John Ward EU DEAL IS NO DEAL

EUROCON: Would you buy unsecured junk bonds from a spiv?

The EU’s latest ‘deal’ is buck-naked spin

Slog’s Bankfurt mole: this new ‘deal’ is a page one scam

Crash 2 analysis: Behind the headlines, the EU has delivered nothing.

After due consideration of the detail of the ‘deal’ announced at 4am by EU leaders this morning, The Slog can confirm that the IIF has yet to deliver participation by the bondholders to take a 50% haircut on Greek debt; that bank recapitalisation will be 106bn euros, rather than the IMF recommended target of 300bn; and that the much-vaunted ‘leveraging’ of the EFSF is entirely dependent on the newly-created spiv.

At midnight last night, the EU leaders had nothing concrete at all in the way of an agreement. It now transpires that they didn’t at 4 am either. The deal heralded throughout the European press today can now be revealed as a content-free sham cobbled together at the last moment…such revelation having been achieved with the help of the ever-insightful Bankfurt Mole.

In no particular order of importance, these are the ‘unresolved’ parts of the agreement:

  1. The International Institute of Finance (IIF) – a sort of bankers trade union – has accepted in principle voluntary Greek bond haircuts of 50%. But they have yet to deliver participation by the membership. “Personally, I think such cooperation to be unlikely in the extreme” said Bankfurt Mole, “because in many cases it will act against their CDS interests. Also they do not like to set such precedents”.
  2. The raising of the additional 860bn euros to ‘leverage’ the EFSF fund is yet to be attempted. In reality, the Special Investment Vehicle (SPIV) is the chosen method: the ideas is that BRIC countries like Russia, China and Brazil will provide this gigantic amount of money.
  3. This too is unlikely to materialise. With Germany specifically capping its EFSF loss limit at 210bn euros, there is no guarantor of last resort – the first thing investors will be seeking. Any losses incurred by investors will be insured for up to only 20% of value. “In the context of 50% haircuts, this is hardly an attractive deal,” comments Bankfurt Mole. (Sarkozy has already announced that he’ll be on the blower to Wen Jaibao forthwith. We are saved.)
  4. Although the IMF recommended a 300bn eurobank recapitalisation, the sum agreed last night was a mere 106bn. We also still await so much as a peep of comment from the formerly gobby IMF boss Christine Lagarde.
  5. The plan calculates that, if achieved, it will reduce Greece’s debt to gdp ratio to 120% by 2020. Few observers of the Greek economy see this as anything other than a fantasy: the country’s GDP is shrinking rapidly, while its austerity measures are lagging far behind. Given this last point, the question remains as to what relief if any the Troika will recommend giving the Athens regime three weeks from now.
  6. The Italian leader Berlusconi’s submission of reform measures to the EU leaders yesterday was regarded, off the record, as risible. With 860bn of the 1.3 trillion EFSF bazooka still to be raised, not even the full amount could bail out Berlusconi’s Boot. No mention has been made of this so far.
  7. The largest mammoth in the understairs loo remains France, whose banks are exposed heavily to both Greek and Italian bad debt. Barred from access to the EFSF for the foreseeable future (if it has any) France will be forced to raid its own assets to bail out largely Government-guaranteed banksters. The obvious, easily tradeable asset is its gold reserves. Raiding these must, given the mind-boggling amounts involved, doom the country’s AAA rating. And that will adversely affect the credit rating of the EFSF….with or without spiv leveraging.

The bottom line – as always with the EU – is that sleight of hand and dry ice have been employed to give the impression of substantive action. The eurozone’s proposal is to borrow BRIC money in order to buy more time to deal with money it unwisely borrowed elsewhere. But the BRIC level of interest remains in doubt. That’s it.

As for the Bankfurt Mole, it is increasingly obvious what that person’s agenda is: viz, the destruction of Merkel’s plans to drag Germany down with the ill-fated SS Eurozone. I see nothing pernicious in this, given that the Mole’s view coincides exactly with that of 90% of CDU members, the electorate, and the Judiciary of the Bundesrepublik. Nor have I as yet discerned a single detail in which the Maulwurf has either misled me or been proved wrong. Essentially, the analysis from that quarter remains sound. I have family feelers to thank for the original access to this source; but I believe the Bankfurt Mole continues to answer my calls because access to a wider readership is difficult….and often barred.

For myself, I retain the simple view. Using a spiv to expand the EFSF is merely going to spread the creditor contagion already faced by the West. In this latest stunt, the EU has produced its most audacious con to date. But it will not pull it off.