Germany & France Announce Plans to Buy Peripheral Europe

By Hemingford Grey

Brussels | Wednesday, 24 August 2011, 9 30 GMT

This evening in Brussels, Chancellor Angela Merkel & President Nicolas Sarkozy announced plans to resolve the eurozone crisis which has dogged markets for nearly two years. In a bold move Germany and France announced that they would purchase Greece, Portugal and Ireland. It is thought that the sums are likely to be in the order of €1 for each country.

Chancellor Merkel & Presisent Sarkozy at a press conference in Brussels this evening

"We believe this will draw a line under the instability that has shaken the Euro and will put the European continent back on the footing it needs to grow and create prosperity" said Chancellor Merkel in a pre-prepared statement.

President Sarkozy said he was delighted that Germany and France had come up with a plan that finally made sense. In an off the cuff conversation with a French journalist, President Sarkozy is quoted as saying: "Angela and I were banging our head off the wall. What are we going to do? Greece is a blackhole. The more money you put into the place the the worse it gets. The only thing they seem to be good at in that country is burning things down. As Angela says 'you can't export that'. We all knew the approached lacked sense. Then suddenly an adviser from the European Commission suggested that perhaps it would be easier simply to the buy the countries rather than lending them more money. At least in that scenario you might have some upside. We all looked at each other and then we broke out the champagne and foie gras."

Pierre De Roquefort, a seasoned European Commission legislator, is credited with the move: "I actually had a hand in drafting the Lisbon Treaty. Even I did not spend the time reading the whole thing. Luckily someone mentioned they had dropped the best part of a procedure into the amended treaties providing that if there was a national insolvency one of the other members could offer monetary assistance in return for the assumption of the nation's sovereignty. This suddenly came to me in the meeting with the Chancellor and Sarkozy ..."

The reception of the news has been mixed in Greece, Portugal and Ireland. "I suppose deep down we all knew this day was coming" said Prime Minister Enda Kenny in Dublin. "I suppose we really just ran out of road. I know whenever there is a takeover there tends to be redundancies. I just hope the new management work with us to preserve as many jobs as possible."

No one was available for comment in Athens. It is understood that the majority of the population are busy removing anything that is not nailed down before the handover.

Rick Engels, M&A Director at Goldman Sachs in London, indicated that this presented an opportunity for Spain and Italy. "Everyone knows Ireland, Portugal and Greece are insolvent and that is why they fetched the price they did. I think with Italy and Spain there is an opportunity for them to spruce themselves up for a sale. I think we could definitely spin off some non core functions and make their accounting look a bit better. If we could get China interested, we might have an auction. Italy and Spain, could go for big money."

Chancellor Merkel when asked what the new merged entity would look like said: "France and Germany, we have not always seen eye to eye and even when we have seen eye to eye, we were looking through the wrong set of eyes. This, however, we agree on as being the only sensible solution. Peripheral Europe cannot operate effectively in today's markets. We can teach them how to work and France can go back to being effective at being rude to tourists."

When asked if there would be any big changes in the offing, Chancellor Merkel responded "Well I think we always knew the EU flag had something missing at the centre between those stars. I have talked to President Sarkozy and I think they are quite happy to put an eagle in there."

Always Believe in, because you are ... Gold

Spandau Ballet implored us to believe in our souls and gold.

If people feel part of their souls are contained in any asset they would probably say their home or their ancestors jewelery.

As far as I can see the present rush towards gold bears a lot of similarity to the lower to middle class obsession with residential property.

As with property, "they are not making any more of it". As gold is created at the centre of a supernova, you can't manufacture it in your garden shed. There are instances of land being created in the Netherlands by reclamation from the sea or dumping sand in the ocean in line with Dubai's tasteless Palm Islands development off the coastline but this is just whimsy. Property and gold are a hedge against inflation and a good store of wealth.

There is no way to value gold, there is no price to earnings ratio and no yield. While there is a yield on residential property, during the height of the boom the emphasis was on the yield not being a necessary metric and property traded like antiques.

If you take the view that all the excess liquidity that has been pumped into the banks to keep the financial system going is going to emerge from the banks and swamp us with hyper inflation before the central banks can retract it, gold is a great thing to own. If you can't believe in your governments currency you can always believe in gold.

On the other hand, I am disturbed to hear radio pundits telling people that they should hold at least 20% of their wealth in the hard metal. Shoeshine boy mania might well be under way. Should people's confidence firm we could see a savage correction which could hit terrified retirees. These are people who have already taken a severe hit to their net worth due to a decline in house prices. A second hit on gold prices would just be careless. The long term the trajectory will be up for gold and property however people's view of what is long term seems to be 2-5 years as opposed to decades.

It is often what are perceived to be the safest assets are the most dangerous, such as AAA rated securities and residential property as we have seen. The mantra that gold is the only safe asset is being chanted through virtually all media.

To my eyes, I think an untidy end to the Euro project could easily be in the tea leaves over the next few years where there is reversion to national currencies (the drachma, the lire, the punt, the escudo etc.) or the adoption of a party nation southern currency. The ensuing volatility and damage to capital of wild currency movements could make trips to London or Zurich to check on the family gold deposit not an unusual middle class occurrence.

To my mind the worry in relation to not owning a solid store of wealth is worth the risk of a possible 20-30% parabolic correction in gold prices which has been widely predicted.

In a super-cycle collapse the upside of owning gold would be quite extraordinary.


http://www.youtube.com/watch?v=gSq8ZBdSxNU