Like clockwork, hours before the US market reopens, we get another Greece bailout. Since last week's Chinese white knight "rescue" of Portugal helped the EUR for about 18 hours, it is now time to get the biggest guns possible out: the WSJ reports that Germany, contrary to populist demand which has indicated that another German bailout of Greece would mean the end of Angela Merkel, has decided to allow Greek bailout round two to proceed. Per the WSJ: "Germany is considering dropping its push for an early rescheduling of
Greek bonds in order to facilitate a new package of aid loans for
Greece, according to people familiar with the matter.Berlin's concession that it must lend Greece more money, even without burden-sharing by bondholders in the short term, would help Europe overcome its impasse over Greece's funding needs before the indebted country runs out of cash in mid-July." The end result: the EURUSD surged by 70 pips from the closing print of 1.4270 to a high of 1.4350, although the half life of even that innuendo appears to have peaked and the pair is now on the way down, as it does absolutely nothing, except to destroy any credibility Merkel may have had, to resolve the impasse which is that, well, Greece is bankrupt.
Below is a snapshot of the halflife of the latest intervention, which appears to be 45 minutes:
The WSJ explains why Germany has thrown in the towel and has done a complete 180, to the terminal detriment of Ms. Merkel's political career:
Some officials in Berlin hope that a short-term fix can be found that would allow a full deal including a bond rescheduling later this year.
LOL. No really, LOL.
Euro-zone officials have acknowledged for weeks that Greece will face a shortfall in financing of around €30 billion ($43 billion) a year in 2012 and 2013—even after a €110 billion bailout agreed last year. But agreement on how those gaps should be filled is proving difficult, thanks to growing political opposition in northern Europe to bailouts of profligate countries such as Greece.
Germany has for weeks argued that private investors in Greek bonds should, in some way, bear part of the burden of any new bailout package for Athens. But the European Central Bank staunchly opposes any form of debt restructuring. Meanwhile the International Monetary Fund is demanding clarity on Greece's 2012 funding before it releases money that Greece needs to get through this summer.
A senior German official said on Monday that the deal being discussed in Vienna might not include any investor participation—even though that could spark a backlash from German lawmakers.
"We will try to resolve the Greek problem between now and the end of June," Luxembourg's Prime Minister Jean-Claude Juncker said on Monday. European finance ministers are expected to discuss Greece at a June 20 meeting, ahead of a summit of European leaders on June 24.
And good luck: the Greeks are so delighted with being bailed out, pardon, with bailing out Germany's banks, that they have been celebrating this fact for 6 nights straight in front of the parliament in Athens. Surely this latest batch of good news, will only send the popular jubilation to previously unseen highs.