[kitchencabinetforum] DON'T EVEN THINK OF EUROBONDS!

The European Council had a heated discussion on eurobonds. Joint borrowing didn't find much support, particularly in the German speaking area but found a certain enthusiasm in the French speaking area. Merkel told PIGS to not even think of eurobonds!

Merkel reinforces her opposition to Eurobonds, declaring that a communistic collectivization of debt would leave the bloc's members worse off. This is communism, pure and simple! Germany, Europe's largest economy, would face extra costs of a hundred billion euros a year through the alignment of interest rates with nations that pay more to borrow. Eurobonds lead us to a debt union, not to a stability union.

Leaders gave Van Rompuy the task of sketching out building blocks for a more integrated eurozone by the next summit on June 28. Van Rompuy's task will extend to a cross-border deposit insurance scheme. Giving eurobonds to PIGS is giving gin to alcoholics! Eurobonds create a transfer union. Eurobonds would benefit profligate PIGS, especially corrupt Greece, whose borrowing costs on the open market have become prohibitively expensive, but they would expose fiscally sound countries like Germany to more risk, increasing the country's low interest rates. Eurobonds would subsidize the dolce vita of PIGS.

AAA rated countries rejected eurobonds, becuse they would force up their own interest rates and give deficit-prone states an incentive to go on spending. Merkel rejects joint eurobonds as absolutely wrong. Restoring stability to the single currency bloc requires a longer-term step-by-step approach. We must move away from a debt union and toward a sustainable stability union. This won't be easy but it is right. In order to bring about common interest rates, you need similar competitiveness levels, similar budget situations. You don't get them by collectivizing debts.

Hollande said some countries are totally hostile to eurobonds, some can imagine them in the future, some can imagine doing them much more quickly. Merkel points out that if the debt all goes into the one pot, you have difficulty figuring out where it all comes from. Spreading risk through eurozone would place Germany on a slippery slope where in the best case it would be on par with the European average, or, we all get worse together. Instead, a European framework needs to be developed in which a regulating body must have a right to intervene in order to bring fiscal discipline to failing budgets.

Eurobonds violate the Maastricht Treaty, which stipulates that no country can be held liable for another country in Fourth Reich (EU). Eurobonds would even elevate liability to the level of a principle and force Germany to vouch for the debts of other countries whose fiscal behavior they cannot control. Germans would not tolerate the tax increases and reductions in transfer payments that this would necessitate.

Eurobonds would not be as safe as German government bonds. And since they would stimulate even heavier borrowing, they would have to yield higher rates. In the wake of the current bailout measures, the German government burdens taxpayers with risks worth one trillion euros. Likewise, over the last year, risk premiums for German government bonds have doubled. There simply isn't any more room for maneuver.

Paul Krugman doesn't see too much alternative now about grexit. It's going to be terrible in the first year if Greeks do leave. So Krugman is really reluctant to say that it's a little bit like shouting Fire! in a crowded theater, but what is the realistic option here? It's not as if anything anyone's proposing has any hope at all of getting Greeks out of the mess they're in.

The European Council wants Greece to remain in eurozone while respecting its commitments. After the elections, the new Greek government will make that choice. Krugman points out when Greece leaves, then you have a bank run in PIGS, because they've set the precedent. But, again, that could be contained with lending from the ECB. What has to happen is that ECB has to be willing to replace all euros withdrawn as is necessary.

Krugman thinks the case we're making for that lending becomes a lot easier because the Greeks were actually irresponsible. The Greeks actually did behave badly, and so the political case for unlimited exposure to Greece is very hard to make. A much easier case to make is for Spain and then Portugal and Italy, all of which did nothing wrong on the official side. So you could argue that the bad actor has been ejected, but we need to save the good actors.

Greek debt differs from that of other nations, because it's not due to spending, but robbing! Graecokleptocrats got huge kickbacks from overpriced purchases of public equipment and contracts and by churning the state insurance funds. If this is not robbing, what is it? When politicians of other nations were trying to do things for their citizens, Graecokleptocrats were trying to fatten their secret offshore accounts, protected by parliamentary immunity. Graecokleptocrats rob Peter not to give Paul, but to themselves!

That's why the Greek workers are on strike. They resent paying the huge Greek debt created by Graecokleptocrats. It's not fair to tax and reduce the salaries and benefits of workers to make up for the money stolen by Graecokleptocrats. The fairest action would be for Graecokleptocrats to return the stolen money back to the Greek treasury. Many Graecokleptocrats live like princes of Saudi Arabia! Enough is enough, bring the money back! http://venitism.blogspot.com

Greece is the queen of political corruption in Occident. The impunity of the 300 MPs of the Grand Brothel of Democracy on Syntagma Square is the most freakish thing on Earth. Even though Graecokleptocrats loot many billion euros in bribes and churning, Graecokleptocrats cannot go to jail! Graecokleptocrats are protected by the parliamentary immunity, and nobody can touch them, no matter what. Moreover, they have the nerve to jail dissident bloggers. The freakish government of Greece stole my computer! It's a long way from the 300 Spartans of Leonidas! Allons enfants de la Grece!

Hail! A sensitive issue cannot be fully explained in a post, but only in a speech, in that magic eyeball to eyeball contact, baring my soul, and declaring truths that cause shock and awe. That's why I look forward to the invitation of your organization to speak at your conference. Basil Venitis, venitis@gmail.com