The end of Europe

The end of Europe

How the European time bomb will explode… and what that means for your
money, Brexit and the stockmarket
In this report:
How a closed-door meeting with Alan Greenspan lead me to a shocking
conclusion
Why Europe is doomed – politically and financially
What to do with your money to survive, whether you’re a novice investor or a
seasoned veteran
A special report by Nick O’Connor,
Publisher, Southbank Investment Research
It’s the most fragile point in the worldwide financial system…
And this year, that fragility could be brutally exposed – with serious
consequences for your money, your retirement and for Britain as a whole.
I’m talking about Europe.
As you’ll see in this report, the current problems in the eurozone that you’ve
likely read about in the papers have been growing… morphing… and intensifying
for nearly a decade. This year I believe they will strike at the heart of the entire
European project.
I’m not the only one.
Today I also want to show you what I learned in a closed-door meeting with the
world’s most powerful former central banker, Alan Greenspan. Pay close
attention. Greenspan revealed why he’s so worried about Europe. In private
conversation with our analysts he explained exactly what could happen.
That’s what this report is all about.

In particular I want to show you how the financial problems building in the
European banking system will morph into a political crisis. And that could strike a
mortal blow to the entire European project. If these problems continue to
escalate… there won’t be a Europe for Britain to negotiate Brexit with!
Greenspan predicts the euro’s demise
Our meeting with Greenspan was private. There were no representatives of the
mainstream press there. Most of them were down the road from us in
Washington, preparing for Donald Trump’s inauguration. With that in mind, it’s
worth us looking at precisely what he said concerning Europe since you won’t
find it anywhere else but here.
Here’s what he said, with added emphasis from me.

1 | Page
 The end of Europe

There’s one thing that bothers me considerably, which nobody makes any
mention of. There is in the European Central Bank [ECB] a mechanism as it exists
of necessity where the European Central Bank is made up of the central banks of
the European, euro area and there’s a thing called TARGET2, do you know what
TARGET2 is?
TARGET2 at this particular stage is turning out to be an extraordinary large
transfer from Bundesbank to essentially Italy and Spain, and most recently the
European Central Bank. That means the Bundesbank is lending money to the
European Central Bank and the question is – it’s big numbers. We’re talking
7,800 billion euro.
This can’t go on indefinitely because at some point somebody’s going to have
the courage to move Greece out. Greece is in the ECB by accident. They came in
under false pretences and the government, immediately following the
government that got Greece fraudulently into the ECB, said the numbers were all
wrong and if they were actually the numbers used they would not have been in,
but nonetheless they let them stay. That was a terrible mistake. The Greek
personal savings rate right now is -20%. You cannot run an economy at -20%
savings rate.
Something is going to happen there. My view is it’s either going to be Greece – it
conceivably could be Italy. The funny part of it is that the second largest
contributor to the net flow in lending to Spain and Italy is Luxembourg. They’ve
got some steel and they’ve got a few other things and they’ve got some banks,
but it is extraordinary what is going on in this system while the total assets of
[the] European Central Bank continue to go straight up. What would happen if
there was a default of the euro?
In the United States, if there were a default on the dollar the US Treasury could
always [step in]. For example, if the federal reserve went into default the US
Treasury would bail it out but what do [European banks do?] There is no
comparable vehicle to help the system.
I’m very worried. Mario Draghi, whom I know and he’s a very good guy, is just
talking like we’ll do whatever is required. Well at some point somebody’s going to
say, “I don’t want to accept euros.”
I didn’t expect Greenspan to make any major predictions about the US monetary
system. He’s biased: the dollar is part of his legacy.
Like a parent incapable of seeing the flaws in their children, I doubt he’ll ever
truly acknowledge the financial problems he helped create in the US.
That’s not true of the euro, though.
When it came to the eurozone he was surprisingly direct. From where I was
sitting, it sounded like he believes the next major financial crisis will be triggered
by either Greece or Italy and will result in the total destruction of the euro as a
major currency.
Greenspan pointed out that Mario Draghi’s promise to “do whatever it takes” –
otherwise known as his promise to flood the market with freshly printed euros

2 | Page
 The end of Europe

until everyone just leaves him alone – has a flaw. It only works if people are
willing to accept euros.
Someone in Greenspan’s position at the Federal Reserve doesn’t quite have this
problem. The dollar is still the world’s reserve currency. For as long as that lasts,
people are going to need dollars. You can print with abandon because there’s no
real alternative.
That’s not true in Europe. There are two reasons why.
Two ways the euro can disappear
The first possibility is internal demand. By that I mean the demand for euros
within eurozone nations. There’s a high level of demand there because people
need euros to pay their taxes.
But those nations didn’t always use the euro. People have long memories. They
remember when the euro didn’t exist and each nation had its own currency.
Perhaps they even yearn for the good old days.
It sounds like Marine Le Pen does, anyway. In January she proposed the creation
of a new basket of currencies to be used in Europe – a kind of shadow euro.
France could then reinstate the franc and peg its currency to that basket.
That’s one way in which internal demand for euros could drop – a move back
towards national currencies. Once you pay your taxes in francs… there’s not
much incentive to hold euros.
The other mechanism would be external demand falling. That means the rest of
the world looking at Europe, seeing its huge structural problems will never be
resolved, and ditching the euro.
Again that would lead to a situation where “nobody wants euros” any longer.
Draghi may as well be printing monopoly money at that point. He’d be out of
ammo.
Of course, either one of those scenarios would likely trigger the other. External
demand drying up would push more nations towards reinstating national
currencies. Or vice versa. It doesn’t really matter. Europe is doomed either way.
A sordid history of central banking in Europe
Let’s dig into what else Greenspan said. There’s a whole sordid history of central
and commercial banking subterfuge hidden between the lines. Take, for instance,
the fact that Greenspan is direct about the fact Greece should never have been
allowed into the euro to begin with. He even uses the word “fraudulent” to
describe its admission.
But then, it’s ironic that he outlines what a good guy ECB chief Mario Draghi is in
the very next breath. Why?
Because it was Goldman Sachs that helped Greece cook its books in such a way
that it could enter the euro to begin with. The head of the GS International
division for large parts of that process was… who?
You guessed it! Mario Draghi!

3 | Page
 The end of Europe

Never underestimate the ability of the Deep State and the global financial
establishment to look after one another. The risks of cutting anyone loose or
showing any genuine critical thinking about their actions would be highly
dangerous to the system. Whether Draghi is a good guy or not is beside the
point, but we certainly can’t take Greenspan’s word for it.

How Europe’s financial crises become political nightmares

It is worth considering why Greenspan is so concerned though. He highlights
Greece and Italy as potential flashpoints in the next European crisis. Clearly he
believes the endgame is a crisis in which the ECB becomes powerless due to the
fact that people won’t accept euros any longer.
That crisis would have to be both financial and political in nature in order for
something that drastic to happen.
How precisely would it blow up?
We’d need to see a renewed flare up in the “periphery” nations. Except this time
the contagion wouldn’t just be financial, but political too – we’d likely see not just
a spike in bond yields, but in support at the polls for anti-establishment, anti-euro
parties.
2017 certainly has the potential to be the moment that happens. Perhaps it’ll be
the beginning of the endgame for the European project.
In short, Europe has always been a political movement. It’s held together by
political commitment. Logic dictates it’ll take a political disaster for it to end. But
financial forces will create the conditions to make it possible.
Exactly what could that bring that about? Well, we’ve covered Greece. It
shouldn’t even be a part of the eurozone. But then, it’s already knee-deep in a
depression that’s bleeding the nation white. It hasn’t cracked yet.
But what of Italy? What could put the Italians in such a position that it could bring
the entire system down?
That’s something we’ve been covering in detail for 12 months now. Tim Price, in
particular, has been tracking the problem that’s come to be known as “le
sofferenze”. Here’s how Tim put it in a recently published warning on the fate of
the European project.
“Le Sofferenze” is what the Italians are calling their banks’ bad loans.
It means “the suffering”.
These non-performing loans are now so big they are stifling any hope of a
banking recovery.
It all comes down to the country’s failing economy, which is still 8% smaller than
it was BEFORE the 2008 financial crisis.
The chart below reveals the scale of the problem. Le Sofferenze now account for
18% of all loans.

4 | Page
 The end of Europe

To put that in context, Britain’s banks’ “bad loans” amount to less than 1.5% of
their total. The global average is 4.3%.
And the problem is getting worse at a frightening speed: in the last five years,
the sum of non-performing loans has increased 85%. The total now stands at
€360 billion.
Let me repeat that: Italian banks have taken on 85% more “bad debt” in the last
five years alone.
They do not have capital reserves to cover anywhere near that amount should
they default.
Now, you only need look to the last crisis to understand how devastating non-
performing loans can be to the global economy.
The 2008 recession was triggered by the build-up of bad loans in the US housing
sector.
But the percentage of bad loans made by US banks in 2008 was just 5%. The bad
loans made by Italian banks are currently more than three times that level.
So imagine the financial chaos, social unrest and negative impact of the last
crisis all over again – and perhaps even worse.
Then you have weakness across the rest of the eurozone, including inside
systemically important banks right at the heart of the European project. As Tim
puts it:
In June, the International Monetary Fund (IMF) labelled Deutsche Bank “the most
important contributor to systemic risks among the global banks”.
That’s a diplomatic way of saying: if Deutsche Bank goes down, the global
financial system might be severely impacted.
It’s not hard to see why: Deutsche has derivatives contracts (obligations to buy
or sell assets) worth an estimated €46 trillion. According to the Bank for
International Settlements, that’s approximately 12% of derivatives outstanding
worldwide. The sum is also roughly 14 times more than Germany’s GDP.
Deutsche has been in disarray for years now.
In other words, Deutsche Bank would make Lehman Brothers look boring. Back to
Tim:
Restructuring its business model and building up capital to deal with litigation
after years of malpractice has proven highly damaging to the bank.
In September, the US Department of Justice (DOJ) proposed that the bank should
pay a $14 billion fine – to settle claims Deutsche mis-sold mortgage-backed
securities before the financial crisis. While this figure is not set in stone, the bank
only has $5 billion to cover it. Should it fail to persuade the DOJ to reduce the
fine, it will be required to raise more capital urgently.

5 | Page
 The end of Europe

Deutsche Bank is in such a bad state, billionaire fund manager George Soros
actually made a €100 million bet against the bank right after Britain’s EU
referendum, predicting it would crash.
Deutsche Bank has made a lot of loans to the Italian banking system, too. That’s
part of what’s weighing it down. Like I said, they’re joined at the hip. I’ll come to
Italy shortly, but the long and short of it is – it’s not likely to get all of that money
back.
There are problems elsewhere, too.
France:
Using the US stress test system, French banks BNP Paribas and Societe Generale
– two of the six biggest in Europe – were found to have capital shortfalls (money
required to survive a future crisis) of €10 and €13 billion respectively.
Only Deutsche Bank requires more (€19 billion). Another study concludes that
France requires more money – in absolute and relative terms – than any other
country to meet these requirements.
Spain:
In May, Spain’s Banco Popular saw its share price drop 25% in one morning after
it admitted it needed to raise €2.5 billion – just one month after claiming it had
“one of the best” savings reserves in Europe.
Remember the thesis we’re testing. The financial problems within the European
banking system are going to morph into political problems that will pull the
European project apart in 2017.
Bad debts, low growth, capital shortfalls, a business model slammed by negative
rates… they’re the gunpowder.
What they need is a spark.
And that’s where politics comes in.
I believe I can show you, down to five specific dates you need to mark on your
calendar, precisely when the whole thing will go up in flames.
The EU crisis calendar
There are plenty of financial problems to contend with in Europe. A
fundamentally unsound monetary-but-non-fiscal union. Bad debts within the
banking system in Italy. Systemically important banks in Germany suffering.
Capital shortfalls in French banks. Low growth all round. Negative rates on
savings just to make doubly sure the saving populace know they’re being utterly
shafted.
Well, get ready. Because 2017 is year those problems manifest themselves at the
polls.
That’s because, this year more than any other, there are several clear-cut
opportunities for the people of Europe to send a message – or a shockwave –
through the heart of the European political establishment.

6 | Page
 The end of Europe

Our own Tim Price put it bluntly in a recent letter on the topic:
The eurozone is on the precipice of a political collapse.
A series of elections will be held in 2017, with many to be fought on lines of “for”
and “against” membership of the euro. For the first time since its inception in
1957, the European Union cannot afford to take its future for granted.
Germany – by October 2017: Angela Merkel’s Christian Democratic Union (CDU)
party has been losing seats to the anti-EU Alternative For Germany (AfD). A
Merkel defeat would be the biggest possible blow to the EU’s future. Germany is
the continent’s biggest economy.
Italy – by April 2018: general election after pro-EU prime minister Matteo Renzi
was comprehensively defeated on 4 December 2016 in a constitutional
referendum. Italy’s three opposition parties are in favour of leaving the euro,
which they believe is preventing the country’s economy from growing.
Italy is perhaps the country with the biggest financial problems. Its banking
system is suffering with an eye-watering number of non-performing loans. It had
to bail out its oldest bank, Monte dei Paschi di Siena, just before Christmas last
year. And on top of that, the entire nation has already experienced a decade of
virtually zero growth (on top of virtually zero interest rates!).
Tim quotes economist Roger Bootle, who agrees with that assessment. Here’s
what Bootle had to say on an imminent Italian departure.
“My view is that she [Italy] is more likely to leave the euro within the next year or
two. The boost that this would give to Italian competitiveness would see Italian
GDP recover and this would prompt other southern countries to leave.
Before long, the euro would be in tatters. Could the EU itself survive the collapse
of its greatest project, along with the consequent recriminations and financial
wranglings between Germany and the southern members? I doubt it.”
Those three major threats to the European political establishment – votes in
France, Germany and Italy (potentially) – aren’t the only opportunities for anti-
establishment movements to take root in Europe. But they’re certainly the
biggest.
Any major change to the political landscape in those “core” nations would
vaporise the glue that holds the European project together. It would only take
one unexpected negative result (from the perspective of the mainstream media
and the political elite) to make this year the year of europocalypse.
But it’s not just a case of those three nations. There are more votes on the
horizon in the “periphery” nations. Tim explains:
But the potential dangers do not end with France, Germany and Italy. Other
eurozone members holding elections soon include:
Netherlands – 15 March 2017: Geert Wilders vowed to withdraw the Netherlands
from the EU should his surging far-right Party for Freedom (PVV) win. But thanks
to the Netherland’s fractured electoral system, that was always unlikely. Instead,
Wilders merely gained five seats, coming in second with 13% of the vote.

7 | Page
 The end of Europe

Hungary – by Spring 2018: the popular current prime minister Viktor Orban has
incurred the wrath of the EU by erecting wire borders around the country – in
defiance of the EU, which he openly disparages.
The economic failure of the euro is now starting to manifest itself politically. As
deputy assistant secretary of the US Treasury, Dr Christopher Smart led the US
response to the European debt crisis. In a paper for the Mossavar-Rahmani
Center for Business at Harvard University’s Kennedy School of Government,
published in January 2017, he writes,
“The European Project looks in trouble once again. Mounting political extremism,
feeble growth and the loss of its second largest economy shape a convincing
case that the integration of Europe’s political and economic institutions has failed
to deliver. Sharp and unexpected political developments—a populist election
victory or a fresh immigration crisis—may well trigger events that lead to
miscalculation and collapse.”
So what do you do?
You’re a British saver and investor and you’re getting a lot of confusing signals
right now.
The truth is, your savings and investments are in the firing line.
Not just from the fall out we’re set to see following Brexit. That is part of it, no
question.
But as I would like to show you, there is something that runs even deeper…
An unsolvable problem at the heart of our financial system.
And I believe it could be about to cause an alarming change to all our lives.
It could radically alter the way you work, how much you earn, the way you look
after your family and plan for the future. In truth all of those things could be
about to come under threat.
Here’s why.
I must warn you now. These findings will be disturbing. They reveal the alarming
truth about Britain. And the conclusions we have drawn are controversial.
Many people will not be able to accept them.
But I can say without reservation, it is the most important research you will ever
read. It reveals a critical flaw at the heart of the British financial system.
Something that could put years of hard work and careful saving in jeopardy for
millions of people.
I take no pleasure in telling you that I think British investors will soon be split into
two kinds of people: those who prepare for what’s coming – and those who could
lose a great deal of money.
Ignoring this urgent video presentation may mean you could lose a significant
amount of your hard-earned wealth.

8 | Page
 The end of Europe

It doesn’t matter if you have £5,000 in the bank or £500,000. It doesn’t matter if
you own your own home or rent a small flat. We believe everyone could be
affected by this trend. No exceptions.
But those who prepare for it now have a chance to protect themselves.
So please take a look this urgent briefing in full, today. The impact on your
wealth could be lasting.
Click here now to find out what’s going on.
If we’re right, you’ll need to act quickly.
Many thanks,

Nick O’Connor
Publisher, Capital & Conflict

From time to time we may tell you about regulated products issued by Southbank
Investment Research Limited. With these products your capital is at risk. You can
lose some or all of your investment, so never risk more than you can afford to
lose. Seek independent advice if you are unsure of the suitability of any
investment. Seek independent advice if you are unsure of the suitability of any
investment. Southbank Investment Research Limited is authorised and regulated
by the Financial Conduct Authority. FCA No 706697. https://register.fca.org.uk/.

Copyright © Southbank Investment Research 2017. All rights reserved

Terms and conditions | Privacy & cookie policy | Contact Us | Top ↑
Southbank Investment Research. Registered office: 8th Floor, Friars Bridge Court,
41-45 Blackfriars Road, London SE1 8NZ. Registered in England and Wales with
company no. 9539630 and VAT no. GB 629 7287 94.

AddThis Sharing Sidebar

Share!
Share to Email

Share to Facebook

9 | Page
 The end of Europe

, Number of shares
69
Share to Twitter

Share to LinkedIn

, Number of shares
Share to WhatsApp

More AddThis Share options

, Number of shares

SHARES

10 | P a g e