[Hmwmzian]

'Two Faces of Evans' as Euro Trembles in Spain

Tuesday, July 31, 2012 – by Staff Report



Temptations of a Peseta default in Spain .. Defying charges of heresy, Spanish economist Lorenzo Bernaldo de Quiros has penned a piece in El Mundo that more or less calls for Spanish withdrawal from the euro – unless Mario Draghi conjurs up real magic at the ECB. – UK Telegraph
Dominant Social Theme: Everything is OK. Wait, everything is NOT OK.
Free-Market Analysis: We have the movie "Two Faces of Eve" and now a journalist gives us the "Two Faces of Evans."
Why bother to comment? Well, the polarity seems to us to illustrate more powerfully than anything we can do ourselves how horrible it is to try to honestly cover the financial news these days.
For Evans-Pritchard it is an especially difficult labor as honesty keeps breaking through. It was just yesterday, in fact, that Ambrose Evans-Pritchard again revealed himself as a proper Keynesian, calling for Mario Draghi to print as much euro paper as possible as quickly as possible.
He wrote the following: "Only Mario Draghi's ECB can avert global calamity before the year is out ... Mario Draghi has promised the moon. The European Central Bank's council had better deliver on his pledge this week. If it does not, the crisis will surely escalate out of control in August or soon after."
Does that not sound like an endorsement of money printing, dear reader? It sure did to us. And yet today we find an entirely different face of Evans-Pritchard's reporting on the anti-EU thesis of Lorenzo Bernaldo de Quiros. Toward the end of this article, Evans-Pritchard writes:
Last week, the president of Asturias [Javier Fernández Fernández] said it would be better for Spain to leave the euro than hold out a "begging bowl." Who can argue with him? Unemployment is now 24.6pc, or roughly 29pc under the measuring method used in the early 1990s. This is the worst in Spain's recorded history.
There is no light whatsoever at the end of the tunnel. Pure blackness. EMU really is that destructive. Growth will contract by a least 3pc next year, according to Citigroup. The slump will grind on into the middle of the decade. It strikes me as very naive to imagine that the Spanish people will put up with this Maquina Infernal for year after year. Why should they?
Are we imagining something? There are apparently at the very least two reporters at work within Evans-Pritchard. As we regularly analyze dominant social themes, he provides us with a properly conflicted mainstream media scribe.
It's very hard to write about, well ... anything from a mainstream point of view in this era of the Internet. Boosting the euro and EU on a regular basis is simply not something any normal person can do.
Evans-Pritchard shows us clearly that it is fairly impossible. He's being driven to distraction by conflicting impulses. First, he cannot fully acknowledge the dysfunction of the modern money system. Second, he cannot ignore its effects.
Thus the schizophrenia. One day (yesterday), he is approaching the oncoming breakdown of the EU and euro from a properly Keynesian point of view and the next he is metaphorically throwing up his hands and declaring that those trapped within the Eurozone ought to rebel. Here's some more – Evans-Pritchard's rough translation of the article in question:
Spain is heading for insolvency as big chunks of debt come due later this year. Events are moving fast. The relevant issue is no longer whether this will happen, but whether it is better for Spain to restructure its debt "inside or outside" EMU.
"Inside the euro and without financial resources, a debt reduction is pointless. The Spanish economy would have to go into deepening internal deflation, with cuts in prices and salaries, to restore competitiveness. This is impossible, or at least improbable."
The process would take too long. Capital flight would continue. It would lead to another debt restructuring in short order (as in Greece).
"The snake would bite its own tail in a diabolic spiral," he said.
Mr Bernaldo de Quiros — who heads Freemarket Corporate Intelligence — seems to assume that there will not fact be a eurozone rescue (or that the Rajoy government will refuse to accept Troika terms).
He contemptuously rebuts the "apocalyptic casuistry" of those who claim that the banking system would necessarily collapse, or that real interest rates would surge, or that Spain would succumb to hyperinflation.
He notes the success of Britain, and the Scandinavian states in leaving the Gold Standard in 1931 – and those Latin American states that did so later (perhaps a better parallel, since Spain today has net external debt near 100pc of GDP). Their recoveries were in stark contrast to those like France, Poland, Belgium, Italy, and the Netherlands that clung to the dysfunctional fixed-exchange system until the bitter end, trapped in perma-slump.
Because Evans-Pritchard is in many ways an erudite financial editorialist, he is obviously being driven over the edge by the brief he must fulfill. If he wishes to keep his job, he simply cannot reveal the depravity of the current monetary system or his complicity in it.
Other journos with less facility have fewer compunctions when it comes to writing drivel, but Evans-Pritchard provides us with a profile of a man evidently in full meltdown, so hounded by moral or intellectual scruples that he cannot remain consistent day-to-day.
Credibility, constancy and profitability are all draining away now as even the best mainstream press and "press-titutes" find it impossible to create a long-term, believable narrative.
Here at the Daily Bell we've been fairly constant in our predictions that the EU was likely built to fail – and that the only question is whether it will fail outright or whether hundreds of millions are to be made even more miserable by the power elite's pursuit of world government.
Conclusion: What we call the Internet Reformation is stressing every part of the elites' phony globalist narrative. It is not surprising, therefore, to find signs of schizophrenia throughout the one-world enterprise. Evans-Pritchard (and others like him) is also a victim.

[suilusargaino]

Pressure on Spain to bow to bail-out

By Ambrose Evans-Pritchard, International Business Editor

Italy’s leader Mario Monti is to make a last-ditch effort tomorrow to persuade Spain to swallow its pride and accept a formal rescue, hoping to clear the way for double-barrelled action by bail-out funds and the European Central Bank.


The frantic diplomacy comes as investors wait nervously to see if German-led officials on the ECB’s governing council will stand behind the bank’s chief, Mario Draghi, who triggered a euphoric stockmarket rally last week with hints of intervention in the Spanish and Italian bond markets.

"The situation is dramatic: markets will react very badly if the ECB doesn’t deliver,” said Dmitris Drakopoulos from Nomura, ahead of the ECB’s crucial policy meeting on Thursday. The bond markets are continuing to signal deep alarm, with safe-haven flows into German two-year debt pushing yields to minus 0.08pc.

Former ECB governor Athanasios Orphanides said Mr Draghi had boxed himself into a corner. “Expectations are now so high, the ECB will have to announce something,” he said.

Bundesbank chief Jens Weidmann shows no sign of relenting, warning on Wednesday that the ECB must not “overstep its mandate” or stray into fiscal rescues. He issued a blunt reminder that the German central bank is master of the euro project, and not “just one” bank among others. “We are the biggest and most important central bank in the euro system,” he told the Bundesbank journal.

While the Bundesbank does not command an ECB majority – and has been outvoted in the past – Mr Draghi must move with extreme care. Two German members of the ECB have already resigned in protest over bond purchases, seen as debt pooling by the back door. EU officials fear that Mr Weidmann may leave as well if pushed too far, risking a political storm in Germany.


Yet the picture is changing as Europe’s industrial recession spreads north. Belgian GDP – a leading indicator for Germany – shrank by 0.6pc in the second quarter. The eurozone’s PMI manufacturing index dropped to a 37-month low of 44.0 in July, with Ireland alone above the contraction line of 50.

Marchel Alexandrovich from Jefferies said the virus was reaching the core. “The ECB has to respond. There is the risk of a deflationary process setting in next year,” he said.

Mr Monti will swoop into Madrid today after garnering support in a whirlwind tour of European capitals for a “grand plan” to shore up the euro. The mission is designed to cajole Spanish premier Mariano Rajoy into requesting help from the eurozone’s bail-out fund (EFSF), the last missing piece of a complex twin-trigger plan to buy Spanish and Italian bonds

Mr Monti was coy about details, saying he was working on “various combinations”, but diplomats say the key thrust is an EFSF “soft rescue” for Spain. This would allow the fund to buy Spanish bonds at auctions on the primary market, giving political cover for the ECB to intervene with real muscle in the secondary markets. The sequencing iscrucial. Only the EFSF can impose the tough conditions needed to satisfy Germany, the Netherlands, and Finland. The snag is that Spain would first have to sign a memorandum ceding fiscal sovereignty.

Mr Rajoy’s team is digging in its heels. Deputy premier Soraya Saenz de Santamaria repeated this week that “there is not going to be a rescue”. A volte-face would be devastating for Mr Rajoy and risk a political crisis at a time when Madrid is locked in conflict with Spanish regions.

Mr Monti has emerged as the Latin bloc’s de facto “prime minister”, working hand in glove with the White House. It is an alliance that boosts his power in talks with Germany. US President Barack Obama telephoned him again on Tuesday to offer “support for decisive action”.

US Treasury Secretary Tim Geithner piled on the pressure, saying budgetary discipline was not enough. “They have to do more to help support growth,” he told Bloomberg TV.

However, Germany seems no closer to a strategic shift in policy, and bail-out fatigue is palpable in the Bundestag. Rainer Bruderle, the Free Democrats’ floor leader, attacked proposals to give the new European Stability Mechanism (ESM) a banking licence to borrow from the ECB, saying it would create a “limitless inflation machine”. Mr Monti predicted today in Helsinki that an ESM bank licence “will in due course occur” but seems to resigned to shelving the idea for now.

Meanwhile, the Federal Reserve stopped short of introducing fresh stimulus as it delivered a downbeat assessment of the US economy. In its regular monthly statement, the Fed acknowledged that consumer spending was now slowing and that the broader economy would only recover “very gradually”.

http://www.telegraph.co.uk/finance/f...-bail-out.html