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In 2013 a 500 billion
Euro "permanent" bailout fund (ESM) was slated to replace the 440
billion "Temporary" European Financial Stability Facility (EFSF)
fund.
Via magic, the latest proposal that has the stock markets excited is to merge
the two funds double counting the money (and then some).
Bloomberg reports EU Said to Weigh
Combined $1.3 Trillion Fund
European
governments may unleash as much as 940 billion euros
($1.3 trillion) to fight the debt crisis by combining the temporary and
planned permanent rescue funds, two people familiar with the discussions
said.
Negotiations over pairing the two funds as of mid-2012 accelerated this week
after efforts to leverage the temporary fund ran into European Central Bank
opposition and provoked a clash between Germany and France, said the people,
who declined to be identified because a decision rests with political leaders.
Disclosure of the dual-use option helped reverse declines in U.S. stocks and
the euro on speculation it could help break the deadlock among European
leaders. Their wrangling led to the scheduling of a summit three days after
an Oct. 23 gathering.
The 440 billion-euro European Financial Stability Facility has already spent
or committed about 160 billion euros, including
loans to Greece that will run for up to 30 years. It is slated to be replaced
by the European Stability Mechanism, which will hold 500 billion euros, in mid-2013.
A consensus is emerging to start the permanent fund in mid-2012, the people
said. During the transition between the two funds, euro-area governments
originally agreed to cap overall lending at 500 billion euros,
a figure deemed sufficient when Greece, Ireland and Portugal were the primary
victims of the debt crisis.
Simple
Math
·
The total overall cap is 500 billion Euros
·
160
billion Euros has been spent
·
340
billion Euros remains
·
340
billion Euros + zero Euros = 940 billion Euros
Bear in mind this raises the permanent fund above the agreed upon amount. The
German Supreme court has stated this cannot be done without a voter
referendum.
Please see Germany's Top Judge Throws
Major Monkey Wrench Into Leveraged EFSF Machinery, Demands New Constitution
and Popular Referendum for Further Powers for details.
There is no way voters will approve this.
Also bear in mind the German Supreme court has ruled there should not be a
permanent bailout fund at all. I am unclear if the ruling meant beyond the
ESM or at all all. Either way, there should be
a popular referendum on the matter, with an emphasis on "should be".
Six-Day Marathon of Lies, Deceit
To ram this mathematically insane proposal through the Bundestag now requires
a Six-Day Marathon on Greece,
Banks
European
leaders braced for a six- day battle over how to save Greece from default,
shield banks from the fallout, and build more powerful defenses against the
debt crisis rocking the 17-nation euro economy.
A falling-out between Germany and France has snagged the crisis management.
French President Nicolas Sarkozy is pushing for the
use of a European Central Bank role in boosting the firepower of the 440
billion-euro rescue fund, a measure opposed by Germany.
German Finance Minister Wolfgang Schaeuble denied a
Berlin- Paris rift, saying Germany called for the second summit to give the
government time to consult lawmakers.
“France and Germany are not at all stuck in their positions,” Schaeuble said.
Seven options are on the table for leveraging the fund, known as the European
Financial Stability Facility. Germany and the ECB have ruled out granting it
a banking license, the most potent option.
“New ones are coming into the process because smart people are looking
for creative options,” Austrian Finance Minister Maria Fekter said in an interview. “None of the models
are amazingly better than the others.”
ESM Term Sheet
Details
Peter Tchir at TF Market Advisors sent a reference
to the ESM Term Sheet from March 21, 2011.
As
originally foreseen, the EFSF will remain in place after June 2013 so as to
administer the outstanding bonds. It will remain operational until it has
received full payment of the financing granted to the Member States and has
repaid its liabilities under the financial instruments issued and any
obligations to reimburse guarantors. Undisbursed and unfunded portions of
existing loan facilities should be transferred to the ESM (e.g. payment and
financing of instalments that would become due only
after the entry into force of ESM). The
consolidated EFSF and ESM lending shall not exceed € 500 bn.
Lies and Deceit Easy
to Find
Lies and deceit are easy to find. The math alone proves as much. So does the
attempt to skirt German constitutional law. Finally please consider the lie
by Schaeuble “France and Germany are not at
all stuck in their positions”.
Hopefully the German Supreme Court nixes this mathematical stupidity before
it gets approved. If
not, there will be a challenge.
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