Goldman Recaps Germany's Eurozone Stance On The Eve Of Thursday's Critical, And Much Despised, EFSF Expansion Vote

Tyler Durden's picture

While we shared our brief summary of last night's lengthy ARD 1 interview with Angela Merkel, the Chancellor's views bear repeating since we are now just 4 days away from the critical EFSF expansion ratification vote to be held this Thursday in Germany. While expectations are for a prompt passage the downside, as improbable as it appears, bears some attention. Here is Goldman's Dirk Schumacher with a summary of what to expect this week out of Germany.

From Goldman Sachs:

Merkel confident to get sufficient support from ruling coalition on EFSF vote. Chancellor Merkel gave a lengthy TV interview yesterday. As the title of the interview ("Fight over the Euro") suggested the Euro was the main topic of the interview. Merkel highlighted again how important the Euro was for Germany ("we need the Euro, the Euro is good for us") and said she was confident that the coalition could rely on a majority within its own ranks for the EFSF vote this Thursday. Note, that a survey for ZDF television finds that a slight majority of those surveyed are not in favour of a Greek default. However, some 75% are against an expansion of the EFSF.

Merkel warned of a Greek default saying that it would be difficult to stem contagion in that case ("we are buying time for these countries to get their fiscal position in order"). However, she also made clear that the assessment of the troika (IMF, EC, ECB) was critical in that respect ("We would need to reconsider if the troika were to come back one day saying that Greece cannot make it").

Related to this, finance minister Schäuble suggested over the weekend at the IMF/World Bank meeting that the second Greek help package may need to be re-negotiated as the underlying assumptions would not be correct anymore. The finance minister also hinted at a possible further increase of the EFSF ("we want to use it as efficient as possible"), though he did not have a leveraging of the EFSF through the ECB in mind saying that "there are other possibilities within the framework than a recourse on the ECB".

The president of the constitutional court Vo?kuhle said in an interview with FAS that there are clear limits to what extent further power can be shifted on the European level. When asked whether the budget authority could be partially passed on to European institutions Vo?kuhle replied: "There is not much more room for shifting power to the EU. If this would be desired on political grounds, which might be politically the right thing to do, one would need a new constitution. This would make a referendum necessary. This can't be done without the population".

EU Commissioner Rehn said in an interview with Welt newspaper that the EU finance ministers will discuss in their upcoming meeting next week plans on recapitalising banks in the Euro-zone: "we need to step up our repair efforts in the financial sector in order to reduce the risk of a credit crunch".

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Fips_OnTheSpot's picture

Row, row, row your boat... to a safe heaven </sarc>

yabs's picture


Thw world is insane if people allow this

GREECE needs to deafualt end of stroy

Mr.Sono's picture

this reminds me when bunch of bankers running around and calling to each other then to fed. just like in 2008. lol funny. people going to start writing books about this soon. panic of 2011 or 2012. and wonder wtf did just happen.

Mr_Wonderful's picture

Pretty direct wording:


U.S. Treasury Secretary Timothy F. Geithner warned at the annual meeting of the International Monetary Fund that failure to combat the Greek-led turmoil threatened “cascading default, bank runs and catastrophic risk.”  - Bloomberg

Sudden Debt's picture

If you plan to fuck things up



Catullus's picture

"It is in the best interest of Germany to continue to bankroll the Italian 12 hour work week." -- Merkel

Merkel is there because she's your occupying regent, Germans.  In exchange for power, her job is to neutralize the CDU into not disrupting the Euro or movement to a pan-european state.  The social democrats are more than happy about the euro and are more than happy to allow Germany to be completely subservient to a pan-european government.  The old socialists put all their post Cold War marbles into this bet.  They'll let Greece default and maybe let a few banks go under, but they won't break the union up.  That's where they've drawn the line in the sand.

ivars's picture

Silver went to 26 on Monday, amazing! Exactly where it was predicted to land in this time in this March prediction chart(25-32USD corridor in H2 2011).:

and gold went to 1550! fantastic: Again, exactly where it was expected to be in this April prediction ( which predicted also the bubble-well I expected it to be there in November) - down to 1500-1600 in November 2011.And I expected bubble and crash in October- it happened in September..


guiriduro's picture

As if the banking system needs saving.  The real economy needs saving, the ability of willing workers to work and to consume need saving, the born and unborn taxpayers of the future need saving.

The interests of the banking cartel and the investor class who failed to oversee them absolutely do not need saving - they took the risks and enjoyed the rewards, and now it looks like their capital might be at risk, they want to socialise this either on German taxpayers, or by austerity, on Southern european workers and taxpayers now and in the future.  That must not be allowed to happen.  The idea that we need the banking system "recapitalised" via any public mechanism apart from them going out and selling their failed business models to rich Arabs, is ridiculous.  Let failing businesses fail, banks of whatever size are no exception.  Depositors (for whom the word deposit is used, not bank bondholders or other creditors) deserve state protection, but States (and their taxpayers) also need protection - so the state deposit protection schemes must be legislated into super-senior position on failing banks assets so these losses are not passed to taxpayers via the back-door.

Yes, we need affordable credit solutions going forward, and here the sovereigns and the EFSF/ECB can step in, to help household's and SME's liquidity, but this can as easily happen via newly-created, debt-free credit unions and need not involve any of the zombie banking sector and their huge, underfunded, risky debt pile of old.  Some pension funds would also get wiped out, but that would be a good lesson for future pensioners when seeking out the best pension fund and measuring its risk management, not a reason to save the whole creaking, failing mass of casino capitalism as it stands.  I, for one, would leave the EU if it pushes onto taxpayers or workers any unnecessary burdens and austerity measures that ought to have been taken as losses by the malinvested investor class and the maverick banker spivs they lauded.


Coldfire's picture

If voting changed anything...

Peter K's picture

Looks like the leveraged ECB has been accepted by the German elites.  Just don't want to talk about it before Thursday's vote.

Moneyswirth's picture

Frau Merkel is putting up a pretty strong front in support of the eventual bailout of Greek deadbeats.  "Germany supports this if necessary, etc. blah blah blah"

I wonder what the actual German people are thinking.  How long before we see the disastrous results of the toxic brew of desperate nationalism spurred on by abject financial depspair?

Cast Iron Skillet's picture

Actual German people are really pissed off that their hard-earned money is to be used to bail out other countries. I know folks over here who really get all red in the face talking about it.

Merkel stands a good chance of getting the legislation passed, but might not be able to count on her own party for enough votes. The SPD (Social Democratic Party = opposition party) has stated that they will jump to her aid to get passage. If the EFSF bill passes, but without a majority from the CDU (=Merkel's party) voting for it, her government is toast.

Lord Welligton's picture

("We would need to reconsider if the troika were to come back one day saying that Greece cannot make it").

Well I can save you some time and expense there angie.

Greece can't "make it".

Outlaw Of The Wasteland's picture

wote? we don't need no stinkin' wote


yabs's picture


It is in the interst of Germns to support greeks to retire at 50 and pay no taxes and let french banksters keep their bonuses

kurzdump's picture

The German people are not too happy about that. However, as they do not "feel" any direct impact on their personal balance sheets they do not care. Shit would become real once taxes are increased or rating agencies step in to downgrade their beloved country.

TradingJoe's picture

It's window-dressing at it's best, no matter what happens them bonuses need a home :)))!
As to what the Germans would do or not do, only time will tell and the social unrest movements coming soon to a German town near you!
What we see, are in my humble opinion, nothing but last spasmic moves of a dead cat that has exhausted it's nine lives a long time ago!

CrashisOptimistic's picture

This is nothing more than Goldman trying to lower expectations and get a SPY bounce out of news of passage.

The German opposition parties are more in favor of Greek bailouts than even Merkel.


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