by Ambrose Evans-Pritchard: The
Horrible Truth Starts to Dawn on Europe’sLeaders
debt crisis on the eurozone periphery is starting to contaminate
the creditworthiness of Germany and the core states of monetary
swaps (CDS) measuring risk on German, French and Dutch bonds have
surged over recent days, rising significantly above the levels of
non-EMU states in Scandinavia.
cannot keep paying for bail-outs without going bankrupt itself,"
said Professor Wilhelm Hankel, of Frankfurt University. "This
is frightening people. You cannot find a bank safe deposit box in
Germany because every single one has already been taken and stuffed
with gold and silver. It is like an underground Switzerland within
our borders. People have terrible memories of 1948 and 1923 when
they lost their savings."
was picked up this week by German finance minister Wolfgang Schäuble.
"We’re not swimming in money, we’re drowning in debts,"
he told the Bundestag.
public and private debt is not extreme, it is very high for a country
on the cusp of an acute ageing crisis. Adjusted for demographics,
Germany is already one of the most indebted nations in the world.
EU officials are hatching plans to double the size of EU’s €440bn
(£373bn) rescue mechanism have inevitably caused outrage in
Germany. Brussels has denied the claims, but the story has refused
to die precisely because markets know the European Financial Stability
Facility (EFSF) cannot cope with the all too possible event of a
triple bail-out for Ireland, Portugal and Spain.
hoped this moment would never come when they launched their "shock
and awe" fund last May. The pledge alone was supposed to be
enough. But EU proposals in late October for creditor "haircuts"
have set off capital flight, or a "buyers’ strike" in
the words of Klaus Regling, head of the EFSF.