The math of the European bailout (using the EFSF or otherwise) is so easy even a cave-EUReaucrat can do it: It doesn't work. But leave it to Europe's financial ministers to figure this out in the literally last minute. As Bloomberg reports, "A 10-hour meeting in Brussels failed to yield a blueprint for banks’ role in a revamped Greek rescue as European finance ministers haggled over what they called a “credible firewall” against fallout from deeper writedowns." And now it's 5 start dinner time: "The ministers’ meeting broke up at about 7 p.m. after reaching agreement that European banks may need about 100 billion euros ($139 billion) in capital after marking their sovereign-debt holdings to market values, according to a person familiar with the discussions. This amount is needed to reach a core tier 1 capital level of 9 percent based on a European Banking Authority test, said the person, who declined to be identified because discussions are private." No, it's not, it's a joke. The number, once again for those who dare to approach "stuff" mathematically is anywhere between €400 billion and €1 trillion. But we give the EUReaucrats another 2 months before they comprehend this simple fact. Which means that tomorrow's summit which was supposed to be the "come to God" meeting which was expected to resolve all of Europe's problems, much to our, and every other non-momo's relentless snickering, will be a complete and total disaster. But fear not: because Europe has another 3 whopping days after that until Summit #2, when everything will be fixed. For realz.
The struggle to get an accord on bank capital was just one piece of solving the two-year-old financial crisis. Governments also are pushing for deeper writedowns on banks’ holdings of Greek debt, a step the investors are resisting.
“Discussions are making progress, albeit limited,” Charles Dallara, managing director of the Institute of International Finance, the umbrella group for 450 of the world’s biggest financial companies, said in a statement late today.
No, Chuck. They are not. But keep saying that. Next thing you know Greek debt-to-GDP will be back to 100% because Europe willed it to.
The negotiations were part of a six-day stretch of talks aimed at stopping contagion spreading to Spain and Italy as the turmoil pushes Greece closer to default, roils global markets and dents confidence in the survival of the 17-nation currency. Finance ministers now yield the conference tables after two days of talks to leaders, who meet tomorrow and on Oct. 26.
Negotiations among finance ministers from the 27-member European Union, including U.K. Chancellor of the Exchequer George Osborne, were repeatedly extended and the plenary discussion eventually broke off into small groups focused on particular issues after 4 p.m. Brussels time.
“We’ve had a 10-hour meeting, but we have made real progress and we have come to important decisions on strengthening European banks,” Osborne said. “That is just one part of the package and obviously there’s more work to do.”
Well, you have had a 10 hour meeting, that's right. But you haven't made any progress: the €100 billion number was floated a week ago, and has already been ridiculed by everyone with an HP-12C. Speaking of, in addition to printer cartridges from Hewlett Packard, can the firm with the rotating CEO please send some god damn calculators to Brussels? For god's sake!
THe BS continues:
Plans now being considered involve an exchange with a 50 percent reduction in net present value, or upfront bond exchanges into either AAA rated bonds from the European Financial Stability Facility or new 30-year Greek government debt, according to people familiar with the matter. Upfront exchanges could involve a 50 percent discount off face value.
“We remain open to explore options on a voluntary approach built on a realistic outlook for the Greek economy and restoration of Greece’s market access,” Dallara said.
Realistic outlook - like the 2013 Greek debt to GDP forecast mysteriously surging from 150% to 190% in... oh... 16 months ? And as we explained earlier to the 5 year old idiots who are in charge of Europe, a 50% haircut on Greek debt means that within 1 month or less, every other European country's debt situation will mysteriously deteriorate as first Ireland, then Portugal, then Italy, then Spain will all demand the same treatment! And if Europe thinks that its €100 billion recap of French banks (to call a spade a spâdé) will be sufficient once every PIIG lines up at the German taxpayer fund trough, we can't wait to quote this article in mid-Novemeber and copy and paste this line: "no, you pathological liars, it is not enough - total exposure to the PIIGS is trillions and trillions. A 50% haircut on Italian debt alone will push every bank on the continent into bankruptcy."
But, hey who are we to predict the future. After all we have career politicians (advised by JP Morgan none the less) and well-paid Economic Ph.D. out there coming up with far more "credible" solutions with every passing day.