It still amazes me how gullible the press is, when large numbers are involved. This next news headline from business.hr in a rough Google translation goes as follows:
“The European Commission is preparing a master plan that would use 200 billion euros of public and private investment in order to activate economic growth in Europe, according to Spanish newspaper El Pais, which refers to "European sources."
The plan is focused on investments worth 200 billion euros in infrastructure, renewable energy and advanced technology, writes El Pais.
The European Union may decide to use double funding. One would have relied on the European Investment Bank (EIB) and European mechanism for financial stability (ESFS), continues El Pais.”
Now, I know it may seem that the translation it a bit skewed, but the EU Commission is acting like Big Brother that possess infinite knowledge and a foresight which is second to none. The greater irony of this, is that, the news headline came out of Spain, the next PIIGS domino ready to fall in the over indebted Eurozone.
My only question is: Where is the money going to come from? If this is a project coming from the EU brass, which country will be on the hook for this cash? The cash I would like to remind doesn’t exist at the current moment.
If the plan is, as it is alleged in this report, going to be supported by the EIB, who will be the glorious capital contributor to this project? Has anyone done ANY calculation on the cost of capital of such an immense project? But, lets put all that aside and focus on the number at hand: 200 billion euros.
I really had no idea that the Eurozone as a whole has packed away in a nice tight closet somewhere the accumulated savings for financing such a venture. The back of this financing might fall on Germany, as is reported, the only country in Europe that has productive infrastructure. But, isn’t Germany also in debt?
The next list of items showing official vs. unofficial German debt is brought to you courtesy of ZeroHedge.
Germany in debt:
German Gross Domestic Product (GDP): $3.2 trillion
Official German Sovereign Debt: $2.618 trillion
Percentage of Liabilities at the European Union: 27%
Percentage of Liabilities at the ECB 18.94%
Germany’s Percentage of the ECB Debt ($4 trillion) $757.6 billion
German annual cost for the EU budget $46.36 billion
German Guarantees for the Stabilization Funds $280.6 billion
German Guarantees for the Macro Financial Assistance Fund $211.14 billion
German Target-2 Liabilities $656 billion
German Guarantee for the EIB Debt $157.29 billion
Sovereign Guarantee for KFW $588 billion
Total German Sovereign Debt & Guarantees $5.315 trillion
Official debt to GDP Ratio 81.8%
Actual German Debt to GDP Ratio 139.8%
I highlighted some of the key debt measures in addition to official debt taken in when calculating the debt to GDP ratio.
As can be seen, the German economy tries to act as a sort of capital buffer to the debt of the other profligate Eurozone members (without any capital of course). Writing blank derivative checks to other stakeholders who own debt from various munis, corporations, banks and other agencies doesn’t really help solve the problem of DEBT, especially when these are guarantees written on who-knows what shady financial paper.
Germany, having written guarantees on EIB debt will probably be forced to take on more shadow debt and therefore indirectly subsidizing any investment project deemed satisfactory by the EU-in-chief.
And if the EU-in-chief decide to finance this splurge with another round of LTRO nonsense, we will have to wait and see where the next Keynesian bubble forms…
and subsequently implodes all around Europe.
Nema komentara:
Objavi komentar