Lisbon’s constitutional court having blocked the country’s planned austerity programme, the euro project now faces a war for survival on myriad fronts: Portugal, Italy, bond market confidence, capital flight, and media coverage. It’s hard to see a way back for EMU now.
Portuguese Prime Minister Pedro Passos Coelho held an extraordinary cabinet meeting on Saturday following the Constitutional Court’s rejection of four out of nine of the budget’s austerity measures, which the government says are necessary to meet the terms of a eurozone and International Monetary Fund bailout. With opposition parties calling for the government to resign, Coelho was still locked in emergency talks with the country’s President in the early hours of Monday morning.
And despite rumours in Italy last Friday that its President would facilitate an emergency technocrat regime under Mario Monti, sources there are now insisting that there is no possibility of such a move.
Meanwhile, yet more evidence of capital flight is emerging from both media articles and Slog sources on the ground. “Capital flight was enough to devalue the Euro by a half percent per day last week until it stabilised at $1.28,” says one Slogger, “We think there was [European] central bank intervention by overt money printing on a massive scale.”
“Projected post-Cyprus eurozone capital flight is at a moving rate $2 trillion per year, or $200 billion per month” says another.
The Financial Times notes that demand for $100 bills has jumped ‘as nervous Europeans stuff them under the mattress, providing vivid proof that the world still loves the dollar, and confirming the benefit to the US of the currency’s status as a global reserve…The surge in demand for US cash suggests that the world is worried about future of the euro.’
But although Mario Draghi talked with a vague desperation last week of “thinking 360 degrees on the non-standard measures”, no capital controls have been imposed. My view remains that this was a fatal mistake. However, to ensure that no euro-doubters need be in any doubt at all, EU economic affairs commissioner Olli Rehn announced in a television interview last Saturday that The Cyprus Approach will be formalised via an EU directive.
Talking out of several orifices at once, Rehn asserted that ““Cyprus was a special case … but the upcoming directive assumes that investor and depositor liability will be carried out in case of a bank restructuring or a wind-down,” during an interview with Finland’s national broadcaster YLE. To clarify a little less still, he added “There is a very clear hierarchy, at first the shareholders, then possibly the unprotected investments and deposits.”. He did not expand upon exactly what kind of ‘protection’ might be recognised by those tunnelling into the bank vaults.
But however one tries to put Olli’s statement into words, the European Commission is currently drafting a directive on bank safety which would incorporate the issue of investor liability in member states’ legislation. This is the now infamously euphemistic Open Bank Reconciliation (OBR) template within which, having already had all our tax monies to rescue them, investment bankers will now get our savings as well. Obligatory organ donations may well follow shortly.
There are already some bizarre signs of online media removing all material found offensive by the Looters: this extraordinary notice went up at the NBC site shortly after the post appeared yesterday:
The Eunatics are in a corner. Anything could happen now – and probably will. Stay tuned.