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Germany Finally Comes Out and Says, "We're Not Touching Greece" - Well, Sort of...

Reggie Middleton's picture




 

From Bloomberg: Germany Seeks IMF Role for Greece in Reversal, CDU
Lawmaker Meister Says

March 17 (Bloomberg) -- Greece should turn to the International
Monetary Fund if it needs aid, the chief finance spokesman for German
Chancellor Angela
Merkel
’s party said, in a reversal that signals a rift with
European leadersJean-Claude
Trichet
Jean-Claude
Juncker
 and Nicolas
Sarkozy
.

“We have to think about who has the instruments to push for Greece to
restore its capital-markets access” if ultimately needed, Michael
Meister
, a lawmaker with Merkel’s Christian Democratic Union, said
today in an interview in Berlin. “Nobody apart from the IMF has these
instruments.” Attempting a Greek rescue “without the IMF would be a very
daring experiment.”

Daring indeed! As my subscribers know, there has been a lot of
creativity in coming up with those "austerity" plans (subscribers, see File IconGreece
Public Finances Projections
). I wouldn't bet the farm on their
ability to accomplish their stated goals. For those that don't have a
paid subscription, reference my Greek Tragedy in prose: "Greek
Crisis Is Over, Region Safe", Prodi Says - I say Liar, Liar, Pants on
Fire!
 Don't forget to notice the optimism...

The Greek government's macroeconomic assumptions
also seem overstated when compared with EU estimates.

greek_debt_forecast.png

image038.png

The German shift underscores Merkel’s attempts to
steer clear of any commitment to a Greek bailout and risks scuttling
European Union efforts to establish a contingency plan for the
debt-strapped nation. Merkel used a budget speech in parliament in
Berlin today to caution against “overly hasty” pledges of financial
support.

While EU leaders on Feb. 11 pledged coordinated
action to safeguard financial stability in the euro area, they’ve yet
to
spell out aid plans for Greece. Juncker said March 15 that the
euro-area group of finance ministers he heads “clarified the technical
arrangements” to enable action.

“The problem has to be solved from the Greek side
and everything that is being considered has to be oriented in that
direction,” Merkel told lawmakers. “There’s no alternative” to the
Greek
government’s measures to cut the deficit, she said.

Therein lies the problem. It can't be solved from the Greek
side in the near term without a default or devaluation. Even then, we
are talking a very deep recession. Greece's remedies appear to lie
outside of the EU, and Greece is not alone, either. 

EU Warning

Merkel was speaking as the EU warned that a dozen
member governments, Germany among them, risk missing their deficit
targets. Greek Prime MinisterGeorge

Papandreou, whose government has pledged to narrow the
euro-region’s biggest budget deficit, met with European Commission
President Jose

Barroso in Brussels today.

Fair not, dear reader. I will have similar analyses of
Italy, Spain, Ireland, the UK and German coming up next. Germany is in
more hot water than many realize, as is much of the EU. I may even be
able to release the Italian analysis tomorrow.

“Greece is a member of the IMF and should avail
itself of IMF aid first,” Frank

Schaeffler, deputy finance spokesman in parliament for the Free
Democrats, said in an interview. “I think this is the right instrument
but it’s the Greeks who hold the key to it.”

‘Solve Their Problems’

Any IMF involvement would signal an about-face from
Finance MinisterWolfgang

Schaeuble’s position of March 17, when the Welt am Sonntag
newspaper cited him as saying that accepting IMF help would be an
“admission that the euro countries can’t solve their problems by their
own means.”

It's not an about face! He is actually admitting in public
"that the euro countries can’t solve their problems by their own means.”
He did not recant his original statement. The positive spin to this
story is showing.

Juncker, who is Luxembourg’s finance minister and
prime minister, said March 5 after meeting with Papandreou that there’s
a
need for “technical assistance from the IMF” without the fund “taking
the lead.” The previous day, European Central Bank President Trichet
said “I don’t trust that it would be appropriate to have the
introduction of the IMF as a supplier of help.”

For that would relegate Greece to the level of emerging
market and third world nations that needed IMF assistance, at least in
the eyes of many speculators. 

Standard & Poor’s affirmed Greece’s
investment-grade BBB+ rating yesterday and dropped the country from
“creditwatch negative,” saying the budget cuts “were appropriate to
achieve” the goal of cutting the EU’s biggest deficit to 8.7 percent of

gross domestic product this year from 12.7 percent.

Standard and Poors also rated many subprime CDOs and MBS
AAA as well! 

“The Germans see the same thing that all of us see:
that at the end of the day, they’re going to be part of the solution
and it’s going to cost them something,” said Paul

Hofheinz, president of the Lisbon Council, a Brussels research
group. “When push comes to shove, I don’t think anyone doubts that the
Germans will be part of this settlement. But why should they play
easy?”

They are going to pay for Greece's woes, actually for the
ill-prepared construction of the EU, regardless of whether they send
funds to Greece or not. A Greece failure will reverbrate through the EU
one way or the other. 

 

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Thu, 03/18/2010 - 08:01 | 269123 overmedicatedun...
overmedicatedundersexed's picture

why does the rich of the world owe any country a bail out ("put their money where their mouth is")..multinational elites have only agenda:

keep wealth and power, avoid major all out wars, placate and manipulate those seeking social justice, avoid confiscation / taxation.

the majority of issues so many on left and right feel strongly about,waste so much print and energy on, are the very tools used by the multinational elites to maintain position..

Current economic conditions are a boon to those elites..free market destruction of the work force of America, soverign debt crisis,

minor "police action" wars, (the left- right fight in USA over police and legal action vs military action against terrorist as an example of strawmen) 

The multinational elites came to realize the only threats to their continued power and wealth were: 1. Nuclear war 2. honest strong governments 3. keep public divided and distracted. ignorant of their true role as debt slaves.. they are right and they have been very successful.

now, who wants to fight about man made global warming or some such silly siboliths you name them. 

 

Thu, 03/18/2010 - 07:38 | 269115 Miles Kendig
Miles Kendig's picture

This course of events should be of no surprise to anyone that has been paying attention.

Thu, 03/18/2010 - 07:18 | 269112 Observer
Observer's picture

I seriously believe that the Greek government should force the tax evading elite to fund the rebuilding of the economy through buying long-term government debt or repatriate through the EU the funds they have moved to 'safe havens'. Many among the elite have been avoiding tax for so long while pretending to support socialist policies. They are behaving exactly like the African elites of the past. They now should be forced to put their money where their mouth is. The only other option is bankruptcy.

Thu, 03/18/2010 - 06:54 | 269103 Ned Zeppelin
Ned Zeppelin's picture

Impossible Germany, unlikely Japan.

Thu, 03/18/2010 - 04:49 | 269076 Tic tock
Tic tock's picture

I still hold that Europe's deficits are meagre. Not only in comparison to the US states' deficits, but even in general. Because, slay me if I'm wrong, not only is interest on these deficits entirely manageable from the existing position (even with a Greek partial default), but also because Europe has the next largest financial market (or playground) after the US... which certainly cannot handle interest repayments. 

This could be about US leadership in the IMF??  

Thu, 03/18/2010 - 08:24 | 269128 three chord sloth
three chord sloth's picture

Europe's debts are far from meager, in fact they are in a far worse position that the US.

1. Their ability to pay their debts is limited as the tax burden in the EU is already high, about 40% of GDP compared to the US's 25%.

2. Their taxable population is declining (demographics are a bitch, and she don't care) while the US's is growing.

3. Their economies are more top-down, centralized, and planned than the US's, and therefore less flexible and less likely to successfully handle the wrenching changes coming our way.

Thu, 03/18/2010 - 03:13 | 269062 Quantum Nucleonics
Quantum Nucleonics's picture

But didn't the politicians and media tell us this Greece thing is all sorted out and wrapped up?  Nothing more to worry about here, run along boys and girls.

Thu, 03/18/2010 - 00:09 | 268998 nathan1234
nathan1234's picture

My take on why nothing has happened so far.

IMHO some major event is coming very shortly that will put the Greek problem into obscurity along with others.

Maybe a war with Iran or with Pakistan that will end up with people thinking of their survival instead.

The debt problem has become too huge to manage and will most certainly become worse.

The state of affairs today has been planned, the debt crisis has been planned and the future is also planned.

China has been taken for a ride in the mistaken belief that it can hold the US by it's balls through the debt it holds. A war is surely on the cards as the US is incapable of ever paying it's debts

The Chinese leaders will be torn asunder by their own people for their follies. A nation where you have approx 4 million people graduating and coming of working age every year without jobs  is not going to take these mistakes lying down.

 

Wed, 03/17/2010 - 20:44 | 268848 jm
jm's picture

Reggie, this is an excellent, data-rich post.

One of the surest things I see coming is rising yields in low-rated credit.  Looking at the nature of an IMF stabilization would bring shudders to those not familiar.

I think it would very interesting to see if there are common elements that can help define trigger events in lower-rated sovereign credits.

Wed, 03/17/2010 - 18:57 | 268764 JR
JR's picture

Great article, Reggie.

Here's the picture.  The banks helped Greek politicians cheat.  And they were caught.  Now, the Greek politicians can't deliver because they've lied to Greek citizens about their position.  But, the banks still want their money.  Now, the only place that money can come from is from the people who earned it; namely, German taxpayers, French taxpayers, or U.S. taxpayers.  But it is going to be hard to get the money out of German taxpayers because their political system is a lot more transparent than ours. So now, the IMF is creeping into the story.  The IMF doesn't have any money.  And since it's a filthy lie that everybody contributes to the IMF, it is the US taxpayer who's going to have to pay to keep Greece in the Eurozone.  Is propping up Greece in the US taxpayers' interest, or in the Fed’s interest?

The EU is a creature of the United States central bank.  Yes, other money was involved, and plenty of politics, but only the Federal Reserve private banking cartel, which primes the pump for the IMF and other international organizations, emerges as the shadow figure that’s always present in big stakes financial arrangements.  From the beginning it was clear that Germany, because of its political situation and the light hold Merkel’s party had on the electorate, was not going to be a party to using German taxpayer money in a parade of bailouts from Greece to Spain to Portugal to Italy and on up the line. 

The question to be settled now is whether or not Greece is important to the big international players, such as the Fed.  If not, Greece could be allowed to move on to its own currency and even into probation status within the EU, IMHO.

Therefore, it seems to me that any money forthcoming for Greece, i.e., Goldman, will be from US taxpayers and US inflation.  And the reason is that it’s much easier to use the secret auspices of the Fed printing presses.  Germany can’t get away with such shenanigans with her people; it would be political suicide, as it should be.  But here, in the U.S.A., Goldman and the Fed can get away with anything.  The Fed is the paymaster of the planet and the American people are the patsies of the planet.  When you enjoy the incestuous relationship that Goldman Sachs and JPMorgan have with the NY Federal Reserve Bank, along with government officials such as Paulson who probably was involved in the Greek numbers racket, then we’re not talking about a lot of people.  We’re talking about a concentrated mixture of banks and central banks and their long-term goals for how nations and international trade fit into their private plans.

It’s almost comical to watch these European politicians saying, “We’re going to support Greece, but we’re not going to pay.”

For American taxpayers, and retirees and wage earners and small businessmen suffering dollar devaluation, there is some good news.   So far, there’s only one planet to bail out.

Wed, 03/17/2010 - 19:32 | 268790 MarketTruth
MarketTruth's picture

Well said +1 

Few realize the private member owned USA-based Federal Reserve actually have their hooks in other places and once you know the 'players' it then falls into place.

Rothschilds (of course)

Rockefeller (naturally)

Lazards

Morgan

Brown / Shipley

Warburg (of course)

...and others.

Wed, 03/17/2010 - 19:25 | 268783 Buck Johnson
Buck Johnson's picture

So true, in Germany they couldn't get away with the junk that is done in the US on a daily basis.  That says alot about our country.  We are the Patsies of the planet and not only do they screw us on a daily basis, they even told us that they are doing it and it's in our best interest to be taken.  What worries me alot is that when this warped version of a ponzi scheme finally falls apart, the people in the US are going to get a horrible reality brought to them.  It will show how broke we truly are and how our own govt. won't have the power to "keep the trains running on time".

Wed, 03/17/2010 - 18:18 | 268713 Buck Johnson
Buck Johnson's picture

I truly don't think that Germany is going to give them money.  I think as others have talked about is that they made these austerity plans knowing full well that Greece or any soverign nation couldn't go through with this.  And this would give a reason for Greece not keeping up it's end of the bargain and then Germany saying we can't support you.

Wed, 03/17/2010 - 17:51 | 268655 Leo Kolivakis
Leo Kolivakis's picture

Reggie,

Greece is over, done deal, yesterday's news, just like Dubai. Besides, how can anyone short such raw beauty (brought to you by the Greek National Tourism Organization):

Thu, 03/18/2010 - 03:07 | 269060 Gunther
Gunther's picture

Leo,
the boss of Deutsche Bank, Ackermann yesterday gave a speech stating that Greece needs a bailout because German banks lent "substantial billions" to Greece.
http://www.handelsblatt.com/unternehmen/banken-versicherungen/josef-acke... (in German)

But any politician who wants to get re-elected will oppose a bailout; imagine any party campaigning with the fact that Germans get full pension at 67 while the German-subsidized Greeks enjoy their pensions at 61.
The next provincial elections are in May and the campaigning heats up.

Thu, 03/18/2010 - 08:30 | 269130 Leo Kolivakis
Leo Kolivakis's picture

Gunther,

Thanks, Germans (and to a lesser extent French) are everywhere in Greece. They have financec major infrastructure projects, and financed the debt. I just don't see them walking away now.

Thu, 03/18/2010 - 08:58 | 269144 Gunther
Gunther's picture

Leo, there is an obvious conflict. The banks want a bailout but it would be an extremely hard sell to the paying public.

Update:
German Chancellor Merkel is reported to say "no" to an EU-bailout and points to the IMF.

The report is a bit unclear who exactly said what.

[…]
According to official numbers German Banks lent 43 billion $.

http://www.ftd.de/finanzen/maerkte/anleihen-devisen/:gefahr-der-staatspl... (in German)

Thu, 03/18/2010 - 08:56 | 269142 Gunther
Gunther's picture

Update:
German Chancellor Merkel is reported to say no to an EU-bailout and points to the IMF.
[…]
According to official numbers German Banks lent 43 billion $.

http://www.ftd.de/finanzen/maerkte/anleihen-devisen/:gefahr-der-staatspl... (in German)

Thu, 03/18/2010 - 07:07 | 269108 Anton LaVey
Anton LaVey's picture

Gunther: precisely, thanks for that insightful response.

Thu, 03/18/2010 - 06:59 | 269104 knukles
knukles's picture

You Betcha!

Lever the Goldman model.  Goldman had so much exposure to AIG that AIG had to be bailed out to save the system.

Sociopathy Abounds.

Wed, 03/17/2010 - 16:58 | 268624 dumpster
dumpster's picture

well the fed meeting are always full ,, explain that lol

Wed, 03/17/2010 - 19:18 | 268776 tmosley
tmosley's picture

It was Weekend at Bernie's.  They had to go there so they could PAR-TAY!

Wed, 03/17/2010 - 17:24 | 268656 Rick64
Rick64's picture

Yea well there are exceptions to every rule.

Wed, 03/17/2010 - 16:53 | 268617 Rick64
Rick64's picture

Nobody wants to go near a rotting corpse, it stinks too much.

Thu, 03/18/2010 - 03:02 | 269057 merehuman
merehuman's picture

vultures, there are always vultures

Wed, 03/17/2010 - 23:14 | 268954 Bthewee
Bthewee's picture

So sorry for Jackin the post - my apologies.

However...

 

I/We have not Seen MARLA - post-comment-edit-or do anything in AT least 2 months!!!

WHAT..... ZH has become of Marla?? and the Great job she has done for this site??

Do NOT follow this link or you will be banned from the site!