In Brussels It's Always 3 Years Ago

Yesterday's speech from the European Commission President perfectly underscores Brussels' feeble grip on reality. 

Now is not the time, amidst multiple sovereign insolvencies - "a burning building with no exit" - to be debating (yet again) the need for a 'Tobin Tax' that might take effect in 2014. 

Now is not the time to be recommending legislation that might one day deliver greater centralised control. Nor is it timely - or wise, given the confessed lack of central control - to assert that solutions cannot be achieved by negotiations between governments. 

Surely, the EC President's role in such troubled times, if he ever really had one, was to do all he could with the structure he'd been given. Which would have included locking governments in a room until they did what was necessary.

Alas, that opportunity slipped by in 2008, if not before. "Europe" is an ex-parrot.

Even the news that German MPs have backed moves to bolster the Zerozone rescue fund is beside the point, as Satyajit Das explains in an excellent article today. The Zerozone central banking system simply does not have the capital to leverage itself, CDO-style, to the point at which the rescue mechanisms need to stretch:

"A 20 per cent first loss position may be too low. Unlike typical diversified CDO portfolios, the highly concentrated nature of the underlying investments (distressed sovereign debt and equity in distressed banks exposed to the very same sovereigns) and the high default correlation (reflecting the interrelated nature of the exposures) means potential losses could be much higher. Actual losses in sovereign debt restructuring are also variable and could be as high as 75 per cent of the face value of bonds."

We must get our heads around the fact that Europe's building will inevitably burn down.

So where will you be in 2014, Mr Barroso?

Images from Crisisboom and The Nation.