The future of the eurozone all boils down to Germany. I’ve been forecasting for months that Germany will increasingly focus on domestic interests and that it will ultimately opt to leave the Euro rather than prop up the EU. The former (focusing on domestic issues) is already underway and I believe the latter will occur once the EU Crisis spreads to France which I expect to happen before autumn. At that point, it’s game over for any notion of the current EU lasting because Germany will walk! [Let me explain further.] Words: 675
So says Graham Summers (www.gainspainscapital.com) in edited excerpts from his original article*.
Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has edited the article below for length and clarity – see Editor’s Note at the bottom of the page. This paragraph must be included in any article re-posting to avoid copyright infringement.
Summers goes on to say, in part:
Once the EU Crisis spreads to France any discussion of EU bailouts is pointless, as the very countries needing aid (France, Italy, Spain, and Greece) account for 53% of the ESM’s funding. So far the markets have been willing to ignore the fact that Spain and Italy are meant to contribute 30% of the ESM’s funding.
Once France Starts Needing Aid It Will Be Game Over
If France starts needing aid (and it will) it’s GAME OVER as any discussion of where the money will come from will be moot and, by the look of things, this development is not too far away. France’s Socialist party took…[control] during the most recent elections and they are already proposing reforms that will result in French businesses and capital leaving the country. Michel Sapin, the labour minister, has promised:
- to make it so expensive for companies to lay off workers that it will no longer be worth their while
- to penalize firms that fire people while still paying dividends and
- to force companies to sell factories, presumably along with the brands manufactured there, to competitors rather than close them down…
- to cap pay for bosses of companies in which the French state holds the majority of shares will be capped at a flat rate of €450,000, or roughly 20 times the wage of the lowest-paid worker and which, in some cases, will lead to a 70% pay cut. Measures to limit pay at fully private firms are expected before long….
- to raise the top rate of tax on incomes over €1 million to 75 percent.
The Wealthy French Are Fleeing the Country
Whenever the euro crisis heats up somewhere in Europe, the demand for expensive homes increases in Western Europe’s largest city, London, particularly among well-heeled foreigners beset by asset angst. London real estate agents are like the canary in the coalmine for the debt crisis. They can sense early on the next country to get sucked into the vortex. So who’s up next? Apparently it’s the French.[The influx to London] began in 2010, when wealthy Greeks started buying up expensive townhouses in upmarket neighborhoods there. Amid fears that Greece might leave the euro zone, they believed their money would be safe in Britain in its splendid isolation from the euro and the Continent’s sovereign debt crisis. Then rich Spaniards started arriving and they were following by well-off Italians, who at the start of the year overtook Russians as the biggest group of foreign buyers snapping up property…
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Real estate agents have been aware of a new wave of interest for months, but it’s been especially noticeable since Feb. 28. The night before, the then Socialist candidate for French president, François Hollande, who famously said “I don’t like the rich,” announced that, if elected, he would raise the top rate of tax on incomes over€1 million to 75 percent. At home, he got much applause for the announcement but in London, the news…immediately led to a 40 percent increase in inquires from worried French citizens.
French banks are already leveraged at 25-to-1. The impact of a capital exodus by the wealthy will rapidly push leverage levels even higher and given that French banks’ exposure to the PIIGS is equal to 30% of French GDP, it’s no surprise that French banks are posting some truly horrible charts.
I expect the EU Crisis to spread to France before autumn. At that point, it’s game over for any notion of the current EU lasting. Germany will walk.
*http://gainspainscapital.com/?p=1869 (To access the above article please copy the URL and paste it into your browser.)
Editor’s Note: The above article may have been edited ([ ]), abridged (…), and reformatted (including the title, some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.
The second half of the year has begun, and…one of the best leading indicators that can shed light on the health of the economy is the purchasing managers index (PMI). The latest local readings of the manufacturing PMI for countries around the world collectively…give investors a critical insight into the pace of economic growth by month [and they can be found below.] Words: 550
I’ve often been labeled as “Gloom and Doom” in the past, but the situation in Europe today is beyond anything I’ve ever seen before. It is highly likely that the EU will not exist in their current form by the end of the year. I realize some of this may sound overly dramatic but the following should give you an idea of how serious things are getting: [Words: 715]
Europe is heading into a full-scale disaster [because,] you see, the debt problems in Europe are not simply related to Greece. They are SYSTEMIC. The European banking system’s leverage levels alone position Europe for a full-scale banking collapse on par with Lehman Brothers. Again, I’m talking about Europe’s ENTIRE banking system collapsing. This is not a question of “if,” it is a question of “when” and it will very likely happen before the end of 2012. Words: 750
In every economic crisis there comes a moment of clarity. In Europe soon, millions of people will wake up to realize that the euro-as-we-know-it is gone. Economic chaos awaits them. [Let us explain why that is the case and how it will come about.] Words: 680
The media is rife with misrepresentations and analysis of the EU. Here’s the real deal, no BS situation with Europe – and its BAD! Words: 900
This report gives you our latest Weiss Ratings for the weakest and strongest countries in the world. Only sovereign countries with stellar scores in four major areas — debt burdens, international stability, economic health and market acceptance — merit a grade of A- or better. Only countries that demonstrate severe and/or consistent weaknesses in the four areas receive a grade of D+ or lower. Currently, the data show that the U.S. government does not fall into either category. We rate it…Words: 1434
In the 1930s…when unemployment breached 25% you started seeing authoritarianism really come into vogue….and we are seeing those kinds of unemployment rates in Greece and Spain…. [In fact,] what’s going on in France is starting to look a little bit totalitarian – and this is in France of all places…The world and the global financial system are in an extremely dangerous situation so investors need to be careful and make sure they protect themselves.
“The sense that you have in Europe is that the European political union and the European economic union are faced with some real dislocations. That isn’t to say that it necessarily won’t survive, but certainly from the point of view of the private wealth in Europe, the money managers for those families are quite concerned…. and quite frankly, they have good reason to be concerned…. we have the very real possibility of experiencing a psychotic break in the markets, such as we experienced in 2008.”
I have a sinking suspicion – a feeling I just can’t shake – based on multiple fundamental, technical, and timing indicators….[that] the end is near. I’m not talking about some Mayan calendar apocalypse kind of thing….[but] a catastrophic, painful, epic meltdown-type endgame for this European sovereign debt crisis…[[Let me explain why I see that to be the eventual outcome.] Words: 810