Regurgitated Euro Talk

Juncker: Euro zone leaders, ECB to act on euro – paper | Reuters.

Euro Group President Jean-Claude Juncker has joined the “believe me, it will be enough” chorus. There are several key features to Euro Talk. Read this passage:


Asked whether it was true that France wanted the bailout fund to buy government bonds, under an agreement made by euro zone leaders at their summit in June, but that Germany was resisting, Juncker answered:

“I have no doubt that we will implement the agreements of the last summit. We still need to decide what we will do when. That depends on the developments of the next days.”



The first feature is that the Germans always have to be persuaded. While there is a strong anti-inflation faction in Germany, Merkel is driving the bus. The Eurocrisis has been a boon to Germany so far. The weakened Euro has helped German exports, and the perception of Germany as a safe haven since the start of the crisis has lowered government financing costs precipitously. Furthermore, Merkel and the rest of the euros wish to bring full political union to the Eurozone to back up the currency. Naturally, citizens from the Eurozone would be suspicious of yielding so much sovereignty, so the politicians lie to them about their true goals. Germany does not have to be persuaded about anything; they are playing good cop, bad cop with the periphery. 

The second and third features of Euro Talk are revealed in this passage:

“The euro countries have reached a point where we have to use all means possible to show that we are determined to protect the stability of the euro zone… nobody should doubt the will of those involved, to prove our determination,” Juncker said.

The Euros like to say that the crisis is entering a critical phase and new and improved measures are being contemplated. Remember that after each of the 21 Euro-summits, new and improved measures are promised. So far, there has been some money printing via LTRO and SMP, but very little else.

When Juncker says that nobody should doubt the will of those involved to prove our determination, which shows the third feature of Euro Talk. He is warning speculators à la Draghi’s “Believe me, it will be enough,” speech not to short periphery bonds. Don’t worry, Jean-Claude. The speculators will not jump in until the ECB unleashes whatever it planning and speculators take advantage of the bond price increases to take profits or establish short positions.

The last feature of Euro Talk is likening this sovereign debt crisis to a war. Virtually every article written uses the language of war. You’ll see terms like firepower and bazooka. Look at this passage for a current example:

According to media reports, the euro zone rescue fund could buy government bonds on the primary market, flanked by ECB purchases on the secondary market.

Let’s hope that this Euro war is not like every other disaster that has occurred in Europe over the last 100 years or so. Whenever Europe gets itself in trouble, guess who ultimately has to sort it out.





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