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Greece Spreads Tighten On Deutsche Bank Bailout Rumors, Which Josef Ackermann Categorically Denies
Greek spreads were about 10 bps tighter earlier after rumors that Deutsche Bank CEO Ackermann's meeting with Greek officials was to set the tone for a €15 billion DB loan to Greece. Even as Eurostat was analyzing the Greek swap info, and Greece announced slightly better than expected January budget data, the country was still forced to delay its bond offering as expected by Zero Hedge, despite consistent disinformation rumors spread by the Greek ministry otherwise. As for Ackermann's visit to Greece, Dow Jones had the following blurb:
The Chief Executive of Germany's Deutsche Bank AG (DB) Josef Ackermann is in Greece to meet with Greek government officials, the bank confirmed Friday.
The meeting with Greek officials is part of a normal business trip to the country, the bank said. Deutsche Bank wouldn't provide details on the nature of the discussions.
This would be a funny development: if there is anything that would certainly mean an increase in systemic risk, would be not a bailout by Germany but by an institution whose leveraged assets are multiple of Germany's GDP. If anyone thinks Germans will be happier with this development, think again.
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Reuters reports Greek PM says economic crisis confirmed worst fears:
ATHENS (Reuters) - Prime Minister George Papandreou on Friday vowed to ignore the political costs and take drastic measures to pull Greece out of a debt crisis threatening the stability of the euro zone.
Crisis in Credit
Speaking to parliament after a visit by EU economic inspectors, Papandreou said Greece did not want other countries to pay for its debts but expected solidarity from its European peers as it struggled with worse than expected fiscal problems.
"Unfortunately, history has fully confirmed our worst fears," he said. "Our duty today is to forget about political costs and only think about the survival of our country ... Past policies make it necessary to proceed to brutal changes."
He appeared to be preparing the ground for a fresh set of fiscal measures expected ahead of a mid-March EU deadline to show results in cutting a double-digit deficit. Economic Affairs Commissioner Olli Rehn visits Athens next week.
"There is only one dilemma: Will we let the country go bankrupt or will we react? Will we let the speculators strangle us, or will we take our fate in our own hands?" Papandreou said.
"We must do whatever we can now to address the immediate dangers today. Tomorrow it will be too late, and the consequences will be much more dire."
Greece is also anxious to regain investor confidence by slashing its deficit and restoring the credibility of its statistics as it prepares to sell new bonds in the market with about 20 billion euros due to be repaid in April and May.
EU peers and markets were shocked when Papandreou's socialists revealed after last October's election that the previous government had understated its budget deficit by half.
Rating agencies downgraded Greece. Since they started raising concerns in early December, the euro has fallen almost 10 percent against the dollar and Greek stocks are down over 20 percent.
Meanwhile the cost of insuring Greek debt against default fault has more than doubled since early December to nearly 400 basis points.
The yield premium for holding 10-year Greek government debt over German government bonds has also soared, but narrowed around 14 basis points to 341 after Papandreou's speech.
"We became the weak victim, the guinea pig, we stood unprotected before the markets' wild appetite," Papandreou said.
MORE MEASURES
Fellow eurozone members have endorsed Papandreou's pledge to cut a deficit that hit 12.7 percent of GDP in 2009 by 4 percentage points this year.
He aims to get the deficit under the eurozone limit of 3 percent of GDP by 2012 with tough public spending cuts, tax increases and pension reforms.
Greek government officials say the EU inspectors, visiting Athens with IMF experts, have delivered a grim assessment of the economy. They say further measures worth up to 4.8 billion euros, will be needed to achieve deficit cutting targets.
Despite crippling strikes, opinion polls indicate most Greeks support the government's efforts and are ready to suffer the pain if it is distributed evenly and those responsible for the crisis are punished.
"I want to assure the Greek people that its efforts will pay off," Papandreou said. "We must put an end to irresponsibility and cover-ups ... If someone has done something wrong, he should be charged, no matter who he is."
EU leaders, grappling with crises at home, have given Greece political support but stopped short of outlining a specific aid roadmap. Polls in countries like Germany showed taxpayers oppose bailing out Greece, fanning tensions between Athens and Berlin.
Papandreou said Greece was dealing with its own problems and was expecting not aid but solidarity from its EU partners.
"No other country will pay for our debts," he said. "It is a matter of honor and pride for our country to put our own house in order."
Opposition politicians asked Papandreou whether he would renew demands for Germany to pay World War Two reparations, stemming from the occupation of Greece. Germany says it has fulfilled its obligations.
Papandreou, who will visit Berlin on March 5 at the invitation of Chancellor Angela Merkel, said the issue of reparations was not settled but he would not bring it up now.
"We have never given up on our claims," he said. "But this is not an issue that we will use for our convenience now, when we are in a weak position and called to put our house in order."
what a crap...
the mkt has been talked up with greece rumors from its feb lows...
the rumor engine is slowly but surely running out of gas.
eu, ecb, imf...any officials are talking a different language about greece. as is greece reaction by blaming germans of not repaying ww2 damages - that would not be the case if they are on the same line!
greece will probably leave the euro and refinance... expect a 30% haircut to debtors and not the tarp & aig crap lobby perks as with us banks.
at best the other eu states will guarantee that their institutions won't fail due to writeoffs from the haircut and eagerly buy spain and italy debt to send a signal to the mkt.
When someone with a 40:1 leverage ratio is your savior, you know the world is firing on all cylinders.
"...with a 40:1 leverage ratio..."
It's one thing to say or think something and another entirely to see it in print. It's so absurd that it's hilarious.
Blah blah blah, no.1 in Porsche Cayenne SUVs sold in 2009. 365 pieces baby! More than the UK! They might as well give us some €€€ those cheap bastards!
I said it last week. There will be a bailout. It's just a matter of leeting the big boys get invested properly before the announcement is made. There is no way germany, france, or switzerland are going to take multi billion dollar banking hits over this, especially since they know that the CDS they are holding on the greek bonds are worthless right now.
Sure, if I were a German citizen I'd really feel good about this, a bankrupt country being bailed out by one of my insolvent banks...great. This just smells like tax payer backstopping again.
Growth revised up to 5.9% bitches!!
Time to buy, buy, buy.
I believe the problems with Greece is that some powerful banksters want control overt the greece trade boat fleet, e.g. drys, exm, ocnf, etc.
So, am I right or wrong in thinking that Greek gov. bonds issued after 1 March won't be accepted as collateral by the ECB? http://www.paulhastings.com/assets/publications/1471.pdf?wt.mc_ID=1471.pdf It would certainly be a good reason for the government to be in a hurry to make a big issuance just now.
The EU cant bail out Greece coz of the anger of the german poulation so they put Deutsche bank in front. What's interesting is that nobody really speaks about the other PIIGS states, where the situation must be similar.......
For maximum squalid irony it would be Dresdner offering the bailout.
Jesus, guys, could this situation be more obvious?
1. The Greeks need the Germans and the EU to play bad cop so they can shove reforms and austerity down their constituents throats, while blaming "those bastard foreigners" for "forcing" them. This is not a good thing, this is a GREAT thing, possibly the first genuinely responsible action plan by a Greek government since independence from the Ottomans in 1830. Trust me, foreign intervention and conspiracies are a favorite theme for Greeks, good to see the government manipulating their fears like this. One of the government officials who mentioned the whole Nazi war reparation issue, Pangalos, has been in politics forever, and is a very smart and very serious person, so if he's saying silly stuff like this, there's a reason.
2. The northern EU states, especially the Germans, want this crisis to continue to weaken the euro, because their exports are TOAST. They'll use this faux squabble with the Greeks, a bit of strategic social unrest and general resistance of northern taxpayers to southern bailouts to drag this crisis out as far as possible, with brief hope-inducing comments to allow the PPT to prop up stock markets in between take downs of the euro.
3. Mark my words: mop up tax evasion in Greece, and fix some of the more egregious off-shoring of income and assets (real estate registered as off-shore assets, that's LUDICROUS), and government tax receipts double. Anyone stating this is a minor issue has never lived or worked in Greece, and knows nobody in Greece, they are getting their information from statistics agencies, and we know how reliable that shit is.
I personally know dozens of people who are guaranteed to be hiding six figures worth of income from Greek tax authorities every year, and I haven't lived in Greece since the 1980s. This isn't a few isolated rich folks, this is easily 30-40% of the population doing this to one extent or another.
4. While there was some violence in downtown Athens, this occurs on such a regular basis, it was almost a non-event in Greece. Only sensationalist news sources like CNN and Clusterstock (sorry, Carney! You bought the cow, now drink the milk) made it look like city-wide anarchy. In the areas outside the center of Athens, where most Athenians live and work, everyone took the day off to... go shopping. My sister went out briefly (she worked from home) and the retail center of Halandri was PACKED with people in cafes, restaurants and stores. Don't be surprised if retail sales figures for February spike in Greece from the de rigueur disastrous lows. Banks were open. Sure, traffic sucked, but, you know, ATHENS... it probably got so bad it resembled a normal rush hour in São Paulo.
The more strikes there are, the more inconvenienced the overworked, underpaid and overtaxed private sector workers will get, and the easier it will be for the government to completely screw the public sector unions and absolutely CRUSH tax evasion. This crisis could redefine political demographics, public versus private sectors, old versus young, taxpayers versus tax evaders, which would be truly refreshing. We here in the US could learn a thing or two if this does come to pass... and don't think the powers that be here and in Europe aren't observing this with keen interest.
Greece: after 2000 years, we are once again a laboratory for radical social experimentation. Awesome.
A bailout of Greece or any other EU member states is not very likely.
Although bailouts by the EU (EU Commission) as a whole or by member states could still happen, it looks like this would be against the Lisbon Treaty. Financial and debt restructuring help from the IMF is apparently allowed.
An amendment of the Lisbon treaty is needed to make any EU based bailout legal.
Even if Germany would agree on a Greek bailout, it will be challenged in court maybe even before any funds can be transferred to Greece.
I looked it up in the publicly available Lisbon treaty text
According to Matthias Ruffert (Prof . EU Law, University of Jena, Germany):
http://www.faz.net/s/Rub3ADB8A210E754E748F42960CC7349BDF/Doc~E06A3051636...
"dies wäre ein klarer Bruch des Vertrags über die Arbeitsweise der Europäischen Union (AEUV), wie das Abkommen seit dem „Lissabon-Vertrag“ heißt. Der AEUV beinhalte in Artikel 125 eine „No Bail Out“-Klausel gegen ein Herauskaufen strauchelnder Länder, erläutert Ruffert. Demnach ist ein EU-Staat nicht nur nicht verpflichtet, einem anderen unter die Arme zu greifen – er darf es nicht einmal. Und dies gelte gleichfalls für die Europäische Kommission."
or translated:
"this would be a clear breach in the Treaty of the Functioning of the European Union (TFEU), as the agreement since the Lisbon-Treaty is called.
The TFEU includes in Article 125 a „No Bail Out“ clause against buyouts of stumbling countries, explains Ruffert. Consequently an EU state is not only not required to prevent an other from falling - one is not allowed to. And this applies similarly for the European Commission."
Reading the articles, it looks like Article 123 and 124 also apply to this case:
Article 123
(ex Article 101 TEC)
1. Overdraft facilities or any other type of credit facility with the European Central Bank or with
the central banks of the Member States (hereinafter referred to as ‘national central banks’) in favor of
Union institutions, bodies, offices or agencies, central governments, regional, local or other public
authorities, other bodies governed by public law, or public undertakings of Member States shall be
prohibited, as shall the purchase directly from them by the European Central Bank or national central
banks of debt instruments.
2. Paragraph 1 shall not apply to publicly owned credit institutions which, in the context of the
supply of reserves by central banks, shall be given the same treatment by national central banks and
the European Central Bank as private credit institutions.
Article 124
(ex Article 102 TEC)
Any measure, not based on prudential considerations, establishing privileged access by Union
institutions, bodies, offices or agencies, central governments, regional, local or other public authorities,
other bodies governed by public law, or public undertakings of Member States to financial institutions,
shall be prohibited.
Vincent Dert
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