Not so F.A.B….No wonder Brains looks worried
…but you can’t see the money.
In Part Two of a double-header, The Slog uses the numbers to tear apart the G20’s fantasy
Over the next few weeks, Greece will be in a very strong bargaining position. Until the eurobanks are fully recapitalised, the Athens Government can lie its head off, and still keep being drip-fed aid. The Troika are willing pawns in a game that involves avoiding a Greek default until the EU’s banks are ready to face the storm. But even if they survive Hurricane Hellen, the world’s bankers will still face Typhoon Silvio. And the G20’s plan is big on hype but low on substance.
At the moment, Greek Prime Minister Papandreou could stick two fingers up to the Troika, but it would make little or no difference: the men in Athens will get their October slice of bailout aid, because somebody – probably Tim Geithner in Wroclaw – finally managed it get it through the heads of the EU Finance Ministers that the global banking system isn’t keen on collapsing just to salve European pride. Over the last few days, the G20 has been repeating this dosage of ‘advice’ at regular intervals. For once – at long last – the eurobanks are being ordered to find some cash. When this process is ‘complete’, it says in the secret script, only then will the Greeks be allowed to throw their keys into the estate agents.
But it’s all smoked fish and bread mirrors.
Yesterday, The Slog demonstrated how the immediate crisis could easily be solved with minimal pain felt by Sovereigns, taxpayers or banks. Today, I pull apart the numbers to reveal what a complete charade the ‘Greek debt crisis’ and the G20 action plan are….and how, as ever, it is entirely about banking survival – specifically, French banking survival.
This is what the Bloomberg site reported yesterday:
‘Greece is in tense talks with the International Monetary Fund and European authorities, known as the troika, to secure a new 8 billion-euro instalment of its rescue package to avoid bankruptcy in October. In return for aid, Athens pledged austerity measures, but negotiators have expressed frustration at what they say is Greece’s slow reform pace. The nation’s finance minister [Venizelos] is due to meet the head of the IMF on [today] Sunday.’
In fact, they’ll be meeting in a few hours time, shortly before lunch – or shortly afterwards: this is Greece we’re dealing with here, and everything is a movable feast. As to what Venizelos and Lagarde are going to talk about, the media as yet have no idea. We should expect a communique dripping in balm shortly afterwards, but The Slog can reveal that, in one last throw at craps, Venizelos wants the banks to take a 50% haircut. This, he will suggest, could make Greek survival entirely possible.
I can also tell you that he doesn’t believe that: in private, both he – and the entire Papandreou Cabinet – are sure that the game is over, and their country must default if it is to avoid pauperising itself for decades to come. The game in Athens now is coming out of the mess with some kind of shirt intact.
This is the stark reality: Greece needs another €109billion in order to stop it defaulting on the debt heap. The tranche being negotiated right now is worth €8bn. At current interest rates across the piece of all loans, that will last it a month – maybe three or four days more. If this is the last they get, the Greeks will default in mid November. Reuters this time:
‘”The troika officials said they were going over again measures they had agreed to months before. They said they had a sense of deja vu,” a source close to the talks said on condition of anonymity’.
The truth, according to Slog sources, is that even what the Greeks say they’re doing isn’t being done – and the Troika is fully aware of this. Like Simon Jenkins in the Guardian recently, I have to say that – were I Greek – I’d be doing exactly the same thing. Whatever they are or are not guilty of (and most of the blame seems to rest with the previous, even more seedy, government in Athens) there is no way I’d be rushing round to sell national assets while the lenders refused to take as much of a light trim in the way of a haircut: why sell the family silver when you’re a limited liability company? Why make yourself the most unpopular administration since the Colonels for the sake of a legal definition? States default and life goes on: real people know and accept this. Only bankers insist otherwise – and they would, wouldn’t they?
The eurocrat game plan, post Wroclaw, is if nothing else now clear: a mad dash to ring-fence the problem within Hellenic boundaries….and then once the firewall is in place, dump the Greeks unceremoniously. However – again, as German Slog sources correctly identified ten days ago – the Bundesrepublik Finance Minister Wolfgang Schauble retains his desire to keep the Greeks inside the EU. This would be a smart move on the basis of proving to the markets that a eurozone member could default, but the event still be managed. In my view, however, it falls down on two commonsense dimensions: the Greeks won’t be interested in staying in, and the markets will simply ask, “Italy? Spain? Portugal?…”
However, I don’t think The Slog is entirely sticking the scrawny neck out by observing that the dash for recapitalisation – puffed up in the media by the G20 – is like some sort of odd combination of delusional fantasy and bare-faced spin. But sadly, the quality of discernment these days – even in Britain’s quality media – borders on the risible. A piece appeared at the Telegraph’s website yesterday by Philip Aldrick which bears no interrogation whatsoever. Since then, the hopeless Jeremy Warner seems to have joined the Act.
The piece makes for dramatic reading (this was obviously the G20’s intention) but fails to tell us (a) why ‘Officials are confident that some banks could raise the funds privately’ or (b) how ‘Officials are working on a way to leverage the EFSF through the European Central Bank’ to turn €440bn of EFSF into ‘€2trillion of firepower’. (Ten days behind The Slog, however, the writers ‘reveal’ that ‘the Germans are understood to be demanding a managed default by Greece, but for the country to remain within the eurozone’.)
Just to put this nonsense into perspective, the failing French bank BNP Paribas hopped over to the Middle East to investigate ‘private sources’ last week. They were after €9bn….and I understand they didn’t have much success. The capitalisation required to give every eurobank even a chance of remaining upright is €300bn. To be safe, the EU obviously needs €2trillion….otherwise this wouldn’t be the figure in the G20 press pack.
And if officials are confident that Arabs can be our salvation (the Chinese having told BNP to go away last week), then why the need for this loaves and fishes job via the ECB? The ‘explanation’ of how the junk papering Monsieur Trichet’s walls will be transmuted into gold by Alchemy appears to be (my italics), ‘the EFSF provides a loss-bearing “equity” tranche of any bail-out fund and the ECB the rest in protected “debt”. If the EFSF bore the first 20pc of any loss, the fund’s warchest would effectively be bolstered to Eu2 trillion. If the EFSF bore the first 40pc of any loss, the fund would be able to deploy Eu1 trillion.
“And then, a miracle occurs…..”
Basically, the ‘idea’ is to empty the ECB if necessary….and print more euros when we find there aren’t enough in there.
The Telegraph piece is unadulterated bollocks, I’m afraid. And I think Mathew Parris was right when he said on the Marr Show this morning, “One still gets a sense of discoordination, that nobody is in charge”.
Anyway, there’s a bloke down the chip shop who says he’s Elvis, so I suppose anything is possible. What is not possible, however, is that Greece would be the end of it even if the G20’s International Rescue managed to cobble together a patch-up job. And those who have themselves been in the thick of it in this arena are becoming increasingly frank about the truth.
Whatever you may think of Lawrence Summers, the former U.S. treasury secretary, gave a sombre assessment of the dangers facing the world economy – this time, including a U.S. recovery that has ground predictably to a halt.
“This is the 20th annual meeting (of the IMF and World Bank) I’ve been privileged to attend. There has not been a prior meeting at which matters have had more gravity and at which I have been more concerned about the future of the global economy,” he told a discussion panel on Friday.
Monday tomorrow, back onto Cloud Nine.
Related: Our leaders cannot face up to systemic failure
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