The ECB has already dangerously leveraged up support for the PIIGs via Long Term Refinancing Operations (LTRO). Leveraging up the ECB’s capital base has allowed it to put nearly €1 trillion of PIIG sovereign debt on its books, at a massive leverage ratio of nearly 40 to 1. If the ECB were a marked-to-market hedge fund instead of a Central Bank we would say it was investing recklessly, a mere 2.5% market move against it would wipe out all of its capital. The market doesn’t move it against it because it massively intervenes to support its own position.

If however the German Bundesbank decides that the ECB can’t go on literally doubling the chips on the table – up 106% since last year – the €uro as is could be too big to save. That is why all Osborne’s Treasury’s protestations about the IMF always getting its money back count for little. The US and China want to see Germany bet everything on the €uro before they join the rescue party. German politicians – including those of the left-of-centre SPD – expect Hollande to govern from the centre whatever he says on the hustings. British left-wingers hoping for a left-wing surge on the continent sparked by Hollande should be careful what they wish for, it would trigger the end of the €uro. If Hollande abandoned Sarkozy’s deficit reduction programme Germany would probably seek alternative arrangements – a hard-€uro Fiscal Union made up of Northern Europeans who run their affairs like the Germans and a looser soft-€uro of Southern Europeans who overspend. The dream of a united continent of Europe with one currency would be over…

“He could easily not have known, because as you can imagine, at these kinds of parties you’re not always dressed, and I challenge you to distinguish a naked prostitute from any other naked woman.”

It remains to be seen if a jury will be asked to accept that challenge live in court…

Given that Sarkozy claimed last night that the UK “has no industry“, you might have thought Dave would be playing it cool, but he instigated the smiles and bat backs. All ten seconds of them…

Sarkozy’s chances of re-election have taken a battering as France is no longer judged the safest of credit risks. What this means is that the French backed €uro bailout fund is no longer a AAA credit risk. Slovakia, Italy and Austria also got downgraded. Greek debt restructuring talks have broken down and Greek 10-year debt is trading at 20c/€ to face value. Which shows what the market thinks of  their chances of getting their €uros back… 

As Lord Nelson might have said “I see no credit downgrade.”

Labour types are scraping the barrel this morning claiming that Newt Gingrich has “stolen” Ed’s much derided “predators” line. Tom Watson is crowing, Political Scrapbook are grandstanding and Guido is laughing. Ed isn’t even the first European leader to develop the theme. Rewind to 2007 and enter stage right French Presidential candidate Nicolas Sarkozy:

bbc.co.uk/news/world-eur… I always thought that M Chirac was dodgy—
Chris Bryant (@ChrisBryantMP) December 15, 2011

But what’s this Early Day Motion from 2004?

“That this House celebrates the 100th anniversary of the Entente Cordiale; notes that, notwithstanding mutal stereotypes of haughty Brits and arrogant Frenchmen, relations between France and the UK have strengthened dramatically in the intervening century; further notes that many Britons enjoy holidays and have holiday homes in France and that three million French tourists visit the UK every year, spending £694 million; welcomes the visit of President Chirac on 18th November; and wishes him bon voyage.”

The proposer was none other than Chris Bryant…

Via @chadnoble

The think-tank research out this morning showing that Britain is the worst country in Europe for taxpayers to have kids is only the half of it. In Britain we incentivise those who can’t afford to have children to have kids by paying them more welfare benefits and upgrading their state housing. This has created a multi-generational underclass who vote Labour to keep their benefits. Anyone would think it was Gordon’s deliberate plan…

Michelle might buy it once, but twice?  It is clear to every guy what these two presidents have been comparing during the photo line-up.

Via : Englishman’s Castle

During the Cold War the logic of Trident and other nuclear missile systems was compelling, now the threat is from terrorists and rogue states the case for Trident is nowhere near as strong.  The Russian nuclear arsenal is much reduced from the Soviet era, so any future threat response imaginable need not be made to meet an over-whelming massive multiple warhead nuclear attack from a hostile superpower.

Yet the Tory and Labour party establishments remain committed to the U.S. supplied Trident system.  The £100 billion price tag for a system that isn’t really independent is too much in these circumstances.  Britain needs a much reduced smaller bespoke system along the lines of the French force de frappe.  Something more akin to smart missiles which can be launched from air, land or sea.

Nick Clegg has asked Ming to review the LibDem approach to strategic defence.  The military top brass will always demand expensive new toys, just as trade union leaders always demand pay rises.  The Tories are also reviewing defence matters.  £100 billion is a lot of money to pay for the wrong insurance policy.