The future of European stabilty?

[AdamG]

MOSCOW (AP) — Russia is facing a heightened risk of being drawn into conflicts at its borders that have the potential of turning nuclear, the nation's top military officer said Thursday.

Gen. Nikolai Makarov, chief of the General Staff of the Russian armed forces, cautioned over NATO's expansion eastward and warned that the risks of Russia being pulled into local conflicts have "risen sharply."

Makarov added, according to Russian news agencies, that "under certain conditions local and regional conflicts may develop into a full-scale war involving nuclear weapons."

http://start.toshiba.com/news/read.p....org%3E&ps=921

[AdamG]

Russia warns it will deploy Iskander missile systems in the Kaliningrad and Krasnodar regions, and in the neighboring Belorussia if there is no agreement over the planned American missile defense shield in Europe between Russia and the US. A spokesman for Russia’s Defense Ministry told this to reporters in Moscow on Wednesday. He also announced that by the 1st of December Russia will raise Aerospace Defense Forces that will be able to effectively handle potential missile threats.

http://english.ruvr.ru/2011/11/23/60890065.html

Or as a more alarmist headline would read, "Russia’s top military commander has warned of nuclear war with NATO". http://www.zimbabwemetro.com/?p=30650

[tequila]

German Bond Auction Falls Short

Germany failed to get bids for 35 percent of the 10-year bonds offered for sale today, propelling borrowing costs in Europe higher and the euro lower on concern the region’s debt crisis is driving away investors.

“This auction is nothing short of a disaster for Germany,” Mark Grant, a managing director at Southwest Securities Inc. in Fort Lauderdale, Florida, said by e-mail. “If the strongest nation in Europe has this kind of difficulty raising capital, one shudders concerning the upcoming auctions in other European nations.”

This is beyond contagion - the eurozone is becoming terra incognita for investors - people are terrified in the markets. The "core" should realize what Benjamin Franklin said - that the EZ will either hang together or most assuredly hang separately.

[AdamG]

Nov. 23 (Bloomberg) -- Russian President Dmitry Medvedev ordered the military to prepare to "destroy" the command capability of the planned U.S. missile-defense system in Europe.
*
"I have ordered the armed forces to develop measures to ensure, if necessary, that we can destroy the command and control systems" of the U.S. shield, Medvedev said. "These measures are appropriate, effective and low-cost."

"This is a Cold War-style issue that can be damaging for Russia-U.S. relations," Gevorgyan said by phone. "Unfortunately, it's going to stay for a while and during an election period it is an issue that can attract a lot of attention."

"The West has been listening to Russian concerns, but it's true that the Russians are disappointed with the dialogue," Roman Kuzniar, an adviser to Polish President Bronislaw Komorowski, said by phone today. "I don't think they'll station missiles in Kaliningrad though. I'm more worried about the Russian threats to withdraw from the arms control treaty."

"This is a Cold War-style issue that can be damaging for Russia-U.S. relations," Gevorgyan said by phone. "Unfortunately, it's going to stay for a while and during an election period it is an issue that can attract a lot of attention."

Read more: http://www.sfgate.com/cgi-bin/articl...#ixzz1eYGdjYZq

[Surferbeetle]

Prepare for riots in euro collapse, Foreign Office warns, By James Kirkup, Deputy Political Editor10:00PM GMT 25 Nov 2011, The Telegraph

As the Italian government struggled to borrow and Spain considered seeking an international bail-out, British ministers privately warned that the break-up of the euro, once almost unthinkable, is now increasingly plausible.
Diplomats are preparing to help Britons abroad through a banking collapse and even riots arising from the debt crisis.
The Treasury confirmed earlier this month that contingency planning for a collapse is now under way.

Wikipedia backgrounder on The Telegraph paper

The Daily Telegraph is a daily morning broadsheet newspaper distributed throughout the United Kingdom and internationally. The newspaper was founded by Arthur B. Sleigh in June 1855 as the Daily Telegraph and Courier, and is since 2004 owned by David and Frederick Barclay.

According to a MORI survey conducted in 2005, 64% of Telegraph readers intended to support the Conservative Party in the coming elections.[3] It had an average daily circulation of 634,113 in July 2011 (compared to 441,205 for The Times).[2]

Germany, France plan quick new Stability Pact: report, BERLIN | Sun Nov 27, 2011 7:43am EST, Reuters

France and Germany are planning a quick new pact on budget discipline that might persuade the European Central Bank to ramp up its government bond purchases, Welt am Sonntag reported on Sunday.

In an advance release before publication, Welt am Sonntag said that because it would take too long to change existing European Union treaties, euro zone countries should just agree among themselves on a new Stability Pact to enforce budget discipline - possibly implemented at the start of 2012.

It could be similar to the Schengen Agreement which applies to EU countries that choose to take part and enables their citizens to enjoy uninhibited cross border travel. Among the countries in the Stability Pact, there would be a treaty spelling out strict deficit rules and control rights for national budgets.

****Actually it seems the story was broken in Bild (ack ) but let's follow the trail******

Geheimverhandlungen ber neuen Euro-Vertrag, 26.11.2011, Die Welt

Deutschland und Frankreich wollen offenbar bis Anfang 2012 einen neuen Euro-Stabilittsvertrag notfalls auch ohne Rcksicht auf die EU-Kommission.

Auf die angestammte Rolle der EU-Kommission wollten Merkel und Sarkozy notfalls keine Rcksicht nehmen. Schon beim nchsten EU-Gipfel am 8./9. Dezember wolle das Duo seine Plne vorstellen. Scharfer Protest werde vor allem aus Grobritannien erwartet, das zwar nicht zur Euro-Zone gehrt, aber nicht weiter an den Rand gedrngt werden wolle.

Wikipedia backgrounder on the newspaper Die Welt

It was founded in Hamburg in 1946 by the British occupying forces, aiming to provide a "quality newspaper" modelled on The Times. It originally carried news and British-viewpoint editorial content, but from 1947 it adopted a policy of providing two leading articles on major questions, one British and one German. At its peak in the occupation period, it had a circulation of around a million.[1]

The modern paper takes a self-described "liberal cosmopolitan" position in editing, but Die Welt is generally considered to be conservative.[2][3]

The average circulation of Die Welt is currently about 209,000 and the paper can be obtained in more than 130 countries. Daily regional editions appear in Berlin and Hamburg, and in 2002 the paper experimented with a Bavarian edition. A daily regional supplement also appears in Bremen. The main editorial office is in Berlin, in conjunction with the Berliner Morgenpost.

Die Welt is the flagship newspaper of the Axel Springer publishing group. Its leading competitors are the Frankfurter Allgemeine Zeitung, the Sddeutsche Zeitung and the Frankfurter Rundschau. Financially, it has been a lossmaker for many years.

Merkel und Sarkozy wollen neuen EU-Vertrag, 26.11.2011 07:55 Uhr, Bild

Deutschland und Frankreich drcken aufs Tempo! In Rekordtempo soll ein neuer Euro-Stabilittsvertrag erzwungen werden -mglichst schon zu Beginn nchsten Jahres! Damit soll endlich Ruhe an den Finanzmrkten einkehren.

Nach BILD-Informationen erwgen Kanzlerin Angela Merkel und Frankreichs Staatsprsident Nicolas Sarkozy sogar, den neuen Stabilittspakt zunchst als Vertrag zwischen den Nationalstaaten zu schlieen -hnlich dem anfnglichen Abkommen ber den Wegfall der Personenkontrollen in der EU ("Schengen-Vertrag"). Der Vorteil: Das geht schneller und lsst skeptischen Mitgliedsstaaten weniger Raum fr Widerstand. Auf die EU-Kommission wollen Merkel und Sarkozy notfalls keine Rcksicht nehmen.

Wikipedia backgrounder on the Bild newspaper

The Bild (formerly Bild-Zeitung[clarification needed], lit. Picture Newspaper; pronounced [ˈbɪlt]) is a German tabloid published by Axel Springer AG. The paper is published from Monday to Saturday, while on Sundays, Bild am Sonntag (lit. Picture on Sunday) is published instead, which has a different style and its own editors. Bild is tabloid in style, although actually broadsheet in size. It is the best-selling newspaper outside Japan and has the sixth-largest circulation worldwide.[1] Its motto, prominently displayed below the logo, is unabhngig, berparteilich (independent, nonpartisan). Another slogan used prominently in advertising is Bild dir deine Meinung!, which translates as "Form your own opinion!" (i. e., by reading Bild), a pun based on the fact that in German, Bild (more properly Bild'!, a short form of Bilde!) can also be understood as the imperative form of bilden, "to shape, to form".

Bild's nearest English-language stylistic and journalistic equivalent is often considered to be the British national newspaper The Sunthe second highest selling European tabloid newspaperwith which it shares a degree of rivalry.[2][3][4]

[Fuchs]

It's at this point useful to remind everyone that the German government is a bunch of dilettantes in regard to economic policy.

The seat of the minister of the economy is assigned 100% based on politics, 0% based on competence. The current owner is a yuppie who for reasons unknown to me leads the junior coalition partner party.
The economic competence of his secretaries is uninspiring as well (there's one professional politician (in this case a lawyer-politician) and a professional bureaucrat (who studied bureaucracy) as right hands of every minister in Germany.


The ministry of finance is no better; there's the former 'law & order' minister of the interior, a man whose psyche is in my opinion too affected by a near-fatal assassination attempt that bound him to a wheelchair.


The advice that comes from the German central bank is heavily influenced by a focus on the German economic situation and not helpful in this case either.


The advice from our half dozen leading economic research institutes is usually contradictory and thus an all-inclusive buffet; every politician can pick what he likes the most (a systematic disadvantage in comparison to small countries such as Denmark or Netherlands - and a suspected reason for why big countries are worse at actual reforms).



We really need to clean up this incompetence mess once we got rid of Merkel, but that's not so easy. Powermongers and master politics strategists are difficult to displace for people who want to push for competence over politics.

[davidbfpo]

Surferbettle,

Please note the quoted UK press report is in the Sunday edition of The Telegraph and is based on a convenient "leak" from part of the UK government on a reported contingency plan. The UK government has plenty of reasons at home to distract the public, including that decisions over the Euro crisis are largely taken without it.

Considering there are half a million French citizens resident in the UK, plus a larger number of Poles and small numbers from most EU members I doubt if any other government is making similar "leaks".

Most governments have contingency plans, although here many have argued HMG has not done so for a collapse of the Euro - the Conservatives coalition partner is rather committed to the EU.

[Firn]

It's at this point useful to remind everyone that the German government is a bunch of dilettantes in regard to economic policy.

The seat of the minister of the economy is assigned 100% based on politics, 0% based on competence. The current owner is a yuppie who for reasons unknown to me leads the junior coalition partner party.
The economic competence of his secretaries is uninspiring as well (there's one professional politician (in this case a lawyer-politician) and a professional bureaucrat (who studied bureaucracy) as right hands of every minister in Germany.

Sounds like business as usual in politics.

Anyway it really seems that banks are overall pulling a lot of money out of gov. bonds, both due to internal and external reasons. Even the "Germanic" countries (Austria, Belgium, Germany, Luxenbourg and the Netherlands) plus Finland have to pay now quite a lot more this week due to fears and demand.

Italy had to pay roughly 8% this week. Personally I'm buying as we are reaching 10-11 % yields for short-term bonds running only a bit over a year. I can not imagine Italy leaving the Euro. Making a haircut for Italian gov. bonds denominated in Euro would cause a massive outroar as so many Italians hold them. Leaving the Euro zone without making a haircut would however greatly increase the debt as a new Lira can just suffer against a Northern Euro. At least this was always the case with the old Lira, which was devalued (avoiding a internal uproar) quite a number of times to make the economy more competitive. The danger of a massive outflow of Italian captial would be a very real threat too, something already happening in Greece where so much Greek money already left the country toward Switzerland and Germany.

Hungary, who still has the Florint is now rated below investment grade while once gain the currency is tailgating against the Euro. In this case I understand at least partly the rating agencies, as the recent government is really a nationalistic mess in many ways.

In general the situation is of course bad. While it is good that at last chronical economical problems get tackled in quite some countries doing so now is in the short- or medium term depressing the economy and will influence the overall growth long-term also negatively. Stimulating the economy or better avoiding drastic cuts would help the real economy a great deal but will be hard to finance unless the ECB does it's part.

P.S: I do think that the big three rating agencies are partly upkeeping the top rating for the US due to massive political pressure. While in theory it would be not too difficult to balance the budget especially due to higher taxes it seems almost impossible to do so due the polical dead-lock...