This EU Summit was hardly a game changer

This EU summit was hardly a game changer – just another exercise in buying time. Fortunately for the EU politicians, the ECB continues to pick up the tab. But this won’t last forever.

I am confused, was this the EU Summit that was supposed to put all doubts to rest? The plan for a plan which sometime, preferably after the French election, will be implemented to do what was always the intention? To have a rule for debt levels?

I find two things very confusing here:

1. The policy makers keep telling us that the initiatives already in place are misunderstood by markets. Which initiatives? Do they mean the non-compliance of Greece and Portugal, and in many aspects Spain and Italy?  Or do they mean the LTRO, which is a de facto violation of Maastricht because it allows governments to access the balance sheet of the ECB?
There must a reason why the ECB balance sheet is up 38 pc since July 1st and most likely will increase by yet another trillion euros after the next LTRO in February.

2. Why did they opt to go for a non-enforceable version of the fiscal compact? The financial penalty of 0.1 per cent of GDP is a farce. Where is the original Stability and Growth Pact? The very pact which Mr. Euro himself - Jacques Delors – in a very frank interview with the Swedish newspaper Dagens Nyheter on Sunday regretted he did not more forcefully act in the early days of the 1990’s when the present mockery of Europe was in its design phase. For the record Delors was disappointed overall about the EU and in particularly its lack of vision.

The fiscal compact is almost as funny as the Greek opposition to cutting the “13th and 14th salaries” (i.e., extra yearly two months of wages that are effectively a bonus) on the basis that it will cut GDP further. Using that logic the solution to Greece's problem and the world is to pay all public employees more bonus as it will increase GDP.

No the 19th non-solution EU Summit was yet another exercise in futility as we march on towards the inevitable Meeting of Cardinals (a real EU summit that will decide Europe’s fate and really grapple with the issues, but only once Europe has been more thoroughly disciplined by the markets) I’ve described many times before. An end game where Germany ultimately prioritizes solidarity over discipline but only after moving Europe to the brink of collapse in order to get their “prosperity through austerity” concept embedded in the future law and order for Europe.

Even the politicians acknowledge that last night’s deal was a side show put on to secure German concessions which in reality are non-enforceable but from which Merkel can show the German voters and domestic commentators that she has forced EU in the right direction. Consequently, the time is now almost right for Germany to finally endorse a Euro-bond with a debt brake policy in place.

It is also the pinnacle of the last year’s trend in Europe where all deals in reality are a bilateral agreement between France and Germany, (again as Delors pointed out in the interview), which has been a total violation of both the spirit and the modus operandi agreed by the EU’s founders.

I understand the plan by which Europe and policy makers are conducting their policies:

• Print money indefinitely (give the patient morphine)
• Violate the EU Treaty (in spirit and directly if necessary) using the logic: if we did not do this, Europe will collapse. (Keep telling everyone that the patient needs the morphine or he will die.)
• Ignore solvency issues - throw liquidity at all problems. (Only using medicine that kills the pain while avoiding the risky surgery that might finally see his prognosis improve.)
• Continue to buy time.(Hope that the patient makes a miraculous spontaneous recovery.) 

But....history shows us that any economic model and political construct ceases to exist when the fantasy strays too far from reality.

This latest summit added another layer of complexity to the EU, but again they failed to initiate talks about taking a loss (dealing with solvency), but do not worry! In May (after the French election) that will be the main subject because this EU Summit served as an appetizer for the final show down when Greece and probably Portugal will ask for a holiday from the EU. Then maybe we see the full endorsement of the Germans for a Euro bond once its fantasy of prosperity through austerity is dashed on the rocks reality. 

Safe travels
Steen