and bureaucratic honchos threatened everyone in sight with the demise of the euro, or promised to do “everything” or “whatever it takes” to save it even if it violated treaties or the foundation of democracy. In between the lines, the mammoth costs of continuing the bailouts or of breaking everything up oozed to the surface. But it got even worse.
It must be infuriating for Mario Draghi, the hapless President of the European Central Bank, to see how masterfully the Fed and the Bank of Japan control their respective credit markets, how they manipulate them for the benefit of the banks, and how they’re allowing their governments to fund huge deficits at near zero cost. Draghi just doesn’t seem to be able to wrap his arms around it.
Hope persists that Germany would not only bail out Spain and the rest of the Eurozone but would also tolerate the Fed-ization of the European Central Bank. Even Treasury Secretary Tim Geithner was hounding German Finance Minister Wolfgang Schäuble, who was on vacation. Yet, Deutsche Bank, Germany’s de-facto vice-ministry of finance whose CEO serves as éminence grise behind elected officials, well, that venerable institution at the core of Germany Inc. appears to be closing the book on Spain.
As a kid in Germany, I engaged in underage beer drinking. I was too young to drive, so it didn’t bother anyone, except me the next day. It was when German beer consumption peaked at 151 liters per capita, the highest in the world. But then I went to America … and German beer consumption took a multi-decade dive. In the US and other Western countries, the beer industry is now morose as well, but it’s booming elsewhere.
The coordinated confidence-inspiring words from the Eurozone’s fearless leaders yesterday and today about doing whatever it would take to save the euro wasn’t about Greece anymore. Politicians have apparently given up on it. Instead, the fearless leaders were afraid of Spain. Its vital signs were deteriorating. It had threatened with default. So the ECB caved. And in doing so, it threw down the gauntlet.
In June, Cyprus had held its nose and requested aid from the Troika, those despised austerity thugs made up of the European Union, the European Central Bank, and International Monetary Fund that have wreaked so much havoc in Greece. This week, these despised Troika inspectors are swarming again over Cyprus. And each time they do, the numbers balloon. How can such a small country blow through so much money? Well….
Mitt Romney is venturing overseas to spend two days each in the UK, Israel, and Poland. It will hone his international credentials, give him an opportunity to look “presidential,” and allow him to establish or refine connections. He will also court Americans living abroad. Every vote counts. Campaign brawls will stay “at the water’s edge,” so no speeches or news conferences. But there will be fundraisers. And foreign corporations are donating to both sides.
After 21 summits to save the euro, followed by dog-and-pony shows to calm the markets, followed by confidence-inspiring pronouncements about insurmountable firewalls and pandemic structural reforms, the euro is in greater danger than ever before. Spanish Prime Minister walked away from the last summit in June with a victory smile. Now, Spain is on the brink. And word is out: default.
Spain’s banks are getting bailed out with €100 billion. It won’t be enough, but it’ll buy time—a Eurozone mantra. Three of Spain’s seventeen heavily indebted regions asked for a bailout from the central government, and more are coming, but the central government can’t bail out anything because it’s broke. It needs a bailout for itself and for its regions. A bailout far larger than any of the prior bailouts. And then there’s Italy.
“The euro is irreversible,” said ECB President Mario Draghi as a whiff of panic began sweeping over the Eurozone. Everybody was supposed to enjoy their long vacation, and nothing important was supposed to happen. But, like a group of disruptive homeless guys, the ECB, the International Monetary Fund, and politicians have apparently gotten tired of kicking the Greek bailout can down the road, and they stomped on it instead.