Is Berlin trying to force Athens into controlled default?
During the last 24 hours, The Slog has contacted German banking, Washington diplomatic and Parisian sources to gather opinion about what seems to be a growing split between the Bundesgovernment in Berlin and the ECB in Frankfurt about Greek debt strategy. This is my report and conclusions.
In the last hour, European Commission bigwig Jose Barros says he is “confident a solution in Greece will be reached next week”. How many times have we seen confidence misplaced over the last five weeks?
Allow me for a few paragraphs to inject some reality into the latest stage of the Greek debt management to which I attached Zen-like qualities yesterday. Only this time, no fun is intended.
Wolfgang Schauble, the German Finance Sinister, stuck his oar into the Brussels negotiations last night by saying that Greece is still “325m euros short” on being in shape to keep the country’s national debt within reasonable size.
Now the Greek debt has not been of a manageable size for something like four years. It has just been reduced by around 12o billion euros, and before that it stood at 351 billion euros. Herr Schauble is an intelligent man, and he is fully aware of the fact that 325 million euros is almost exactly one thousandth of the total. Mathematically, there is no way that amount is going to make the slightest difference to an already impossible debt situation – the impossibility of which, you can be sure, Wolfgang Schauble also understands perfectly well. Otherwise, he wouldn’t have been pestering Merkel about letting Greece default inside the eurozone for at least ten weeks already.
You may well be joining up the dots like I am here. Schauble was also influential in getting the Fuhrerine to send out that disgraceful EU commissioner memo to all EU FinMins a week ago. Wolfie’s game plan remains the same: he wants a controlled default within the eurozone.
Now as it happens, the ECB’s Mario Draghi doesn’t want that, because being a wise man with no real national interest (he did after all once work for Goldman Sachs) the Central Bank’s director knows a controlled default is a bit like a gradual panic: there is no such thing. This is why twice in the last 36 hours, Signor Draghi has stepped in with some disguised debt forgiveness – to the tune, I am informed, of some 35 billion euros via one devious means or another.
Directly running a controlled default from Berlin sorry Brussels via a commissioner would be a win-win for Germany: it could prove to the markets that it can ride crises without expulsions, it would kick all the local bandits sideways….and above all, it would leave Berlin’s hands firmly around the French balls – should it ever be able to find them.
For a controlled default would still mean big trouble for at least two major French banks…and Brussels would need German approval for how the list of creditors to be paid shaped up. Think that’s far-fetched? Cast your minds back to when Sarkozy went steaming ahead in his desperate efforts to get at the EFSF via the ECB…to bail out his banks. Then remember how Berlin quashed any support for that idea on four separate occasions. Germany is running the EU now, and don’t let anyone suggest otherwise. Think the power-play is far-fetched? Don’t forget the Gauleiter memo that became an Unthing 48 hours later.
This is not a scheme designed to deliver Grossdeutschland. It simply reflects the Merkelian view that Germany is the only EU member capable of constructing a solution to the EU debt crisis: FiskalUnion. Or FiskalNacht as the wags in Brussels are starting to call it. It is a very dangerous game – but one that is suspected by a variety of Slog sources.
We should continue monitoring what happens next in Brussels. But there is a growing feeling in the Foreign services of Europe that there are some mad folks involved at the top.