Europe's future could be decided in the next few days

[whyuthinktoomut]

 

This is the week that could shape the fate of Europe for a decade or more, with the fallout from the war in Ukraine colliding with key moments for eurozone monetary policy and the political crisis in Italy.

Thursday is looming as the critical day, with the European Central Bank poised to raise interest rates in the eurozone for the first time in a decade and all of Europe - Germany in particular - waiting anxiously to see whether Russia resumes supplies of gas that have been cut off for 10 days while the key Nord Stream 1 pipeline has been undergoing scheduled annual maintenance.

A day earlier Mario Draghi, who offered his resignation as prime minister last week after the broad coalition of national unity that he leads splintered, will address the Italian parliament.

If he does resign it could force an election in a country that is almost ungovernable and financially unstable, with a parliament riddled with numerous fractious factions and a debt-to-GDP ratio of more than 150 per cent in an environment of rising interest rates and weakening economic activity.

This week will therefore be critical for both the traditionally strongest economy in the eurozone, Germany, which is reliant on Russia for about 60 per cent of the gas which powers its energy-intensive economy, and an Italy which is acutely vulnerable to higher interest rates.

Somehow, the ECB has to reconcile the necessity of bring a rampant inflation rate - it is running at 8.6 per cent - with the threat to the weaker southern European economies like Italy and Greece (debt-to-GDP ratio approaching 200 per cent) of higher interest rates and tightening credit conditions.

Already the spreads between Italian and Greek government 10-year bonds have blown out against Germany's bund yields to more than 200 basis points, which is the level that flashes dangerous territory for their economies and eurozone stability.

The ECB has been working on an "anti-fragmentation tool" and might provide some details of its plans to manage an otherwise dangerous and destabilising divergence in sovereign debt costs on Thursday.

Historically that has meant using the strength of the northern European economies, Germany's in particular, to prop up those in the south by heavy central bank buying of their bonds to keep a lid on their bond yields.

Whether that is as feasible if Germany's economy, indeed the entire eurozone, is driven into deep recession by insufficient gas supplies, is an open question.
Germany is at severe risk of a severe recession if Russia's gas stops flowing entirely. Russia has already cut its supply by about 60 per cent, forcing Germany to start enacting a national gas emergency plan. Its next step would be to heavily ration gas to industry and households.

If Nord Stream 1 doesn't resume supply, not only would it be devastating for Germany's petrochemical, fertiliser, steel, ceramic, plastics and glass industries, but the flow-on effects to a European economy and manufacturing sector which is highly integrated would be devastating. Germany is also a conduit for Russian gas to other European countries.

The threat of Russia shutting down supply has been latent ever since Europe, the US and others started imposing sanctions on Russia after the invasion of Ukraine. It has triggered a scramble by the Europeans to secure alternate supplies in a very tight global market for gas, which has sent European gas prices soaring.

European gas that was trading around €20 (about $30) per megawatt hour pre-invasion is now costing more than €170 per MWh.

The far higher energy costs and slowing global economy - particularly the weakness in China - are already taking a toll on Europe's powerhouse export economy. After more than 30 years of continuous trade surpluses Germany recorded a €1 billion trade deficit in May.

The impacts of the war in Ukraine complicate an already complicated situation for the ECB. Hiking interest rates even as eurozone economies slide towards recession, or worse, isn't particularly palatable but sustaining an inflation rate that heading towards 9 per cent is even less so.

Compounding the challenge is the rate at which its US counterpart, the Federal Reserve Board, is moving. The Fed has raised US rates by 150 basis points in three months, with at least another 75 basis points expected late this month.

The disparity between US interest rates and those in the eurozone, where the policy rates are negative and the safest of the bonds, German 10-year bunds, yield only 1.2 per cent, has also pushed the US dollar up with the euro now trading around parity with the dollar - it broke through parity last week for the first time in more than 20 years.

The euro's depreciation adds to the inflationary pressures confronting the ECB. The US dollar's 20-year highs against its trading partners in recent weeks has been exporting inflation to them and sucking capital from them while reinforcing the Fed's efforts to bring the US inflation rate down.

The ECB, now badly lagging the path of the Fed and constrained by the vulnerability of the southern European economies and having to factor in the impacts of the war in Ukraine, isn't expected to do anything dramatic this week.

A 25-basis point increase is expected, which would still leave its key policy rate in negative territory at minus 0.25 basis points. The bank has been flagging the prospect of a 50-basis point move in September.

If it moves more decisively the potential for more destructive increases in rates on Italian debt - and Italy is the eurozone's third-largest economy - would rise unless the ECB is in a position to deploy its "anti-fragmentation tool" to limit the threat of a material divergence of rates across the eurozone.

If Draghi goes, and Russian gas doesn't flow the policy dilemmas for the ECB and, indeed, the European Union and its constituent states, will be enlarged and complicated and the consequences of their decisions more significant for both the short and long-term futures of the eurozone.

 

 

https://www.msn.com/en-au/money/markets/europe-s-future-could-be-decided-in-the-next-few-days/ar-AAZIri7?ocid=msedgdhp&pc=U531&cvid=2ee123a1e24441219201f0ca8bf72d5c 

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Rates must eventually go up..by quite a bit.. with all this artificial phony money printing malarkey. 

Speaking of artificial, how do our European brethren feel about Germany basically shouldering the load (financially) of the rest of the EU and  Brussels pretending all is well? 

 It was a good theory at the time ( holding hands,  singing kumbaya - one passport, easy travel / mobility for work, with a single currency...but how long can this go on  ( where one is pretty much paying for another, or multiple, "family members"...where they can't or won't get their political will and /or fiscal responsibility act together ?   

Could we just take a look at how giving "loans" to our Thai extended family, brothers etc  ends up, treating it as a gift more often than not, to peer into the future       ( regarding the feasibility of the EU staying intact)?

Be kind. Try not to mention work ethic in the first sentence 

[Fanta]

But TAT says the tourists are coming back so your carefully researched argument is obviously a lie… lol

The “buy now pay later” Western world is heading for a recession, the biting sanctions against Russia are biting the wrong countries and the Wuhan flu time & money bill is still growing. There is no good news on the horizon except the inevitability that a lot of politicians are going to have to eat a lot of humble pie. 

[Benroon]

On 7/20/2022 at 2:11 AM, Fanta said:

But TAT says the tourists are coming back so your carefully researched argument is obviously a lie… lol

The “buy now pay later” Western world is heading for a recession, the biting sanctions against Russia are biting the wrong countries and the Wuhan flu time & money bill is still growing. There is no good news on the horizon except the inevitability that a lot of politicians are going to have to eat a lot of humble pie. 

There's a little bit - tech stocks are woefully oversold - solid tech companies don't go bad because Putin's a nutter - buy into it.

[palooka]

Lucky the Poms had Brexit.

EU over played their hand when demanding more control over member nations.

P.I.G.S. have had financial problems for in excess of 10 years now and no light at the end of the tunnel and after ten years the EU has not been able to turn them around.

(honestly I think they don't know how to fix it)

Now some of the East European countries are faultering or have already.

Too many nations on a free ride and living off the wealthier countries.

Days of the Euro as a strong currency are probably numbered.

 

[NorskTiger]

The economic santions upon Russia has spectacularly backfired ina way that one would almost think it was Vlad himself who designed them.  The MAIN problem with the European economy remains the monetary union was founded; Each member province (state) issue bonds at differing rates and at the same time this is supposed to be riding on the Euro. This was never sustainable. Eurocrats either thought they could get it all merged into a single "Euro-bond", like the USA has the petrodollar; or make smaller nations bonds simply wither away.  

      Trump was 110% correct when he mentioned the sheer foolishness of being dependent upon Russia for energy and yet intending to make a strong stance against same country. All the phony Davosites were laughing or mocking this and now we see what has happened. 

        Another thing that sees to have disappeared as a topic these days is that the mass immmigration from thord world shiteholes to provide more consumers of issued debt, has become a pure drag upon resources and is a big part of driving up debts everywhere. 

 

           Finally, Brexit did immenesely much more damage to the EU than one would think at first. Maybe they foresaw THIS thing and therefore were fighting so much against it.  

[Rookiescot]

5 minutes ago, NorskTiger said:

The economic santions upon Russia has spectacularly backfired ina way that one would almost think it was Vlad himself who designed them.  The MAIN problem with the European economy remains the monetary union was founded; Each member province (state) issue bonds at differing rates and at the same time this is supposed to be riding on the Euro. This was never sustainable. Eurocrats either thought they could get it all merged into a single "Euro-bond", like the USA has the petrodollar; or make smaller nations bonds simply wither away.  

      Trump was 110% correct when he mentioned the sheer foolishness of being dependent upon Russia for energy and yet intending to make a strong stance against same country. All the phony Davosites were laughing or mocking this and now we see what has happened. 

        Another thing that sees to have disappeared as a topic these days is that the mass immmigration from thord world shiteholes to provide more consumers of issued debt, has become a pure drag upon resources and is a big part of driving up debts everywhere. 

           Finally, Brexit did immenesely much more damage to the EU than one would think at first. Maybe they foresaw THIS thing and therefore were fighting so much against it.  

Never, in the field of human forums, has so much drivel been written by one man. 

[astro]

22 minutes ago, Rookiescot said:

Never, in the field of human forums, has so much drivel been written by one man. 

Thanks for the valuable contribution and reasoned rebuttal.

[DesperateOldHand]

On 7/24/2022 at 4:32 AM, palooka said:

Lucky the Poms had Brexit.

EU over played their hand when demanding more control over member nations.

P.I.G.S. have had financial problems for in excess of 10 years now and no light at the end of the tunnel and after ten years the EU has not been able to turn them around.

(honestly I think they don't know how to fix it)

Now some of the East European countries are faultering or have already.

Too many nations on a free ride and living off the wealthier countries.

Days of the Euro as a strong currency are probably numbered.

On the other hand, those that might be reasonably intelligent don't give a rat's backside. 

Kharma is waiting not too far.

[Wanderer]

An interesting OP here, and same with responses. 

I don't keep too up to date with world affairs but can someone (or several) clarify where we're at. 

Is the Euro likely to collapse, and the Eurozone with it.? How is Italy doing.? The weaker Eastern European economies are they defaulting yet.? Or at least one or two.? 

I enjoy a bit of doom and gloom, for other people that is. 

[NorskTiger]

The EU will do almost everything to shore up Italy's currency and economy. If it comes to an Italian government wanting to abandon the Euro, everything will be thrown at them in order to stop this. 

    Once EU is in danger of an ItalExit, you will see a hasty abandonment of the Ukrainean adventure to shift all resources upon Italy. There is NO future for the Euro if Italy leaves and ECB knows this well enugh to ensure the Davos-crowd  do their job to ensure this does not happen. 

[DesperateOldHand]

19 hours ago, NorskTiger said:

The EU will do almost everything to shore up Italy's currency and economy. If it comes to an Italian government wanting to abandon the Euro, everything will be thrown at them in order to stop this. 

    Once EU is in danger of an ItalExit, you will see a hasty abandonment of the Ukrainean adventure to shift all resources upon Italy. There is NO future for the Euro if Italy leaves and ECB knows this well enugh to ensure the Davos-crowd  do their job to ensure this does not happen. 

Many have suggested that such an unification was doomed from the start, as it was plain to see there was nothing intentionally unified about the effort and practice.....a theoretical strategy that was founded on ideals to combat a still flourishing and influential Asian market. Failed big time. 

I believe the easier way out [especially for Germany] might be to disband the whole ridiculous concept of an union and unified currency. Allowance for independent sovereigns to do as they wish for their own best interest. Dissolve the EU, the Euro, NATO, the US-controlled UN and induced/invented foreign enemies. Might be surprised as to how beneficial this all might be in time.

[NorskTiger]

I thik it would be a monumental, and very risky task to dissolve the EU. Empires, even wanna-be empires like the EU never tend to dissolve themselves, but rather get dissolved ue to internal catastrophies or disastrous warfare.  I could see the former happening as the Euro cracks when a major member calls it quits, but the latter is unlikely all the time the EU simply has little to no military capability and are unlikely to drag themselves into a military quagmire, although some may say that is what they are starting to do int he Ukriane. 

[Rookiescot]

5 minutes ago, NorskTiger said:

I thik it would be a monumental, and very risky task to dissolve the EU. Empires, even wanna-be empires like the EU never tend to dissolve themselves, but rather get dissolved ue to internal catastrophies or disastrous warfare.  I could see the former happening as the Euro cracks when a major member calls it quits, but the latter is unlikely all the time the EU simply has little to no military capability and are unlikely to drag themselves into a military quagmire, although some may say that is what they are starting to do int he Ukriane. 

Germany and France has little military capability? 

[Rookiescot]

3 hours ago, DesperateOldHand said:

Many have suggested that such an unification was doomed from the start, as it was plain to see there was nothing intentionally unified about the effort and practice.....a theoretical strategy that was founded on ideals to combat a still flourishing and influential Asian market. Failed big time. 

I believe the easier way out [especially for Germany] might be to disband the whole ridiculous concept of an union and unified currency. Allowance for independent sovereigns to do as they wish for their own best interest. Dissolve the EU, the Euro, NATO, the US-controlled UN and induced/invented foreign enemies. Might be surprised as to how beneficial this all might be in time.

The EU is the biggest free trade market in the world.

3rd world countries like China, Russia and India rely upon trade with it. There is no danger it is going to dissolve. 

[Wanderer]

I have taken my eye off the ball again so must ask, are Greece and Italy nearer to implosion, and how do their bond spreads differ from Germany now.? 

And how does now compare to say 2 months ago.? 

[yselmike]

10 minutes ago, Wanderer said:

I have taken my eye off the ball again so must ask, are Greece and Italy nearer to implosion, and how do their bond spreads differ from Germany now.? 

And how does now compare to say 2 months ago.? 

Greece is in the clear  now out from under the ECB yoke.Italy another election coming up,must be averaging one a year since WW2.Still a basket case,one step away from a fascist government.

[Wanderer]

1 hour ago, yselmike said:

Greece is in the clear  now out from under the ECB yoke.Italy another election coming up,must be averaging one a year since WW2.Still a basket case,one step away from a fascist government.

Thank you for your reply. So Greece now a stand on it's own feet economy and not a liability, not imminently likely to cause a eurozone collapse as the OP was having us believe. In Italy would a Fascist government necessarily be a financial disaster.? Are they still a major factor in Europe's imminent financial collapse or was the OP just full of it. 

Wish I knew the answers to these things. 

[whyuthinktoomut]

41 minutes ago, Wanderer said:

I have taken my eye off the ball again so must ask, are Greece and Italy nearer to implosion, and how do their bond spreads differ from Germany now.? 

And how does now compare to say 2 months ago.? 

                 Italian 10 year Government Bonds hit over 4% in mid-June, and just came off 3.7% yesterday. These "number's are getting up there but it doesn't seem to be a problem... yet.                                            The ECB, the FED and other central banks will be doing everything to make those yields come down (by buying them when investors won't), because that  dictates the cost of money and the interest they, ( yes, govts),  pay on loans ( which now is mathematically impossible to pay off) .                 

               High yields wouldn't be so much of a problem in times of more certainty, stability and real growth.  That's the problem- there's quite a lot of uncertainty in the markets right now - compounded by mountains cash being printed ( ECB " whatever it takes"), mountains of money being sent overseas where it more needed to fix problems on home soil ( support small- medium businesses which are the drivers of economic growth), high energy prices, no real wage growth..and asset bubbles in everything except precious metals  ( which the elites do not want to go back to because that would mean the end of phony baloney money printing and the petro-dollar)                                                                                                                               

               Interesting to watch if you're interested...keep an eye on the U.S 10 year yield.  Whenever it starts spiking, the U.S markets do not like that and sell off soon after.   Are European markets that different with everything and everyone connected?

Extrapolate the U.S effect on world markets and you'll see that it is indeed quite a precarious situation.. under the surface. Remember, not too long ago Jerome Powell was saying that there was no inflation problem.                                                                                                                                                                                  I tend to agree with the posters that said the elites of Europe would have too much to  lose by letting Italy or any of the others fall down. So in the short term they will do whatever is needed in keeping the extended family together ( and succeed).  

The real question is though, for how long ? Can these taxpayer funded monetary methadone addicts keep injecting the system and themselves indefinitely?  

Will central banks and governments keep sticking bananas in their ears, sing La La La and completely ignore what happened when they tried this before? 

" You mean, this has happened before?"

" You bet. Did you think these shenanigans from the late 20th century and new 21st century were all new ideas?  That Greenspan, Bernanke, Yellen, Trichet, Draghi Lagarde were geniuses.. with ideas that some other self important money controller never thought of?    It's  happened all before.                                        In economic history. 

Which history ? 

The failures of every fiat currency due to currency debasement, which is what they're doing now ( via inflation, money printing into the stratosphere, money backed by nothing ). If you go back far enough- the Roman empire, 3rd and 4th century China, cultures of the Middle East and others.

Thanks everyone who shared their opinion.  Keep them coming.  

 

[whyuthinktoomut]

39 minutes ago, Wanderer said:

was the OP just full of it

I would hope not . Those words in the opening post weren't mine (except the last paragraph under the link), they were from a news article.

Yes, not exactly a happy title or topic ..and sadly designed to make people a little fearful. That's what news is designed to do (mostly). Please don't succumb to the fear side. That wasn't my intention. It was merely to share opinions.   Thanks for your questions, Wanderer. 

[NorskTiger]

It looks like parts of the German main political party is even starting to think peace may be a good idea to contemplate. 

   This is the official decreet from SPD and can probably be easily translated by some online translate app for those who do not speak German. I am not sure if this link works, but one can cut/paste it and find it online. 

     Layout Antikriegstag.indd (joachim-schuster.eu)

       You will find similar opinions all-over Europe. Of course, the armongering media is not going to present much of it. The number of European fighting-age men willing to join the fray in this conflict is also miniscule. Soon it may be only the anglosphere who is trying to keep this war going. 

     

Edited August 27, 2022 by NorskTiger

[EdwardV]

6 hours ago, NorskTiger said:

 

It looks like parts of the German main political party is even starting to think peace may be a good idea to contemplate.

 

Wouldn’t Germany actually have to be at war in order to make peace? Just saying. 
 

No one of consequence pays attention to the left wing of the SPD. They are the only ones talking peace and have been since day one. There is no change in that regard. The ones driving the dialogue of all people the Greens. They are after the chancellor to start delivering even heavier weapons (read tanks). Even so for a country as you claim looking for peace they have a funny way of showing it. The donated cutting edge anti aircraft unit that was suppose to show up at the end of the year is now showing next month. Germany just sent over three more Flakpanzers from a total of 30. And just approved the sale of some 50 of their big beast self propelled howitzers and 11 more of the anti aircraft units. Actions speak louder than words. 

[NorskTiger]

There are many ways to work on avoiding wars. In Europe, there is significant anti-war factions in all countries and the basic political persuation seems to matter little. In germany it is the "leftwing" of SPD (as you say); in Italy it is the nationalist factions; In Hungary it is the government; in Nordic countries it is intellectuals and people fed up with high energy bills. 

   The "greens" are like most "greens" in Europe. They have little or no concern for "green policies",  but are merely an extension of the modern green fascism. Sme goes in Norway. It is the "green" parties who are most insistent on footing more war expenses. 

     The anglos are increasingly becoming more isolated, although they are still working on pushing their vasalls towards doom. USA remains the most absurd scenario as they manage to force much of EU to stop importing Russian energy, while buying expensive LNG from USA to facilities not even built yet. 

    This remains a global-economic conflict that is sbout much much more than Ukraine. I would not be so dismissive of SPD factions. Historically, they still bear a big burden for endorsing the start of WW1 and there are deep movements within that party who do not want to be behind a third WW, but rather be knwn as peace broker. 

    Hint: It is very possible to broker peace in OTHER nations while not being formally at war one self. Not something the anglosphere knows about or have a tradition with doing, but it certainly is a good possibility for those not entirely at war footing. 

[Wanderer]

On 8/25/2022 at 11:00 PM, whyuthinktoomut said:

I would hope not . Those words in the opening post weren't mine (except the last paragraph under the link), they were from a news article.

Yes, not exactly a happy title or topic ..and sadly designed to make people a little fearful. That's what news is designed to do (mostly). Please don't succumb to the fear side. That wasn't my intention. It was merely to share opinions.   Thanks for your questions, Wanderer. 

My wording should have been - was the post full of it.? Sorry about that. 

But I am still curious, did the next week set the course for Europe for the next decade.? Or not.? 

[EdwardV]

51 minutes ago, NorskTiger said:

The anglos are increasingly becoming more isolated, although they are still working on pushing their vasalls towards doom. USA remains the most absurd scenario as they manage to force much of EU to stop importing Russian energy, while buying expensive LNG from USA to facilities not even built yet. 

Who are these vassals and what is their doom? You make it sound like whatever countries you seems to be talking about don’t get to make their own decisions and do whatever is in their best interests. This isn’t Russia and it’s minions, I’d mention china too but they don’t have any (well except Pakistan and no one cares about that train wreck of a country). 
 

Well besides the fact it’s Russia who has decided to not sell to the EU except in minimal volume (economic blackmail). Seems they would rather burn it instead. Why do you care who the EU buys their gas from? Exactly how did the US get the EU to buy much more expensive LNG from them instead of cheap NG from Russia? Oh that’s right, the US convinced Putin to invade Ukraine and destroy his own army in the process. Damn those Americans are good! 

1 hour ago, NorskTiger said:

Hint: It is very possible to broker peace in OTHER nations while not being formally at war one self.

You mean except for the fact Ukraine wants to kick Russia out of its country first right? Exactly how is a fringe part of one segment of a coalition government expected to convince Ukraine to sue for peace? Keeping in mind the Ukrainian’s don’t really trust the Germans to begin with. This while going against your claim of the wishes of the Angelo countries that are the main supporters of Ukraine? You really seem deep into this particular rabbit hole. I don’t think your hint is all that helpful. 

[NorskTiger]

First of all, Pakistan used to be a "reliable" US vasall. How quickly the anglos alter their views, lr is it merely their inner thoughts coming out? That "train wreck" is more than half the population of USA and the second largest muslim nation in the world. Your dismissiveness and off-handed remarks add nothing except a further impression of the arrogance and haughtiness I sense in so much other things your seem to portray. 

   Now, Pakistan is no longer willing to sing to the tunes of Langley at all times. And therefore no longer of usage in your worldview. 

   Most of European nations do everything the Anglos dictate with the endorsement of their technocratic siblings in Brussels. However, Europe remains a place with many strong and historical national identities and a sophisctication about their conducts that are forged on the back of long-standing history. 

    The energy situation is not what the European peoples, for the most, want, but merely what is the ideal strategic dictum of DC and global banking elite. It seems secondary to the Anglosphere whether or not European people starve and freeze as long as this can be used as a lever against Russia. There would be NO end to cheap Russian gas if the leaders in Europe were free to execute the wills of their own people. 

     Hungary has already broken ranks; Italy is an election away from doing the same and several other nations seem poised to take a further drive in favor of OWN interests and not Wall Street. 

   With regards to Ukraine, what they want is of little meaning in this large geopolitical game. The only thing which will end this conflict is a negotiated settlement. The alternative is a continued slumbering march towards nuclear disaster. I hope and believe Europe will stop this madness long time before that and simply ignore further pressure from DC and London.