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DAX Crashes After Germany Warns Greek Bailout "Insufficient"
With the Greek bailout deal now nearly done, all that stands in the way of disbursal is the Greek parliamnent and a predictably incalcitrant Germany which, according to Bild (citing EU sources) has now determined that the new bailout plan is "insufficient." Lawmakers reportedly want "immediate answers" to three questions. Here's the summary, via Bloomberg:
- German govt sees agreement between creditors and Greek govt on 3rd bailout as insufficient, Germany’s Bild-Zeitung reports, citing EU officials it doesn’t name and written Finance Ministry analysis.
- Germany sees open questions regarding participation of IMF, debt sustainability and privatizations
- Implementation of many measures not foreseen before October or November
- “Some very important measures are not yet implemented and are not specified”
- Three basic questions must be answered immediately:
- Whether IMF agreed to all terms of bailout completely
- Whether debt sustainability can be secured although debt relief is planned to take place only later
- Whether independent privatization fund can start work quickly and could take over Greek banks
- Analysis criticizes that agreement falls short of almost all decisions taken by special euro region summit in July
And meanwhile, German 2-year yields have collapsed to record lows:
And The DAX is getting hammered...
... in fact, German stocks are now down -6% in the last two days, their biggest two-day fall in 4 years! The reason: German exporters are very focused on Chinese demand, and with a devaluation in the CNY, it means far less profits for Germany's most important economic and financial sector. In fact, it is for the sake of German exporters why the Euro exists in the first place.
For those interested in the full Greek tragicomedy update, read on:
On Tuesday, in "Third Time’s The Charm? Greece Agrees To Bailout Amid Rampant Skepticism," we argued that although formal discussions between Greek officials and creditors’ on-the-ground technical teams look to have concluded "successfully" (whatever that means in the context of Greece), there’s still quite a bit of political wrangling ahead if Athens hopes to use a portion of the new bailout funds to make a €3.2 billion payment to the ECB next week.
As absurd as the ECB “deadline” is - this is all just one circular funding scheme - it’s perceptually important. That is, the ECB can’t afford to be seen as supportive of the Greek banking system via ELA if Athens defaults on its SMP debt. Additionally, Greek banks desperately need to be recapitalized, and because €10 billion we be funneled immediately to the banking sector once the ESM program is formally in place, Athens isn’t keen on being patient.
Here are the details of the bank recapitalization effort as outlined in the bailout proposal (via Bloomberg):
- EU25b buffer for Greek banks available under bailout deal to address bank recapitalization needs of viable banks, resolution costs of non-viable banks
- Following assessment of 4 systemic banks’ capital needs by ECB and submission of capital plans, remaining identified capital shortfalls will be addressed fully by end-2015 latest
- Law relating to govt guarantees on deferred tax assets will be amended to minimize funding
- Additional measures and actions may be needed in the future to resolve NPLs issue
- Bank of Greece will deliver report on segmentation of NPLs on banks’ balance sheets and assessment of banks’ capacity to deal with each segment by end-Oct.
- Greece must establish judicial framework for corporate and household insolvency, establishing of Credit and Wealth Bureau as independent authority, amending the out-of-court workout law, fully operationalize specialist chambers for corporate insolvency within courts by end-Nov.
- Greece must introduce coordination mechanisms to deal with debtors with large public and private debt by end-Dec
- Bank of Greece to agree with banks on operational targets for NPL resolution, creation of joint ventures by end-Feb. 2016
- Banks will report quarterly from June 2016 to the BoG against key performance indicators
- By end-March 2016, Bank of Greece will revise Code of Conduct for debt restructuring guidelines to deal with groups of borrowers
- Greece has by end-June 2016 to assess effectiveness of insolvency legal and institutional framework and introduce any necessary amendments
But as the German finance ministry made clear on Tuesday, this can’t "just be about Aug. 20 and an installment payment, but really about how, together with the Greeks, we can have a lasting solution for Greece."
Of course any “lasting solution” will have to include debt writedowns and the IMF has wavered on whether the Fund will be willing to participate in the absence of debt relief. We got some indication on Wednesday as to what a compromise between Berlin and the IMF might look like on this. Here’s Reuters, summing up the original report in Die Zeit:
The German government is looking at whether the European Union could provide guarantees for Greek debt to the International Monetary Fund (IMF) in order to keep the Fund on board and avoid the need for major debt relief, German weekly Die Zeit reported.
Without citing its sources, the paper reported on Wednesday that the idea meant that "if Greece ran out of money, the Europeans would jump in and the IMF would suffer no losses. In return, the Fund would no longer demand extensive debt relief."
The plan would thus fulfil two key demands made by German Chancellor Angela Merkel - keeping the IMF involved and avoiding a debt writedown.
So in order to avoid having to writedown a portion of its Greek debt, Germany will effectively guarantee all Greek debt. The part that's unspoken here is that Germany would rather guarantee the entirety of the IMF's contribution than risk emboldening Podemos (the party that some liken to a Spanish Syriza) ahead of general elections due before the end of the year. Substituting a guarantee for debt writedowns would presumably disabuse Podemos of the idea that debt relief is possible.
This "rumor" was promptly denied:
- GERMANY ISN’T WEIGHING EU GREECE GUARANTEE FOR IMF: WEISSGERBER
Meanwhile, German Chancelor Angela Merkel reportedly told Greek PM Alexis Tsipras that she would prefer it if Greece were to apply for a bridge loan from the remainder of the funds in the EFSM rather than rush into the ESM program. Here's Bloomberg:
Merkel discussed Greece on Tuesday with Francois Hollande of France and commission head Jean-Claude Juncker, as well as with Tsipras. Greek television cited unnamed Greek officials as saying that Merkel also spoke with Tsipras on Monday evening, telling him she would rather he asked for a bridge loan. Her office confirmed the call though refused to discuss its content.
Pressure is building on Merkel after 60 lawmakers from her caucus voted against opening bailout talks with Greece last month. Having survived that revolt, party leaders want to avoid another situation in which members are again summoned back from their summer recess at short notice to prevent a Greek bankruptcy without adequate information on which to base their vote, the two officials said.
But the bridge loan would require the backing of non-euro countries, which proved politically difficult last month, meaning that German lawmakers' vacation plans will in all likelihood have to be interrupted in order to rush the new bailout through the political approval process. As for Greece, the 400-page bailout agreement has been submitted to parliament and lawmakers are expected to vote on the deal by the end of the week.
In the end, this will likely all be for nothing, because as we've said before and as Capital Economics told AFP this week, "the extremely optimistic economic and fiscal projections underlying the plan suggest that it might not last for very long."
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Germany is still fear mongering to close that budget deficit I see. Here Germany, take my money and hold it for me. I'll even pay you.
So much talk about loaning the Greeks more money. Pathetic.
Greek pussies
Almost as big as us of a
Right just send them the money already. Kick the can before it gets filled up or your leg WILL hurt
True schadenfreude would be Germany demanding a bail out from the IMF in a few months.....
Now thats one dip I wouldnt buy
STAWKS DOWN?? THIS IS BULLSHIT!!!
JPM down 3% today. If that isn't telling I don't know what is.
Also don't forget stawks are a leading indictor. This is signaling recession in the mainstream economic field. This looks like the crash we have been waiting for.
This crash will not just see stocks fall but all fiat currencies. This is a currency crisis. Look at the Swiss, China, Europe. Everyone is devaluing at a rapid pace but there are no returns.
Diminishing returns are a bitch when it all goes up in flames. Be your own bank to withstand the fire.
BUY SILVER
If this is truly the crash we have been waiting for then long time coming! Been waiting for this shit show to start for 2 fucking years. 2 fucking years of being short squeezed, my balls are like raisins right now.
lol I know how it is. I've been short for the last year. Here's the thing though, I've continued to purchase silver rounds. The feeling I get when I walk into the coin shop and buy silver sub $20 (including the premium) is exstacy. So even though my fake paper bets haven't made me money, knowing that whatever happens I physically own my wealth gives me the greatest peace of mind.
Just wait a bit longer. The Shemitah is September 13-23. I don't believe in jewish god interventions, but after 3 recessions which could have happened at any moment and than happened on 29th of Elul on the Jewish calendar I have a just enough reason to believe it will happen again. Figuring out the exact cause leads to 3 possible positions:
1)the god/devil is real and takes quite a bit of interest in economy,
2)the market fundementals always drive toward a 7 year cycle regardless of interest rates, societal equality, levels of investment,
3)someone aims to have steam let go on these dates. Someone jewish or jew affecianado, someone who has the resources to make the can kicking happen, someone religuos or who want others to be.
The truth is .com could have burst at any moment, but the can was kicked to 29th of Elul. The Lehman brothers as well could have gone out the door at any point since the end of 2007, but the can was kicked to 29th of Elul. An interesting video by Christine Lagarde. Dismiss the comments.https://www.youtube.com/watch?v=QYmViPTndxw
As for Greeks, there is no way out but an autarky and full debt default. It is neccessery for them to learn what it means to live withing their means. It is also neccessery for creditors to learn that this is a possibility which needs to be factored in risk calculation. It is neccessery for northern Europe (sufficit countries) to learn that they can not grow their economies any more if their consumers (the south) cannot pay for their products. Here we come to another possible but in the end impossible option. That in order to grow the economies of the north, these economies must transfer accumulated wealth to south countries. No credits, just wealth. And control the south's spending by creating a EU anti corruption agency where germans, dutch, finns, norwegians can control how their money is spent.
Greek bailout problems? But those were fixed!
:)
The real secret is that money is free, created from ether, no need for anyone to work.
Once that realization "trickles down" all central bankster economies will be unsustainable.
Go long ether!
Greece should hit up the State of Wisconsin for a bailout. That state must be super rich if it can afford to give $400 million in taxpayer money to fund an NBA arena.
http://www.huffingtonpost.com/entry/scott-walker-signs-arena-deal-handin...
Scott Walker, Man of the People and poster child for the modern-day GOP.
Not a bad idea actually! They do have cheese in common..
Its amazing how many people who are squeezing the nuts of the Greek people, like dried up olives to extract the last drops in them, suddenly realize and shout "This ain't gonna work" !
After Lagarde of the IMF, after Juncker of EU, after Hollande of France, after Draghi of ECB, now the head torturer himself : Germany says : these nuts are dry!
When the Inquisition grows a brain maybe reason will checkmate blind greed, fear and prejudice.
These Germans are supposed to KNOW how to count, but only seem to act like they know how to make a kunt dry or a Kant lose his head.
I really would like to know who you are and why you are what you are.
Maybe you should write books or you do it anyway.
we are at a point in which the media not only spins news in the direction their masters tell them to, they lie and misreport on the news developments. german media said all along that this deal was not approved and still major hurdles remained, while our corrupt puppet show media claimed that is was a done deal.
there is not one cog in our system that is not rotten.
Does this mean that Greece is going to default?
I'm not certain when to BTFD before QE4 because I don't know how low pension funds are allowed to drop. I would say that it was Dow 1300 two 1/2 years ago so maybe Dow 1500 then BTFD.
Endless pit.ECB is the MoneyHoney.
Of course its not going to be enough...how would they get a free lunch every day at some meeting if they did not keep this going....milk it for all its worth...with someone elses cash of course....
The game of controlling the sequencing of managing the disasters - one at a time - is unraveling as the magnitude of the moves and their interrelationships becomes increasingy difficult to predict in a complex system
the balls cannot be juggled - it is failing - the Banks are FUCKED and so will many hedge funds blow up
Germany won't be happy until every german household has greek slaves. I guess the greeks wouldn't mind that too much since at least they might stand a chance of getting to eat.
We need to put an end to this debt business, and sentence anyone wanting to borrow or lend to death.
hmm... so this may actually end up w/nobody getting what they want & everybody getting what they feared: greels eat the pain grexit would have caused but remain german vassal while germany could end up eating full defaults instead of controlled, negotiated haircuts.
if the potential consequences to both (&rest of world) weren't so dire it would be eminently fitting...
Just reading between the lines, the real sticking point seems to be the NPLs. The Germans want to make absolutely sure that the Greek individuals and businesses that owe those debts to the Greek banks don't escape with their assets via a non-formal debt jubilee through non-enforcement of bankruptcy proceedings, or through formal means of debt forgiveness.
Of course it's "insufficient" it should be an infinite amount for eternity like QE.