The Slog goes behind the scenes in the eurozone:

Merkel fights for survival

Trichet ‘never up for G20 plan’

Greek progress backsliding again

Portugal now ‘critical’

France focused on bank survival

G20 ‘fantasy’ seen as ‘dead in the water’

The Slog’s German banking source was proved right yet again last night, when the Germans described The Big EU Rescue as ‘stupid’. I think he was being Germanically correct when he told me last week  “this will not play well in Berlin” in relation to the Geithner/G20 Plan; but that’s OK, because Geli Merkel has cleared up any potential misunderstanding. And if my source is right about new developments in Berlin, then we’re in very deep doo-doo indeed. He begins:

“Actually you know, Merkel and Schauble’s outright rejection of the 2-trillion-euro G20 suggestion has saved the face of [EU Central Bank President] Jean-Claude Trichet. If America wasn’t prepared to get involved in a sort of Marshall Plan, then Monsieur Trichet did not have the stomach for this idea. He is a sharp man, Trichet: he kept quiet knowing the idea was mad, and would run out of road very quickly.

“But what people have forgotten in the midst of all this fantasy about trillions of euros is that the plans we already have are falling apart”.

The Slog’s BundesMole is not exactly ripping the scales from a million eyes with that one, but this next bit is something of a bombshell (My italics):

“There has been in the last five or six days in Berlin and Paris something of an awakening. First, Frau Merkel is in a corner. She will get her EFSF expansion bill through one way or another I think. But the word coming back from the Troika is 100% opposed to what Papandreou and Venizelos said in public yesterday. Despite some spin, Greek progress is negligible. She daren’t give any more money to a nation already seen by most Germans as feckless….and she is fully briefed on the situation in Portugal, which is now critical.

“Second, the political, legal and banking opposition to bailouts within Germany is gaining strength….to the point where even partaking in the expanded 440 billion euro EFSF fund may become politically and perhaps constitutionally impossible. Merkel has had the riot act read to her by CDU colleagues: you may want to go down forever on this issue, but we don’t.

“Finally, Paris is at last being brutally frank about not only its disastrous level of exposure to Greek debt, but also its direct responsibility for guaranteeing the losses in the event of Greek default. The Elysee Palace is in a full-blown panic about this. Under such circumstances, Sarkozy will not even contemplate giving more money to mortally wounded member States. His focus now is 100% on ensuring the French banking system survives.”

Well, some of us have been wondering about the ominous silence over the last few days. Now we may be getting an indication of what it’s all  about. So since 9.15 am EU time today, I’ve been investing some time and telephone bill in getting the view from Paris.

I wouldn’t say the news is unequivocally confirmatory. To be frank, only one contact had a view on the situation at all. He told me:

“I can state clearly that Dominique Strauss-Kahn’s telephone has been very busy indeed. I even hear rumours that Lagarde has sought his advice. I can confirm that the mood among Elysee staff is best described as hysteria. And I understand that capital is being gathered from every corner to prop up the banks. As to Berlin, however, that’s too complex for me at the moment”.


We live in a culture where the unbelievable is nevertheless inevitable. And when this is the case in fiscal economics, we are so obviously doomed, one might just as well dump the debate in favour of deciding how to survive and prosper. Either way, what the eurozone represents to investors this morning is the world’s biggest, multivariate Bananas Split.

Four days ago, in describing the Geithner G20 Transmutation strategy, The Slog predicted that the banks wouldn’t want the haircut, and Germany would reject the plan. Today, we learn that seven eurozone members want the banks to pay more, the banks themselves want to pay less, and the German Government has described the G20 plan as ‘stupid’. All this on the day that Papandreou was in Berlin begging for unity. He might just as well beg for Unity Mitford for all the difference it’s going to make now.

The FT described the FTSE reaction to this news as ‘uncertain’. In Wonderland, this too is both mad and predictable: they shoved the markets up 3% on Monday and Tuesday ‘on news of a G20 rescue plan’ that was a rescue plan – up to but not including rescuers, people willing to be rescued, and rescue vehicles apart from one used Reliant Robin. The International Rescue was indeed F.A.B. – froth and bollocks. What’s to be uncertain about?

“It’s a crisis of confidence that has not happened for decades,” President Barroso said in his annual State of the Union address, during a session of the European Parliament in Strasbourg. ‘Centuries’ would’ve been nearer the mark there Jose, but he’s a game guy is Mr Barroso: every week Merkel slams a baseball bat against his temple, but he still gets up and finishes fourth. Last month it was a eurobond, now its a financial transactions tax.

The bottom line to all this ridiculously anarchic posturing is that, like it or not, the US Fed Reserve is now turning rapidly into the lender of last resort….while at the same time being a borrower of the first magnitude. Logically – unless the US cuts the rope on Europe, as many there now want it to do – this can only end one way: a massively over-reached America, followed by a spectacular default. In fact, by this time – say, mid next year – it’s going to be quicker to tot up the developed nations not in default.

I really can’t say what happens next, but I’m clearer on the Franco-German focus. For them right now, the G20 plan-builders are a bunch of  space cadets between planets. National self-interest is well and truly back. Are these two founder nations actually going to make themselves totally safe…and then cut the rope?


  1. Was it ever thus. At the end of the day the European Union always comes down to individual national self interest. Hence it can never agree on anything and is ultimately doomed to end in failure. The biggest wonder is that it has lasted so long.


  2. And yet still the Pound Sterling goes down against the Euro. I’m convinced now that the only thing that will push the pound up is when the UK raises Interest Rates above those of the EU zone. Someway off then.

    In regards to your last paragraph: It is probably a blessing that national self interest has finally become the priority, in my view. From what I have seen of their behaviour so far this year those representing the EU seemed to be relaxed about, even determined to, to destroy every nation in it’s quest for the EU not only to survive but to be able to justify all the more demanding taking even more central control.

    I haven’t given up the fear that they haven’t given up on that plan yet either.


  3. “National self-interest is well and truly back. Are these two founder nations actually going to make themselves totally safe…and then cut the rope?”

    Maybe. But one absolutely cannot dismiss the political capital that France/Germany (and other members) have invested in the EU & its baby: the e-zone. It is enormous – whole careers ramped up on their back. Killing them both off will only be done as a final last resort if there is no other taxpayer-funded solution possible.


  4. Not a wonder, I fear, but reality postponed by egregious, stupid state and personal borrowing. Return to reality is about to occur. Hold tight, we’ll soon be back in the 1990’s.


  5. Interesting article.

    It is mostly Germany that has been acting in self interest. The EU (which I am against) can’t function with Germany obfuscating every move.

    The whole German banking superiority issue is a complete myth, they are more leveraged than the US. Whats more, much of the Greek debts are from fraudulaent, bribed, inflated contracts to German firms, who cleverly, used French banks to finance these inflated contracts.

    Siemens did this, then last week pulled their money from French banks and put it in the ECB.

    Economic warfare.


  6. Ah,democracy, national self interest,parliaments of individual nation states, market forces,living within your means,surely the end of this farce is in sight,isn’t it?


  7. If Merkel and Schauble have now rejected outright the €2 trillion slush fund, that’s new news and IMV it’s because they had no other choice after getting a dressing down by the German constitutional judges and increasingly, by German politicos. This being so, she will now have to come up with some alternative idea to save the e-zone or face the reality that it’s a crock and must be trashed.


  8. With the UK,along with France,and Germany,being the top shareholders,in the ECB,if the EU goes belly up, so does the UK. There are numerous comments of further QE,from the members of the BoE finance committees,so one would presume this is a done deal. With the Greek tax dept. running out of ink,no tax forms,being sent out,and now the Greek middle classes revolting,and saying they refuse to pay the taxes,including the new property tax,their default is a done deal. The French seem to be back peddling,to save their own skins,as do the Germans. The Americans are running round like headless chickens,and the East is laughing its cotten socks off,except Japan of course,which is in deepest doodoo itself. And all that in less than 24 hours. We need Dick Barton,Special Agent,to sort them out.Meanwhile John,back on the ranch,is chasing a French pig,for some more porkies.


  9. Its only new news in the City and America. 2 Trillion euros was little Timmy’s idea to bounce the eurozone into supporting their banks thus avoiding the situation whereby the Credit Default Swaps insurance is due. Guess who sold massive amounts of CDS on Greek Debt. Wall St & the City.

    Tell me how do think taxpayers might feel when they are asked
    to bailout banks for these poor CDS bets in the UK & US? Certainly in the US Obama can kiss the election goodbye. Fear drove Geithner to Washington. He was frantically trying to cover the Democrats 2012 bid shouting his mouth off trying to bounce Berlin into signing up German taxpayers to be fleeced.

    This distorted Keynesian rubbish of bailing out banks has to stop. And CDS trades curtailed. They create the illusion of wealth for the UK , nothing more.


  10. Like I and others have said before there is no more wriggle room left…

    The silence was deafening last week and no wonder.

    It was an open secret that Sarkozy was crapping his training pants.


  11. When the Washington meeting took place it did seem like the €2 trillion bail out idea gathered some traction …and there are certainly quite a lot of unelected EU-crats who’d like it to fly to save their precious baby: the euro, and their longer term aim of creating a USE. They have nothing to lose by committing more taxpayer funds into ClubMed black holes.
    Merkel has hitherto been in favour of saving the euro except that she mysteriously disappeared for nearly a week after that meeting, during which time she got dressed down in Germany and we now hear she’s appeared and rejected the idea! Bravo!

    Dunno how much the UK is in for if CDS insurance needs paying out.
    What we do know is that the govt would lie and lie some more to hide it.

    Obamarama loses his re-election if that comes to pass? Too bad for him :-)

    On ending this farce, I agree with you but I have seen no numbers on the alternative costs which would also be high – not least when the banks went down and govts had to pay out on their Deposit Protection Schemes.

    What we’re seeing from Greece/Portugal/Italy/Spin is a drip-feeding strategy to secure more bail out money. Northern Europeans simply do not understand the Latin mindset.


  12. Just in from Bloomberg,and Zerohedge,Which totally bears out what John has been saying. ten an unbelievable oped in the Hungarian portal which, frankly, make Alessio “BBC Trader” Rastani’s provocative speech seem like a bedtime story. Only this time one can’t scapegoat Szalay-Berzeviczy “naivete” on inexperience or the desire to gain public prominence. If someone knows the truth, it is the guy at the top of UniCredit, which we expect to promptly trade limit down once we hit print. Among the stunning allegations (stunning in that an atual banker dares to tell the truth) are the following: “the euro is “practically dead” and Europe faces a financial earthquake from a Greek default”… “The euro is beyond rescue”… “The only remaining question is how many days the hopeless rearguard action of European governments and the European Central Bank can keep up Greece’s spirits.”….”A Greek default will trigger an immediate “magnitude 10” earthquake across Europe.”…”Holders of Greek government bonds will have to write off their entire investment, the southern European nation will stop paying salaries and pensions and automated teller machines in the country will empty “within minutes.” In other words: welcome to the Apocalypse…

    But wait, there’s more. From Bloomberg:

    The impact of a Greek default may “rapidly” spread across the continent, possibly prompting a run on the “weaker” banks of “weaker” countries, he said.

    “The panic escalating this way may sweep across Europe in a self-fulfilling fashion, leading to the breakup of the euro area,” Szalay-Berzeviczy added.

    Szalay-Berzeviczy has just arrived in Hungary from a trip abroad and can’t be reached until later today, a UniCredit official, who asked not to be identified because she isn’t authorized to speak to the press, said when Bloomberg called Szalay-Berzeviczy’s Budapest office to seek further comment.


  13. This is only part of the article,and you need to be a member of Zerohedge to read the full transcript,which is originally,Hungarian. So John is this quicker than you thought?


  14. National self-interest never really left… :-)

    When everything was rosy it was in their national interest to not rock the boat… that has now changed… good.


  15. Indeed…and then to blame the resultant inflation on “external factors”, as if it has nothing to do with Merv and his cronies.


  16. The sound of the City and Wall Street dumping bad Euro debts back onto the ECB has been deafening me for the last couple of months…

    As a result the UK’s exposure to the Eurozone countries debt is far more manageable than it was at the beginning of the year.

    The Europeans kept telling themselves everything was going to be alright and thus did nothing to lessen their exposure to the PIIGS…

    Oh dear its too late now.


  17. What worries me is that the EU politicos have a well worn track record of circumventing democracy when it suits them (which is most of the time).

    National interest is one thing but when (not if) the eurozone politic-elite face annihilation, who is going to bet against some convoluted emergency powers that usurp the democratic process? In desperate times people do desperate things, logic or long term interest will play no part in it.


  18. European Commission financial tax opposed by UK

    “The commission said that if the UK vetoed the tax, it would look to implement it in the eurozone.

    Referring to “the constraints of unanimity”, Mr Barroso said “further changes to the Treaty of Lisbon” may be required in order to push through measures to stabilise Europe’s economy.”

    This should test the European Union Bill 2010-11


  19. GW
    Absolutely. The German culture has always had a streak of selfishness and self-pity within it…a form of neurosis that seems oddly unique to them. The Siemens issue I blogged on at the time.
    But they did do one thing right: ring-fence all the toxic crap in a bad bank. France, on the other hand, owns its banks and must therefore pay for the lot.


  20. Nerdbloke
    Last night before going to bed, I wrote on my pad here ‘Lead tomorrow – gap between Geithner and Germans?’ By the time I’d finished talking to my German chum early this morning, the article was pointless.
    We are being overtaken by events: twas ever thus….


  21. You’re quite right. But in practical terms what can Brussels do? send in its armies of mindless morons to confiscate our money? No. I think there are serious limits to what Brussels can do and implement across the EU. New laws and directives can be ignored. Only armies matter…


  22. ditto what John wrote. Someone needs to introduce the waste of space Barroso to the business end of a baseball bat and put him out of our misery once and for all. He lied abut his new tax today by claiming it was a tax on banks. But any sane person knows that all taxes are passed on to the consumer.


  23. Angela Merkel and Wolfgang Schauble keep hitting him with the bat but he just bounces back up again a bit like Mr Blobby.

    I am surprised we have not already heard from that other waste of space…

    Van Rompey Pompey


  24. “The Greek conservative opposition New Democracy party said a shortage of ink had prevented the computerised tax centre at the finance ministry from sending out claims to taxpayers over the last 10 days. There was no response from the finance ministry to the claim.”…

    As you can see the Greek govt are taking tax avoidance very seriously indeed…



  25. Jeremy Clarkson did a “many a true word spoken in jest” opinion piece in the Times a few years ago where he said that zero interest rates and yields meant that there was little use in hoarding your money – pay off all your debts because the money then becomes the other person’s problem if the banks crash.

    What are all you Sloggers’ favourite safe havens? I’d have bought gold except the US’ confiscation of private gold in 1933 sets a worrying precedent.


  26. This EC ‘financial tax’ rather reminds me of Selective Employment Tax,invented by Kaldor for a 60s Labour government as a solution to a problem that did not exist(since you ask,the low growth in productivity in manufacturing compared to services).It was a new way of raising more money,sounds familiar? I seem to remember the Germans have good form,post 1973 oil price up 5 times,in having a strong currency, low inflation economy to which their exporters adapted(they always do):I suppose Merkel may still dream of Frankfurt running Europe(peacefully),but how much more of this nonsense will Hans and Helga stomach.Is the Slog read in Germany?If not, why not.I lost my little bet with Cronshd ,but surely the best thing for the German citizen is to call it quits, take the loss,exit the Euro and leave Clubmed to sort out their own problems.


  27. Given that London is Europe’s premier location for financial transactions, 80% of Blobby Barroso’s Tobin tax would come from London. No wonder the French & Germans are so keen on it. This is economic warfare.


  28. Carys

    I disagree with your remark of egregious,stupid state and personal borrowing I think this remark is short-sighted.To my opinion your statement is too simple, ofcourse there are some members having too much debt but there something going on to destroy the Euro. The weak point is afterall that it was possible to attack one state after another, they tried the weakest and should there have been a firm solution and in time the Euro should not be harmed. For instance take for example Portugal they got a rescue package and were just implementing to fullfil this and within one month rating agencies thought it was insufficent and downgraded Portugal for two or three steps. This is just politics and has nothing to do with normal rating. Take Germany about two weeks ago it was mentioned by a rating-agency that should there be a solution in performing a EFSF for which Germany’s participation was a 27% they told them that probably their rating could go down. This all is politics and it started when there was alot money created by the Fed that was not used in their own economy but travelled around the world to do a lot of harm and at the moment that the USA was degrated the attacks started pounding at the Euro to prevent there would be any other country with AAA rating now the USA lost theirs.
    Should we have kicked Greece out of the Euro in a swift and probably a descent they we should not be in this mess. Still I’am proud to be a Dutch and think that it is very laborious in getting all the noses in one direction and Yes the Euro will not survive in the way it started.


  29. Indeed, there are certain nations that have form in terms of ignoring the rules. I seem to remember a deficit limit of 3% of GDP, the Germans and French both happily ignoring it and watching others follow suit. Let’s see if the EU can set itself up in a disciplined manner with serious sanctions for those who misbehave. Somehow, being very familiar with the Iberian peninsula, and having some experience of France, I doubt if it can ever work.


  30. A technical challenge for you John, have your blog simultaneously translated by (eg) Google (ha!) into Welsh, Latin, German, Hungarian and many other useful languages. Spread your international wings. OK, the translations are sometimes hilariously wrong and worse, but you can get the drift. That would really upset your blog hosts and there would be much Huffing and puffing…


  31. If you knew what I know about Portugal, you would have kicked them out as well. I spent 3 happy years in Lisbon dealing with that ‘interesting’ bunch. To quote someone else here, the Latin mindset is very different from that in the north. That is a big part of the problem, put simply the level of cheating. Yes my comment was over-simple, but at least it was short!


  32. @BT

    It does not matter, we will veto it anyway…

    They will then implement it within the 17 Country Eurozone… assuming the Eurozone is still around then.


  33. They should never have been let in and now it is too late as the damage has been done.

    One size does not fit all and never will.


  34. Events may ‘seem’ that the EU Commission wants Germany to leave the euro and they may well do that if there’s no other way out. But IMV it’s just as likely that the EU-crats haven’t got a clue what they’re doing. Headless chickens running around fretting about their USE dream comes to mind. EG: Barroso’s re-announcement of his Tobin tax plan today was highly inappropriate but I doubt he has the intellect to understand that.

    ISTM one very big thing that is writ large is that Merkel doesn’t want to be the one who torpedoes the euro, and maybe the EU. That would take Germany another 2-3 generations to live down after the last major European event caused by one of her predecessors. As a result, she’s bending over backwards to accomodate the Latin debtors but is meeting growing resistance among her own country’s electorate and political partners. And they have the last say.


  35. Hein. I agree with you, the Americans,have a lot to do with this,especially,the rating companies,who attack other countries, but leave their own banks,and states.untouched. then there are the Derivatives,CDOs,etc which have a triple A ratings. Then there is the crooked FED..But in the end the EU,has only itself to blame,an overloaded,thick,administration,all on the gravy train,which costs billion to run,top heavy,bringing together,south and north Europe, with not a hope in hell of making it work. Jobs for the boys comes to mind (and girls).


  36. Has anybody any idea of the total annualized cost,to the UK,of being in the EU,bearing in mind,we are a nett importer of goods from the EU. And the costs of implementing, all the crazy laws they keep bringing out.


  37. There will be some serious political fallout… lots of finger pointing and wailing, dont forget the denials and the tantrums as well.

    Not too mention the resignations, sackings and mea culpa’s.


  38. Not sure we do pay towards the CAP which is a subsidy of French farmers but we get our money back (thanks Maggie).

    Above and beyond that it all gets a bit murky.


  39. This is just a great site! And John, never in the field of human bollocks, has the truth been told with such wit. Thank you. For everything.


  40. Gold mining company shares (JW’s prefered choise), Norwegian Krone, Singapore Dollar, Seychelles Ruppee (for personal reasons), vintage french wine, some good scotch, chickens, museli, crossbow, hunting slingshot, solar electric panels, solar heat panels.


  41. Nerdman. I blame the USA and it should be normal for leading countries who have to admit that their Glory and Influence is over, to say goodbye in away that involves the rest of the world.
    The only thing that scares me a lot is the lies to use military power, it’s one of the things they like to use and it could be frightening when our world is collapsing.


  42. David

    Indeed! And has for some weeks now been my first port of call in the morning—as well as repeat visits throughout the day. Three cheers for The Slog!





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