Rally Killer? German Report Says "EMU States Can't Guarantee Other States' Debt"

Tyler Durden's picture

Confusion reigns day 2, only this time add a pinch of political dissent. Germany's ruling coalition of the Free Democratic Party and the Christian Democratic Union has commissioned a parliamentary report which concludes that "member states may not guarantee the debts of another member state" reports daily Handelsblatt.

Market News reports:

Germany's government is not allowed to help Greece, as such aid would violate European Union law, German business daily Handelsblatt reported Wednesday, citing an internal report from the German parliament.
The legal report also rules out any form of financing of the Greek budget through the ECB or national central banks.

"Moreover, member states may not guarantee the debts of another member state," the report argued.

From Dow Jones:

A German parliamentary report has concluded that many forms of potential aid to the Greek government would violate European Union regulations, the Handelsblatt newspaper reported on its Web site Wednesday.

The parliamentary report states that aid from the European Central Bank, the national banks of euro-zone members, as well as euro-zone governments, would violate EU rules, the Handelsblatt said, citing documents reviewed by its reporters.

"The member states also may not answer or stand in for the central government of a member state," the report says, according to the newspaper.

Members of the Free Democrats, the pro-business party that shares Chancellor Angela Merkel's center-right government, have reportedly urged the government to take the report seriously.

Euro-zone finance ministers are scheduled to discuss Greece's mounting budget woes in a conference call Wednesday afternoon.

And here is the Google translated section from Handelsblatt directly:

FRANKFURT / BERLIN. "For the bilateral aid, the same as for EU aid: they are not on the agenda," it said on Wednesday in German government circles. There are no plans for support of this kind. "The acquisition of debt by other countries (from the EU) is inadmissible, that says it all," said government representatives. The EU's current ban on a joint rescue operation for a country also applies to the national level. "Basically, the bail-out ban is not only for Community instruments, but also for bilateral," it said in the circles. "There's no doubt about the solvency of Greece. There is also no financing needs now, "it said.

An internal
report of a research department of the Bundestag, held by the
Handelsblatt, Moreover, it is having regard to current EU law, that the
Bundesregierug Greece may reach under her arms.
The Parliament's legal experts warn that Berlin before a rescue package. They exclude, in its opinion not only any form of financing by the Greek budget by the ECB and national central banks. "Also, a Member State shall
not be liable for the debts of the central government of another State,
or advocate," write the lawyers.
Explicitly states that: That's Germany was also bound

The legal view is shared by the chief economist of the Allianz Group, Michael Heise. He
recently showed in an interview with Handelsblatt online to possible
legal problems in Greece-Aid, since the Maastricht Treaty a "bailout",
an assumption of debts of individual countries by the community,
generally excludes.
Heise has therefore advised to provide EU aid
to state indebtedness "only in exceptional cases," but does not advance
in prospect, especially since the current financial distress of some
euro area countries not due "primarily to the financial crisis, but a
consequence of long-term budget deficits and partly creative accounting
is ".
Was therefore primarily to improve the prevention and the general discipline of the euro countries in good times. "Issue rules, as envisaged by the Advisory Council could help here," said Heise.

According to the violation of the FDP parliamentary report commissioned
report including financial support for Greece with the Treaty on the
Functioning of the European Union (TFEU), designed to ensure sound
fiscal policies in the Member States.
financial expert Frank Schäffler called on the federal government to
take seriously the opinion: "It does not help the alcoholic by him one
puts down a new bottle of liquor,"
said Schäffler.

what extent bankrupt EU countries by other EU countries can be helped
to actually be read by the Treaty on European Union (EU Treaty, EU
However, the wording of the 1992 Maastricht Treaty
signed in are vague and leave room for Intepretationen in one direction
or another.
Thus, for example, in Article 103 that
the European community, "not for the commitments of central governments
of Member States (...)"-like, the other opens up the possibility of
Article 100 to help.
It says: "If a Member State due
to exceptional events, is beyond its control, the difficulties or is
seriously threatened with severe difficulties, the Council may, acting
unanimously on a proposal from the Commission, the Member State under
certain conditions, Community financial assistance to grant."

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Anonymous's picture

So Germany ends up bailing out Deutsche Bank when the CDSes all come due instead.

Seems like the same thing to me.

Assetman's picture

If the Germans are resigned to bailout someone, I'm pretty sure they would choose a domestic bank over Greece.  I certainly agree with your sentiments.

I think the reality of the situation is that the Germans are (and should) rightfully demanding an austerity plan for Greece that can actually be enforced-- BEFORE any money is given.

The political situation in Greece is so dicey, though, that forced austerity will not sit well with a workforce realy to go on strike.

I'm not surprised the EU/Greece is exploring the IMF avenue-- but there will be austerity strings attached as well.

If the Greeks were fortunate and managed to get a no conditioned bailout package, I gather the French would be the ones funding it.

Anonymous's picture

An IMF bailout would make life easier for the EU politically: let greedy yankees/heartless globalists take the stick for all the nasty austerity.

A Man without Qualities's picture

I agree - any financial arrangements must come after the strikes and riots etc, so the Germans don't get cast as the villains of the piece.

One of the big problems is the highly corrupt union heads in Greece, who see this as an opportunity to increase their personal power and the more they can destabilize the country, the better for them.

Anonymous's picture

Why can't Germany just say FU and declare CDS and CDO contracts as illegal contracts and declare a moratorium for Banks that reside inside German borders?

It seems this crisis is going to make winners out of the ones with political fortitude.

There won't be many winners in this though. Germany could be one of the few and not just be a winner but excel exceedingly.

Anonymous's picture

What's scaring me is that a nation with, what? Half a dozen failed bond auctions? is now the de facto bulwark of this monetary union.

bokapita's picture

If the Greeks were fortunate and managed to get a no conditioned bailout package, I gather the French would be the ones funding it.


What with?

Assetman's picture

Chesse, wine, and old French Francs, I'd gather. LOL!

Anonymous's picture

Well if thats the case, the euro will weaken and risk aversion is on again.

I wonder if there is any way the US can step in and help guarantee some greek paper? That would seem like a likely scenario...large hedge fund, sells the CDS's then covers the payments to capture payment over CDS duration.

Hephasteus's picture

Or not. Which is why i keep getting pointed to something happening at Deutshce Bank. I don't like some sort of karmic retribution for pumping billions of dollars into germany and hitler and causing a bunch of problems and then making the citizens carry the shame for it when it was all done by 3 freaking banks.

The fact that they are running thier own CIA, KGB type operations outside of the government facade may be opening them up to attack as well.


Cursive's picture

Like sands through the hourglass, so are the days of our lives....

Postal's picture

That's so wrong...


tpberg7's picture

Guarantee Greek Debt?  A Socratic Fallacy!

Going Down's picture


Here Comes the Calvary!


IMF help with Greece may be unavoidable

WASHINGTON (Reuters) - If the European Union can't quell concerns over Greece's debt burden, the International Monetary Fund may have to step in, whether or not its help is welcome.



perchprism's picture


So the US contribution to the IMF via our taxes will be used to bailout Greece.  Great.  That's just swell.

suteibu's picture

Did you really expect any other outcome?  Really?

Cognitive Dissonance's picture

And thus another round of Bailout Bingo commences. Who will it be next week? Stay tuned and find out.

Anonymous's picture

Rally continues. It MUST continue. Otherwise oh dear.

Missing_Link's picture

Oh Good Lord  ...  Not Cetin Hakimoglu!!!

Cetin, you already destroyed SeekingAlpha by posting thousands of trolling comments on every single SA post for the last several years.  You're an idiot permabull with no useful insights.

Please, please, moderators  ...  For the love of all things sacred, ban this horrible troll!

Anonymous's picture

Yeah, it's amazing how you're redirected to their website a few seconds after the page with the chart pops up.

Stinker, me thinks.

Anonymous's picture

What a DICK
redirects are a very good way to make lots of enemies...

Moderators need to kill this slime – showing up several times in every thread now...

Domain Name.......... iamned.com
Creation Date........ 2007-07-26
Registration Date.... 2007-07-26
Expiry Date.......... 2010-07-26
Organisation Name.... CETIN HAKIMOGLU
Organisation Address. PO Box 61359
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Tech Name............ TECH PrivateRegContact
Tech Address......... PO Box 61359
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Tech Address......... Sunnyvale
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Tech Email........... contact@myprivateregistration.com
Tech Phone........... +1.5105952002
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Name Server.......... yns1.yahoo.com
Name Server.......... yns2.yahoo.com

Going Down's picture


Bloomberg Fail


See Financial Times' page dedicated to news and opinion on Greece.





infotechsailor's picture



nogeithner's picture
nogeithner (not verified) Feb 10, 2010 10:13 AM
Anonymous's picture

Hey this is interesting Greece moved up to #27 in GDP this weeks ranking according to Wikipedia. They must got a big Olive oil order.

Im going to throw a dart to see which little tourist mecca gets the honor of moving the worlds economy around like underwear in a washing machine next. The fun house has many rides. Think my next job will be sprinkling Pixie dust on the Tilt-A- Whirl or barking for the Yak Lady.


MsCreant's picture

PMs crash with the stock market because everyone is selling off to get cash for margin calls? Dollar up!

bugs_'s picture

USA on the hook for it all, not just Greece.

Euro at par.  Backed by the full faith and credit.

Anonymous's picture

Maybe you missed the announcement. Right before GWB was booted out of office and the idiot in waiting was voted in, GWB announced a new economic sphere of cooperation with Western Europe. Part of the New World Order. What I don't get is that Europe is land locked so how can it become part of Oceania, I always thought it was part of Eurasia. And what will Eastasia think about this?

Oh well, 2 + 2 = .......eh, um, uh, (struggling) 4?

Whew! Finally got it right!

MsCreant's picture

Could the Big boys actually let things crash by not propping them up to sort of black mail tha EU into a big fat greek bailout? PPT is home cause it's snowing...heh heh

Edna R. Rider's picture

It's my impression the rally was killed back in mid Jan.  Now the goal is to keep the market from crashing.

Grand Supercycle's picture


No more counter trend rally: the SP00/DOW downtrend and the USD uptrend reasert their dominance yet again.

This is very bearish for equities.


HEHEHE's picture

Why would they set the precedent of bailing out Greece knowing Spain, Portugal, Ireland, and Italy all will come next with hat in hand?  Especially as has been pointed out the German banks have all kinds of bad debts they've yet to recognize and will be crying for a bailout soon enough.

georgetown's picture
georgetown (not verified) Feb 10, 2010 10:44 AM

Obviously, this is the start of many more bailouts

good articles: http://stocknews.freeoda.com

The next shoe to drop and look out below.

Anonymous's picture

What a crappy way to redirect everone to your lame website.

At least the ZH has original material, all you can do is provide links, most of which I prefer not to read.

chindit13's picture

Strong bid in all the banks.  For the past nine months, when this has happened on down days, the market ramped up into the close.  Today's question is does this pattern repeat, or does fear of saying a final goodbye to the Dow 10,000 party win out in the end?

mberry8870's picture

This will be interesting. It is clear that Greece will get bailed out by something. I want to know where it stops. The intersection between the idiocy of bailouts and the recognition of the implications of the bailouts will make for a very interesting trading day.


Coming to a movie theater near you, and very soon!

Anonymous's picture

When you're the Federal Reserve and all you know is Keynesian voodoo (inflation, or the raising of dead markets), and are extremely fearful of deflation, almost to the level of pathalogical paranoia, then bailouts are your soup du jour.

Eally Ucked's picture

There is no way out of this s..t. If they bail out one country the next week they will have 2 more to bail-out. Who's faster the better, there won't be bailouts for those at the end of the line-up! The same with states, no different situation here. What those guaranties from different governments mean? They have their own debts which have accumulated through decades, they could not even lower their own debt load and now they guarantee somebody elses' debt, what a pile of horse manure good for cretins!!! 

Anonymous's picture

At some point soon, we just have to realize and embrace the fact that we can't keep layering fraud upon fraud, with taxpayer cash dumped on top to keep the plates spinning for another month.

Sooner or later, this whole house of cards NEEDS to come tumbling down, so we can start a REAL and meaningful recovery, not just a pretend one.

We will realize we will have bailed out the world, and are still DEAD BROKE.

Stop the bailout madness and sue/Jail the banksters that got us here!!

Anonymous's picture

The EU imposes a discipline upon government theft.

Anonymous's picture

Germany must get out of the euro. The sooner the better. Then the ECB must be allowed to print and buy PIIGS` debt at will. The Germans will benefit too by repudiating their euro denominated debt. The money they save by not paying government debt will be used to save the banks.

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