The only thing in this world worse than Hank Paulson showing up in Congress with his initial 3-page TARP proposal giving him unlimited control over the US printing press? 12 non-Hank Paulsons, all of whom speak different languages, all of whom are hell bent on bailing everyone and everything out (just not on their political or physical dime...or 10 eurocents as the case may be), and all of whom have no idea how to bail out others' (and soon their own) economy... oh, and none of whom have access to Hank's reserve currency printer. In short, more than 24 hours after announcing a "bailout" of Greece, nobody in Europe has any idea what they need to do to actually "bail" Greece out. On the verge of tomorrow's summit during which it is widely expected that EU's new president Herman Van Rompuy will announce just what the details of [asset guarantee|debt purchase|IMF (aka US Taxpayer) to the rescue] plan will be, the utter cluelessness and confusion is unprecedented.
One modest proposal: send Larry Summers and have him exacerbate, er, fix, the European mess, by showing those pesky Burssels bureaucrats how we fix stuff over at Harvard, er D.C. In exchange, a grateful Europe can keep him. In perpetuity. With negative interest. He could even moonlight as the Oxford University hedge fund manager. After all nothing beats Two Stay Puft Marshmellow Men for the price of one.
Finance ministers from the main economies in the single currency area, led by Germany and France, worked through the night to let the EU’s new President, Herman Van Rompuy, save his first one-day summit from disaster by announcing a guarantee that Greece would not be allowed to fail.
There were sharp disagreements yesterday over how to restore market confidence in Greece, with the Netherlands continuing to argue for the Washington-based International Monetary Fund (IMF) to be called in despite strong opposition from Angela Merkel, the German Chancellor.
Germany will be expected to put up most of the money and after years of misleading Greek statistics, fiddles and broken promises of reform, the rescue plan is likely to infuriate conscientious German taxpayers. Nevertheless, it is increasingly seen as the least worst option. One possible outcome of the crisis would be the break-up of the euro.
The rescue is also seen as more attractive than getting a German state-owned bank to buy Greek debt, as that would only increase Berlin’s exposure to the risk of a crash in Athens.
One longer-term plan under discussion is the creation of a “European monetary fund” to avoid the humiliation of having to call in the IMF to save the euro. France and Germany in particular have invested a great deal of prestige in the euro.
And of course:
There is still a question mark over how markets will react even if the EU can agree on a bailout, because it may not satisfy demands for systemic change.
The clusterfuck reaches epic proportions as the European leaders realize that someone has to pay for their stupidity. That someone is gradually emerging to be, gasp, Uncle Sam (congrats America, you will soon LBO Greece).
Ruling out a role for the IMF, José Zapatero, the Prime Minister of Spain, said last night: “We have to support Greece, that’s clear, and it’s Europe and the Eurogroup which will do it.”
France, like Germany, is eager to avoid calling in the IMF. “We are not going to have Washington coming in to tackle our problems,” a French official said.
However, officials at the French Finance Ministry were reported by Le Monde yesterday to be favouring an IMF role in the bailout in order to take the weight off EU taxpayers.
In France, the crisis is being depicted by the Government and media as the product of immoral speculation by “Anglo-Saxon” banks and hedge funds. Mr Sarkozy, the first EU leader to sound the alarm over Greek finances, has seized on Athens’s predicament for his crusade to impose new regulation on the markets and the world economy.
Meanwhile across the English Channel, Gordon Brown is panicking, as he realizes that the €20 billion (and far more likely €60 billion) that will be needed to bail out Greece will have to come largely from his pocket. Yet if it does, he can just as easily resign tomorrow as he will likely be promptly crucified by Her Majesty's subjects.
Last night European officials were involved in furious efforts to try and complete a €20 billion rescue package, designed to halt the looming crisis in Greece before it spreads to other countries. France and Germany were at the forefront of the eurozone negotiations.
However, Mr Brown - when challenged in the Commons over Britain’s position - was unable to rule out Britain's involvement in a a Greek rescue package.
But the issue of other countries needing urgent help, as well as Greece, is also pressing. The economies of both Spain and Portugal are in serious trouble and their deficits spiral.
It means a total rescue package for the so-called PIGS – Portugal, Ireland, Greece and Spain – could be as high as €60 billion.
Britain contributes 20 per cent of the EU budget and any EU-wide bail out of either Greece - or the other threatened economicies - could, as a result, fall heavily on British shoulders.
At least Brown realizes that his political career is almost over.
Gisela Stuart, a former Labour Europe Minister, asked Mr Brown: "Could you confirm that any negotiations involving a bail-out for the Greek economy will be completely confined to eurozone countries and will have no impact on the UK?"
Mr Brown said support was available at an "international level" under the G20 agreement and added: “If the euro area wishes to move ahead with a proposal, that is for the euro area," he added.
Amusingly, after all the recent chauvinist posturing it seems that even the UK is once again looking at Ben to bail Europe out.
Mr Brown yesterday pointed to new G20 commitments to the International Monetary Fund which will enable it to intervene. An intervention by the IMF would be considered almost a last-gasp solution as some senior Brussels officials fear it is an instrument of American foreign policy.
Surely that is the best outcome: US citizens have proven completely oblivious to being robbed blind in broad daylight. After $23 trillion has already been pledged to pay for a few more Goldman Sachs G-V's what's another $80 billion in future increased taxes and US debt expressed in silly notation, between friends? At least the Europeans are willing to quickly go to the bathroom when the bill comes. America, on the other hand, is always eager to pay with the Taxpayer Platinum card. And tip handsomely. Especially if it means the dollar goes to zero and buys even more G-Vs for Goldman.
And just because you asked, we'll end this post not with pictures of striking grandmothers in Greece, but with another money shot of the marshmallow scourge from D.E. Shaw-cum-Harvard.