Wikileaks Exposes German Preparations For "A Eurozone Chapter 11"

Tyler Durden's picture

The following cable from US ambassador to Germany Philip Murphy ("Ambassador Murphy spent 23 years at Goldman Sachs and held a variety of senior positions, including in Frankfurt, New York and Hong Kong, before becoming a Senior Director of the firm in 2003, a position he held until his retirement in 2006") "CONFIDENTIAL: 10BERLIN181" tells us all we need to know about what has been really happening behind the smooth, calm and collected German facade vis-a-vis not only Greece, but all of Europe, and what the next steps are: "A EUROZONE CHAPTER 11: DB Chief Economist Thomas Mayer told Ambassador Murphy he was pessimistic Greece would take the difficult steps needed to put its house in order.  A worst case scenario, says Mayer, could be that Germany pulls out of the Eurozone altogether in 20 years time.  In 1990, Germany's Constitutional Court ruled that the country could withdraw from the Euro if: 1) the currency union became an "inflationary zone," or 2) the German taxpayer became the Eurozone's "de facto bailout provider."  Mayer proposes a "Chapter 11 for Eurozone countries," which would place troubled members under economic supervision until they put their house in order.  Unfortunately, there is no serious discussion of this underway, he lamented." This was In February 2010. The discussion has since commenced.

Full cable, created on February 12, 2010, presented with no comments, and just the occasional highlight, as all of what Germany is really saying has already been said by us as well.

C O N F I D E N T I A L SECTION 01 OF 03 BERLIN 000181
E.O. 12958: DECL: 02/12/2020
¶1. (C) SUMMARY:  Chancellor Angela Merkel's government welcomed the decision taken at the EU's February 11 informal summit in Brussels not to provide financial assistance, for the moment, to cash-strapped Greece.  German officials believe a bailout is not needed at this time, and that extending a lifeline to Greece would have carried too many risks.  One major fear in Germany is that "saving" Greece would lead to other needy Eurozone members expecting the same treatment.  Another concern is that extending an explicit guarantee for Greece could weigh on Germany's own good standing in the markets, ultimately raising its borrowing costs.  While German government officials do not totally rule out an IMF program for Greece if push came to shove, most consider this eventuality highly unlikely, especially in light of the European Central Bank's strong opposition.  In fact, the German government, the ECB and private German economists are downplaying the seriousness of Greece's predicament and its potential impact on stability of the Euro.  They agree, however, that the crisis could have longer-term consequences for EU institutions and how they interact with member states that stray off course.  END

¶2. (C) Prior to the February 11 EU Summit in Brussels, there was much hair pulling in Berlin over the wisdom of participating in some sort of Greek rescue.  No one savored the idea of explaining to German taxpayers, already concerned about Germany's record deficit, that they would be footing the bill for the irresponsible behavior of another country. A Finance Ministry official explained to us that many Germans felt disgusted by the situation in Greece: "While Germans have spent the past decade tightening their belts and improving their competitiveness, Greek civil servants still earn 14 months' salary per year."  A recent editorial in the German daily Frankfurter Allgemeine Zeitung (FAZ) asked rhetorically whether Germans would need to work until age 69 just to finance early retirement for Greek workers.  With important upcoming elections in the state of North Rhine-Westphalia, bailing out Greece would not be a vote winner.
¶3. (C) The German government was, in fact, "relieved" that the European Council meeting on February 11 decided not to put concrete assistance on the table at this time.  Wolfgang Merz, Director for European Financial Affairs, German Ministry of Finance, told us that while Germany stands ready to throw a lifeline if the Greek government truly runs aground, Greece currently has access to capital markets and needs no outside assistance.  The key to overcoming the crisis will be the Greek government's implementation of the planned austerity measures, said Merz.  Bernhard Speyer, Head of Banking, Financial Markets and Regulation at Deutsche Bank (DB) Research, agreed that the EU struck the right balance: "The decision gave reassurances that Greece would not be abandoned, but kept the pressure on the Greeks by not yet putting cash on the table."
¶4. (C) Stepping in with assistance at this point carried too many downside risks, according to Merz.  Legal questions aside, a German or EU bailout of Greece might have harmed Germany's credit worthiness, thereby raising its own borrowing costs.  Merz added that a bailout would certainly have set a bad precedent for other Eurozone countries, such as Spain and Portugal, experiencing similar stresses.  (Merz acknowledged, however, that these two countries' problems were less acute -- a sentiment echoed by Speyer.)
¶5. (C)Still, there is some skepticism that Greece's austerity program will get the country's finances on the right track, even if fully implemented.  Merz said an IMF bail out remained on the table, despite the official line that the situation in Greece could be addressed within the EU.
¶6. (C) According to Karlheinz Bischofberger, Deputy Head of the Financial Stability Department at the European Central Bank (ECB), the likelihood that the IMF will be asked to bail out Greece is "zero."  Greece does not have a balance of payments crisis, so there is first and foremost no basis for the IMF to step in. Bischofberger added that apart from the damage to the ECB's reputation an IMF intervention would inflict, it was uncertain that the IMF could even succeed in doing the "political dirty work" of forcing Greece to implement a structural adjustment program.  DB Research's Speyer concurred, adding that [and IMF intervention] would undermine the credibility of EU institutions to manage a crisis.
¶7. (C) Talk of a possible break-up of the Eurozone is "absurd," according to Moritz Kraemer, Managing Director, Standard and Poor's.  He noted that Eurozone membership is still seen as highly desirable, and there was absolutely no incentive to exit, despite the allure of devaluation.  Any country that tried to leave the Eurozone would get hammered in the credit markets, exacerbating any underlying structural problems.  S and P estimates that Greece's rating in the case of an exit would drop to "BB " or lower, i.e. below investment-grade.  Even today, Greece's rating of "BBB " is higher than it was in 1997 ("BBB-") before joining the common currency. [ZH: HAHA]
¶8. (C) While the current crisis may have revealed an "Achilles heel" of the Eurozone, it may present opportunities, according to Klaus Masuch, Head of the EU Country Division, Directorat General of Economics, ECB.  The crisis is a "healthy warning signal" that Eurozone members must conduct "sound national policies in line with the agreed rules."  It also underlines the necessity of better integration and coordination of member state fiscal policies. 

The Euro will come out of this crisis strengthened, he said.

Better and stricter early warning and surveillance systems will be in place, and the Stability and Growth Pact will ultimately be reinforced. DB Research's Speyer agreed, adding that the crisis could make EU member states proceed more cautiously with enlargement.
¶9. (C) DB Chief Economist Thomas Mayer told Ambassador Murphy he was pessimistic Greece would take the difficult steps needed to put its house in order.  A worst case scenario, says Mayer, could be that Germany pulls out of the Eurozone altogether in 20 years time.  In 1990, Germany's Constitutional Court ruled that the country could withdraw from the Euro if: 1) the currency union became an "inflationary zone," or 2) the German taxpayer became the Eurozone's "de facto bailout provider."  Mayer proposes a "Chapter 11 for Eurozone countries," which would place troubled members under economic supervision until they put their house in order.  Unfortunately, there is no serious discussion of this underway, he lamented.
¶10. (C) Chancellor Merkel is clearly relieved she does not, for now, have to explain to the public why the German government is running up its own deficit to bail out debt-laden Greece.  Still, the German government appears prepared to step in as a last resort if needed and is cognizant that German banks (such as Hypo Real Estate and Deutsche Bank) and insurance companies (Allianz) have significant exposure to Greek sovereign debt.  The crisis is also viewed -- within the German government as well as within the ECB -- as a way to exert greater influence over the public finances of profligate Eurozone members.  Some Christian Social Union (CSU) politicians are even using the crisis to promote the candidacy of Bundesbank President Axel Weber as next ECB President, arguing that Weber's selection would send a signal that Eurozone stability is paramount. [ZH: Axel Weber was passed over for the post of ECB head and instead former Goldman staffer Mario Draghi was appointed] One way or another, the consequences of the Greece crisis seem likely to outlive the immediate situation.  One strong possibility is that German influence over policy in the common currency area will grow.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
oogs66's picture

Greece would be smart to stop paying their existing debt before this gets put in place!

bdc63's picture

NOW it's getting interesting ...



Pladizow's picture

Before you walk out of the bar for good, you run up your tab as high as possible!

Vampyroteuthis infernalis's picture

Yeah, and who is going to save Germany? Mass default bitchez!!

Mr Lennon Hendrix's picture

Who saves Germany?


Who saves the US?

The BIS.

Then the BIS makes everyone loan their gold to them, and they institute a global currencie, backed with all Central Bank gold reserves; the kicker is how debt owed would come into play, because there is no way China will let the US et al stiff them on repayment of debt.

That is, unless WWIII happens.....

oogs66's picture

maybe russia will save france and germany because they have such fond memories of those countries?

Uber Vandal's picture

Don't forget Sweden under Charles XII.

They invaded Russia in 1708-09, with the same results as France and Germany.

Then again, maybe Afghanistan might bail out the world with its trillion dollars or more of mineral wealth.

Pretty much every major power from antiquity to now has invaded that country. Holding it has been problematic for its occupiers though.


Popo's picture

Maybe a minor quibble, maybe more: why is the cable dated February 2020?

Vampyroteuthis infernalis's picture

Mr great musicians, I cry BS! The hole is too deep. They can print till the cows come home and it won't make a difference.

eureka's picture

US is bankrupt. Who bails out US?


1) US destroys EUR by rigging European countries with US garbage paper

2) US attacks Iran and Korea

3) US shafts China by making USD worthless


Oh regional Indian's picture

Wikileaks: Convenient, as needed to be released disinfo (always a little good info mixed in) but nothing too bad.


of Leaking wikis and true lies

Rick64's picture

 I am still undecided on this. You have the highly suspicious rape charges against him in which he just lost his appeal against extradition. Many members have left the org. (maybe coerced by threats?) . Financial blockade by BoA, Visa, Mastercard, Paypal, and Western Union which constitutes 95% of Wiki's income. Much of the BoA secret files were destroyed. Many companies will not do business with him. Now Assange and Wikileaks seem to be rendered impotent. Maybe he will be a U.S. puppet when they get done with him. Whose interests were served?

AldousHuxley's picture
  • What Does Plutonomy Mean?
  • Economic growth that is powered and consumed by the wealthiest upper class of society. Plutonomy refers to a society where the majority of the wealth is controlled by an ever-shrinking minority; as such, the economic growth of that society becomes dependent on the fortunes of that same wealthy minority.  


  • Investopedia explains Plutonomy
  • This buzz word was initially coined by analysts at Citigroup in 2005 to describe the incredible growth of the U.S. economy during that period despite increasing interest rates, commodity prices and an inflated national debt. Citigroup analysts argued that as such an economy continues to grow in the face of contradictory elements, the more important the society's ultra rich become to maintaining such growth. The analysts also believed that in addition to the U.S., Canada, Great Britain and China are also becoming plutonomies.


  • This interview was with a REPUBLICAN advisor from 2004 BILL MOYERS: With me now is a man who has been tracking the political and economic history of American wealth for a long time. Kevin Phillips and I were both young men in Washington in the 60s. We were on different sides but had a mutual interest in politics that reached workaday people. He was the chief political strategist for Richard Nixon's victory in 1968 and wrote the bombshell book on the emerging republican majority. Ten years ago his best-selling book on the politics of rich and poor influenced the 1992 elections. In his new book, WEALTH AND DEMOCRACY, he is writing about how big money and political power are the invisible hand in the hidden story of the American experience. Good to see you again.

KEVIN PHILLIPS: Well, the plutocracy ... and I think we have one now and we didn't, 12 years ago when I wrote THE POLITICS OF RICH AND POOR is when money has ceased just entertaining itself with leveraged buyouts and all the stuff they did in the '80s, and really takes over politics, and takes it over on both sides when money not only talks, money screams. When you start developing philosophies in which giving a check is a First Amendment right. That's incredible. But what you've got is that this is what money has done. It's produced the fusion of money and government. And that is plutocracy.

BILL MOYERS: But hasn't money always held politics hostage?

KEVIN PHILLIPS: Well, it's usually been very influential. And sometimes it really hasn't been too influential,

But what we've seen in the '80s and '90s is that it's taken control of both parties, pretty much taken control of the culture, and controls the whole dynamics of politics. And that is ...

BILL MOYERS: But the si- ...


KEVIN PHILLIPS: ... a plutocracy in a way that we haven't had before, since the gilded age.



Barbar's picture

he has enough street credibility to buy him an audience. but where's the substance? according to wiki we are supposed to believe that the state department is run by sophomore idiots who don't know afghanistan from yoghurt.

francis_the_wonder_hamster's picture

"there is no way China will let the US et al stiff them on repayment of debt."

I've often wondered how exactly China would ever be able to enforce collections from the US....what are they going to do, start hacking and stealing our technology? 

francis_the_wonder_hamster's picture

"there is no way China will let the US et al stiff them on repayment of debt."

I've often wondered how exactly China would ever be able to enforce collections from the US....what are they going to do, start hacking and stealing our technology? 

LeonardoFibonacci's picture

Germany about to go full retard & Merkel to use playbook à la Adolf Hitler: radical financial control! Reich will rise from the ashes.

NoClueSneaker's picture

It'll rain brain tommorrow, biatch  ... Get out and enjoy.


Es regnet Hirn morgen, du Penner. Geniesse es.


Sonnst kannst du mich am Arsch lecken mit deinem Scheiß, klaro ?

prains's picture

the douche mark may leave a stain

Careless Whisper's picture

Dewd, you're an idiot. You got it backwards. The EuroZone was created using Hitler's playbook. The EuroZone is what Hitler wanted all along. The people in the Euro have given up their sovereignty. They let a bunch of pinhead, unelected, unaccountable twits pass laws that they must obey.  What's the benefit to the people of belonging to the Euro? None, because other nations will still trade with them anyway. It's just another scam to promote the furtherance of One World government. But it's failed in the marketplace; so it's just a question of a slow painful ending, or they admit no more euro and go back to each country's sovereignty.

topcallingtroll's picture

It came about because the europeans had shortman syndrome and were envious of the freebies that accrued to the usa ( deficits without tears) and its stature in the world by the grace of its reserve currency.

I remember all the arguments for the euro and this was a common one. However it usually wasnt put so baldly.

The Europeans used to say things like "becoming more relevant in the world" and "have more control of our financial destiny."

Hahaha! This is one thing over the last two hundred years of europe imitating the united states that they shouldnt have done. The other thing is imitating our immigration policy thinking it would help them, but I digress. They even followed us on cigarette policy after first harumphing that starbucks and the united states had gone mad...but i digress again. Concealed carry is just around the corner for them if history is a guide....please somebody stop me...hose me down....

Rynak's picture

While i agree that the popular propaganda used to push the euro introduction was "being a big tradeblock like the other big boys, especially the usa", "freebies" were almost never mentioned..... and at least in germany, there is a reason for this: At that time, the "social net" in germany, was vastly bigger than in the USA at the time.... actually, precisely because of the euro, and to transform germany into an export-addicted nation, those "freebies" were axed significantly.

While one may argue, that the socialist safety net in germany before the introduction of the euro was overblown, the degree to which it was axed (in practice, below existencial legal limit) and the speed, had nothing to do with budget, and everything to do with wagedumping to make germany a pusher inside the EMU.

So yeah, sorry to say it despite of your frontal hate of anything even remotely socialistic for the lower-class.... freebies and the wellfare state had absolutely nothing to do with how the euro introduction was pushed. It in popular massmedia quite simply was "oh, then we're gonna be one big europe... and in terms of size can be like the other big boys, including the USA". So yeah, according to MSM, the euro was introduced for pure eco-penis envy, and nothing else.

Bunga Bunga's picture

Some facts before YOU go full retard: Most German corporations and banks (receiving the greek bailout money in the end) are owned by foreigners. Gold reserves are in the US. 50.000 US troops. No constitution, no peace treaty, it is not a sorveign country.

the tower's picture

Everything is the world is owned by foreigners, it's called stocks.



RafterManFMJ's picture



My Plan for Greece: I am available for consulting work.

Step 1.  Use next bailout check to issue every adult greek an assault rifle and bandolier of ammo. Cost: ~7 Billion Euros.

Step 2. Insist debt payment check is in the mail.  Stop answering your phone; chortle at the angry messages with heavy German or French accent.

Step 3. Strike trade deals with China.  Offer them an easy, duty-free port of entry into the soft underbelly of Europe. 

Step 4. Translate 'Come get some' into German and French, distribute pamphlets EuroWide.

Step 5. Reissue the Drachma 

Final Step.

Enjoy good laugh while at the beach over how you ever got a credit card denominated in Euros at the preferred German interest rate. 

Rynak's picture

Cool idea - just one little problem: It doesn't solve anything about greece's (and the other PIIGS') import-bias.... but actually increases it via the trade deal with china.

On the other hand, china is much further away than germany, so shipping costs may offset the lack of tariffs a bit. In any case, greece and other PIIGS would not be done with their work, just via such an arrangement. Unless they can repair their domestic market and local production, and employ tariffs on unfair exporters, they will still not have a balanced economy.

So, while exiting the eurozone is one important premise, leaving it is just an enabler - you still have to apply those opportunities which an EZ-exit grants.

RafterManFMJ's picture



Greece was able to do much to modernize its infrastructure with projects that simply would not have been financed without the fantasyland that is the EuroZone;  if they simply reissue the Drachma at a level of devaluation that makes sense, they are again competitive.  All the money they owe, default. This is the lesson to the bankster class - sometimes you cannot use threats and force to have taxpayers bail out your bad descisions...and ya don't like it? Grab a rifle and come on down!

And by no means leave the EuroZone. Make them PAY you to leave. Remember, there is no mechanism to force a member out.  You want the drunked up, wild-spending Asia canoodling Uncle out of the house? Pay him, silly bankers.

With a set of balls, Greece could be booming in 1 year while the Eurozone derelict lists hard to port, still taking on water.

For any consulting work, I must be clear I need to be paid in advance, in gold or silver. Nothing personal, you understand.

Rynak's picture

Okay, you go and try to win the bankster-game according to the set rules of the banksters...... if i were greece.... and actually, also if i were germany (which is where i live)..... i'd rather leave the casino, and built on being autonomous, balanced and souvereign. And that requires the ability to set up barriers against parasites.... something that is not possible while one is in the eurozone, because the whole point of the EZ, is to neutralize all such barriers.

That's not to say that i "know" that your proposal is impossible to work. I do not know that. But if i had to make a bet on the odds, i'd rather go with the "autonomous"-path, even if it may require more work, because there I'M in control of my destiny, instead of trying to win some boardgame designed by others.

By the way, i'm available for "uncommon sense" work. Paid not fully in advance, but in intervals - you aren't satisfied, you don't pay me. You don't pay me, i stop delivering to you - permanently. Don't really care about the currency for now, because i can convert however i want anyways at the moment - plus, i enjoy chatting with my local metal dealer.

Rick64's picture

In international law, odious debt is a legal theory that holds that the national debt incurred by a regime for purposes that do not serve the best interests of the nation, should not be enforceable. Such debts are, thus, considered by this doctrine to be personal debts of the regime that incurred them and not debts of the state.

 When you have politicians acting in their own interest while the banks and corporations profit at the peoples expense then this should qualify as odiuos debt.

PARIS - France and Germany, while publicly urging Greece to make harsh public spending cuts, bullied its government to confirm billions of euros in arms deals, a leading Euro-MP alleged Friday.

In 2008, allegations of bribery against Siemens surfaced after it was found that the company had paid substantial sums to government officials and other companies to win deals, including security contracts for the 2004 Athens Olympics and a contract for the Athens subway. Close to 100 million Euros in bribe money was involved in the case.

Just a few examples of politicians using and abusing the taxpayers then lining their pockets all the while preaching austerity. Audit the debt to determine what is owed and what is odious.

zhandax's picture

Lots of luck getting that enforced....most of the sovereign debt on the planet qualifies as odious these days.

Rynak's picture

Which is the reason for the whole problem, isn't it? All the unservicable debt they're talking about, is bogus.

It HAS to be addressed one way another - and it being addressed has nothing to do with consent. It simply cannot work, and the whole showdown right now, is about some degree of sacrifice for the sake of illusions, vs. saying "fuckit!". Mind you, the "fuckit!" part MUST happen anyways... the question is just how much of the "sacrifice"-part happens beforehand.

Phrased another way: The debt CANNOT be called in anyways. All the current game is about, is how much of it can be reigned in.

Any if you think that this implies any "loss" to them, remember: They never lended anything significant. They're just printing debt, and hoping that as much of it as possible is taken seriously - as opposed to getting the treatment it deserves: laughter.

Rick64's picture

True, but it has been done.

On December 12, Correa said that an interest payment due on Ecuador's national debt would not be made. He declared the country in default: "We are ready to accept the consequences". He described the debt as "immoral", saying the government would take its findings that past debt sales were tainted by graft and bribes to international courts

On June 11, 2009, Ecuador announced that it had successfully bought 91% of the bonds at a cost of 30-35 cents to the dollar. The Finance Minister said that the remaining bond holders will have another opportunity to sell their bonds at the same price of 35%. This move will nominally reduce the total foreign debt by $2 billion dollars (although it might lead to losing access to private financial markets in the future).

PulauHantu29's picture

Raise the Drachma from the Dead and pull out of the Eurozone and pay all those Banks with Drachmas ( that the Greeks will be able to print with abandon using the Fed as their playbook).

jdelano's picture

Had dinner with a Morgan trader and the middle market blowhard that was footing the bill on Saturday night. The trader (just promoted to md as his boss jumped to Merrill) asked me what I thought of morgan stock. I told him "I think you guys have 39 billion in unhedged exposure to French banks". He laughed and said "me too.".

covert's picture

germany has much bigger problems than greece


Mongo's picture

€ = Farce x Idiocy ^ n

zippy_uk's picture

Sorry - wrong operators in that expressionl. CORRECTION:-

€ = (Farce!) ^ (Idiocy!) ^ (n!)

Fish Gone Bad's picture

When problems become non-polynomial they are a bitch to solve in real time.

sethstorm's picture

€ = (Farce!) ^ (Idiocy!) ^ (n!) + $USD


the 300000000th percent's picture

is the ! just for exlamation or is it actually ! for factorial, because factorial would make more sense

Unprepared's picture

Corzine, mi corazón

Corzine’s Sach’s ex-parson,                                                   specialized in rape and arson

With few matches and kerosene,                                        shows what’s behind the scene

Your M.O. is asset coercing,                                                 leaving clients crying, cursing 

Markets in state of phosphene                                                    You too claimed “all’s fine”

Seeing all the stars and light,                                             they assumed the Futures bright

Even though you broker-dealer,                                        you managed to break the dollar

First, you went Zenga Zenga,                                                  betting on the Bunga Bunga

You proclaimed:  “Have no fear                                                Look, all our hedge is here!”

Then they came the margin calls,                                        Trichet, Merkel but no miracles

Peeked at accounts after-hours                                           You said VOSTRO is now ours

Let’s fake the sign and number                                                lest we fall before November

Had a crush for symbol.PK                                                      like Shakira on Gerard Piqué

Ticker’s now domain Pakistani                                               trusting theorem of Modigliani

Claiming this was just an error                                               same as Bush’s war on terror

While nailing M.F.’s coffin                                                     everybody heard you laughing

Knew you agent under cover                                                       No principal left to recover

Doing God’s work is no easy                                                 Ask N. Jersey ‘bout the sleazy

Yet you truly seem so Zen                                                           Your heart must be frozen

“Jon, me gustas mi corazón                                                 You’re a Goldmanite garçon

Time to sacrifice the minion                                                      for our enterprise dominion”

Clients said we want no haircuts                                       someone oughta be in handcuffs

Rub your a** with this wasabi                                                and give us some Hammurabi

Cramer came to their defence                                                    “Selling is a capital offense

Fringe Blogs and Tyler Durden                                            over’em lays the entire burden”

Obama’s their poster child                                                   Banksters, always on their side

“TOTUS, TOTUS on the wall                                                    Am I da best in recent poll?”

“No, there is bolder than y’all                                             His name is Congressman Paul”

“Can’t we just mark to unicorn                                             and avoid the orange uniform?”

“The Indian guy with diabetes                                                  takes the fall for what this is”

“We need something mo’ formal                                             just to get us back to normal”

“Tell SEC I need you Gonzo                                                      investigating lines of Ponzo

Whose stick is really bigger                                                      Sarkozy’s or Justin Bieber?”

CPL's picture

get a beat behind that and you'll sell a million copies baby!

john39's picture

"collapse" by akashik ancestorz, a new favorite tune: