Richard North, 30/06/2012  

Merkel 485-atu.jpg

Not 24 hours ago, I wrote my first response to the European Council, only to find myself roundly contradicted by the media torrent. But now we find a commentator in Spiegel having a rethink.

This is Christian Rickens, head of the economics department at Spiegel Online, who has revisited the received wisdom and decided that Merkel's "defeat" is no such thing. It is, he decides, a "tactical victory".

Allowing loans directly to Spanish banks, he avers, is a sensible concession, as it really makes no sense to loan Spain cheap money to save its banks when doing so only increases the country's sovereign debt load and drives up the rates Madrid must pay for issuing new debt.

But, he also notes that which was evident to those very few that had actually read the statement, that "aid will only begin flowing to the banks once an effective European banking supervision mechanism, under the auspices of the ECB, has been put in place". And, writes Rickens: "That will take some time".

With an obvious grasp of the politics, Rickens then observes Monti and Rajoy are Merkel's allies in securing reforms, so much so that they have come under strong domestic resistance. In Italy, however, elections are scheduled for next spring. As such, it was vital that Merkel allowed Monti to land a punch or two.

Hence, the "win" by Monti was theatre for the masses and, like the gormless, gullible fools that they are, the hacks have fallen for it, hook line and sinker. The football parallel was bait, and they took it without triggering so much as a single brain cell.

Gradually, more commentators are beginning to realise that they've been had. Soon enough, the markets will wake up to the fact that there is going to be no serious flow of money to the Spanish banks until next year, and then only under the strictest of conditions.

Others will then realise, as some already have done, that the fundamentals haven't changed in the slightest, and that the "colleagues" have sold the pass, ducking out of pushing for measures that needed a treaty change.

Then the markets will wake up, and we will be back in the death spiral that Van Rompuy said he was trying to break out of, but was actually doing nothing to improve.

At least, though, Merkel can sleep happy tonight. She's got her fiscal pact ratified, and her ESM, in the Bundestag with a massive majority. With 604 votes cast, 493 voted for the ESM, 106 against and five abstained. With few exceptions, both the coalition parties of the CDU – the FDP and SPD - and the Greens voted for the pact. The Left Party voted against.

Making mischief, some of the opposition had earlier called for a delay, and some of the wuzzies in the media had believed their own propaganda and thought Merkel was actually in trouble.

With headlines like these, though, the lesson coming through with absolute clarity is that the only people you need to trust less than politicians are the journalists who report their doings. This week, they sunk to a new low.


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