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Spreading Eurozone Contagion

by Stephen Lendman Monday, Nov. 28, 2011 at 1:09 AM

class war

Spreading Eurozone Contagion - by Stephen Lendman

The operative word is contagion. It's malignant and spreading because it's unresolved and irresponsibly addressed.

Germany, Europe's strongest economy, just had its worst ever bond auction since 1999. Over a third of 10-year bunds offered were unsold. More on the failure below.

Comparable Italian yields jumped to 7.3%. Italy's two-year bond hit 7.7%. The inverted curve signals tougher times ahead. Italy also sold six-month bills at 6.50%, its highest rate in 14 years.

Troubled Spain had to pay 5.11% for three-month money, the highest short-term rate since formation of Europe's Economic and Monetary Union (EMU) in 1999.

Other Eurozone rates also rose, including Portugal's after Fitch downgraded its debt to junk and retained a negative outlook. Hungary was downgraded to junk as well with a negative outlook. Yields there jumped close to 10%. Belgium's in trouble. So are France and Britain. Credit default swaps on European sovereign debt and banks reached all-time highs.

Earlier in the week French bonds were hammered. Europe's debt crisis moved from periphery countries to core ones. Many believe the Eurozone can't survive, except perhaps with fewer stronger members.

The European Investment Bank (the EU's financing institution) is also being pressured. Yields on its debt rose. So did European Financial Stability Facility (EFSF) bond rates. Yields on its 10-year maturities jumped from 3 3/8% to 3.88%, up from 2.68% two months ago.

In other words, not only are Eurozone countries being pressured, but institutions established to rescue them. Smart money's saying don't bet on Europe. Bet against it. Some say it also about America. Expect that chorus to grow.

Belgium's key business confidence measure was negative for three straight months. French consumer sentiment reached a two-year low.

Goldman Sachs' Manipulative Dirty Hands

Paul Craig Roberts blames major US banks for Germany's auction failure, including Goldman. At issue is their guarantee for trillion or more of European sovereign debt through credit default swaps - "insurance against which they have not reserved."

As a result, they're on the hook for any European sovereign debt failure. Big money's involved. "The reputation of the US financial system probably could not survive its default on the swaps it has issued."

Moreover, Obama doesn't want another major financial disaster in an election year. As a result, Washington "wants Germany out of the way of a European bailout."

Germany's "in the way of the power that the EU authorities wish to wield." They want Eurozone cohesion, "unity," and loss of member countries' sovereignty.

Germany gave up its Deutsche Mark to be part of a failed Eurozone system. It traps member states in the euro straightjacket.

It forced them to surrender sovereign monetary and fiscal policy to a czar-like central bank. It empowered bankers at the expense of sovereign governments and populations.

Goldman's dirty hands are especially evident. Mario Draghi is new unelected European Central Bank (ECB) president. Formerly he was Goldman Sachs International vice chairman and managing director. He also served on Goldman's management committee and held other prominent banking positions.

His job is to serve the money masters that run Europe and most other countries.

Mario Monte is Italy's new unelected prime minister. Goldman and other bankers sacked Silvio Berlusconi and installed him.

Lucas Papademos is Greece's new unelected prime minister. The same scenario repeated. George Papandreou was sacked. Papademos replaced him. Bankers installed him. He's one of their own. He's a former ECB vice president, once served as governor of the Bank of Greece, and is a member of David Rockefeller's Trilateral Commission.

In 1973, it was formed because of a crisis of democracy - too much of it. Jimmy Carter was a charter member. TC today has enormous global influence. Its power broker members explain why. Many come from EU member states.

At home, they serve bankers. Paying them comes first. The scheme involves transferring wealth from sovereign states and populations to them. A dirty end game is planned.

Banks wield more power than monarchs. They want a classless society of rulers and serfs. Unless stopped, they're well on the way to getting it.

2012 Economic, Financial and Political Issues

Economist David Rosenberg suggested 10 behavioral changes likely in 2012, including:

(1) greater consumer frugality

(2) more sovereign country austerity

(3) rising protectionism, nationalism and isolation

(4) increased market volatility

(5) more ideologically and fiscally-driven political movement

(6) reduced growth and deflationary expectations

(7) less risk-taking

(8) shifts away from government responsibility for healthcare, education and other entitlements

(9) rising social tensions, and

(10) greater geopolitical risks affecting national defense, security of supplies and government procurement

Eurozone Trouble

Eurozone tensions are rising. France, Britain, Italy and America want Eurobonds issued and unlimited ECB funding for troubled countries. Germany opposes the idea. It favors indebted nations imposing deeper austerity cuts, no matter the consequences.

Germany's Vice Chancellor/Minister of Economics and Technology Philipp Roesler insists Berlin won't take financial responsibility for other Eurozone countries even though it's been doing it for Greece. Nonetheless, Roesler said:

"We say 'no' to Eurobonds. A transfer union would be wrong because it would mean German taxpayers pick up the costs. Eurobonds are wrong because they would mean a rise in the interest rates for Germany."

Chancellor Angela Merkel told French President Nicolas Sarkozy and unelected Italian Prime Minister Mario Monte the same thing. She added that EU treaty changes will be proposed to give Brussels more power to enforce harsher austerity measures than already imposed.

Expect her Eurobond stance to soften. If issued, they'll be used to save banks and Europe's super-rich at the expense of greater austerity on workers. She proposed a Group of Eight working cooperatively with the ECB, IMF and European Commission to run Eurozone countries without accountability. In other words, she wants financial oligarchs more empowered than already.

Progressive Radio News Hour regular Bob Chapman calls Eurozone's crisis "the lynchpin and the catalyst that could bring about a financial chain reaction worldwide."

Europe poses America's biggest threat. It's nowhere near coming up with debt crisis solutions. The ECB's played a modest role so far. Britain, France and Washington want it to monetize debt like the Fed. Germany fears later inflationary fallout. Adding more debt to a huge problem compounds it.

A Final Comment

Expect much worse crisis conditions before they improve. Political leaders sold out their people. Mass street protests reflect it. An eventual breaking point is coming. Chapman and others believe anger may explode in revolution. People can only take so much.

Chapman thinks 2008 troubles will "be repeated in a much larger way in 2012." Looking ahead, things look awful. Debt's out of control. Much of it won't be repaid. Bankers run governments, not politicians. Paying them first is top priority.

People are slowing catching on. Short-term fixes don't work and punish people struggling to make ends meet. The Western economic model doesn't work. Too few benefit at the expense of most others.

Radical alternatives are needed. Getting them requires major changes. Sentiment for them may accept whatever it takes.

Already today's stress is intolerable. Politicians are indifferent to public pain. Why else would they propose more? Do they expect people to grumble and go along? Do they think bankers can loot public funds forever? Do they doubt a threshold beyond which all hell will break loose?

Policies today are destroying Western societies. Wealth's more than ever concentrated than in modern times. Financial warfare is crushing people. Something has to give. It will, and when it does, watch out.

The entire system has to be dismantled and rebuilt. A new model is needed, including returning money power to public hands where it belongs, ending capital's divine right, and replacing governance by the privileged for their own kind with an alternative serving everyone equitably.

Given how low Western societies have sunk, it may take revolution to get it. There may be no other way despite uncertainties about what's next.

Stephen Lendman lives in Chicago and can be reached at

Also visit his blog site at and listen to cutting-edge discussions with distinguished guests on the Progressive Radio News Hour on the Progressive Radio Network Thursdays at 10AM US Central time and Saturdays and Sundays at noon. All programs are archived for easy listening.                                  

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