EMU Domino Fears As Spain Downgraded, Germany Drags Feet on Rescue!

• This Greece mini meltdown will past. I don’t believe the Illuminists are ready to pull the plug on the sovereign debt crisis. They will build this into an even bigger problem over the next 12 months. After which, all Eurozone countries will be stuffed to their noses in debts. They will then detonate this ginormous debt bomb and crash the global economic, financial and currency system. The smart money are all quietly fleeing into hard assets particularly gold!
   
• What we are seeing: is the controlled demolition of the old order to make way for a New World Order. This is for One World Government, One World Bank and One World Currency! This is a planned collapse orchestrated by the Illuminist money powers!
   
  German leaders have agreed in principle to a rescue package of up to €135bn for Greece in emergency talks with EU and IMF officials, but failed to offer any clarity on the conditions for such aid.
    
  Hopes for a respite for Southern Europe’s battered bond markets were quickly dashed as Standard & Poor’s downgraded Spain. Rainer Brüderle, Germany’s economy minister, said the Greek bail-out would be much larger than first thought, acknowledging that Greece cannot hope to tap the private debt markets for three years.
    
  The heads of the European Central Bank and the International Monetary Fund made a joint pilgrimage to Berlin, pleading with lawmakers in the Bundestag to throw their full weight behind rescue efforts before the chain-reaction spreads to Portugal and the rest of the EMU periphery. Their presence as supplicants in Berlin marks the symbolic moment when Germany appears the undisputed master of Europe.
   
  Dominique Strauss-Kahn, the IMF’s chief, said the stability of the eurozone itself is in danger. “We need to act swiftly and strongly,” he said. German Chancellor Angela Merkel once again refused to give concrete assurances, leaving the markets as wary as ever over the real intentions of Berlin. “This is about the stability of the euro overall, and we won’t avoid this responsibility. But the challenge is for Greece to accept an ambitious program,” she said.
   
  “Europe risks the biggest coordination failure in modern history,” said David Simmonds, research chief at RBS. The Berlin talks are as vague as ever. “We believe that markets will remain very sceptical.” 
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  The Greek debt market came close to disintegration yesterday. Yields on two-year bonds rose briefly to 38pc. “This no longer has anything to do with interest rates: it is a forward contract on the return of the Greek Drachma,” said Charles Dumas, head of Lombard Street Research.
   
  Markets are already looking beyond Greece to Portugal where spreads on 10-year bonds rose to 330 points — higher than the level that first prompted Athens to invoke aid — before falling back on pledges of further austerity. Premier Jose Socrates is to bring welfare cuts planned for 2011 and 2012, accepting that the markets will not give Portugal another year to tackle its deficit of 9.4pc of GDP.
   
  S&P cut Spanish debt one notch to AA with a negative outlook, warning that the fall-out from the housing bust will keep the country trapped in near slump until 2016. It said private sector debt of 178pc of GDP was a major concern. Daniel Cohn-Bendit, leader of the European Greens, said Europe’s handling of the crisis had been “catastrophic” and rebuked Germany for resorting the “discipline of the whip”.
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  Greece knows it can opt for default at any time, setting off an EMU-wide crisis and bringing down Europe’s banks. It also knows that key figures in the Bundestag favour debt restructuring. “Those who chased high yield by purchasing Greek debt must share the costs,“ said Volker Wissing, chair of Bundestag’s finance committee. Leo Dautzenberg from the Christian Democrats said banks should prepare for a `haircut’ of up to 50pc.
   
  The ECB, Brussels, and the IMF have been fighting feverishly to head off such a move, fearing a financial chain-reaction. Julian Jessop from Capital Economics said investors have been too complacent about the EMU crisis. “This could pose as big a risk to the global economy and financial markets as the collapse of Lehman Brothers in September 2008. In some respects the wider fall-out might even be worse,” he said. The world has already used up its fiscal and monetary ammunition. What happens if there is a fresh shock?

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