As far as the cartoonish characters go, European leadership provides fertile ground for rich pickings. And as the crisis continues to spread from one Euro area country to the next, there is hardly any respite from their brilliant pearls of wisdom being showered on unsuspecting European public and the markets.
On August 9th, Olli Rehn, European Monetary Affairs Commissioner, issued letter to the European parliament in which he objected to the experts opinion of the ECB as the 'bad bank' on the back of the ECB purchases of distressed Government bonds from Italy and Spain. Apart from making up the claim that the ECB bonds purchases programme is compatible with the EU Lisbon Treaty – the fabrication to which he managed himself to admit in his interview with Bild newspaper today – Olli really struck the golden vein of wisdom in his comments on the ECB programme. As brilliantly put by the zerohedge blog (link here):
"Where you should prepare to have your frontal lobe turn to jelly is the following: in defending why the expanded SMP program, which may soon hit hundreds of billions in onboarded toxic bonds, Rehn said the central bank's investments are safe because "the bonds are purchased in the secondary market at market price -- i.e. the credit risk is already factored in," according to a response dated yesterday to a query by an EU lawmaker. We will repeat this.... because it bears repeating: there is no risk of loss to the ECB's loan portfolio because they are purchased in the open market. In other words, if you, or a central bank, or an alien from Uranus, buys something in the open market, it is a risk free transaction."
What can one add to that? Not much, unless you are Olli – the inexhaustible fountain of wisdom on the markets, finance, macroeconomics and all things concerned. Yesterday, in the interview published by German Bild newspaper, Olli told the world that Spain, Italy and France won't need a rescue.
Of course, Olli managed to put his foot into his mouth so many times with respect to the EU rescues that one begins to wonder if he ever actually takes the said foot out of the said mouth at all. Rehn assured investors that Greece won't need a rescue package 1 and then rescue package 2 just weeks before the country was sent into the EFS/ESM/IMF/ECB 'safe' house. He did the same with Ireland – a week before the IMF/EU/ECB troika arrived into Dublin. Olli was also bullish on Portugal not requiring assistance shortly before it went to the wall. Olli also consistently denied any plans for the EU bailouts in all of the above cases, even while the Commission ardently labored behind the scenes to push them through.
And, as the above instance with his deep grasp of risk considerations in financial investment clearly indicates, he is also deeply confused as to whether subsidized purchases of Italian and Spanish bonds by the ECB last week (and before that) constitutes a rescue measure. According to the ECB and Olli's own bosses in the Ecofin, it does. According to Olli, it does not. Go figure how this man made it to be a Monetary Affairs Commissioner when his grasp of both finance and macroeconomics (the two core components of the monetary policy) is so bizarre, he couldn't probably even get a job as a junior bank loans administrator.
But Olli 'La-La" Rehn is hardly the only serial gaffer in the top circles of Brussels elites. Close to him in these dubious accomplishments it the President of the European Council, Herman "Frompy" Van Rompuy.
Usually busy with his war against Europe's 'other' President – the Commission chief Jose Manuel "Grabosso" Barosso for the title of the Presidency (please, keep in mind that Europe has three (!) Presidents, including Frompy, Grabosso and Jean-Claude "Junky" Juncker who is the President of the Euro Group of Finance Ministers), Frompy took some time back in July to share with us, the mere mortals, his wisdom on the global value of Europe (aka, the EU, for apparently non-EU members of Europe do not warrant to be called European).
"Europe is still sexy," declared President Frompy. "As long as a club attracts new members," he added, "it is in good shape."
That, of course, is exactly what the Ottomans were saying to themselves in the 18th century before switching to congratulating their rulers for keeping the empire going in the 19th century. Never mind they were presiding over the 'Sick Man of Europe' all along.