Draghi’s speech at an investment conference in London boosted
markets at the time and forced down Spain and Italy’s borrowing costs
after saying; “Within our mandate, the ECB is ready to do whatever it
takes to preserve the euro. And believe me, it will be enough.” The
markets responded because they were effectively being manipulated.
Known as “Outright Monetary Transactions” the scheme was to have been
deployed alongside a QE [Quantitative easing] programme from March 2015, itself racking up
¢80billion a month. Several trillion euros later and the EU looks as
precarious as ever with growth a distant memory.
In Italy, yields on bonds dropped from 6.3 per cent to 1.2 per cent
after that famous speech and all seemed good – on the face of it. But
deep down, it was not as we had been led to believe. Italy’s government
debt grew and is now equal to 133 per cent of GDP. When Ireland imploded and had to be fully bailed out by the ECB, its debt pile was 132.2% of GDP.
With all this intervention, the ECB’s balance sheet ballooned – set
to overtake the U.S. Fed Reserve and has now reached over $3trillion according to Bank of America Merrill Lynch (not to be confused with national debt).
Then, totally off the mainstream media radar came news that another
Italian bank had disintegrated. And while attention was focused on the
rescue of Banca Monte dei Paschi di Siena, which is still not fully
finalised, news came that Banca Etruria, has quietly slipped into bankruptcy.
“It was announced (Dec 21st) that the first part of an
investigation concerning fraudulent bankruptcy charges (at Banca
Etruria), in which 21 board members are implicated, had been closed.
This strand of the investigation concerns €180 million of loans offered
by the bank which were never paid back, leading to the regional lender’s
bankruptcy and eventual bail-in/out last November that left bondholders
holding virtually worthless bonds.”
Next up and out of the blue comes UniCredit, the country’s largest
bank. It is seeking to raise €13bn of desperately needed capital but
large as though this is, the biggest problems, according to the FT is that the smaller banks, like Banca Etruria, are now in a perilous position and on the verge of falling over the cliff edge.
Italy has banks on every street corner, with more branches per capita
than any other OECD country. The lack of growth (occurred since it
joined the Euro), has suppressed much needed profits on the one hand
whilst seeing poor wage growth on the other, causing drastically
increased non-performing loans that now add up to an eye-watering
The FT reports that
Italian banks “have long sold their own shares and debt to their retail
customers as an attractive alternative to savings products, a
disgraceful practice that should never have been allowed. It means that
ordinary Italians, many in retirement, have already suffered as bank
shares have fallen. They will suffer much more in a bail-in.”
The FT is suggesting that
a full bail-in is on the cards. It is. TruePublica reported back in
September that banks throughout the EU would simply steal depositors
money if any of them failed now that new bail-in rules had been implemented. And that is exactly what is happening.
The result of all this is that Mario Draghi, clearly feeling the
strain, has finally admitted defeat and said that there is a strong
possibility of the EU falling apart. This time the tactic to keep unity
was to threaten every country in the EU by stating that leaving the
Eurozone would cost dearly and would require any member country to
settle its claims or debts with the bloc’s payments system before
severing ties. There’s nothing to stop a desperate member country from
leaving and simply defaulting.
According to ArmstrongEconomics,
“This statement reveals the heated discussion at Davos and the rift
that is beginning to spread. This statement, (Draghi) was made in a
letter to two Italian lawmakers in the European Parliament.”
Martin Armstrong himself says “Southern Europe, which are the weaker
economies including Italy, Spain, and Greece, have accumulated huge
liabilities to keep the euro afloat while Germany stands out as the
biggest creditor with net claims of €754.1 billion euros. This alone may
set off the massive capital flight to the dollar. We are looking at the
complete collapse of the Quantitative Easing carried out by the ECB
since 2008 without any success.”
German Minister for Economic Affairs Sigmar Gabriel, the most senior Social Democrat in Angela Merkel’s government, also warned just last week that the EU could fall apart if populists in France and the Netherlands win national elections later this year.
So convinced are
aides to US President Donald Trump that the EU is on the verge of a
breakup that they recently asked EU officials over the phone which
countries will be next to leave the bloc after Britain.
In the meantime, the man tipped to be Donald Trump’s ambassador to the European Union has told the BBC the single currency “could collapse” in the next 18 months.
Even the creator of the Euro professor Otmar Issing has predicted that
Brussels’ dream of a European superstate will finally be buried amongst
the rubble of the crumbling single currency he designed accusing
eurocrats and German leader Angela Merkel, of “betraying the principles
of the euro and demonstrating scandalous incompetence over its
management” – pointing a finger directly at Mario Draghi’s failing
Economists, commentators, experts and pundits are now divided when it
comes to the survival prospects of the Euro in the near term and even
that fact alone has considerably worsened since last year. With the head
of the ECB Mario Draghi admitting an eventual break-up is a
possibility, probability is that much higher than previously ever
Source: Global Research