Tag: finance

Summary:

• Singapore extends lockdown until end of June, longest in the world
• Demonstrators fill the streets of Paris
• Yonhap denies reports that NK’s KJU is dying

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After a day of historic insanity in the American oil market, the Brent international oil benchmark is down more than 40% already Tuesday morning as investors continue to digest reports from late last night that North Korean leader Kim Jong Un might be in critical condition (a Trump Administration source said ‘yes’ while South Korea’s Yonhap said ‘no’) and a Tweet from President Trump that he would be “suspending” immigration into the US due to the coronavirus. The news prompted a whipsaw in equity futures late last night.

While liberals lose their minds, it’s worth remembering that immigration into the US is already effectively shut down. Refugee resettlement has been put on hold, visa offices have been shuttered, and citizenship ceremonies have been put on hold. CNN said it’s unclear how this will impact green-card holders.

In light of the attack from the Invisible Enemy, as well as the need to protect the jobs of our GREAT American Citizens, I will be signing an Executive Order to temporarily suspend immigration into the United States!

— Donald J. Trump (@realDonaldTrump) April 21, 2020

Meanwhile, in the latest indication that nobody really knows what’s going to happen with this outbreak, Singapore announced just minutes ago that it will extend its mandatory stay-at-home order until June, making Singapore’s lockdown the longest currently on record.

Singapore’s Straits Times reported that, in a televised national address, Singapore’s leader PM Lee Hsien Loong said that after yet another record jump in new cases – an outbreak that has been tied to camps of migrant workers who represent a ‘forgotten class’ in Singapore society – his government has decided to extend the densely-populated city-state’s lockdown for another month until June, making Singapore’s the longest lockdown extension in the world.

The city-state reported another 625 new cases on Tuesday, bringing its total case number to 7,213 according to BNO News.

While Lee insisted that Singapore’s ‘circuit breaker’ – don’t call it a lockdown – has been effective at suppressing the spread, Lee stressed that Singapore cannot be complacent, and that the number of “unlinked” cases has been stubbornly high, suggesting a “hidden reservoir” of cases in the community still.

Singapore was praised for its rapid and intense methods to combat the outbreak, rolled out back in February when the virus first started to spread outside Wuhan and mainland China. Among its toolkit was a protocol that required a team of investigators to trace contacts of newly positive patients within 2 hours to prevent further spread.

 But the big flaw was that Singapore overlooked the densely populated camps of migrant workers who typically fill the lowest level of jobs in Singaporean society. The second round of Singapore’s outbreak has been largely centered around these camps, with thousands of migrant workers becoming infected.

During Lee’s fourth national address to the nation since the virus emerged, the PM explained that the current measures would remain in place until May 4, at which time the city-state will start trying to slowly reopen society, using some of the same cautious criteria adopted by New Zealand and Germany.

To accomplish this, workplaces will be closed to further reduce the number of workers keeping essential services going. Some hot spots, such as popular wet markets, remain a problem, as large groups of people continue to congregate there, Lee said.

Lee noted that while there will be some “privacy concerns”, ramping up contact tracing via the “TraceTogether” contact tracing app – which all residents of Singapore have been asked to download – is a critical priority for the government as it moves to stamp out the virus.

“There will be some privacy concerns, but we will have to weigh these against the benefits of being able to exit from the circuit breaker and stay open safely.”

And as far as migrant workers are concerned, Lee promised that “we will take care of you like we take care of Singaporeans.”

Roughly one-fifth of the world, led by India, is starting the painful process of reopening. And countries that are refusing to start lifting some restrictions are facing growing unrest, including in France, where protesters poured into the streets of Paris to protest the lockdown and alleged mistreatment of minorities under lockdown conditions.

In the first two weeks of the Trump administration’s Paycheck Protection Program (PPP) for small businesses crushed by coronavirus, the credit spigot was wide open. Still, it was not evenly distributed across the country.   

On a geographical basis, loan amounts for firms were approved at a very high percentage in Central, Midwest, Rust Belt, and Southern states, compared with lower numbers for coastal ones. 

Bloomberg notes the findings were calculated via Evercore ISI estimates of eligible payrolls in each state, suggests the $342 billion of Small Business Administration (SBA) loans were ‘unevenly distributed’ in the first two weeks of the program ending on April 16. 

The disparity between individual states was evident in New York. SBA loan approvals were as low as 23% on April 13, while other states had a higher degree of approved loans for small firms. Then right before the fund ran out of money, approved loans in the state jumped to 40% from 23%. This phenomenon was also seen in California. 

Ernie Tedeschi, the Evercore analyst responsible for computing the available payroll figures, noticed hard-hit states with early lockdowns saw firms have the most trouble in arranging rescue loans.

Tedeschi said some companies in hard-hit states did not apply for the loans because it wouldn’t be impactful. He added that some firms received loans much quicker in some states because they had better relationships with community banks. 

Judging by the distribution of the loans on a state by state basis, one thing is evident: it appears Republican states were favored to a higher degree than Democratic states, which was noticed by Jackie Speier, a Democratic congresswoman from California, who tweeted last week: 

“I’m hard-pressed not to think that this is political,” Speier said. “Blue states like California got a pathetic number of loans.”

Democrats have found something else to b*tch at — not just President Trump’s virus response… 

Authored by Paul Joseph Watson via Summit News,

Amidst an investigation into the question of whether Spain’s draconian lockdown laws are constitutional, people are being fined a whopping €2,000 euros for “disrespecting” a police officer.

 

Unlike other European countries, people in Spain aren’t even allowed to go out to exercise during the coronavirus quarantine.

Citizens are only allowed to visit their nearest grocery store and only one person can be in a vehicle at a time unless the other person is classed as “vulnerable” or there is a medical emergency.

The lockdown is enforced via a network of roadblocks at which drivers are quizzed as to their intentions by aggressive police, some of whom carry guns. A physiotherapist was hit with a €600 euro fine for going to see a client after police stopped him when he was driving home.

The €2,000 euro fine for “disrespecting” a police officer is obviously completely arbitrary and easily open to abuse as a form of revenue generation.

“The guidelines state a standard €601 penalty for unauthorized movement outside the home without good reason that can be increased to up to €2000 if the offender responds with an “inappropriate attitude” to law enforcement officers, reports the Local.

No nos gusta
No es lo que queremos
Pero la irresponsabilidad nos daña a todos #QuedateEnCasa pic.twitter.com/OQG2lOO1hJ

— Policía Nacional (@policia) March 21, 2020

People who cannot provide identification to police are fined €700 euros, while a trip to a second home earns a €1500 euro fine. The biggest fine – a gargantuan €10,400 euros – is reserved for anyone who attempts to “to organize or participate in a gathering, party or celebration.”

According to journalist Jason O’Toole, who is locked down in Madrid, tensions are “running high” and people are now being arrested for going out “too frequently” to the grocery shop.

This has prompted some judges, solicitors, law professors, and NGOs to complain that the onerous fines are “unconstitutional.”

“There’s an investigation now underway by the Defensor del Pueblo (Spanish Ombudsman) to see if the fines are “correct and proportional,” because they want to “protect the rights of the citizens.” It’s a move that has even been welcomed by La Abogacia del Estado,” writes O’Toole.

“The Ministry of Justice is now questioning whether the fines are legally sound and says it’s possible many cases could be thrown out of court on a technicality. They say, for example, those apprehended might get off scot-free if the police didn’t first give them a formal warning – like a yellow card in football.”

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News that HIV drugs were being deployed in hospitals in China and elsewhere to treat COVID-19 patients has resulted in panic hoarding on the Russian black market by speculators and people who fear they could contract the deadly virus. 

Panic hoarding began in February and has since increased months later. Reuters points out that Kaletra is one of those leading antiviral HIV drugs that are in high demand. 

Reuters’ explanation of why Kaletra is in high demand dates back to January in China, where scientists used the drug on COVID-19 patients and showed encouraging results. There were also 20 other trials of the drug across the world that followed. The Russian Health Ministry even recommended Kaletra as a possible treatment but added its effectiveness was uncertain.

We noted in February that a 21-year-old man in Wuhan, China, who contracted the virus, was prescribed Kaletra, which the treatment ultimately led to his recovery.

Speculators on the black market were buying Kaletra, and the generic form Kalidavir, in large amounts earlier this year, betting shortages would develop. 

“Three months ago, people were buying Kaletra from us without much enthusiasm for 900 roubles ($12) a box,” an online trader of HIV drugs told Reuters. 

“Now, anticipating (supply) interruptions, people are buying between 100 and 700 boxes from us, at 3,800 roubles ($51) a box. Mainly, people are buying (Kaletra) with the aim of reselling it for a very high price.”

The trader said a box now fetches 7,000-8,000 roubles ($94-$108), which is a dramatic increase in the price from several months ago. 

The prescription-only HIV medicine is ordered in bulk by the Russian health ministry and handed out to HIV patients for free. Still, with panic hoarding over the last several months, supply disruptions could materialize.

The director of H-Clinic in St. Petersburg, who specializes in infectious diseases, said HIV patients at his pharmacy had been worried that the supply of the medication would run out thanks to the new demand. 

“We have a van coming from the pharmaceutical company, and everything in it has already been claimed in orders,” H-Clinic’s Andrei Skvortsov told Reuters. “There were up to 120 calls a day.”

Skvortsov said there were ample supplies of the generic drug, but it was the distributor of Kaletra that said supplies had recently become exhausted. 

A person that goes by the name of Alexei, who asked Reuters for anonymity, operates a ‘back-up medicine cabinet’ that delivers leftover drugs to people in need when shortages emerge. 

He said, “Messages and calls started coming in from people saying they were ready to purchase these medicines.” 

Alexei said there are “resellers and middlemen” attempting to acquire as much of the HIV drug as they can.

R-Pharm CEO Alexei Repik said Kaletra is in high demand, and it is now being sold illegally at some pharmacies. 

Repik said he was boosting the output of Kaletra as the pandemic could worsen. 

“But of course, no one can predict the full scale of the epidemic,” he added.

Demand for Kaletra has flourished on the Russian black market as the world is without a vaccine at the moment for COVID-19. Speculators, who bet on the shortages of the drug would arrive, have been handsomely rewarded as cases and deaths surge in Russia.

Authored by Troy Vincent via The Mises Institute,

Although the heads of the world’s largest oil-producing nations were quick to claim a diplomatic victory following the latest OPEC+ (Organization of the Petroleum Exporting Countries “plus” non-OPEC oil producers) output-cut agreement, crude prices are telling a different story. Prompt month Brent and WTI futures contracts are now trading nearly 20 percent below their early April highs, both returning to a supercontango forward curve price structure following the conclusion of the OPEC+ meeting. A contango price structure, where near-term prices plummet relative to prices further along the curve, is the market’s way of clearing. But political efforts to support crude prices from around the world continue to muddy the waters for those trying to efficiently and rationally reallocate capital in the industry.

With the long-awaited OPEC+ deal failing to balance the market, some Texas oil producers are hoping to rekindle a largely dormant regulatory body in the Texas Railroad Commission to coordinate output cuts in the heartland of US crude production for the first time since the 1970s. In addition, amid this week’s turn lower in oil prices, US tariffs on crude imports are reportedly still on the table as well as a newfound idea to potentially pay producers to shut in production. Although politicians and regulators are still busy trying to find regulatory cures, this historic moment in oil markets should serve as a lasting reminder of the limitations of political remedies and the need to allow market prices to be the ultimate arbiter of production levels. Efforts by US policymakers to boost crude prices and to throw a lifeline to high-cost US crude producers is the exact opposite of what prices are telling us the market needs at this time. Seeking to prop up the least efficient US oil producers through import penalties or production quotas risks further misallocations in the sector going forward.

Let us address a few key points:

1. Higher Crude Prices Are Not What Is Needed Amid Sharp Fuel Demand Contraction

Much of the recent focus for US politicians and other representatives of oil-producing nations has been on getting crude prices higher. But nothing could be more unwarranted at this time. As fuel demand for transportation has ground to a halt globally over the past two months, refining margins have been crushed—particularly for gasoline and jet fuel. It is this record weakness in underlying demand for transportation fuels, and the accompanying weakness in refining margins, that has led to the rapid surplus of crude oil globally as refineries have cut throughput.

Therefore, global political efforts to send crude prices higher risk exacerbating demand contraction for crude oil in the near term as higher crude prices without higher refined fuel demand would further limit a refiner’s incentive to process crude.

2. The Market Is Trying to Do Its Job

Crude prices returned to a state of supercontango early this week, following the conclusion of the OPEC+ meeting. After narrowing to just –$3.96 in early April, the Brent 1–7 month time spread has widened back to –$9.51 as of the April 15 close. Prompt month WTI is at an even wider discount to prices further along the curve than it was prior to the OPEC+ agreement, with the 1–7 month time spread closing at a whopping –$13.54 on April 15. This historically steep discount for near-term crude reflects the market coordinating multiple needed processes simultaneously.

On the one hand, physical crude prices and prompt month futures prices are coordinating the process of shutting in production. With prompt month WTI trading at a $13.54 premium to current prices just six months from now, a steep contango price structure is the strongest signal a US producer can receive to shut off new supply today and reserve that production for a future date. To the extent that production cannot be immediately shut in, this same price structure incentivizes placing crude into storage rather than continuing to push it onto the market, further crushing physical prices.

On the other hand, and to reflect on the first point above, the steep discount in near-term crude prices is needed to begin to stimulate crude demand at refineries once again. Crude prices must drop faster than refined fuel prices or refiners will have no profit motive to begin to process the glut of crude. In order to clear, the crude market needs positive gasoline-refining margins and/or diesel margins high enough that the weak gasoline and jet fuel margins are not overwhelming. This can only be accomplished by allowing for weakness in crude prices.

WTI Crude Oil Forward Curve

3. Only the Market Knows Which Crudes Should Be Cut and in What Quantities

Any refiner knows that crude quality matters, but most policymakers certainly do not. Crude quality, which is to say the profile of a specific grade of crude based on both its API gravity and sulfur content, is of chief importance to a refiner. A crude refining slate consisting of various grades is chosen carefully, based in large part on a refinery’s physical sophistication (what they can run) and the cost of the crudes compared to their expected revenues (based on their relative yields of the refined products (what they want to run)). For example, with gasoline currently bearing the brunt of the demand-contraction pain, light, sweet crudes that yield high volumes of light distillates, such as the majority of US shale grades, are far less desired by refiners that can run heavy crudes and are optimizing their refining slate to target higher yields of diesel.

Only the market knows which crude grades need to be produced and in what quantities at a given time. Likewise, only the market knows which crude grades need to be exported or imported and in what quantities. Prices along the oil supply chain alone coordinate this process. Now more than ever, the market needs unfettered prices to tell producers which grades to produce and refiners which grades to refine. This is just another reason why blanket production cuts or quotas and penalties on crude imports are both risky and suboptimal. Only refiners and producers themselves are sophisticated enough and can respond in a timely enough fashion to optimize the supply chain. And let us not forget that this market function will be just as important as demand begins to recover in the coming months. Policy interventions risk not only skewing market prices today, but also causing misallocations longer term.

Conclusion

It is often forgotten that market prices are themselves the constant coordinators of commerce. “The market” is not just some amorphous entity in the imaginations of ideologues and traders. Markets are made up of the industrial players that have the most skin in the game and the most to lose from misallocating capital.

In times of high uncertainty and economic risk it is politically difficult to resist the temptation to intervene in markets in an effort to protect specific pieces of domestic industry, but policies enacted in panicked times can also produce large and lasting unintended consequences. As we hope for a slow return to normalcy in refined product demand as COVID-19 quarantines are lifted in the coming months, let us be cautious of policy prescriptions that can wind up further ailing the entire oil industry and consumers in the long run.

As international crude benchmarks get clobbered (though not quite as badly as their American cousin), major oil-producing nations have been a major focus on Monday. The markets have taken a keen interest in how they plan to weather this unprecedented market dislocation, or whether the damage to the local energy industry might set production capacity back for years.

However, we’ve found an intriguing story from Norway – Europe’s biggest oil producer – and its sovereign wealth fund, one of the biggest – if not the biggest (it has got some pretty stiff competition in the Middle East) – piles of fossil fuel blood money in the world.

The story is this.

The fund’s former chief executive, who announced his plans to resign last fall, as well as his successor have become embroiled in a scandal involving the appearance of what might be a bribe involving a seminar appearance, five-star treatment including food and musical performances by major artists (we hear Sting is very popular in Norway), and a ride back home on a luxury jet when an affordable public option was available.

Here’s more from Bloomberg:

The world’s biggest sovereign wealth fund faces serious questions over the conduct of its outgoing chief executive and the selection process of his successor amid a scandal involving a luxury jet and a private performance by Sting.

CEO Yngve Slyngstad has had to explain why he accepted a flight paid for by Nicolai Tangen, the hedge-fund manager who was eventually tapped to succeed him. The development has now prompted the central bank’s watchdog to look into convening an emergency meeting to examine more closely the circumstances under which Tangen was selected.

The revelations have stunned Norwegians and created the appearance of scandal around one of the country’s most revered institutions. Tangen’s appointment had already raised eyebrows. To some, his jet-set lifestyle seemed at odds with the spirit of a fund created to safeguard the savings of an entire nation.

The Supervisory Council of Norway’s central bank, which oversees the $1 trillion fund, will try to find out whether the events “represent a breach of regulations applying to Norges Bank’s activities,” its head Julie Brodtkorb, said in a text message on Monday.

In his defense, Tangen, a billionaire who doesn’t really even need this job, said he booked Slyngstad years ago when the seminar was first planned, and that the other accoutremonts were last-minute requests, and perhaps reflective of bad judgment.

At this point, who would even want that job? Slyngstad grew the fund’s capital by many, many hundreds of billions during his tenure as a rode a global equity bull market to riches. It certainly doesn’t sound like a good fit for somebody who’s no longer ‘hungry’ to make a name for themselves.

Tangen

For foreigners who are reading this and trying to understand why such a small appearance of impropriety is being taken so seriously, the FT explained it’s simply the latest reminder of how cozy Norway’s elites are. It seems they all know each other, because they probably do.

Slyngstad

Norway’s central bank governor Oystein Olsen, who led the search, told the FT  on Monday that he has “concluded” an investigation into whether Slyngstad breached ethical guidelines by agreeing that the central bank should pay Tangen for the costs of the hotel in Philadelphia and the flight home. Put another way: The central bank has decided to put to rest questions of improper financial gifts made to a public official by reimbursing the alleged ‘giver’ of said gift for the costs of the gift.

Now, if they had asked Slyngstad to reimburse Tangen – who was already treated with suspicion by many in Norway’s establishment due to his flashy jet-setting lifestyle – that would have made more sense. But this?…

“Judged from now, he [Mr Slyngstad] should have taken another route home,” said Mr Olsen, who added that he now regarded the matter as closed.

[…]

The central bank published a long overview of the hiring process on its website, including the entire history of email exchanges between Slyngstad and Tangen. It also said it had decided to try to refund Slyngstad’s expenses.

Tangen is officially due to take over as CEO of the fund in September, unless his appointment is somehow rescinded, or he declines to accept it under pressure (or simply because he’s realized he’d rather be chilling on a yacht like Obama).

Back in October when we reported Slyngstad’s decision to resign after more than 20 years at Norway’s central bank and the sovereign wealth fund (which is an arm of the central bank, though it maintains a level of independence), we noted that Slyngstad was still planning to have some kind of hand in investment strategy via an advisory role with the fund’s renewables group. We must admit that raised eyebrows at the time. Is it still a good idea for Slyngstad to have any involvement with the institution after being the one who solicited the jet-ride? Perhaps we shall learn more in the coming weeks and months.

Via UnHerd.com,

Professor Johan Giesecke, one of the world’s most senior epidemiologists, advisor to the Swedish Government (he hired Anders Tegnell who is currently directing Swedish strategy), the first Chief Scientist of the European Centre for Disease Prevention and Control, and an advisor to the director general of the WHO, lays out with typically Swedish bluntness why he thinks:

• UK policy on lockdown and other European countries are not evidence-based

• The correct policy is to protect the old and the frail only

• This will eventually lead to herd immunity as a “by-product”

• The initial UK response, before the “180 degree U-turn”, was better

• The Imperial College paper was “not very good” and he has never seen an unpublished paper have so much policy impact

• The paper was very much too pessimistic

• Any such models are a dubious basis for public policy anyway

• The flattening of the curve is due to the most vulnerable dying first as much as the lockdown

• The results will eventually be similar for all countries

• Covid-19 is a “mild disease” and similar to the flu, and it was the novelty of the disease that scared people.

• The actual fatality rate of Covid-19 is the region of 0.1%

• At least 50% of the population of both the UK and Sweden will be shown to have already had the disease when mass antibody testing becomes available

UnHerd host Freddy Sayers speaks with Professor Johan Giesecke in what they describe as one of the most extraordinary interviews they have done… Watch:

For the first time going back to February 25 when Iranian leaders first publicly admitted they had a serious outbreak on their hands, and with the country establishing itself with the grim distinction of remaining the Middle East epicenter, another regional country now leads in total infection numbers outside the US and Europe. As of Monday morning, Turkey has 86,306 cases, surpassing China’s 83,817 and Iran’s 83,505 reported cases.

Turkey on Saturday confirmed that its numbers had risen to over 82,000 – a jump of nearly 4,000 cases from Friday, surpassing Iran for the first time ever, making it the new regional epicenter.

Like Iran before, Turkey is another country which has come under scrutiny and criticism for not only its slow response since cases began growing last month, but lack of testing and under-reporting numbers as well.

Over the weekend the Interior Ministry announced it was extending travel ban orders between 31 major cities for at least 15 more days.

Ankara has still held out against ordering a nationwide lockdown like other countries with its high numbers of cases, only opting to close schools and bars and imposing a weekend curfew only. It’s also imposed various age-restricted curfews. 

“At [Turkey’s] level, most countries are implementing a full lockdown,” one virology expert was quoted in CNN as saying. “A partial lockdown can be good, it can balance keeping some of the economy functioning while still trying to contain the outbreak.”

The government has maintained its hospitals and heath care system is still functioning optimally and is nowhere near capacity, as Foreign Policy describes: 

As the number of coronavirus cases has increased, Turkish Health Minister Fahrettin Koca has sought to allay fears of an overwhelmed health system. Speaking on Friday, Koca said that unlike Western nations, Turkey’s hospitals still hold excess capacity and that intensive care units were not exceeding 60 percent occupancy. A licensed physician, Koca’s daily briefings have made him a star on social media over the course of the pandemic; he has gained over 4 million followers on Twitter since the beginning of the year.

“Turkey’s problems with containing the virus came into focus on April 10, when a late announcement of a weekend curfew led to panic buying across the country,” FP adds.

The already battered Turkish economy looks to be pummeled further by the crisis, as the Turkish lira’s recent plummet to a near-historic low of 6.95 lira to the dollar demonstrates. 

Recall too this report from ten days ago: “Turkey has held talks with the United States about possibly securing a swap line from the U.S. Federal Reserve and has discussed other funding options to mitigate fallout from the coronavirus outbreak, Turkish officials said on Friday.”

As recently as Sunday Presidents Trump and Erdogan spoke on the phone and agreed to continue pursuing “close cooperation” to contain the pandemic.

Authored by Tom Luongo via The Strategic Culture Foundation,

No matter how hard I try to dig German Chancellor Angela Merkel’s political grave she proves more adept at staying alive than a cockroach in a woodpile. And the recent fight amongst European Union members over “Coronabonds” has proven yet another escape path for her to avoid political termination.

Thanks to Merkel holding the line on debt mutualization and EU fiscal integration, which is very unpopular in Germany, her Christian Democratic Union (CDU) is now polling at levels it hasn’t enjoyed since before the last general election in 2017.

According to Europe Elects, the latest polling out of Germany has the CDU commanding around 35-37% of German voters. This is a party that was in shambles not two months ago after Merkel heir apparent Annagret Kramp-Karrenbauer stepped down as CDU leader, prompting a new leadership vote, which, conveniently for Merkel, has now been postponed indefinitely thanks to the COVID-19 crisis.

Germany, INSA poll:

CDU/CSU-EPP: 37.5% (-0.5)
GRÜNE-G/EFA: 16% (-2)
SPD-S&D: 16%
AfD-ID: 10.5% (+0.5)
LINKE-LEFT: 7.5% (+0.5)
FDP-RE: 7% (+1.5)

+/- vs. 3-6 Apr.

Fieldwork: 9-14 Apr. ’20
Sample size: 2,108
➤ https://t.co/obOCVirbpF pic.twitter.com/VBIblbijEh

— Europe Elects (@EuropeElects) April 14, 2020

Some of that is the normal “rally around the current leader” that occurs during any crisis. President Trump’s numbers in the U.S. have been strong despite the twin crises here. Even marginal leaders like Prime Minister Giuseppe Conte in Italy have seen their numbers rise.

But a 15-point bump for Merkel is tremendous and it only happens in conjunction with her refusing to cave on Germany being seen bailing out southern Europe. It may win her support domestically, but it sets up a disastrous future for the European Union.

As COVID-19 rages across Europe the two major factions within the EU have been fighting a desperate battle for its future with the issue of debt mutualization being the fulcrum. Now, I believe wholly that the use of lock downs and draconian measures to fight the disease have been more political than practical. Using a public health care crisis to advance a political agenda is the height of cynicism and megalomania.

On the one side we have the Euro-integrationists, led by French President Emmanuel Macron. On the other are the fiscal conservatives led by Merkel, who has given way to Dutch Prime Minister Mark Rutte to be the point man for Macron’s derision.

Trapped in the middle is the real human tragedy in northern Italy where thousands of people have died from the toxic mix of a lack of medical infrastructure, high concentration of high-risk people and lack of knowledge of how to fight the disease.

Worse than that, the government in Italy was put together to spearhead this fight for Eurobonds since Conte was kept in power to ensure Lega’s Matteo Salvini didn’t and fight Macron and Merkel by threatening to leave the euro-zone.

Whether you believe the EU’s response, or, more accurately, lack thereof, to Italy’s plight was motivated by malice or incompetence the result is the same. Thousands of Italians died and weakened already weak bonds between Italy and the rest of the EU technocracy.

As I said in an article back on March 14th:

So in the midst of this mess comes COVID-19 and the uncoordinated and inept response to it from the political center of Europe to date. Only now are they coming to the conclusion they need to restrict travel, after sitting on their hands for a few weeks while Italians died by the hundreds.

And do you think that’s engendering waves of love and affection among Italians towards Germans?

If you do then you don’t know Italians… at all.

And this is your signal that this is the beginning of the real crisis. Because while COVID-19 may have been the catalyst for the breakdown of capital markets, capital markets were simply waiting for that spark to occur.

Honestly I wasn’t harsh enough in my assessment of what was happening back then, but it was clear that this crisis was being used to push forward EU integrationist plans of Macron and ECB President Christine Lagarde trying to strongarm the Germans and the Dutch into their position.

By the meeting on March 26th that plan failed. Rutte, Merkel, Austrian Chancellor Sebastain Kurz and Norway all held their ground and the meeting would have ended in a fistfight had it not been held using social distancing rules via teleconference.

That meeting set up last week’s which saw Italy cave to German and Dutch intransigence. Macron and Lagarde lost, securing just $500 billion in new loans but no ECB bond issuance. And the issue now is whether Conte will partake of the program or not.

His failure to act as Macron’s Agent of Shame to secure the EU’s future now puts the whole European project in jeopardy because Conte’s government is in serious trouble in Italy. Moreover, this failure was likely unexpected because now even the hardest-core EU integrationists in Italy’s government are wondering why they are part of the EU.

Meanwhile the polls in Italy haven’t really budged with Salvini’s Lega holding onto around 30% of the electorate with the Brothers of Italy holding onto recent gains in the mid-teens.

Italy, Termometro Politico poll:

LEGA-ID: 31%
PD-S&D: 22%
M5S-NI: 14%
FdI-ECR: 13%
FI-EPP: 6%
IV-RE: 4% (+1)
Azione-S&D: 3%
LS-LEFT: 2%
EV-G/EFA: 2%
+E-RE: 1% (-1)
PC-NI: 1%

+/- vs. 1-2 Apr. ’20

Fieldwork: 8-9 April 2020
Sample size: 2,200 pic.twitter.com/QTCcUpCffP

— Europe Elects (@EuropeElects) April 11, 2020

Moreover, now the question of EU membership in Italy is a coin flip. Two different polls (here and here) have it well within the margin of error.

Lastly, and most importantly, Conte’s coalition government is split on whether to avail itself of the newly-approved loans. Reuters reported that the divisions within the Italian coalition are rising and portend a split. In a show of political spine not seen in over a year senior partner Five Star Movement (M5S) is opposed while the Eurocentric Democrats are all for it since, as of right now, there are no strings attached to the money.

Conte will have to settle the dispute before a video conference among European leaders on April 23 when Italy will be expected to make its position clear.

He tried to defuse the quarrel on Wednesday, warning in a Facebook post that the ESM “risks dividing the whole of Italy,” and adding that more information was needed on the terms of any credit lines before a final decision could be taken.

Until these details are clear, discussing whether an ESM loan is in Italy’s interests is “a merely abstract and schematic debate,” Conte said.

But we all know there will be strings in the end. If you doubt that assertion, I suggest you ask Greece how about this. So, Conte has his work cut out for himself. There is real urgency now in the EU to get even token Eurobonds approved before Germany takes over the Presidency of the European Commission in July, where it will set the agenda on the EU’s next seven-year budget.

After years of kicking the can down the road to avoid a messy political upheaval, which is Merkel’s trademark move, nothing has changed in the EU when it comes to fixing its untenable structure. And for this reason, as long as Angela Merkel is on the stage, there will be no European dream.

All Merkel ever does is manipulate events back to the previous status quo. She has no capacity or stomach to face the German voters nor will she allow anyone else to fully express themselves. Her handling of Brexit negotiations was a fiasco for the EU, thankfully, and her handling of Italy today is just as inept.

With Salvini waiting in the wings, the people ready to revolt over Germany’s handling of the crisis and a weak coalition government put in place by Merkel to hold things together, the probability of Italeave occurring rises daily.

So, while Merkel may have won this latest battle in the end she may lose the war for the EU. And, in the ultimate irony, the people of Europe may have her to thank for their deliverance from its dysfunction.

For the second time in four days a Russian jet has intercepted a US plane over the Mediterranean, bringing tensions between the two countries to boiling point at a moment Moscow is appearing to flex in defense of its ally Syria.

The Pentagon confirmed the latest “unsafe and unprofessional” intercept incident in international airspace Sunday, after an incident the prior Wednesday involving a US P-8A Poseidon reconnaissance aircraft, which was similarly “buzzed” by an aggressive Russian SU-35, which reportedly performed a high-speed, inverted maneuver.

“The unnecessary actions of the Russian SU-35 pilot were inconsistent with good airmanship and international flight rules, seriously jeopardizing the safety of flight of both aircraft,” the US Navy said Monday. “While the Russian aircraft was operating in international airspace, this interaction was irresponsible. We expect them to behave within international standards set to ensure safety and to prevent incidents.”

However, a Russian Defense Ministry (MoD) statement framed the latest incident as one in which the Russian fighter, scrambled from Hmeymim air base in Syria, “shadowed” the US spy plane which apparently came too close to the Syrian coast for comfort. 

The Navy’s 6th Fleet released video of Sunday’s incident in which a Russian SU-35 Flanker came dangerously close to a Navy P-8A surveillance aircraft:

The Russian MoD said Monday: “On April 19, the Russian equipment controlling the airspace over the neutral waters of the Mediterranean Sea detected an air target performing a flight towards Russia’s military facilities in the Syrian Arab Republic,” according to TASS. “A fighter jet from the air defense alert quick reaction force of the Hmeymim air base was scrambled to identify the target.”

“The aircraft of Russia’s Aerospace Force performed and perform all flights in strict compliance with the international rules of using the airspace over neutral waters,” the statement added.

Gen. Tod Wolters, Commander of US European Command and NATO’s Supreme Allied Commander, has subsequently said he’s protested Russia’s “unprofessional” and potentially dangerous maneuvers involving US planes over the Mediterranean directly with counterparts in Moscow.