IT COULD HAVE BEEN WORSE…COULDN'T IT?

The more I read of the goings-on of the weekend, the less I was sure. The EU, it appears, is very much at a cross-roads and there is no clear answer as to the route to be taken.  What struck me in the result of these local and parliamentary elections across the continent was the sheer lack of conclusiveness in any result.  Nowhere was there a vote for anything; everywhere the results were cast as a vote against something and despite local variances, that something was certainly the Union.

I asked my pal Gordon about Farage and his response was that he probably represents the views of 75% of the people in the UK which is always the sort of number that Gordon comes up with when agreeing with a position but this time the truism in the statement lies in the fact that when push comes to shove, no sane man can stand and say the UK stands with Europe.  And if that cannot be said, then the Union is effectively finished with just the mopping up to be done and the face-saving to be continued.  I suppose the Brits would hand in there is Brussels were to, in effect, disappear, tariffs lifted, etc.  Amazingly, in the face all all that had just occurred the geniuses on the Commission just asked for another 3.5 billion Euros to run themselves with 500 million supposedly coming from the Brits.  Stupidity such as this should be savored like a memorable meal or a fine wine but alas, it is just another step in a pattern of governing stupidity that rises no higher than an undercooked trotter.  There is probably no room for another nail in that coffin an the left of the Channel.

And then there is France.  Mme. Le Pen won nary a thing except about 22% of the popular vote and a bunch of seats in Brussels where her mob will be a complete pest, but what she did do was to shatter the socialist psyche to the point that it may not recover.  Yes, Frankie will serve out, but he is an empty suit politically, leaving Germany and his gal Angie, in the position they so desperately wish to avoid; being out front with no different colored uniforms marching with them.  Germany, for reasons that can be well-understood and magnified by the undeniably dominant position, does not like the images it creates.  Worse yet, the first thing Mrs. Pen let drop was that if she were President, the Franc would be back!  Oops.  Now of course what everybody is babbling about over here is that her party is anti-Semitic and what an awful thing that it (it is), completely forgetting that France has probably been the most anti-Semitic country in the history of Europe and with an 8.5% Muslim population things probably aren't going to get much better, but it is not that that could sound the death knell for Europe.  She wants out of the monetary union and recognizes that is France AND England leave, Finis, as they used to say at the end of the "art" movies into which we used to sneak.

Within the strictures of the Euro, it is nearly impossible for any country to spend its way out of the depression which continues to linger over western Europe and while it pains me to say it, Little Paulie Krugman who's Over There as we write and babbling on about this  is correct.  Of course Paulie, mesmerized by Europe's soft socialism can't think of anything else nor can Mme. Le Pen who has lived under it for too long.  Not good.

With the exception of the Netherlands, it was a right to center right philosophy that swept across norther Europe but not so as we move south.  And yet, many of the complaints were the same, as were many of the shouted proposed solutions.  Curiously, there was no one wave of ideology but a concerted belief that what was in place didn't work.  I'd like to take tomorrow to explore the Southern Tier as to the ideologies seemingly in place in that region and then try to tie everything up in a nice bow atop a box of bold predictions.  Why not?  Everybody else is.

A FUNNY THING HAPPENED ON THE WAY TO THE BLOG

So there I was, all ready to write about the near and far future of Europe, full of certainty as to my subject and then the stupid Euros starting voting and that took care of my theories.

Well, not entirely.  You see, I was at the point of proclaiming, along with a lot of other people who foolishly published their views before me that there would be a massive shift to the right in the make-up of the European Parliament when the continental elections for the same were completed over the course of this weekend.  The lock in this regard was the Netherlands.  Wrong.  The Dutchies, first to report, dealt the right a nasty blow, they gaining only 22% of the vote, well below the expected result.  Why?  No one has a clue, nor is anyone willing to speculate to the effect of "So goes the Netherlands…"

Anyway, yesterday the Brits went to the polls in local elections and the UKIN--that's United Kingdom Independence Party to you--while hardly winning anything outright, kicked the political crap out of the Libs who are of course in the coalition with the Conservatives and put a serious hurt on both the Conservatives and Labor.  The party stands for precisely what its name suggests; it wants no part of the EU and whose showing has to be causing a rethink on the part of the big two as to their stance of the future relationship with the blokes across the Channel.  Then again, the Scots are about to have the referendum on staying in or getting out of the UK---not to mention the EU--and one has to ask what kind of influence this result might have on that decision.

Now this European Parliament thing is no small matter.  First of all it's about the best gig around.  You show up  about two months a year, do nothing except pass stupid regulations that are written by staffers which intrude on every manner of life for 360,000,000 people, get paid a bomb, travel first class in all respects and are answerable to practically no one.  Once you get in you are IN, baby.  Of course the time you spend on the job is in Brussels which is a dreadful city but the grub is fantastic.  Some Brit newspaper did a study of the pay received by 10,000 Euro technocrats and pols and found it to be higher that the salary of the Prime Minister.  Now of course the PM job does come with a rather nice house in central London within walking distance of the Tube (Westminster-Circle & District) and a lovely country place for weekends, but a mere 140,000 Pound…do get along.

Anyway, with this confusing set-up, the rest of the mob goes to the polls over the weekend and now I have to wait like everyone else to see where this is headed.  Nevertheless, I get the distinct impression that the big losers may well be the Socialists..the real Socialists of decades past who have held on to the fiction of their beliefs despite the awful realism of the Euro which has made the philosophy pretty much a losing proposition.  I suspect at the end of the day it's going to be a hodge-poge with all of the same pressures and internal road blocks to any meaningful structural change which will leave the future of the Union, at least in the near-term, with Sr. Draghi and the ECB.  Now there could be a few real shockers, Italy being one and dare we say it…Greece which could really throw a spanner in the works as the rumblings along the Hellenic coast are of the nature that the bail-out is about to be scrapped and bugger the creditors…i.e. the rest of the Euros.  And just when things were going so well in the public debt markets for the whole Southern tier.  Oh well.

The good news is we have three days to decipher all this and an absolutely marvelous forecast for Memorial Day in the Fly-Over zone.   Enjoy the weekend but remember, it is for those who served and as the Great President said, especially for those who "Gave their last, full measure of devotion."

See you next week.

A TRIFECTA

Finally, something important happened today--well, yesterday and today.  As a matter of fact, three things happened.  Remember the agreement among heads of state Over There of a few months ago? You know, the one on the austerity budget where Angie backed David and Frankie went nuts?  Yesterday, the Euro Parliament rejected it by a wide margin and reaffirmed that austerity is a four letter word in so far as the parliamentarians are concerned (when you are making 200,000 Euros for 6 weeks of work one can see why).  The gang is gathering as we speak and will have the the decision of the Parliament presented to them at this, another two day conference of Heads of State and ministers.  The fireworks should be heard tomorrow.  Reminder: the ECB's umbrella is based on an austerity scenario for Euroland.  While the market watch is on, it is too soon for any firm conclusions as to how this difference of opinion is going to play out.

Important things # 2 & 3 occurred Over Here.  J.P. Morgan got absolutely hammered by a joint committee of the Senate looking into the "London Whale" disaster.  This was an afternoon announcement around the same time as the final Fed report on the latest stress test (couldn't be deliberate, could it?), causing folks like me all kind of problems as there is no time to review it before "going to press."  In that Fed report came the conclusion that the capital structure of both Morgan and Goldman Sachs was inadequate and would have to be corrected before the end of the year.  Mind you, the operative word is "structure." Capital adequacy for both institutions is, well, adequate, but this is a huge double whammy on what everyone was touting as the "best run bank" with the world's greatest banker at the helm and a "fortress balance sheet." Which reminds me of one of the great truism in the financial world told to me by my dear departed friend, Joe Dilworth.  "Charlie," said he, "you have to realize that all banks are screwed up; they're just screwed up differently."  What will be the reaction?  I don't know but I do have some advice.  Hubris, Jamie, hubris.  Find some.

Important thing #3 is the Phoenix-like return of Citibank.  This is a welcome event as it spells out a clear road map as to how these things can be accomplished.  It also provides--hopefully-- much needed confidence in the system and in some of those who manage it.  One thing it should do is point out to our Euro pals how far behind they are in coming to grips with their own problems but of course it will not.  We'll try to have much more on this tomorrow.