The DAX is back

Germany’s DAX broke out of its narrow line (or consolidation) between 10200 and 10800, signaling a primary advance with a target of 11500* and confirming a bull market.

DAX

* Target calculation: 10500 + ( 10500 – 9500 ) = 11500

Europe on the mend

Germany’s DAX is holding above its new support level at 10500. Respect, with follow-through above 10800, would confirm the primary up-trend.

DAX

* Target calculation: 10500 + ( 10500 – 9500 ) = 11500

France’s CAC-40 Index is consolidating in a narrow band between 4400 and 4500. Upward breakout would suggest a primary up-trend. Follow-through above 4600, completing a broad double bottom, would confirm. Rising Twiggs Money Flow reflects buying pressure.

CAC-40

The Footsie retreated from resistance at 7000 but short candles and strong Twiggs Money Flow, high above zero, suggest long-term buying pressure. Expect strong resistance between 7000 and 7100. Correction to 6500 would establish a more stable base for further advances.

FTSE 100

* Target calculation: 6500 + ( 6500 – 5900 ) = 7100

Why Europe Failed

Dr Oliver Hartwich of The New Zealand Initiative discusses his new book, Why Europe Failed.

Over the past years, we have become used to Europe’s debt crisis. However, the fiscal problems of countries such as Greece are only the tip of the iceberg. Europe’s crisis has much deeper roots. Here, Dr Hartwich explains the causes of Europe’s decline.

Russian policy follows “organized unpredictability”

From Der Spiegel:

….Russian policy, says [German diplomat Gernot Erler], is currently following the “principle of organized unpredictability.

“Foreign Minister Frank-Walter Steinmeier, who sought to establish a “positive agenda” with Moscow when he took office, is particularly frustrated. In recent weeks, Steinmeier has complained several times of significant breaches of trust perpetrated by the Russians and says he doesn’t foresee relations with Moscow normalizing any time soon. Merkel is of the same opinion….

One official at Merkel’s Chancellery says that in some ways the situation is even more difficult than it was during the latter phases of the Soviet Union. Back then, the official says, Moscow at least adhered to agreements.

Read more at Germany Worried about Russian Influence in the Balkans – SPIEGEL ONLINE.

DAX support holds

Germany’s DAX respected primary support at 9000. Follow-through above last week’s high at 9250 would suggest another attempt at 9750. Recovery of 13-week Twiggs Money Flow above zero would strengthen the signal. Breach of primary support at 8900/9000, however, would signal a primary down-trend.

DAX

* Target calculation: 9750 + ( 9750 – 9000 ) = 10500

The Time Has Come for Europe to Act | SPIEGEL ONLINE

From a DER SPIEGEL editorial:

Europe, and we Germans, will certainly have to pay a price for sanctions. But the price would be incomparably greater were Putin allowed to continue to violate international law. Peace and security in Europe would then be in serious danger.

Read more SPIEGEL Editorial: Time to Impose Tough Sanctions on Russia – SPIEGEL ONLINE.

How Hitler’s roads won German hearts and minds | VOX

Interesting conclusion from Hans-Joachim Voth and Nico Voigtländer, writing at VOX.

Long before the Nazi regime committed its singular crimes, it had become remarkably popular in Germany (Evans 2006). Voting records from 1933 and 1934 reveal the effect of one factor that, according to many historians, boosted support for the regime – the building of the Autobahn. Using detailed information on the geography of road-building, we isolate the effect of construction on voting behaviour by analysing the ‘swing’ in favour of the regime over a nine-month period (November 1933 to August 1934). We find that opposition declined much faster where the new ‘roads of the Führer’ ran.

Direct economic benefits for residents in Autobahn districts may have played a role, but they were probably small. More importantly, the new roads provided concrete proof of the regime’s actions, delivering on its promise to get ‘Germany moving again’. Within a couple of months of taking power, a highly ambitious highway construction project was under way at 17 different locations all over the country, affecting more than 100 electoral districts. In other words, the visible progress of road construction made the regime’s ability to follow through on its promises salient for many Germans.

Combined with effective propaganda trumpeting the regime’s successes, the roads succeeded in winning the hearts and minds of many Germans. Nor were they the only ones to be impressed. When the US Army rolled into Germany at the end of World War II, one of the officers taken with the ease of transport on motorways was Dwight D. Eisenhower. When he became President of the United States, he lead the initiative to built the country’s interstate highway system.

Read more at Nazi pork and popularity: How Hitler’s roads won German hearts and minds | vox.

The Crimean principle

The Crimean regional government in the Ukraine plans to hold a referendum, to leave Ukraine and join the Russian Federation, amongst its predominantly Russian-speaking population. The Russian parliament has voiced its over-whelming support for the idea.

Gary Kasparov, former world chess champion and member of the Russian opposition, points out that the same principle could apply to Kaliningrad.

Geographically isolated from the rest of Russia, Kaliningrad — formerly known as Königsberg — was part of Germany (East Prussia) until annexed by Josef Stalin at the end of WWII.

Kaliningrad

Reminiscences of a German World War II Veteran | SPIEGEL ONLINE

Jürgen Dahlkamp reports on an interview with a 92 year-old WW II veteran who lost his leg on the Russian front.

“I was a good soldier,” says Heinz Otto Fausten, which seems like the beginning of a sentence that can’t possibly turn out well. But then he says: “I see today that because of that, I was merely a good tool for an unbelievably criminal regime.”

The interview raises questions about individual culpability for collective crimes and when should a “good soldier” disobey orders.

Read more at Reminiscences of a German World War II Veteran – SPIEGEL ONLINE.

What Will Germany Do?

Anatole Kaletsky: With every day that passes, and especially since the French election, it is becoming clearer that the problem country for the euro—the odd man out in terms of economic structure and the chief obstacle to any political resolution of the euro crisis—is not Greece, Spain or Italy. It is Germany. It is Germany that refuses even to talk about mutual debt and banking guarantees. It is Germany that insists on self-defeating fiscal austerity and intolerable political conditions for the debtor countries. It is Germany that vetoes quantitative easing by the ECB, which could cap bond yields and relieve deflationary debt traps. And it is Germany that makes the other euro countries uncompetitive, discourages devaluation of the euro against the dollar and refuses even to relax its own domestic fiscal policies to reduce its trade surplus and support growth….

via John Mauldin’s Outside The Box

Europe’s nuclear brinkmanship with Greece is a lethal game – Telegraph Blogs

Ambrose Evans-Pritchard: Polls show that 70pc or even 80pc of Greeks still wish to stay in the euro, while at the same voting in large numbers for hard-Left and hard-Right parties committed to tearing up the Memorandum – a course of action that will take them straight out of the euro.

I do not wish to reproach the Greeks for cognitive dissonance. We all do this, and besides, euro membership is more than just a currency for Greece. It is the anchor of identity for an isolated Balkan nation living cheek by jowl with the Ottoman nemesis……..

The chief danger is not for Greece. It is for the rest of the eurozone. If the German political establishment is unwise enough to force Greece out of EMU on the assumption that the country is a special case, it will be disabused of this illusion very quickly.

via Europe’s nuclear brinkmanship with Greece is a lethal game – Telegraph Blogs.

German Adjustment – NYTimes.com

Paul Krugman: Germany believes that its successful adjustment was the result of its own virtue, but in reality it was successful in large part because of an inflationary boom in the rest of Europe.

And here’s the thing: the Germans are now demanding that the European periphery replicate its achievement (and actually surpass it, because the required adjustment is much bigger) without providing a comparably favorable environment — they’re demanding that Spain and others do what they never did, which is deflate their way to competitiveness.

This is a road to disaster.

via German Adjustment – NYTimes.com.

The World from Berlin: ‘Europe is Pouring Money Into a Bottomless Barrel’ – SPIEGEL ONLINE – News – International

In an interview with SPIEGEL published on Monday, [Interior Minister Hans-Peter Friedrich] said: “Greece’s chances to regenerate itself and become competitive are surely greater outside the monetary union than if it remains in the euro area.” He added that he did not support a forced exit. “I’m not talking about throwing Greece out, but rather about creating incentives for an exit that they can’t pass up.” It was the first time a member of the German government called on Greece to leave the currency.

via The World from Berlin: ‘Europe is Pouring Money Into a Bottomless Barrel’ – SPIEGEL ONLINE – News – International.

Greek death spiral accelerates – Telegraph Blogs

Ambrose Evans-Pritchard: This is what a death spiral looks like. It is what can happen if you join a fixed exchange system, then take out very large debts in what amounts to a foreign currency, and then have simultaneous monetary and fiscal contraction imposed upon you.

Germany discovered this on the Gold Standard when it racked up external debt from 1925 to 1929 (owed to American bankers) in much the same way as Greece has done.

When the music stopped – ie. when the Fed raised rates from 1928 onwards – Germany blew apart in much the same way as Greece is blowing apart. This is not a cultural or anthropological issue. It is the mechanical consequence of capital flows into a country that cannot handle it, as Germany could not handle it in the late 1920s.

via Greek death spiral accelerates – Telegraph Blogs.

Euro Pressures Mount–Necessary for Eventual Resolution | Credit Writedowns

Germany is using this crisis to tighten its hegemony in Europe. It needs to close the fiscal loopholes. Many have recognized that this was a necessary birth defect in EMU–monetary union without fiscal union. A fiscal union–where countries, especially those that struggle to adhere to the Stability and Growth rule, have to cede a greater degree of fiscal autonomy. This will take the form not of German officials, but EU Commissioners having greater say in the fiscal policies of the debtors.

via Euro Pressures Mount–Necessary for Eventual Resolution | Credit Writedowns.

Merkel Rejects Rapid Action on the Euro – NYTimes.com

PARIS — Quashing recent speculation of a softening in Germany’s hard-line stance on the euro, Chancellor Angela Merkel repeated on Thursday her firm opposition either to bonds issued jointly by the euro zone countries or to an expansion of the role of the European Central Bank as quick responses to the sovereign debt crisis.

“Nothing has changed in my position,” she said at a news conference…..[but] The German newspaper Bild reported Thursday that the Merkel government was inching towards accepting so-called eurobonds, at least in some form, even if the public stance remained against them, and that some of her party said they could be a tradeoff for treaty changes.

via Merkel Rejects Rapid Action on the Euro – NYTimes.com.

Colin Twiggs: ~ I am getting a sense that Angela Merkel already knows the outcome. As a consummate negotiator she is using the debt crisis to force her EU colleagues to make concessions that in normal times would be politically unthinkable. Germany does not want to abandon the euro which has served them well over the last two decades. They also does not want to risk inflation — so an ECB solution is ruled out. But euro-bonds may be acceptable to the German public — provided that there are strict controls throughout the EMU to ensure fiscal discipline. That, I suspect,  is her desired outcome — she just has to make her EU counterparts feel the heat long enough that they fully appreciate the concessions she makes — and do not start back-tracking on their commitments.

German Bond Auction Spurs Worries – WSJ.com

A German government debt auction drew some of the weakest demand since the introduction of the euro, signaling diminishing investor appetite for even the safest euro-zone assets amid Europe’s worsening debt crisis….The German government was able to sell only €3.644 billion $4.92 billion of the €6 billion in 10-year bunds on auction for an average yield of 1.98%. Interest rates on Germany’s 10-year bonds rose sharply after the auction to 2.09%, their highest level in three weeks, leapfrogging the yield on the U.S. 10-year note.

via German Bond Auction Spurs Worries – WSJ.com.