Glimpse of Europe's End Game

  I knew the EU Summit yesterday would end with nothing concrete getting done. I thought they would at least announce some grand bailout scheme that was all smoke and mirrors. They not only could'nt get even that done, they doubled down on their own stupidity. Here's a recap:

* No EuroBond or any form of debt co-signing.

* No additional bailout money 

* No ECB loans for IMF's plan

* No banking licence for ESM

* Restrictions on ECB sovereign debt purchases

  This summit was something very different. This one was an attempt to begin the process of making changes to the European Union Treaty itself. These changes would require that nations to:

1. Balance their budgets
2. Enact a Balanced Budget Amendment into each of their Constitutions
3. Enact specific penalties for those who cross the line.

It all has to be done by March when another summit is to be held. These changes would have to be approved by all 27 member states. If this was not possible, "Plan B" is to have the 17 nations who use the Euro currency approve the measures. Its' here that the problems began.

  Some of the measures in this new EU treaty could curtail London's financial markets. It also calls for a minimum tax rate on corporations, which most saw as a direct slap at Ireland, who maintain the EU's lowest corporate tax rate. British PM David Cameron immediately said "no thanks" to the deal, as did Sweden's Prime Minister. Others are soon to follow. For me, the worst move of all {one very under reported in newspapers} was the move to force Ireland's hand on the corporate tax issue. Lets not forget that the Irish Gov't is backstopping about $700 billion in loans to Irish banks from EU Banks. Is this who you really want to kick to the curb? So even before the Summit was over, Plan A had failed. As the Summit was ending, Brit PM Cameron extended a handshake to French President Nikolas Sarkozy, who turned away. It was called "Le Snub" by the British papers. Ambrose Pritchard put the blame squarely on Sarkozy for the anti London and anti Irish laws in the new Treaty and rightly called him petulant for his snub of Cameron. But wait.. it gets worse. These changes are to be accomplished by March. Merkel and Sarkozy apparently were not around to remember that it took years and years to get the original EU treaties written and approved. Worse, there is zero chance it will be approved by Greece, Spain, Portugal and Italy even if the timeline is extended because these peoples won't allow their countries to be run in part by EU bureaucrats, especially ones speaking German. Everyone-- including Merkel and Sarkozy-- know this. The markets were essentially unchanged after this catastrophe was introduced to the press as a victory. My guess is that very soon, the markets will give the Summiteers it's answer-- and it's going to be the middle finger. There is a fair chance the Euro won't even make it until the March summit. Here's a well written summary of this fiasco: http://blogs.reuters.com/felix-salmon/2011/12/09/europes-disastrous-summit/

  So.. why even bother ? I think we just caught a glimpse of how it all ends in Europe:  Sign & Comply or Bye.