Archive - Feb 9, 2012 - Story

And so the EURUSD spikes on yet another supposed agreement out of the Greek politicians. The FT reports: "Greek politicians have reached a deal. Statement out shortly according to FT's Athens correspondent." Further from the FT's blog: "An official in the prime minister’s office says: “There’s an agreement, Mr Papademos has met with Mr Samaras and it’s done. There will be a statement shortly." Yes, we have heard this before, and we have seen the same reaction before. The deja vu'ness is now all blurring into one. In practice what this means, for those who can think beyond the most recent headline, is that Greece has formally agreed to pledge that its GDP will be positive in 2013... Sold to you.

The following anecdote should probably explain why Germany is now ready to part ways with Greece, Lehman-like consequences be damned. As Kathimerini reports, former PASOK defense minister Akis Tsochatzopoulos has had one of his properties in central Athens seized, the same he is alleged not to have declared to avoid paying taxes. Yep - one of the top Greek political figures caught in tax evasion. And one thought such travesties only occur in the US. But wait there is more: this is the same defense minister whom the Greek Parliament voted in favor of indicting in connection with taking bribes for the purchase of submarines. As a reminder, "At least 120 million euros was paid in bribes by the German firm that struck a deal with the Greek government for the sale of four navy submarines, according to German court documents seen by Kathimerini....Two former executives of Ferrostaal, the Germany firm that was part of the consortium which won the contract, gave depositions in Munich concerning the kickbacks paid to secure the deal, which was worth just over 1.2 billion euros. According to court documents seen by Kathimerini, the first illicit payment of 32 million euros was made in May 2000. The money was deposited into a Swiss bank account but the two former Ferrostaal employees said they did not know who the recipient was. The executives said their main aim had been to win over a “top level” official in the Defense Ministry." Turns out it is the same guy who was concurrently engaging in tax evasion. And that is why Greece had a budget revenue miss of about the same amount as it paid Germany for its subs. It also explains why, as Germany will no longer receive payment for its subs, it no longer needs Greece as a mercantilist partner.

As expected.

Somehow the anger of the sex pistols, the sound of boots marching in the background, seem right to me today. Greek Industrial Production dropped 11.3% in December. The unemployment rate jumped to 20.9%, up from 18.2%. The charade of negotiations and a bailout can go. Some deal is likely to be announced. I’m not even sure it will be relevant by the March 20th bond maturity deadline. The economy is getting worse, fast. People are getting angry, fast. The “force feeding of austerity” and plan after plan that is really just a focus on banks at the expense of the people is getting old. While we wait for whatever plan is about to be announced, to some fanfare and some small pop in stock futures, the markets are mixed.

• New Greek demands threaten debt deal (FT)
• Greek Finance Minister Heads to Brussels; Loan Talks Stall (WSJ)
• Talks Stalled on Greek Bailout as Venizelos Heads to Brussels (Bloomberg)
• US banks near historic deal on foreclosures (FT)
• Obama: Europe needs "absolute commitment" on debt crisis (Reuters)
• Fed's Lacker sees no need for more easing for now (Reuters)
• Europe compromise urged at summit (China Daily)
• China to Punish Illicit Bank Lending, Shanghai Securities Says (Bloomberg)
• Monti Meets Obama Amid ’Spectacular Progress’ (Bloomberg)
• Draghi’s First 100 Days Presage Greek Help (Bloomberg)

Many have been scratching their heads over just why the EURUSD hit a multi-month high of over 1.33 in the overnight session after once again, nothing was resolved in Greece, and in fact Greece has come begging to the finmin meeting in Brussels hoping the Troika would simply let it slide with open issues relating to pension cuts. That scratching promptly came to an end some minutes ago after the EU's Altafaj said there would be no deadline extension, somewhat illogically since there is no deal yet and the deadline has already passed, but some are finally starting to grasp that putting the ball back in the Troika's court is actually not a good thing since it is Germany's desire at this point merely to have the smallest excuse to part ways with Greece. The EURUSD has thus dipped by 60 pips back to levels seen last night, yet levels that are still 250 pips rich to the 1.30 seen three days ago before the relentless rumor (and hope)-driven ramp up commenced. Should there be nothing favorable to come out of the FinMin meeting today look for that difference to promptly close, now that there are just 40 days left until the heard Deadline of March 20, and a bond exchange offer needs an absolute minimum of 30 days before results are tabulated, and holdouts (yes there will be many billions in holdouts) are calculated.