The Impending EU\Greece Deal

It appears that a deal involving the EU and Greece is imminent. Greek bond yields hit their peak level in the current crisis, the ECB has altered its rules for collateral and the media are reporting that a deal is in place (here and here.)

The FT reports on the negotiations over the terms of the deal:

Officials added that Germany was sticking to its demand that the eurozone portion of the loans would have to be made at or near Greek market rates of 6 per cent or more, though this could lead to different rates being charged by other countries.

One said the agreement “reflects high rates … it is not a ‘subsidy’ and thus not a climbdown. Not even the Germans regard most recent rates as market rates”.

The FT also editorialises on this, blaming the Germans for failing to calm the bond markets sufficiently:

Berlin is also adamant liquidity support be given at market rates. This makes no sense: a rescue is needed precisely when debt markets cease to function and refuse to refinance Greece at sustainable rates. Insisting that a rescue takes place at “market rates” is to insist no rescue takes place at all. Market yields reflect this contradiction, and show that Europe has not yet put its money where its mouth is.

I have a tendency to question agreed wisdom so let me play the role of academic devil’s advocate here for a second. Ultimately, Greek fiscal stability will require a combination of lower spending and higher taxes. Yes, bond yields at current levels—if sustained—would be unlikely to be consistent with long-run fiscal stability.

However, a program that

(a) Made it clear that Greece would be able to roll over private sector debt because the EU will intervene to provide the funds

(b) Credibly lead to the adjustments in Greece’s structural deficit.

should stabilise the fiscal situation in Greece and lead to a return to lower borrowing rates for Greece. That the EU should charge a high interest rate for providing the funds for (a) and overseeing the program for (b) is, it could be argued, not unreasonable. Indeed, if the rates associated with (a) are not high enough to be painful then it may be difficult to get much traction going on (b).

Of course, the Greek government is going to look to get the interest rates on its assistant loans set as low as possible. But that doesn’t mean that a percent here or there on these loans is the key issue right now.

The other major unknown here is how any deal will affect the sovereign bond market’s attitude to Ireland.

47 thoughts on “The Impending EU\Greece Deal”

  1. @ Karl

    i posted this on the other Greek thread, but probably more relevant here!

    April 9th, 2010 at 10:38 pm

    Greece basically has 9bn in spare cash right now (estimate from UBS).

    They have 12bn in debt maturing over the next 14 days. They have another 8bn maturing in 6 weeks time. They are also running a deficit of around 2bn per month.

    So in the next week and a half they will have to find 3bn or so (1bn t-bill auction on monday), and in the next 6 weeks they will have to find around 14bn in total.

    It aint gonna happen folks. Greek bonds are being refused for repo’s by some banks, and last week’s syndicated issue was down almost 9% from issue price at one stage yesterday. No one is gonna buy those bonds, and even if they did its going to be at such destructive rates (the May maturity hit 10% this afternoon) that it’ll destroy Greece anyway. There will simply have to be a full on rescue plan enacted, not simply discussed/planned, in the next couple of weeks, simple as that.

  2. http://www.nytimes.com/2010/04/09/business/09views.html

    BO’H and Chou should be able to understand this article as it is clarity itself. Ireland is becoming the most deflated country, and the most indebted country in the EZ and EU. There is a tipping point, when no one will sell us debt, as they know we cannot pay it back. Japan has a higher debt GDP ratio. Their only buyers of sovereign debt are Japanese. They have no longer any choices……

  3. Karl,
    While you are correct in what might happen to calm things, why should anyone want to calm them?

    In whose interest, sorry, would that be? We have a whipping boy, who lied and got the big bad Gold in Sacks to help them trick the EU. We need fall guys, once there is a crisis. Who else is likely to came along. And whom would that embarrass?

    Shame to waste a good fall guy!

    The Euro will have to fall further, don’t you think? The US dollar has a way to go, too. This one will run and run!

    By the way, did anyone else read that the PRC failed to sell all 90 day bonds on offer? Is the jig up?

  4. One way not to calm them is to repeatedly leak that there is a deal and then to leak that there is no deal. Certainty is always a good thing, sorry, Good Thing, in order to calm matters. The EU is so good at things, that most Irish still think that the Dail runs the country. So why so “disorganized” on a simple refi job?

    What other way to devalue currency, after all, interest rates are hardly capable of being sent lower?

  5. @Karl

    There is plenty of room for Greece to be charged an interest rate that is high in the sense of above German levels without going all the way up to current market rates, and the FT is right in pointing to the inconsistencies of the German position.

    When Brazil hit the wall in 2002 spreads went out to over 2000 bp – surely you wouldn’t argue that the exceptional financing provided to them by the IMF should have been based on those market rates rather than on standard SDR-based terms?

  6. It is reassuring that the Commission will be evaluating how CMV and LEV were established. This might not turn into the fraud infested mess I was anticipating. Hope springs eternal.

  7. PatD: This is not directed at you – you seem to realise the reality!.

    The citizens of Hellas and IRL are, real persons – like sentient beings. And ye think that inflicting pain (ie finacial Waterboarding) is a ‘wholesome’ thing!!!! It will all wash out with Tide (a-la-Lever Bros). It won’t ’cause it can’t!!

    Please advocate – Debt defaults and Debt Jubilees. Its financial YeeHaa time (rem that US Air Force pilot in Dr Strangelove as he ‘rode’ the A-bomb out of the bomb-bay!!!). Triggered the ‘Doomsday Machine’ ’cause the dopey designers locked-in the ‘LockOut’ key!!!

    Defaults and Jubilees spread the ‘pain’ – like those gobshite Quants on Wall Street – ‘spreaded (sic) the risk’. That’s OK! Lets go!

    B Peter.

  8. @ Pat Donnelly well said ‘why so “disorganized” … One way not to calm them is to repeatedly leak that there is a deal and then to leak that there is no deal.’ The demands for a subsidised loan, and the confused responses, have been very damaging both to Greece and to EMU. It was a very bad calculation to set this ball rolling, and now it is rolling out of control.
    .
    So what might we see? Ongoing IMF loans of course would be offered subject to achieving certain macro goals, as per usual for the IMF.
    It would be a grave error however for the EU to offer finance at IMF rates plus a margin, or alternatively, a simple fixed rate as reports today suggest. The EU instead could offer cash at a sharply degressive floating rate conditional on the achievement of specific macro goals. It is imperative that the initial rate be set at a penalty level at first, above 6%, as sensible (in my view) policy makers have been recommending. Rates could then fall, with modest amounts of cash paid out, conditional each month on progress in cutting the budget deficit, the passage and implementation of legislation, etc.
    A subsidy (or a promise of one) straight out the gates would be toxic for the future of EMU. The ramifications of such an error would go far beyond the Aegean.
    .
    Remember that there is a big difference between making yet more promises, and actually agreeing to raise and hand over some cash in the coming weeks.
    .
    @ Eoin Bond , I would take issue with the figures given above in the first post. The arithmetic is more complicated than that. The needs are a bit less, more funding has been done than implied in the above figures, and luckily governments have other means of finding cash than just borrowing through bonds. Governments also have more levers to play on too, than just borrowing. Hard to write about however – I can’t say anymore – plus no Treasury is ever going to reveal its full deck of cards, whether good or bad. But you could allow your imagination run riot!
    .
    Fitch downgraded Greece to BBB-, negative outlook, Friday afternoon, just after the first reports on a supposed Greek deal came out. That was both very surprising very bad news. Fitch also downgraded 5 banks and left them on Watch Negative. So what motivated such a large move at this time? Unfortunately the Fitch comments accompanying the actions do not raise any new concerns or give any new perspectives or information. The comments (short and concise) do however refer to the prospect of aid.
    .
    Despite this development, I think a market solution is still possible, given certain conditions. Remember Greece is selling Tbills next Tuesday as well as Tuesday week, if for modest sizes. That might help restore confidence if well conducted. However the options are clearly diminished as errors in policy and in policy pronouncements continue apace.
    .
    In that context, I would very much share the concerns of the German government and of Karl Whelan. This is one of those times when policy making can make an enormous difference, for better or for worse.
    .

  9. @ Karl – I agree with your sketicism.

    Given that the Greek position from the outset was to look for a bailout their efforts to tackle their problems are not credible. If they had tried hard to sort this out themselves and then found they needed help, help would have been forthcoming including from Germany. This makes our position so much better – the efforts made here on sorting out the problems (regardless of what we might think about them) are earning us a lot of brownie points in Germany, which might come in handy at some point!

  10. @ Ciaran

    what figures are you disagreeing with?

    I also acknowledge that they have other options available to them, but i suppose if they are forced to use those levers, rather than being able to fund via t-bills and bonds, then its basically them putting their hands up and admitting that the game is up, no? They have 12bn in maturing debt (4bn bills n 8bn bonds) over the next 13 days vs a believed end-March overfunding of requirements by €9bn (per UBS yesterday – see below). As such, they will surely look to raise the gap here (€3bn) via the markets, to show that they can, if nothing else. The €1bn t-bill auction on Monday will of course be a “success”, but if its only Greek banks buying, then again that is nearly an admission that the game is up.

    http://ftalphaville.ft.com/blog/2010/04/09/199351/a-greece-y-weekend-for-markets/

  11. @ EB – t-bills auction on Tuesday, not Monday. And hopefully a bit more than your 1bn. Also auction subsequent Tuesday, if still, admittedly modest. As for your figures, I’d trust more those given by the authorities.

  12. @ Ciaran

    1bn on Monday vs 1.2bn on Tuesday. Not entirely sure that makes much of a difference.

    Also, “I’d trust more those given by the authorities”? So you trust the official Greek figures? That puts you in a relatively exclusive club i would have thought…

  13. @Bond. Eoin Bond & Ciaran – there had been reports of runs on the Greek banks during the week. I did not have time to check this out but if it is true they might not be in great shape to buy the T-bills or indeed do anything else!

  14. As I said on 8th February.

    http://www.irisheconomy.ie/index.php/2010/02/08/even-more-on-greece/#comment-35045

    “The real issue is solidarity and with it the future of the Euro itself.”

    Either Greece gets a real bailout by Monday or there will be a run on its banks in short order. The middle class will start getting their money out and confidence will be lost. Fractional reserve banking is entirely reliant on confidence. Without it there is no system, there are no banks.

    No more pussyfooting from Merkel. This is one can that cannot be kicked down the road. There is no more road.

    The Germans pay for this or watch Greece collapse.

    There’s no point in saying that Greece has been a naughty boy and giving it a thrashing in the form of 8% funding costs.

    They cooked the books. So what. The Germans knew it. The French knew it.

    The Germans and French are now colluding with Ireland to cook the books here.

    Promissory notes?

    Get real.

    Print money.

  15. @Ciaran
    Cui bono?

    The effect of the Greek fiscal debacle has been to weaken the euro. When the IMF-rate deal was announced, the euro strengthened by a cent in short order. At the mid-130s, it is still overpriced for the eurozone exporters. Everyone else is spending themselves to weakness, the Germans aren’t going to buy that, but are they above an uncompetitive devaluation?

  16. Economic warfare may mean regime changes.

    Until a global consensus emerges. Around what, though. It will be dressed up as “democratic”. But AGW will not be on the agenda. What can keep the mob from doing too much damage, now that most of the middle class will be joining them?

  17. @ Greg – perhaps there will be some last minute action but this is not going to be easy.

    Firstly, with a record deficit in Germany, the government has basically no room to play with. Article 150 of the German constitution limits deficits to the size of capital expenditure and some limited temporary stabilisation. If the deficit increases the constitutional court might rule the budget unconstitutional – Angela Merkel is not going to commit hara kiri for Greece.

    Secondly, any bailout that looks remotely like it contravenes the Nice/Lisbon treaties will be challanged in the courts. Again there could be very serious political fallout from this – who wants to take that risk for Greece?

    It is useful to remeber that Greece broke the solidarity pact. The also played this very badly, by asking for bailouts from the start and the way they tried to force their partners into giving the bailout.

    Greece would not be the first country to default and no doubt it would not be the last either. A weaker Euro might suit some and the big question for us is whether there would be contagion.

  18. @ Edgar Morgenroth

    I never thought I would have to refer to the German Constitution. Strange days indeed.

    Good job I did though. It only has 146 Articles. I think you mean Article 115 not 150. 🙂

    https://www.btg-bestellservice.de/pdf/80201000.pdf (Page 74)

    Article 115

    [Limits of borrowing]

    (1) The borrowing of funds and the assumption of surety obligations, guarantees, or other commitments that may lead to expenditures in future fiscal years shall require authorisation by a federal law specifying or permitting computation of the amounts involved. Revenue obtained by borrowing shall not exceed the total of investment expenditures provided for in the budget; exceptions shall be permissible only to avert a disturbance of the overall economic equilibrium. Details shall be regulated by a federal law.

    I think one could interpret the collapse of a EZ member as being “a disturbance of the overall economic equilibrium”. You are of course correct. That would be a matter for a German Court to interpret and that it is ultimately a political decision.

    As regards Nice/Lisbon I suspect the European Court (is that the right body?) can be relied upon to “play ball”. A fudge can be constructed that would allow a bailout not be a bailout. Promissory notes? LTEV? You are of course again correct, a mere challenge could derail any genuine effort to pull Greece back from the brink.

    “It is useful to remeber that Greece broke the solidarity pact.”

    So has Germany.

    “For next year there are no doubts,” said Schaeuble. “We’re going to have a deficit of closer to six than to five percent.” But he promised to stick to the European Union’s Stability and Growth Pact, and bring the deficit back under three percent by 2013. Schaeuble called German a “fundamental anchor in the Pact”.

    http://www.dw-world.de/dw/article/0,,5017828,00.html
    “Greece would not be the first country to default and no doubt it would not be the last either.”

    I hope they haven’t been listening to Brian Cowen because apparently if you do that frogs rain from the sky and the very dust of the land becomes lice and infects man and beast.

    “A weaker Euro might suit some and the big question for us is whether there would be contagion.”

    I don’t think that even the most cynical German would think that achieving a weaker Euro through the default of Greece is a viable tactic. Also I’m not sure that a devaluation of the currency would be long lasting. Would other countries / currency blocs not react?

    Difficulties aside, if Greece is “allowed” to default the Euro currency in mortally wounded. We are not out of this recession/depression yet. How can the currency survive if another two or three countries are forced into the arms of a loving IMF?

  19. @Karl Whelan

    “… how any deal will affect the sovereign bond market’s attitude to Ireland?”

    … a lot less than the impact of a busted-flush Anglo-Irish buying Cavan and half of Fermanagh … !

    @All
    Get on with the bail-out now! Politically, EU will not allow Greece to default.

    @All
    IF Greece defaults … think about it … no, don’t think about it!

  20. @ Edgar

    Greek banks, in general, have actually been very lucky going into this in that they were all quite well capitalised and liquid. In contrast to other struggling western countries, their banking sector was not the cause of the problem, it was all sovereign related. I think the National Bank of Greece (the private bank, not the central bank) actually had more customer deposits than it did loans up until last year, in stark contrast to a 300% loans to deposits ratio at ILP or 175% at AIB/BOI. However, as you noted, and as Greg has suggested, there may now be a mini run occurring on them, and certainly it appears that their credit lines with foreign banks are starting to be cancelled. They’ll have enough spare liquidity sloshing around to buy the t-bills on Tuesday if they are “asked” to, but (a) if its only Greek banks buying, this can only go on for so long and (b) if its only Greek banks buying it’ll be a sure sign that the end game is nearing. (however, unlike with the general govt bond auctions, i dont think they release information on buyer geography etc on t-bills, though i suspect the big European banks will be talking to each other about whether they bought any for themselves of their clients)

  21. @Bond. Eoin Bond – yes, I was aware that the Greek banks had been in decent shape, but if they get hit by a serious run no doubt all bets are off.

    @David O’Donnell – if there is going to be a bailout we will need to get used to them as the problems in Greece won’t be solved by getting them over the next two weeks – a few weeks down the line we will be at the same place again. Before long there will be more countries joining the club…..

  22. [I’ve been trying to post below for over a day… let’s see if it works better without links this time]

    One thing that doesn’t mislead is the amount of cash raised… whether that is through bonds or other sources (if you can identify those other sources). So it was patently clear by already this time last year where Greece was heading for in 2009.

    As for this year and the coming years, here is an assignment for everyone
    The Irish budget deficit is running a little lower that of Greece in cash terms over Q1
    e.g. compare
    independent.ie Irish Budget plans still on track despite tax take shortfall
    to
    ana.gr Sharp drop in Greek budget deficit in Q1

    Questions:
    Are comparisons between these two figures be meaningful?
    Are both sets of data equally trustworthy at this stage? (only Eoin has to answer this question!).
    Should figures in nominal cash terms be informed by respective measures of future national income or size of the working force?
    If national income, how would you estimate it and at what date?
    Are differences in sovereign contingent liabilities significant?
    And a final question for bonus points… Which quarterly figure should be lower come this time 2011, and again in 2012?

    independent.ie Central Bank wants details on how deficit will be reined in
    And
    globalcreditportal.com S&P affirms Ireland AA rating
    where the relevant passage is

    ‘The government has begun implementing what we consider to be a wide-ranging expenditure-led fiscal consolidation program, with €4 billion (2.5% of GDP) of measures detailed in the 2010 budget and plans for a further €6 billion (3.8% of GDP) over the next two years.’

    Good luck to everyone!

  23. @ Ciaran

    Greece has (a) been systematically lying about its true fiscal position for the guts of a decade (b) ran a defict greater than the 3% Maastricht Treaty guidelines for what, 18 of the last 20 years or something like that and hasnt run a surplus in a generation despite the global economic boom, and (c) Greece is coming into this with a debt/gdp ratio of 115% as is. Ireland, on the other hand, has been quite honest about our problems/statistics, ran huge surpluses or balanced budgets for most of the 1995-2005 period, and came into its crisis with 40% debt/GDP ratio.

    Further, tax evasion in Greece seems to be a systematic habit which makes previous Irish evasion seem like childs play, has done very little to address real long term problems like retirement age and pension provisioning/entitlements. Finally, Irish people, in general, are very much behind the measures to both increase taxes and reduce expenditure, despite having a government in place that was elected in far better times and which is now deeply unpopular. There has been no massive or real strike action from a clearly unhappy public sector, and there has been no public demonstrations from the private sector. Greece, meanwhile, strikes and riots and complains about the government actions, despite the current government having only just been elected with a strong mandate to clean the country up.

    Do you think any of this might explain while international investors are willing to give us the benefit of the doubt in our attempts to stabilise the economy and resume economic growth, while they cast a more dubious and critical eye over our friend on the Aegean?

  24. @ Ciaran O’Hagan

    Good Idea.

    Tried to post this @ 2:08.

    Links rmoved now.

    @ Edgar Morgenroth

    I never thought I would have to refer to the German Constitution. Strange days indeed.

    Good job I did though. It only has 146 Articles. I think you mean Article 115 not 150.

    [Link Removed]

    Article 115

    [Limits of borrowing]

    (1) The borrowing of funds and the assumption of surety obligations, guarantees, or other commitments that may lead to expenditures in future fiscal years shall require authorisation by a federal law specifying or permitting computation of the amounts involved. Revenue obtained by borrowing shall not exceed the total of investment expenditures provided for in the budget; exceptions shall be permissible only to avert a disturbance of the overall economic equilibrium. Details shall be regulated by a federal law.

    I think one could interpret the collapse of a EZ member as being “a disturbance of the overall economic equilibrium”. You are of course correct. That would be a matter for a German Court to interpret and that it is ultimately a political decision.

    As regards Nice/Lisbon I suspect the European Court (is that the right body?) can be relied upon to “play ball”. A fudge can be constructed that would allow a bailout not be a bailout. Promissory notes? LTEV? You are of course again correct, a mere challenge could derail any genuine effort to pull Greece back from the brink.

    “It is useful to remeber that Greece broke the solidarity pact.”

    So has Germany.

    “For next year there are no doubts,” said Schaeuble. “We’re going to have a deficit of closer to six than to five percent.” But he promised to stick to the European Union’s Stability and Growth Pact, and bring the deficit back under three percent by 2013. Schaeuble called German a “fundamental anchor in the Pact”.

    [Link Reomved]

    “Greece would not be the first country to default and no doubt it would not be the last either.”

    I hope they haven’t been listening to Brian Cowen because apparently if you do that frogs rain from the sky and the very dust of the land becomes lice and infects man and beast.

    “A weaker Euro might suit some and the big question for us is whether there would be contagion.”

    I don’t think that even the most cynical German would think that achieving a weaker Euro through the default of Greece is a viable tactic. Also I’m not sure that a devaluation of the currency would be long lasting. Would other countries / currency blocs not react?

    Difficulties aside, if Greece is “allowed” to default the Euro currency in mortally wounded. We are not out of this recession/depression yet. How can the currency survive if another two or three countries are forced into the arms of a loving IMF?

  25. @Greg – on the solidarity pact – Greece lied and has been trying to put the gun to their partners heads. Of course the German deficit is far too large – this is one of the reasons why they have been very unwilling to put money on the table for Greece. It will be interesting to see the press statement on the bailout from the German government on this.

    On the German constitution – yes Article 115 I fired the comment off a bit fast. There is also Article 143d. A few years ago the government had to go through significant contortions, calling in the leading economists to testify that the deficit was only transitory and needed for stabilisation. It is easy to get tripped up in a process like that, especially as you can’t claim its transitory if it breaks the rules all the time.

    “We are not out of this recession/depression yet. How can the currency survive if another two or three countries are forced into the arms of a loving IMF?” – indeed, but what is the difference between an EU bailout and an IMF bailout?? I suspect the answer is that the EU is going to be called upon again and again by the same countries. The experience with Germany’s internal bailouts shows that the same states continue to have problems. Of course nobody ever suggested that they have to be kicked out from the federation but at the same time these problems don’t seem to solve themselves via bailouts.

    Do you think a Greek bailout has not wounded the Euro?

  26. @Greg
    “Unquantified from IMF.”
    ‘Help’, maybe… Bulgy suits, square shoulders, low hairlines, spray breath-freshener…

  27. @yoganmahew – “Bulgy suits, square shoulders, low hairlines, spray breath-freshener…”

    You’ve clearly met them. It’s a very accurate description! Puts you in mind of a ‘Men in Black’ movie, only they’re carrying laptops instead of those flashguns that remove your memory (or do they have those too?).

  28. @Joseph
    “only they’re carrying laptops instead of those flashguns that remove your memory (or do they have those too?).”
    Haven’t met them, but my febrile imagination has them as a cross between Invasion of the Body Snatchers and the Midwitch Cuckoos. I reckon they have flashguns that remove the ‘social’ from your ‘social democracy’, the ‘demos’ from your ‘democracy’ and the ‘cratos’ from your ‘cracy’… leaving you with what you deserve for your profligacy….

    Nah, I don’t think they’re such bogeymen. What they are is symptomatic of weak government. When you don’t want to make hard choices, when you tell people there’s a free lunch, they’re eating it and they’re entitled to it, who you gonna have to call? Yeah, the bogeyman. He’ll give you last chance cash and take the flak while you tell the patsies that halving the number of nurses while maintaining consultant salaries is what the IMF forced you to do…

  29. @ yoganmahew

    The John Perkins Appreciation Society will be opening a branch in Athens next week.

    🙂

  30. Hmmm, €30bn from EZ members (including Ireland €450mm, Spain €4bn? Italy €4bn? Portugal €800mm?). I presume Greece doesn’t have to chip in on its own dig out. And €15bn from the IMF.

    Now if I was in the bond market what would I do? Would I thank god for the reluctant solidarity of the Hydra and throw my chips into the pot or would I keep my chips and let the EZ members do the heavy lifting?

    Daddy or chips?

    Hmmm, chips I think.

    I’d let the EZ members use up their money. If all works out well then so be it. I missed a three month window to gain 50bps.

    If all does not work well I’ve still got my chips.

  31. Brian Lenihan says we could make a profit because we can borrow the €450mm cheaper than we will lend it to Greece.

    There are days when you really do have to admire Fianna Fail.

    They really are smarter than the rest of us.

    Brian’s next trick will be not to borrow at all. Just issue a promissory note to Greece and get an annual return of 5.5% on the €450.

    That’s got to be worth more than the preference shares in AIB.

  32. @ Edgar Morgenroth

    “Greece lied and has been trying to put the gun to their partners heads”

    I can only repeat myself.

    The EU knew that Greece was lying.

    The EU is lying now.

    Edgar, can you give me an EU definition of “Promissory Note”.

    How does that work Edgar? What are they? Are they “New” currency? Is it only Ireland that gets to issue “Promissory Notes”?

    Why can’t Greece issue €50bn of Promissory Notes to its creditors now?

    Why are we allowed to do it?

    Did Keynes analyse “Promissory Notes”? Did Karl Marks? Did Adam Smith? Did Pol Pot?

    Greece lied Edgar?

    “Of course the German deficit is far too large – this is one of the reasons why they have been very unwilling to put money on the table for Greece.”

    Here I disagree.

    I think the reason that Germany is (and it is still the case) “unwilling to put money on the table for Greece” is German Zeitgeist. “They” have done everything. “They” have unified Germany and sacrificed the Deutschmark to the Euro at the insistence of the French.

    The only thing Germany wants to know is this.

    Is there a sound currency?

    They have previous. They know the endgame of the debauchment of money.

    “There is also Article 143d.”

    “Promulgated by the Parliamentary Council on 23 May 1949 as amended up to June 2008”

    The link I have is this. 143 ends at “c”.

    https://www.btg-bestellservice.de/pdf/80201000.pdf

    Your knowledge of the German Constitution exceeds mine.

    When did the German people add 143d?

    You make much of it. Do you have a link?

    “but what is the difference between an EU bailout and an IMF bailout?”

    To me it is obvious Edgar.

    The EU has a printing press. The IMF simply creates more debt.

  33. Oh No Not Another One !!!

    Another promise of a bailout for Greece.

    Print 500,000,000,000 now or watch your currency get sucked into the black hole of debt created by your banks.

    Oh No?

    I am absolutely correct on this.

    Print or die.

    It may have escaped your notice not mine.

    Everybody else is printing money.

  34. @Greg – everyone knows about the promisory notes so how is this lying? I doubt the hidden Greek borrowing was know.

    On printing money. Firstly, you might want to go back in German history a bit and you will find that the printing press solution did not work so well. Secondly, how is this going to work if everyone is doing it?

    Article 143d was added in July 2009 – it deals with the transition path towards ‘sound’ budgets at the state level, which are important components of the overall national deficit. This is the current effort to avoid further bailouts of the federal states.

  35. “…you might want to go back in German history a bit and you will find that the printing press solution did not work so well.”

    No but inflating away debts has in fact worked pretty well in plenty of other cases.

    I’m somewhat mystified at how the (memory of) hyperinflation of the 1920s is so routinely offered as a comprehensive explanation of German inflation-hawkery. Usually this is accompanied by the claim the the hyperinflation led to the political catastrophe of 1933.

    The problem is the hyperinflation ended a decade before then. What brought the Nazis to power was mass unemployment. So why are German policy-makers simultaneously so haunted by the spectre of inflation and yet so seemingly complacent about high unemployment?

    Maybe Edgar can offer an answer to this conundrum?

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