The European Central Bank has slashed its euro zone growth forecasts and warned that recession will drag on into the middle of next year, sending the euro plunging below €1.30 to the dollar.
Mario Draghi, the ECB’s president, said the governing council had discussed a cut in overnight deposit rate to below zero for the first time, and was “operationally ready” to do so if needed.
The comment sent the euro into a nosedive, dropping from $1.3075 to $1.2950 in just two hours. “A negative deposit rate is the mother of all sell signals for a currency,” said Hans Redeker, currency chief at Morgan Stanley.
Not much conclusion can be drawn from the above statement apart from This is not about economics, it is about politics. However horrible it may be.
“There are two eurozones, a northern one and a southern one”.There is a third one. A mythical Euro zone. In reality it is every country for itself. If countries lend money it is with the proviso (MOU) that their bondholders, their banks must be paid back first with the “loans” being advanced.
So much for solidarity and so much for logic. Behold I give you a loan with which to repay my first loan and in the process bank debts are transmuted into sovereign debt that is hung like millstones around the necks of citizens.
The reality is that the Mythical Euro zone is only real for the 60,000 bureaucrats that benefit from another reality is, every time a PIIG sinks further and further into the economic mire, the cheaper it is for Germany to borrow and now we are seeing an exodus from the periphery to the centre the whole thing has become perversely self-defeating. Germany has a vested interest in the failure of other countries and eventually it will eat up their economies using permanent contagion, permanent austerity and the Euro itself as the battering ram to weaken and overpower national parliaments. Be afraid, be very afraid.