There have been a few stories in the news this weekend that show the European Union being not so unified.
A couple of years ago, I’d have been saying how unfortunate that was.
Now, I’m seeing it as “good news”.
The reason for the shift is pretty simple: The European Parliament has begun acting as an Imperial Council and has essentially acted as though the Will Of The People was not only irrelevant, but worthy only of derision. ( I’ve actually watched a few sessions on Youtube, and it’s pretty clearly an ‘Insiders Club’).
So what were these things?
One was France saying that it might pull out of the Schengen Zone. I saw that go by in a ‘news crawler’ on CNBC World (a European / Asian oriented business news show on the satellite). As an American, I had not idea what a Schengen Zone was, but figured I ought to find out, since it rated coverage in a news crawler… It’s the “passport free” zone where EU folks can essentially wander around like Americans do between States.
Another was The Greek Bailout. Lots of Central Bankers and Ministers Of Money (or perhaps of Propaganda) seen on the news last week talking about how this was all Just Great and the problems were all fixed “This time for sure!”… Followed by a small news item that the agency responsible for such things had held that the restructuring of Greek Debt did, in fact, amount to a ‘default’ in that folks were not being paid fully and on time, but had to ‘roll over’ some of the maturing debt. Another news crawler said that this had triggered rather large payouts… A bit more to ‘dig into’ as actual amounts hit balance sheets.
Then there was the talk about “Who is next?” on the European Central Bank / IMF / German shopping list? Spain, Portugal, and Italy have all be mentioned, but folks figure Italy is just too big to handle. Portugal is the one most frequently at the top of the list. However, it looks like Spain is being the most cranky. In another thread, R. de Haan posted a link to a story that pretty well covers it. My only point is that it shows just how fragile the “commitment” to EU Membership is becoming.
Furthermore, Poland has said “not interested” in the Carbon Taxes and a sky full of non-EU countries are saying “nope” to the idea of a Carbon Tax on flying. China has just not quite managed to get around to giving the OK to buy a dozen or two Airbus Airplanes while they think about where they will be flying… With the USA, Russia, and China all on the same side on this one, it could get interesting…
For all their talk about “integration” and things like one Europe: Folks care about their country, their history, and their culture. Frenchmen do not wish to be Germans, Spaniards do not wish to act Dutch, Italians have little interest in being more English, and none of them want a load of foreigners just wandering in illegally.
In short, the EU is showing some fairly strong signs of stress fracturing. Only time will tell if this is the end of the beginning or the beginning of the end.
The links, for folks wanting to read some more:
France election 2012: Nicolas Sarkozy threatens to pull France out of Schengen zone
Nicolas Sarkozy threatened to pull France out of Europe’s passport-free zone on Sunday unless the EU tightened its borders against illegal immigration in a “make or break” campaign rally before 60,000 supporters outside Paris.
But, it seems, it is not only what Rajoy has done, but the way he has done it – or, to be more precise – what he has been saying. Bearing in mind that the “colleagues” had just signed their fabulous new treaty, taking the eurzone closer to fiscal union, up pops Rajoy and says: “Democracy, national sovereignty and dignity of the states and their citizens in a democratic Europe that is said is much more important than the supposed ‘fiscal union’ of the EU”.
This is as close to farting in church as it gets, and what Ambrose finds striking is the wave of support for Mr Rajoy from the Spanish commentariat. One from Pablo Sebastián, he says, left me speechless.
“Spain isn’t any old country that will allow itself to be humiliated by the German Chancellor,” he writes – as loosely translated by Ambrose. “The behaviour of the European Commission towards Spain over recent days has been infamous and exceeds their treaty powers … these Eurocrats think they are the owners and masters of Spain”.
Bond holders of Greek debt, who have protected their investment by CDS insurance, might not get paid the money they lost, although ISDA set the CDS auction for March 19 after deciding on a credit event and therefore a trigger for the swaps. So, a $100,000 bond has now incurred a loss of $54K to its holder, replacing the rest with new bonds issued today. If that bond was insured by holding CDS though, the CDS payout that has now been triggered will be substantially lower than the incurred losses. Therefore hedging the bond’s risk will turn out to be an even worse investment and may lead to actually kill the sovereign CDS market according to Reuters!
Industry group finds Greek deal triggers CDS payout
By Daniel Bases | Reuters – Fri, Mar 9, 2012
NEW YORK (Reuters) – Greece’s debt swap deal will trigger the payout of insurance protection on the country’s bonds because of legislation that forced all private creditors to take losses, an industry group said on Friday.
The International Swaps and Derivatives Association said the decision by its EMEA Determinations Commission to declare a so-called credit event was unanimous.
The actual payout to creditors is likely to be less than the maximum of $3.16 billion of net outstanding Greek credit default swap contracts because bondholders are not losing all of their original investment.
“We do not foresee a significant impact from the Greek credit event on the financial markets. The amounts of exposure are relatively small,” Robert Pickel, chief executive officer of ISDA, said in a conference call with reporters. “They are known and they are very public, and most of this exposure (in the overall CDS market) is collateralized.
Markets showed little reaction to the widely expected decision. The euro edged lower against the dollar while U.S. Treasury prices pared losses in thin trading conditions after the announcement.
There was also a news story about various European and Asian airlines balking at the EU Carbon Taxes on airlines. Some folks were saying that might pull orders from Airbus (with numbers in the Billions of Euros being talked about) I’m also including here a link to a story about Poland balking at the Green Handcuffs as well:
China ‘blocks Airbus deals’ in EU carbon levy spat
China has blocked firms from buying planes made by European manufacturer Airbus in a row over a carbon levy, the firm’s parent company EADS has said.
EADS chief executive Louis Gallois says Airbus is being subjected to “retaliation measures” by China. The EU levy took effect on 1 January, and will charge airlines for the amount of carbon dioxide (CO2) they emit. Beijing has not commented, and it is not clear whether it is official policy or a negotiating ploy, analysts say.
More than two dozen countries, including China, Russia and the US, have opposed the EU move, saying it violates international law.
So what say all those countries just don’t buy Airbus airplanes and don’t bother flying to Europe? Think anyone would notice? I think dropping off EU bound passengers in Morocco, Turkey, and wherever the nearest border to Russia might be, that would likely be “good for the soul”… Let them take the train instead…
I know that I will not be flying to Europe unless someone else pays the way. There are a lot of nice places in The Pacific, Asia, and Latin America that I’d like to see. Maybe in a decade or so I’d work in a Europe trip… on a rail pass based out of Switzerland…
Poland Says No…Blocks EU’s Climate Roadmap…Napoleon Hedegaard Vents She Won’t Stand For It!
By P Gosselin on 11. März 2012
Everybody say thank you to Poland.
It was the only of 27 European countries to reject the EU’s climate roadmap at a conference of Environment Ministers in Brussels Friday, angering environmentalists and EU climate protection expansionists.
GO Poland!! Go! Go! GO!!
I suspect we’re going to see a Polish / Slavic union forming on this front. Czech and Slovakia are likely to chime in too, IMHO. Russia has already said they see cold coming. Folks in that part of Europe know what cold is, and they know they are not feeling the warmth… Though I dare say it is starting to look like it is heating up in the EU Parliament…