Courtesy of Mish.
A pair of articles translated from German and Spanish further highlights the pressure on German Chancellor Angela Merkel to not give into to further demands by Spain, Italy, and France.
160 German Economists Denounce Summit Results
The San Francisco Gate reports German Economists Denounce Summit Decisions
A group of German economists has denounced decisions made during last week’s European Union summit, arguing Thursday that they risk increasing the exposure of taxpayers, retirees and savers to the debts of struggling banks.
In an open letter published by the daily Frankfurter Allgemeine Zeitung, a group of 160 economists wrote that German Chancellor Angela Merkel found herself forced to make “wrong” decisions during the gathering. The economists said they “view the step toward a banking union, which means collective liability for the debts of the banks of the eurosystem, with great concern.”
“Banks’ debts are nearly three times higher than government debts … the taxpayers, retirees and savers in the so-far solid countries of Europe must not be made liable for backing these debts, particularly since gigantic losses are foreseeable from financing the southern countries’ inflationary economic bubbles,” they added.
The economists include Hans-Werner Sinn, the head of the prominent Ifo think-tank and a vocal critic of European leaders’ rescue policies. They argued that “banks must be allowed to fail,” with creditors who knowingly took investment risks bearing the burden.
Merkel rejected the criticism.
“First of all, this is about better banking supervision, and one can only say that that is urgently necessary,” she told reporters.
Disingenuous Response by Merkel
Please note the disingenuous response (if not direct lie) by Merkel who says “this is about better banking supervision”.
Of course this is about bailouts. It is also about the need to allow banks to fail. Let that happen, punish the bondholders, and kill fractional reserve lending and the situation will take care of itself.
Merkel also stated “This is absolutely not about any additional liability.” That too is disingenuous. The amount of money may not have risen, but the odds of losses have increased….