Friday, June 29, 2012



Please find below a link to an interview with Dukascopy TV and David SMITH, recorded yesterday regarding the recent Euro Crisis summit meeting:

I am very pleased that my message is reaching an ever wider audience

Thursday, June 28, 2012



This week we will watch yet again, the grandstanding of our political and financial elites, at another champagne drinking, carbon footprint enlarging, summit conference to save the world.

The time has come to introduce a moment of humor and light relief, into  this otherwise Shakespearean tragedy. In trying to think what it all reminded me of, my thoughts were drawn irresistibly to the  Walt Disney cartoon film, that children’s favorite, “Snow White and the Seven Dwarfs”.

In reality only eight people really count in Europe today, and  the personalities portrayed by Disney fit them all rather well:

Snow White                                        Angela Merkel

Dopey                                                  Francois Hollande

Sneezey                                                Mariano Rajoy

Happy                                                  Mario Draghi

Sleepy                                                  Jose Manuel Barrosso

Grumpy                                                Wolfgang Schauble

Bashful                                                 Van Rumpoy

Doc                                                      Dr. Mario Monti

“Snow White”, as the only woman in the group, Angela Merkel is the obvious candidate. She certainly believes she is the most beautiful, even though the mirror on the wall may disagree. She wants the Dwarfs to put the house in order and get back to work in the mine, so long as it is German owned. She also has a split personality and can on occasion double as the wicked  witch. One wonders to whom she would offer the poisoned apple… the choice is limitless?

“Dopey”, although there were many contenders, the winner is probably Francois Hollande, the late arrival. He thinks you can achieve austerity by spending more, increase productivity by working less, and motivate businesses by taxing more. Good luck with all that.

“Sneezy” is certainly Rajoy. As soon as he sneezed all Europe caught a cold, although of course he has been spreading the microbes around for months, while telling everybody he was perfectly healthy and did not need any medication. Snow White should smack him and send him to bed.

“Happy” is Draghi, the only one who is standing on the sidelines, truly understanding what is going on, and  having a good laugh at the discomfiture of the others. When the situation becomes absolutely desperate, the others will ask him to print EUR Trillions, and let the ECB become a real clone of the FED. As the Japanese proverb goes, “if you sit long enough by the river you will see the corpses of your enemies float by”.

“Sleepy” is Barosso, he has been asleep at the wheel for decades, perhaps brought on by reading the thoughts of Chairman Mao during EU plenary sessions. Not even Daniel Hannan’s  reasoned  attacks can get him to lift his head from his Blackberry.

“Grumpy” is our much maligned but very competent German finance Minister, the enforcer of Merkel White’s policies. He is an uncompromising Germany first politician, there are even rumors he was thrown out of the Gestapo for cruelty.

“Bashful” is Von Rumpoy, our anticharismatic non elected “representative”. Much maligned by Nigel Farage for his unprepossessing timid appearance, Von Rumpoy should not be underestimated. He is highly intelligent, cultured, has his own agenda, and is often almost invisible.

“Doc” is Mario Monti. Well you could not arrange a putsch and send a simple citizen to Rome. It would be like a rerun of Mr Smith goes to Washington. No, you need to send a Doctor in Economics at a minimum, even better with a Nobel prize, for the destruction of democracy to be credible. 

Let’s see what the “dream team” will achieve in the next couple of days and in the meantime, happy viewing, and  bring lots of Popcorn and Coca Cola.

Wednesday, June 27, 2012



It is impossible to overstate the seriousness of the situation that is developing in the Euro Zone, and its implications for the EU and the rest of the World.

The unwillingness of bankers and politicians to face up to the real issues for years,  have ensured that all the problems have come together in a perfect storm, in a matter of weeks. What started as a localised banking crisis  has mutated into a pan European banking and sovereign debt crisis.

The lifeblood of the financial system is the Bond market. These vast pools of money finance Governments, banks and businesses alike. In normal markets bondholders are usually stable, low risk, long term investors. Today they are unwilling to invest as they perceive great risk, in governments with unsustainable debt loads, and deficit spending, and banks with wildly overvalued assets on their books. The endless downgrading of banks and countries by ratings agencies is a manifestation of the problem.

The Greek, Portuguese and Irish stories are well known, however in the last few weeks Spain and Italy have come into play.

So far the EUR 200 Billion EFSF rescue fund has been mobilised, and plans are in hand for a further fund, the ESM of EUR 440 Billion,  to replace the EFSF in July 2012. This has neither been ratified nor funded with less than a week to go. If this fund becomes operational, its resources are barely sufficient to bail out the small countries, leaving virtually nothing for Spain and Italy.

The Spanish government have requested aid of EUR 100 Billion for their banking sector, although once a bank is nationalised, the distinction between the state and the bank disappears. Most realistic estimates of the banking sector requirements are closer to EUR 400 Billion, without counting EUR 100 Billions more, to fund state and regional government deficits.

In Italy, although there is not such a real estate driven banking crisis, the country has a Debt/GDP ratio of 180%, and a very short debt repayment schedule.

The real problem as always is cash flow, as both countries have debt repayment schedules to respect, without which they will default. At present short term bond yields are skyrocketing, and 10 year yields are approaching 7%, which with current debt levels makes refinancing economically unsustainable.

The amounts of refinancing required  in the next three years, for Spain and Italy alone, plus  their major banks, substantially exceeds EUR 1,000 Billion. Some observers even quote higher numbers.

The question then is who can pay EUR 1,500 -2,000 Billion, (Spain;Italy;et al), to stabilize the market.

The politicians, like drowning men clutching at straws, say Germany.  The Germans already have a debt/GDP ratio of 80% and while they could find say EUR 500+ Billion, the remaining EUR 1,000 – 1,500 Billion would put them also in serious difficulties.

In short Germany is absolutely not capable of bailing out the EuroZone on its own, without self destructing. This is something never stated in the main stream media.

There are various “solutions” to the problem:

  • Issue joint liability Euro bonds, to replace the existing sovereign debt, at a much higher rate for Germany, and much lower for the other members. This is Pan European socialism, and Mrs Merkel has said “not as long as I am alive”
  • Allow the ECB to act as “lender of last resort” a euphemism for printing money, and flood the market with liquidity, and buy up all unwanted  bank and Government debt. This is not currently allowed in the ECB charter
  • Do nothing and allow countries which cannot pay their bills to default and leave the Euro zone; and allow banks that cannot roll over their debt to go bankrupt. Let countries return to their own currency, devalue and let the resulting losses fall on the core countries and their banks
  • Enlist the aid of the Fed by massive Currency swaps, already ongoing, or the IMF who would love to be involved, to bail out virtually all of the EU countries.
  • A mixture of the above could also be envisgaed

The above explanations are greatly simplified, and there would be various strings attached to any such solutions, such as fiscal union, political union, a real central bank etc. all of which have been bandied around completely ineffectually for months. Many would require new laws treaties etc. before implementation.

All would place sovereign European states under tutelage, subject them to IMF style asset stripping, as in Greece etc. and have powerful inflationary effect.

The overall debt would increase yet again, ie long term it would solve nothing,  and the means of repayment still remain completely undefined. It has all the potential of leading to an even greater collapse after a hyperinflationary period, as in Weimar Germany.

While states still have the luxury of discussing, total confidence has been lost in the banking system. In Spain, and increasingly in Italy  the banks are bleeding colossal amounts of cash on a daily basis. This coupled with their unfinanceable bond repayment schedule, is literally tearing the banks apart and bringing them to their knees at lightning speed.

Regrettably, barring a miracle, the banks have run out of time. We are in all probability only days away from the present “phantom” bank runs being clearly visible in the high streets of several vulnerable European countries.  The Nat West story in the UK may indeed be a cover up for the fact they ran out of cash, literally and not just digitally.

The final trigger for a wider collapse, will be the failure of a major European bank. Whichever one it is will be irrelevant, as their interdependency  will cause total panic and an avalanche of defaults.

The truth is the politicians have lost control and the most powerful market forces in the world, those of the bond market have taken over. This Mr Draghi understands very clearly and has said as much publicly, although he has also said that the ECB cannot be a substitute for a political policy vaccum.

To  reverse this situation before a full scale banking collapse takes place is a EUR 2,000 Billion gamble,  where for the moment nobody  has the chips, and it is not even clear who is at the gaming table.

If the end of this week does not produce an unequivocal  policy response on this level, then the ordinary citizen must work on the assumption of an imminent,  and possibly simultaneous banking system collapse, in the most vulnerable countries and prepare accordingly.

The next post will develop further the key steps to protect you against bank failures, and bankruptcies, prolonged bank holidays, capital controls, and all the tools typically used by failing regimes to expropriate or harness  the wealth of citizens to ensure their own survival.

Tuesday, June 19, 2012



It would now appear that in addition to a banking collapse, in the form of Bankia and with others to follow, Spain is staring a sovereign debt collapse in the eyes.  The follies of recent acts such as lending banks money to buy sovereign debt have compounded the problem. Bank nationalisation is scarcely a credible option as the government is also known to be insolvent, and with Spanish banks needing to roll over several hundred billion EUR of loans this year themselves, the scene is set for disaster.

So with Spain, a key member of the world’s most important economic block, on the ropes, what firepower is available to tackle the problem. All economies which could come to the rescue, Germany apart,  are ex growth and heavily indebted.  In short, there are no resources to fix the problem.

The much vaunted increase of IMF funding to USD 456 Billion represents about 0.7% of world GDP of USD 65 Trillion, which is intended to rescue everybody. In other terms, this amount barely represents 4 months US budget deficit.

If we look at the ESM, with a EUR 500 Billion target, only 4 countries, representing less than EUR 50 Billion have given firm signed commitments. It requires firm commitments totalling EUR 450 Billion minimum before the “virtual” fund is closed and can actually lend money.

Once invested IMF and ESM funds have preferred creditor rights, making it extremely unattractive for a professional bond investor, to invest and risk being treated as a subordinated creditor, as occurred in Greece.

The domino effect of multiple sovereign debt defaults has been explained before. However domino failures of insolvent systemically important Global banks,  will cause a crisis of much greater importance.

This will lead to the biggest financial  and economic crisis ever seen. All the signs are that the first domino will fall  in Europe, maybe even Spain, but thereafter  it will sweep across the world and spare nobody.

The interdependency of banks is enormous, they are counterparties in financing all aspects of world trade, oil, metals, commodities, agriculture and food. Stock and bond  and other credit markets will be paralysed, and  Bank holidays for a period may become commonplace.

The coming weeks and months, certainly not years, represent the end of the post war debt fuelled Keynesian experiment.

Prepare accordingly.



The main bail out sources for sovereign countries in difficulties are the IMF, the EFSF and the ESM.

The IMF was never conceived to rescue any of the world’s major economies, and as the largest provider of funds is the USA, they have resisted providing funds to the EU. Quite correctly they insist the EU should be capable of looking after itself.

The EFSF, described in detail in an earlier posting, was an ad hoc emergency facility established last year, and will be replaced in July, 2012, by the ESM or European Stability Mechanism.

The EFSF  fund has  EUR 200 billion, and once ratified the ESM will have up to EUR 500 billlion at its disposal. Needless to say the ESM is not yet funded and the funding will come from the major EU economies, Germany and  France, etc.  Spain and Italy as well as being contributors, are also shaping up to being major claimants on the funds resources.

At present of the total EUR 700 Billion notionally available, most of this is already spoken for to bail out Greece, Portugal and Ireland, without counting the probability that Greece will shortly come back for a third bail out.

Although estimates vary, the likely bail out amounts required for Spain and Italy are around EUR 800 Billion. Normally they would be net contributors of EUR 180 Billion, so it means that the most of the  EUR 980 Billion ESM funding requirement, will fall on the remaining “solvent” members namely Germany and France. This puts Mr Hollande’s EUR 140 Billion growth fund in its true context.

In effect Spain and Italy will shortly be shut out of the credit markets and in order to avoid default a credible mechanism  needs to be established to find the  EUR 980 Billion.

This sum is approximately the amount of China’s holdings in US treasuries, built up over the past 20 years.

Many solutions to this problem have been floated, making the ESM a bank so it can leverage itself 10 times more and buy up the bad debts, getting the ECB to buy all unwanted bonds, allowing the ECB to go on a further LTRO / QE spree etc etc . None of the above solve any thing, apart from kicking the can down the road, and only serve to exacerbate the problem.

If it were not for Merkel’s stubborn resistance all of the above would probably already have been done.

The EU by procrastinating have completely boxed themselves in, with multiple countries collapsing at the same time. They may not yet have run out of holiday destinations, but they have certainly run out of options. 

Monday, June 18, 2012



These words used in 1980 by Margaret Thatcher, to demonstrate her resolve, appear equally true today of Angela Merkel, the only real man in the G 20 meetings. Whether she is maintaining her position due to conviction, or political and legal necessity, we will probably only learn in the history books.

However refusing to renegotiate the terms of the Greek bail out, apart perhaps in respect to the timing, is a very bold position and one which will accord her no allies whatsoever. This is either a very powerful display of brinkmanship, or a demonstration that she is determined that Greece and other countries either submit, or leave the Euro zone.

The other prodigal children of the Euro zone know that her giving in is their only hope, and the likes of Rajoy and Tremonti are certainly prepared to play very dirty games to achieve their objectives. They have absolutely nothing to lose as they are fully aware that their countries and their banks are bankrupt. The ECB is presently playing low profile business as usual, Draghi in particular is playing the role of Pontius Pilate,  although they also all know full well the extreme gravity of the situation.

The steps that would ensue a Greek default and imminent departure from the Euro, followed by drastic currency devaluation, would provoke a huge outflow of funds from Greece. Contagion would spread rapidly to other Club Med countries, who would move move vast funds to solid core countries banks, to avoid the same fate. This has  already happened and citizens should in a “free market” be able to chose the safest banks to hold their money.

The banks of Greece, Italy, and Spain in this scenario would then rush to request ECB assistance in replacing lost liquidity. The ECB could at it’s  discretion simply refuse to fund a central bank whose sovereign debt had just, or was about to default. The ECB could simply say they were being prudent and were just following the rules, something rather new for them. 

This is how to hold Mrs Merkel hostage, and the bankers know it perfectly well. The only question is how far down this road they can go before the process becomes irreversible?

With collapse imminent and thousands of people in the streets, queueing in front of banks, emergency capital controls introduced,  and border crossings blocked, to ensure no-one could leave with their hard earned cash, the trap would be sprung.

If there is one lesson to be learned from the Weimar Republic, it is that whenever politicians have been faced with similar crises in the past, in a fiat currency system, governments have always printed the money to make the problem go away, even if it stores up even bigger problems in the future.

Sunday, June 17, 2012



Watching the media coverage of the Greek elections, with Papandreou talking of catastrophe if Greecc leaves the Euro, and all European leaders in lock down mode in their five star bunkers, is close to a pantomime.

Firstly the issue today is an election and not a referendum on the Euro. If one accepts that citizens and politicians alike want to have their cake and eat it, nobody actually genuinely wants to leave the Euro. The Greeks want a fresh start and a fighting chance of success, which the  current Teutonic debt prison has rendered impossible.

The chances of a conclusive election result  is, according to pollsters, highly improbable, leading to further negotiations to form a coalition of the willing.

The reality is that virtually all the Euro zone countries are on the edge of insolvency and any one of them could prove to be the weakest link which breaks completely.

The real game in keeping  Greece  in the Euro, and providing them with further bail outs is simply to kick the can down the road one more time.

The real risk for Greece is that of default, when they simply run out of money, which is exactly what will happen shortly in many other countries.

The whole situation is reminiscent of the British forces in Singapore awaiting the attack of the Japanese in 1940. The entire garrison was in the city with their massive guns pointed out to sea, awaiting the Japanese fleet, when the Japanese army attacked through Malaysia, BY LAND.

May I point out to our revered leaders with their eyes fixed on Athens,  like the heroes in a Christmas pantomine,  the real Euro problem “is right behind you!!!!!”

Saturday, June 16, 2012



 Very few options exist which could  resolve the problems and put the EU countries back onto a sustainable  future course.
The likely immediate steps to be taken, mainly by the ECB, which are cosmetic in impact and also appearance include, limited amounts of bond buying, a symbolic lowering of interest rates, adding token amounts to existing bail out funds, perhaps limited  ECB liquidity injections. The purpose of this incremental idiocy is to create the illusion of action when in reality the global situation is probably still deteriorating. It does however keep Mr. Draghi on the front page of the newspapers.
The amounts involved will be probably in EUR 100 Billion tranches, because nobody will dare say that the problem is in EUR Trillions.
The reality is that European politicians and the electorate still want to have their cake and eat it. They wish to retain national sovereignty and remain in the Euro zone, and not to suffer austerity while receiving hand outs. It is likely matters will need to get very much worse before the political elites, completely removed from the ordinary citizen’s reality, will get the message. Regrettably it will be the bond markets which will put an end to this game of make believe.
By the time they do the options will probably be down to the following:
  • Full fiscal integration and loss of sovereignty for those that stay in the Euro zone, with the agreement signed in a railway carriage in Compiegne. For Germany “all things come to he who waits”
  • Exit for all countries not willing to sign up to the new regime, hopefully when an orderly exit is still an option
The wild card possibility is that Germany exits the Euro zone taking perhaps a few Northern European neighbors with it.
While it is virtually impossible to predict the outcome, the only certainty with our completely incompetent leadership, is when the inevitable comes it will be an absolute catastrophe.
However the cake is sliced and diced, I do not believe the Euro zone will be intact at the end of this year. The question is how this will impact our lives. Many will unfortunately find themselves in the wrong place at the wrong time.
The theme of my next blog will be how can we thrive and survive in the resulting chaos


The economic crisis in Europe has reached a crossroads, from which in all probability there is no return. The past many months have been empty debate when the situation has further deteriorated.

Governments depend for their financing on the sovereign bond markets, where they can refinance existing debt, and raise new debt caused  by deficit spending. Today bond investors are shunning these sovereign bond markets as they see unacceptably high risk or are asking interest rates that are so high as to be unaffordable for governments with mountainous debt levels.The Greek bail out and the cram down of bond holders also added a new element of risk that any new money from the Bail out funds would have a preferred status, thus driving away even more  bond investors. In short the bond market has taken away from the politicians the control over the situation as regrettably was forseen by many observers for years.

A similar situation exists for weaker banks, which can no longer raise equity capital and long term bond financing. Thereafter they  turn to their governments for assistance, which as explained above,  they are no longer capable of providing. Such banks are also shut out of the interbank short term financing market, where banks lend to each other. The degree of mistrust between banks is so great, that instead of lending to each other, stronger banks park their cash with the ECB. The amounts involved are staggering, recently approaching   EUR 800 Billion. The cash starved banks can obtain finance from the ECB but only on presenting  valid security for these loans. We have now reached the stage that these banks have pledged virtually all their assets already, and can offer no security in exchange for more cash. The famous LTRO of EUR 700 Billion last year enabled weak banks access cash, but doomed them in the market, where their share price collapsed, as it was a flagrant proof of weakness. Also when the bank used the cash to buy their sovereign bonds, the market now knows the further losses they incurred. For all these reasons a further LTRO 2 looks very unattractive.

Thus we have reached the stage where both soverign countries and their major banks have reached the limit of their borrowing capacities when their actual borrowing requirement increases exponentially, and as explained above the EU and ECB interventions while creating a short term fix have made matters even worse.

Although this crisis has been many years in the making, historians may well come to regard the weekend of the French and Greek elections as the turning point.

Mr Hollande was elected on a platform of reducing retirement age, giving sweet deals to bureaucrats, increasing spending to generate growth, and using other people’s money to pay for it. This of course appealed so much to the French electorate that Mr Hollande a man who has never  held ministrerial office, has taken the reins in France’s most difficult hour. He looks set to consolidate the socialist party power in this weekend’s local elections.

Meanwhile in Greece, the polarisation in politics has cannibalised the centre left and right parties and is making way for irreconcilable extremes. Austerity has slashed living standards for the ordinary Greek citizen, while many abusive anomolies remain. In hospitals the situation is so desperate that Cancer patients are no longer getting medication and the most basic hospital supplies are either rationed or not available. Many state employees have simply not been paid, and private businesses are shuttering their premises.

There is an election this weekend and at this stage it is to be hoped that whatever the errors of the past the country remains governable and does not degenerate into anarchy.

The financial situation in Greece has been debated to death. The economy is contracting, while the tax revenues are dwindling. The monies handed over to Greece have essentially been recycled  to bail out of the insolvent banks in Northern Europe. Virtually nothing remains in Greece. When the Greeks do not wish to play the game of getting even more indebted,  it was even proposed to hand the cash directly to the banks and send the Greek government the bill.

In Spain the true situation is increasingly coming to the surface. Firstly Prime Minister Rajoy said that Spanish banks had no problems and did not need any financial assistance, secondly Bankia reported a profit and a few days announced  later a whacking multibillion loss. Then Mr Rajoy reaffirmed that the problem could be handled in Spain, and a few days later went cap in hand for a EUR 100 Billion bail out, for the banking sector only.

Informed sources estimate the banking bail out, to cover primarily real estate losses,  alone should be of the order of EUR 400 Billion Then there is the problem of spendthrift out of control regions, and the funding of the massive social security commitments of a country where youth unemployment is running at over 50%. Stopping the latter payments could lead very rapidly to serious social unrest.

Spain has  in addition substantial commitments to various EU solidarity funds and also to the ECB. Estimates of its true Debt/GDP ratio is closer to an unviable 120%, pre bank bail out, to which should be added the projected deficits for the coming years

This is reflected in Spain’s cost of 10 yr borrowing at around 7% in today’s market. This is reported as excessive, which is simply not true,  When Spain borrowed in Peseta’s, interest rates were  much higher, which curtailed the borrowings.. Debt levels are the real problem.

In Italy where the EU nominated  Mr Monti to became technocratic Prime Minister, the situation is equally grim. The debt/GDP is approximately 180% but at least Italy does not have a colossal real estate bubble. However their banks also have shaky balance sheets and the economy very weak.

Italy also has  significant contingent liabilites to EU solidarity funds.and also to the ECB.

The inherent risks are reflected in 10 yr borrowing costs only slightly lower than Spain

In the past the commitments and contingent liabilites were never really considered by Governments as cash liabilities as nobody foresaw that they would ever be used. This is rather like an insurance company not collecting a premium and never expecting to have a claim. Now however all the signs are that each and every one will be called to the full and there is absolutely no cash availaible to meet these demands.

Each country has  also realised that the sooner you get in line for a bail out, the better your chances of not being asked to contribute to another country’s bail out.

The quickest way to achieve this is to make sure one of the country’s too big to fail banks has a run on funds, a crashing share price and is on the edge of bankruptcy. At that point the Government will promise to bail out the bank and run cap in hand to the EU for funding, and announce oh by the way we also need cash for the other banks.

Spain has outmaneuvred Italy very effectively leaving Mr Monti fuming. When the Austrian finance minister suggested that Italy may be next, he furiously denied it. “Methinks he doth protest too much” – Shakespeare

We are also seeing Slovenia and Cyprus threatening to join the queue

What Monti does know is that with Greece, Portugal, Ireland, and Spain and potentially Slovenia and Cyprus out of the game the burden falls on those left standing. Italy on its own may just survive but is in no position to shoulder its share of the burden imposed by others.

Thereafter France with high Debt/GDP ratio, increasing deficit spending, massive EU  contingent liabilities, and  its domestic banks overcommitted to Spain, Italy and Greece, could go under overnight. Mrs Merkell has strongly criticised France today for its present policies as she rightly fears a situation where France, instead of being an ally becomes yet one more liability. 

There is  no way Germany virtually alone could redress the situation. The amounts of money required to rectify the situation are vast. Germany would have to take on massive debt burdens much higher interest costs and lower its standard of living to that of the EU average, while continuing to work much harder and being far more productive. This is a tough sell to a teutonic electorate, already  widely disliked by those they would help.

The extraordinary thing, never mentioned by the EU political elites, is that even if the slate were wiped clean, the imbalances which created this mess, differing productivity, same exchange rate, same interest rate for all, would create the problem all over again.

In summary, sovereign states have  run out of cash simultaneously  and cannot access the credit markets on acceptable terms for the amounts needed. The major banks with few exceptions are in the same situation.

The EU rescue mechanisms ESM/EFSF  meant to save individual states in difficulty are largely unfunded, and there is no legal and political agreement as to how the funds should be deployed. Even if totally funded  they are perhaps adequate to deal with Greece and Portugal,  but are completely completely overwhelmed by the scale of the problem posed by Spain, Italy et al.

This in financial parlace is “Contagion” but in reality  it simple arithmetic. These numbers have been known for years. The problem is that the philosophy of “extend and pretend “ so loved by politicians, has its limits.  Ultimately it transitions into “lie until you die”  which is where we are today.

The problem has never been Greece despite all one reads in the media, contagion has always been the problem. Contagion can only happen when all the others are only slightly stronger than the weakest link.

At some point very soon this festering situation has to explode and when it does Europe and probably the world will never be the same again.