n 2013 a 500 billion Euro "permanent" bailout fund (ESM) was slated to replace the 440 billion "Temporary" European Financial Stability Facility (EFSF) fund.
Via magic, the latest proposal that has the stock markets excited is to merge the two funds double counting the money (and then some).
Bloomberg reports EU Said to Weigh Combined $1.3 Trillion Fund
European governments may unleash as much as 940 billion euros ($1.3 trillion) to fight the debt crisis by combining the temporary and planned permanent rescue funds, two people familiar with the discussions said.
Negotiations over pairing the two funds as of mid-2012 accelerated this week after efforts to leverage the temporary fund ran into European Central Bank opposition and provoked a clash between Germany and France, said the people, who declined to be identified because a decision rests with political leaders.
Disclosure of the dual-use option helped reverse declines in U.S. stocks and the euro on speculation it could help break the deadlock among European leaders. Their wrangling led to the scheduling of a summit three days after an Oct. 23 gathering.
The 440 billion-euro European Financial Stability Facility has already spent or committed about 160 billion euros, including loans to Greece that will run for up to 30 years. It is slated to be replaced by the European Stability Mechanism, which will hold 500 billion euros, in mid-2013.
A consensus is emerging to start the permanent fund in mid-2012, the people said. During the transition between the two funds, euro-area governments originally agreed to cap overall lending at 500 billion euros, a figure deemed sufficient when Greece, Ireland and Portugal were the primary victims of the debt crisis.
Simple Math
The total overall cap is 500 billion Euros
160 billion Euros has been spent
340 billion Euros remains
340 billion Euros + zero Euros = 940 billion Euros
Bear in mind this raises the permanent fund above the agreed upon amount. The German Supreme court has stated this cannot be done without a voter referendum.
Please see Germany's Top Judge Throws Major Monkey Wrench Into Leveraged EFSF Machinery, Demands New Constitution and Popular Referendum for Further Powers for details.
There is no way voters will approve this.
Also bear in mind the German Supreme court has ruled there should not be a permanent bailout fund at all. I am unclear if the ruling meant beyond the ESM or at all all. Either way, there should be a popular referendum on the matter, with an emphasis on "should be".
Six-Day Marathon of Lies, Deceit
To ram this mathematically insane proposal through the Bundestag now requires a Six-Day Marathon on Greece, Banks
European leaders braced for a six- day battle over how to save Greece from default, shield banks from the fallout, and build more powerful defenses against the debt crisis rocking the 17-nation euro economy.
A falling-out between Germany and France has snagged the crisis management. French President Nicolas Sarkozy is pushing for the use of a European Central Bank role in boosting the firepower of the 440 billion-euro rescue fund, a measure opposed by Germany.
German Finance Minister Wolfgang Schaeuble denied a Berlin- Paris rift, saying Germany called for the second summit to give the government time to consult lawmakers.
“France and Germany are not.
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Lies and Deceit Easy to Find
Lies and deceit are easy to find. The math alone proves as much. So does the attempt to skirt German constitutional law. Finally please consider the lie by Schaeuble “France and Germany are not at all stuck in their positions”.
Hopefully the German Supreme Court nixes this mathematical stupidity before it gets approved. If not, there will be a challenge.
Mike "Mish" Shedlock
Realist - Everybody in America is soft, and hates conflict. The cure for this, both in politics and social life, is the same -- hardihood. Give them raw truth.
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