CRASH 2: ‘Italy has asked out of next Greek bailout tranche’ – sources.

Mystery of next Troika tranche deepens

Update 12.55 pm BST: Athens introduces domestic payments freeze after Ordinary budget revenue fell to 31.1 billion euros from 32.8 billion while spending rose to 47.8 billion euros from 43.5 billion.

Southern Europe-based sources familiar with the ClubMed debt crisis alleged to The Slog this lunchtime that Italy wants out of contributing to the next tranche of Greek bailout monies. Spain is also thought likely to follow suit. As of now (given the mystery and debate over Greek compliance, or not) it is unclear whether the Italian Government means this month’s tranche, or the one due in December.

If confirmed, the news will send shock-waves through the eurozone’s credit markets, signalling as it would that the default dominoes are wobbling, and Greece is more likely to be the first than the last.

“It is partly the Berlusconi government being unable to see the point of keeping Greece alive, but primarily the belief that Italy needs the money and may still be salvageable,” said the Slog’s informant. “There are also well-founded rumours that the Spanish government will follow suit.”

The news is highly likely to be denied vociferously by all concerned, so it is difficult to say much more until other off the record sources can substantiate the claim. But as and when the German public gets wind of it, all their worst fears will be realised…and the non-Schauble anti-Athens group in the CDU will be impossible for Angela Merkel to control.

Meanwhile, the vibes coming out of Berlin are that Chancellor Angela Merkel is throwing her support behind Finance Minister Wolfgang Schauble’s ‘keep Greece afloat in the eurozone’ strategy reported in last Sunday’s Slog and elsewhere. The hope seems to be that emergency pocket-money out of the public  eye will be fed to Athens, and then the new powers being given to the EFSF at the end of September will weigh in alongside the Troika after that. But with or without full eurozone involvement in the bailout, the numbers still do not, in my view, work. The CDU rebels are right: it is good money after bad.

“The idea that disaster must follow the default of one eurozone member is political bullshit,” said a London-based lending source yesterday, “It’s just that the Germans and eurocrats have always insisted it’s true, so they feel that they can’t U-turn now.”

Giving an interview to German radio today, Frau Merkel told her audience, “The top priority is to avoid an uncontrolled insolvency, because that wouldn’t just hit Greece, and the danger that it hits everyone, or at least a number of other countries, is very big. I have made my position very clear: that everything must be done to keep the euro area together politically, otherwise we would very quickly face a domino effect….Everybody should weigh their words very carefully. What we don’t need is unrest in the financial markets.”

It’s a curious perspective that sees market unrest as something still lying in the future; but then equally odd is the disappearing Greek austerity compliance decision due last Sunday. This from the Bloomberg site (my italics):

‘…..a delegation from the European Commission, European Central Bank and International Monetary Fund [The Troika] suspended a report on progress made in Athens in meeting the terms of its rescue program. The delay threatened to derail the next payment to Greece due next month...’

This is bollocks: the next tranche was due mid September. The Troika team walked away in disgust at the almost complete lack of progress, and debriefed the situation to key EU personnel last Sunday. Last Sunday was to be decision time. Umpteen websites and news sources stated clearly ‘the next tranche of bailout to be delivered mid September’. As predicted here last week, Angela Merkel has broken her pledge to CDU colleagues: she’s simply done it by pretending that September 12th had never been judgement day.

But Dutch Finance Minister Jan Kees de Jager put it succinctly last week when he said that the next tranche of money can’t be paid out to Greece unless the Greek government complies with the terms of its aid package.“What’s holding up everything in the present situation is Greece and whether or not they are compliant in the current programme. The most urgent matter is the issue of compliance,” he told a Berlin press conference.

Well, Greece didn’t comply, so I have to assume Athens didn’t get any more from the Troika. And in fact, this was quietly confirmed to the Wall Street Journal yesterday: the Greeks will, however, get more money – the ‘excuse’ for letting the next tranche be paid ‘some time later this month’ being its decision to levy an immediate tax on electricity bills. It seems highly unlikely that many Greeks will pay it. Either way, Greece didn’t comply, but it did get the money. Just fancy that.

Stay close to the newswires: if this assertion from sources gets further substantiation, it will be more than a game-changer: it will be the final whistle.

35 thoughts on “CRASH 2: ‘Italy has asked out of next Greek bailout tranche’ – sources.

  1. There is, in my view, a growing culture of outright fraud being perpetrated by Eurozone politicians. Fraud, by the way, in many senses of the word. No one should be surprised by this of course, but being held to account for it remains one of the best methods with which to bring our corrupt politicians to book. Question is , who is to do it? Once the dust settles on the impeding Eurozone carnage, we will find those sf same politicians claiming it wasn’t their fault, just as Brown did.

  2. The position of la belle France’s banks is tenious to say the least.

    Preston at the BBC occasionally produces a real gem. There’s a perfect storm gathering for the narcisstic leader desperate for re-election. A unlimited French Government guarantee for the french banks.
    ‘Ireland on steriods’ in the worst case. Well how strong is Sarkozy’s Gallic pride ? Does he even see the dangers?

    http://www.bbc.co.uk/news/business-14896685

      • IMV a German Marshall Plan for Europe is Mason’s wishful thinking as much as anything else. Greek MSM is already referring to The Fourth Reich and the Germans would get little thanks for it over time from other socialist EU members, much like the contempt they still hold for the US.

      • but aren’t credit ratings in reality in reference to other debt holders and if they are all falling as well then……

      • Yes, French banks are essentially the French Republiic. The state has more influence than the UK has over the taxpayer owned RBS.

        So when the medals ceremonies of S & P and Moody’s award no points to french banks this week (My guess Thursday) and downgrade there’s going to be a few gallic curses from Sarko the narco over his re-election going down the toilet.. Fitch of course being French have no wish to move their headquarters to the Bastille Saint-Antoine.

  3. The complexity of inter-bank lending maskes the true indebtedness level, but when Greece goes down the Spanish banks will look very sick. They in turn could drag down (at least) French & UK banks if overwhelmed. It’s the day of reckoning (earthly version) soon.

    • The main basket case bank in the UK was RBS which has been dealt with for the most part, can’t say the same for some euro banks though…

      SocGen – French
      Unicredit – Italian
      Santander – Spanish

      There are rumours that some of the German Landesbanks are heavily exposed to the Greeks… we shall soon find out I guess.

      • Mark G
        Believe me, not rumours. The Landesbanks mostly have real estate subsidiaries 100% guaranteed by Berlin. Where do the Germans go to buy houses?
        Ans: Spain and Greece. The exposure of these cowboys to Greece is bigger than anyone else’s. Unglaublich, nicht?
        Merkel knows exactly how deep a pot of scheise this one is.

  4. Some history, ‘Downfall’.The last attempt by Germany to have control over Europe(by less than peaceful means)fell apart in October 1944 with an exit from Greece,followed by a retreat and defeat in Italy,and an invasion of France,whose position had always been ambivalent,to say the least.Then,Portugal, Ireland and Spain were neutral(now they are all bust).The result was certain after June 1944.Hans and Helga,thankfully, will not permit Merkl

  5. Oh look more can kicking my Merkel…

    Italy and Spain want out of the bailout fund… that only leaves Germany, France and the Nordic Countries…

    This will really piss the Germans and the Nordic countries off because it means they will have to pay more.

    The new bailout system vote failed in Slovakia last night as well, it has to be passed by all members.

    The French are too busy shitting themselves over the state of their banks to notice…

  6. The people with the power to bring an end to this collective EU madness are the German electorate and their political reps. They need to do it now and brush aside any feelings of guilt. If that means Merkel has to get out of the way to make way for saner minds, so be it.

  7. Sarko and Merkel are having yet another get together to discuss their marital problems. Should be interesting to hear what they have to say.

    Sarko also has 4 party funding scandals on the go at the same time. Is this a record for a French president? I had thought that Pompidou was above all that, but apparently he also had his nose in the trough.

    Next years election could be interesting after all.

      • This from Torygraph debt crisis live running update page earlier today

        13.25 I’m not sure if I should post this for fear of another reversal, but Reuters is now saying Merkel and Sarkozy will hold a conference call with the Greek PM George Papandreou tomorrow. They’re citing the Greek state broadcaster as the source of this infomation.

        Either way, its not long until Friday, when the the EU ministers are definitely due to meet…

      • Simple John.

        Geithner attending Eurozone Finance Ministers conference on Friday. Call it 101 marriage guidance for Europe. When one or both of S & P or Moody’s downgrade France or its banks (my guess Thursday) he will have the authority to advise the prickly Sarkozy on the preferred course of action. For the markets of course, its just the blind leading the blind.

        Remember S & P informed the White House first. So the the same courtesy is likely to be shown to France.

  8. “As of now (given the mystery and debate over Greek compliance, or not) it is unclear whether the Italian Government means this month’s tranche, or the one due in December.”

    I suspect it is the payment due now as the Italians and Spanish will know the Greeks have not done what they were supposed to. Merkel will be pushing for them to give up their share of the tranche but Italy and Spain are probably thinking to themselves why throw the money into a black hole, they are better off keeping the money and using it to recapitalise their banks.

    The Finns definately won’t pay there share… if Germany wants to keep bailing out Greece it is going to have to do it alone, I have always felt it would be better for Germany to show leadership and say enough is enough but it seems the other countries in the Euro are going to do that for them.

    • I suspect that a lot of German foot-dragging on this is their deep reluctance not to be blamed for the looming crises & collapse of Greece and possibly the eurozone itself.
      Blame would have serious repercussions for them, politically and economically, so Merkel is working overtime “being seen” to be doing everything possible to prevent it.

      • Yes once it has all collapsed then the next part begins… the blame game.

        The French will probably blame us… they usually do.

        They are all to blame really… their attempts at putting all the blame on the bankers is a bit stupid really… the unions love banker bashing.

  9. If the Armageddon predictions, concerning defaults, of the Euro great and good are correct then surly it follows they have been negligent in tying their sovereigns together in treaties which do not only have no fall back positions but which don’t even recognise the possible problems.

    They can wriggle but they really need to be skewered!

      • So basically you take to the road without any insurance. Or insurance is implicitly guaranteed by the treaty founding fathers, which is what seems to be happening.

  10. There is going to be some serious political fallout once the smoke has cleared.

    I can definately see French debt to GDP going above 100% if they have to privatise the banks… as for Germany, they can either spend a fortune propping up the club med countries forever or let them fall over and then spend a fortune recapitalising their banks.

    If the big banks in the Euro countries really are in deep shit the other smaller banks that rely on them dont have mmuch of a chance either.

    No wonder the Americans won’t lend to them, i would’nt either.

  11. Just walk away Germany and take the Nordic countries with you it would give the Club Med countries a chance…

    Then again if Germany did walk away everyone would pile onto Germany in the blame game.

  12. Nearly 200 billion parked at ECB on Monday… as opposed to 5 billion 2 months ago… oh dear

    I bet trichet has spent it because the EFSF must be nearly gone now 18 billion spent last week on bonds to prop up club med countries and the yields are still rising.

  13. Geithner is in Germany trying to persuade Merky to go the extra mile,and waste more money,but reading the local German newspapers,the mood is becoming very ugly,and she knows it. Geithners job is to take the focus off the USA,which has far bigger problems,and make the focus the EU.At least the EU is aware now,whereas America is still in denial.There are over 56 million people in America,below the poverty line,which is the official version. Obama is hoping the Eu go bust first,then he has someone to blame. Remember elections are approaching fast,and he needs as much luck as he can get. China in the meantime just gets on with it.They are a lot smarter than people give them credit for,after all they have been running a tad longer than America.About 6.000 years give a year or two, and now they are insisting that everyone who sells or manufactures anything in China,has to give them precise details of the product.

  14. Pingback: CRASH 2: MOODY’S DOWNGRADES TWO FRENCH BANKS | The Slog

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s