Germany on the Verge of Bankruptcy*
By Kenneth Schortgen Jr
On July 9, German legislators voted to approve bank bail-ins as the primary solution for re-capitalization the next time their financial system experiences a collapse or major crisis. Thus following in the footsteps of the Cyprus Experiment, which saw depositors lose upwards of 60% of the money they thought was safely protected in their banks and financial institutions, German depositors, not the taxpayers, are now on the hook to pay for a bank’s corruptness, risky bets, or bad decisions.
However, even this egregious new policy may pale in comparison to what is coming for the German state as it is now estimated that 50% of all municipal governments within the chief Eurozone nation are underwater, and on the brink of insolvency and bankruptcy.
I have warned that about 50% of the German municipalities are on the verge of bankruptcy. The pensions have been unfunded and are absorbing everything. As we saw in Detroit with more than 50% of current revenue going to pensions, taxes either rise, the borrow more, or they are out of business.
The German municipalities currently need more than 100 billion euros to renovate their dilapidated infrastructure. Government has been mismanaged on a grand scale and all politicians can do is think it is the public’s fault for not paying more taxes. They refuse to ever look at how they are running government on every level.
German municipalities face rising debt levels that mimic Greece. They cannot afford the investment to even maintain schools and roads any more. – Martin Armstrong
Germany is the linchpin that holds together the entire Eurozone. As the primary contributor to the European Central Bank (ECB), it, along with France to a certain degree, make most of the economic decisions for the rest of the EU, and in particular, the bailing out or financial assistance given to failing nations such as Greece, Spain, Portugal, and Italy. And because the Eurozone never left the Great Recession after 2008, reliance upon debt has only made matters worse since Germany, along with the France and countries located in Southern Europe, are entering into a debt spiral that mirrors American cities like Detroit and Stockton, CA, and brings the entire Union to the edge of collapse.
Europe is now in the same economic landscape they experienced during the 1920′s, only this time it wasn’t war that led to their Great Depression, but underfunded promises to their people, and a budget built on debt rather than growth and production. And with each passing year, where these underfunded liabilities are masked under accounting tricks rather than real financial reform, a day or reckoning is coming fast, and will hit everyone out of nowhere, driving the West into a new Dark Age of civil unrest and financial insolvency.