Merkel….doesn’t trust Athens

German paper Handelsblatt’s article ‘used as plant to prepare ground’

Athens wonders: do Germans not trust Atonis Samaras, prefer to save 130bn euro bailout?

On the eve of a major FinMinCom session in Brussels to ‘approve’ the Troika demands regarding Greek cuts and debt schedules, The Slog has unearthed sensational  allegations being made in Greece, France and Germany this morning. The gist of these is that Berlin wishes to engineer a technical sovereign failure – perhaps even  with Greek bondholders’ covert approval – and leave the Greek Government without a voluntary bondholder haircut to stave off default.

Paris, Brussels, Athens and Berlin are awash with briefings, claims, allegations, rumours, spin and counter-briefings this morning, following a sensational article that has appeared in the German newspaper Handelsblatt. The paper cites unnamed central bank sources as saying the country will fail to achieve that goal, leaving the government little choice but to make the write-down mandatory for investors holding out. Requiring investors to take a loss would prompt credit rating agencies to declare a debt default for Greece.

The prominent German daily made no distinction as to whether the the sources were at the ECB or the Bundesbank, but since picking up the story I have been able to establish with a degree of certainty that at least one of the sources is in the German Central Bank.

However, a French source maintains that the article is a ‘sting’ – or a plant with Handelsblatt’s knowledge – designed to prepare the ground for Greece’s Athens negotiators to carry the can when bondholders walking away from the deal. And MSNBC this morning quotes ‘A European official’  saying that a push by some euro nations for a reduction in a €30 billion ($40 billion) “sweetener” Greece has been negotiating with private creditors is likely to fail.

But both French diplomatic and Greek sources now think there is a strong possibility that this is the idea.

Far-fetched as this sounds, there are solid grounds for believing in its possibility – perhaps even likelihood. A reliable Brussels source relayed to me yesterday that ‘senior eurozone governments’ were actively considering how the bondholders could be further squeezed, and this morning the Wall Street Journal had a similar interpretation about ‘reducing bondholder sweeteners’. Also we still have the bizarre situation of Berlin quibbling about 325m euros of further cuts – as reported by The Slog last Saturday – at less than a tenth of 1% of the debt total.

Suspicions were further raised in both Berlin and Athens yesterday when first, the likely next Greek Prime Minister, New Democracy leader Antonis Samaras, told associates that ” As soon as the bond swap procedure is concluded we will demand the dissolution of Parliament immediately. We are clear, we are in position to impose elections and we will do so. I want to avoid the jump over the cliff today, to buy time, to restore normality, and then go to elections tomorrow.”

I understand Berlin took this very badly. Yesterday later on, Angela Merkel made a point of publicly contradicting Samaras to say that “”An amendment to the programme can’t and won’t happen” – yet another brazen invasion of the democratic right of a Member State’s citizens to vote whichever way they like.

Both Germany and Greece’s other official creditors have sought to tie the hands of Greek politicians after elections expected in April, seeking assurances they will back the unpopular package after then. These have not been forthcoming.

“It looks to me like Berlin has decided enough is enough,” said a Paris source, commenting on the Handelsblatt story, “In theory they [Berlin] could do a deal direct with the bondholders to let Greece go and maybe repay them at around the 70% haircut level out of the EFSF or the ESM in the summer. A lot depends on whether the sources were ECB or Bundesbank…or both.”

Shortly after 10.15am GMT (an hour ahead of Frankfurt) The Slog’s ‘Bankfurt Maulwurf’ offered this opinion:

“This could represent a step back towards sanity on her [Merkel’s] part, but it might also be catastrophic because it is too little too late. I am sure that were Berlin and Frankfurt caught doing such a thing, the markets would immediately write off all the latin EU States. Certainly I cannot confirm this, but naturally they would deny it until Hell freezes.”

Not exactly a straight answer, but if the bloke doesn’t know, then he doesn’t know: and as always, his observation is sensible.

I have also spoken to my bondholder source, now sufficiently removed from the front line to comment even more frankly.

“It’s a f**king den of thieves,” was his crisp opener, “and although I’ve been out of it for a while now, I know that all trust between the Greeks and pretty much everyone else has gone. If Berlin is planning this, they just better make sure they are squeaky-clean, otherwise the markets would go nuts.”

They might: but as I noted earlier this morning, market opinion leaders are one thing, mainstream investors, bondholders and cynical Hedge Funds another. They might well regard such a maneouvre by the Merkel-Schauble-Draghi axis as hard-headed – and thus, on the whole an encouraging sign.

“My personal view is this would be a hugely risky play to make,” the bondholder informant continued, “although I think if they did I would entirely understand their instincts. The general view now is that the Greeks will take the money and run. But you have to ask where that leaves the other ClubMeds. I mean, maybe Berlin doesn’t care any more. I’m pretty sure the Bankfurt bigwigs don’t….they just want Germany off the hook. If nothing else, if this story proves to be true, it would certainly take them off the hook forever.”

From Berlin’s viewpoint, all they would have to do then is move things along to FiskalUnion. And the fewer dodgy sovereigns there are to guarantee by then, the better both Merkel and her bankers will feel about it.

Meanwhile, Olli Rehn, the EU economics commissioner, repeated last night that “the other conditions needed to be fulfilled. They include identifying €325 million of extra budget cuts this year, and getting clear assurances from Athens legislators before they embark on the campaign for the next election.”

Quotes like that tend to suggest, I would argue, that if something is being planned here, then Brussels is fully informed.

Stay tuned. If any usual Slog sources I haven’t reached (or informative others!) can shed further light, please try me at the usual number – or email me at


  1. Well, as I wrote on your blog on Jan 31st:

    “Is it the case that the Germans are effectively forcing Greece into a position where it would end up leaving the Euro? (And that in fact that is the desired outcome from a German perspective).”

    That was my analysis based on some of the nuances of the events. Nothing has happened to change that point really.

    Interested to know the Slog’s analysis of outcomes based on this premise.


  2. “they just better make sure they are squeaky-clean” – I think you can expect the Germans to manage that (although, I will say that the good burghers of Brussels do keep their pavements scrubbed as well as just swept as the Berlinners do*).

    *It is law that a householder keep their pavement clean and clear of snow and ice.

    As to Handelsblatt – I remind you of what Viking Jack said the other day about press freedom being controlled by the US (and others). It would be an encouraging sign if they had responsible media themselves.


  3. Bond holders are, in the main, pension and Government based. This “haircut” will dump a lot of the banks liabilities elsewhere. it’s a bailout of those banks who have yet again cheated their way out of the debts they created before 2008. Until the cosy political and corporate financial unhealthy relationship is broken the austerity for the masses will get ever worse. The ever increasing violence we saw in Athens and Greece will spread throughout Europe and sweep the EU away. Then we will see a slow return to localised normality. Ten years from now is my best estimate.


  4. Tough call. The rumours could be true or the whole story could be planted to ensure Athens understands how serious Berlin is that Greece steps up to its agreements on austerity. Greece’s opposition party – waiting in the wings to form the next govt – must be giving Merkel the geli-wobbles. For Berlin to sanction Greece’s default and exit from the Euro would mean tacit acceptance of a major re-alignment of the EZ and possibly the EU itself. And then there’s the Little Man in Paris and his nation’s future to think about. Or perhaps not.


  5. Agree, in all this melee with Greece (who are no saints btw) people forget the root cause of all of this. The reason Greece could not be allowed to default two years ago was the impact the European Banking system, why was that a problem, well they were still trying to absorb and swallow all of the rubbish MBS punted out by Wall Street that’s why, they could not cope with a Greek default at that time. The reason this is being stretched out to the degree it is goes back to Wall Street (this time CDS written not just on Greek sovereign debt but a whole host of institutions who would be impacted). The Yanks have done it again, every time there is some threat to their position (Japan in the eighties, Euroope in the noughties) they engineer yet another crisis to bring the rival down. Interesting to see what they will dow thi China


  6. I liked this quote:

    When will this Plan come out of the shadows and be discussed in public? After Mr Sarkozy, on whom Mrs Merkel has invested much, wins the French Presidential election, was the answer I was given.

    So it’s all a bit contingent then?


  7. That’s sarko’s re-election plans well and truly cooked now then. Seems unlikely that the president who lost the AAA and then oversaw the collapse of the majority of French banks will get another term.

    Couple that with the fact that merkel is going on the campaign trail with him and he might as well book his summer holiday now. May i suggest a couple of weeks in Greece!?


  8. He may steal a crooked election. Starting that way by keeping Le pemn off the ballot so far. And don’t forget he is an Amboy (Tagalog word for an American sympathiser/Quisling).


  9. If you give a drug addict all the money, he will run and buy any drug available. If you give him 1 cent or less on the dollar, you can coach him to stop using… The Greek will run if they get the cash tomorrow and declear new elections, after that they’ll say we can’t ever pay you back. It all looks very clear to me


  10. I’m sorry but the idea that Europe was going to rival the U.S. is laughable. The whole thing is a shambles and they did this entirely to themselves, with no help from elsewhere. Christ people even told them exactly this would happen when they started the single currency


  11. OAH, I don’t think that he’s keeping the lovely Marine off the ballot. She’s the one having problems raising her 500 signatures. The word might have gone out but that didn’t ever stop her father getting his signatures.


  12. As I have mentioned previously it does look like Dragho and co have been engineering a rally in risk asset prices to help in case of Greek default . Also Funds saved by not being wasted on Greec can be wasted on Portugal / Italy / Ireland / Spain . The PIIS .


  13. Soap

    Don’t get me wrong I am no fan of Europe (sooner we get out the better) but to think this is just a purely a European problem misses the point. The root of all of this is the US housing crisis and the subsequent infection of the Global Banking system. Add in stupid greedy European banks and countries and it is all blowing up.
    Greece should have defaulted two years ago but was basically not allowed too becuase of the impact to the Global Bankig system which has Wall Street at its heart.


  14. If they get more cash (which i suspect they probably will), expect it to be piece meal. The spigot will be turned off as soon as the Greeks start meandering from the agreed plan, whoch probably won’t be that long after.


  15. @Jason:
    The US certainly has a way of dealing with threats against its hegemony et al, but with all its warts it’s still the best option available of holding the line against venal, creeping socialism which is polluting planet Earth.

    But I mainly agree with @soap…the shambles that is the Eurozone is entirely home grown; created by arrogant, dumbf*ck socialist political elites (elected and unelected) in an attempt to create a new European empire called the USE to rival USA global power and influence. It is fundamentally corrupt and as we all know is dangerously undemocratic and very willing to break its own laws in persuit of its objectives. Hopefully, if Greece exits the EZ it will be the beginning of the end for the EU itself. European countries will then be able to begin the process of economic recovery.


  16. I’ve just been reading an online newspaper. Alexander Graf Lambsdorff, an MEP from Germany’s governing coalition has urged his
    countrymen to holiday in Greece to help support the debt-laden
    country struggling to avert a default.
    Do you think that’s altogether wise? Last time I was in Greece, the old boys would spit on the ground at the mention of Germans. I don’t think Herr Lambsdorff has quite got a handle on the situation.


  17. What the French think?

    But I can’t see “Germany” wanting to bankroll all these basket cases into perpetuity. If that is your take on things then they would be looking for an exit.


  18. “””””””””It is a tale….told by an idiot, full of sound and fury,
    Signifying nothing.”””””””””””””””
    Will Shakespeare…Macbeth…..centuries ago.

    “””””””””No event in history has happened BY ACCIDENT. Every event, every war, every boom and every bust, has been anticipated and carefully planned in advance”.
    Everything that you see involving Merkel, Sarkozy, Papademos and Cameron has been planned, rehearsed and choreographed down to the last handshake.
    For the sake of any doubters, here’s what WON’T happen:-
    1. Germany leaving the euro
    2. France, Italy and Spain likewise
    3. Greece voting to leave the EU
    4. Greece actually getting a referendum on the issue
    5. The UK likewise
    6. UK interest rates increasing
    Here’s what WILL happen:-
    6. Greater integration of members of the EU
    7. Proposals touted for a central EU government
    8. Quantities of EU-held gold sold to Rothschild, Rockefeller and Blankfein
    9. EU banks recapitalised by EU taxpayers
    10. Bank mergers & acquisitions planning nearing completion.”””””””””””

    Kennyboy……The Slog…….months ago.


  19. Cronshd
    It’s very very confused because we have several dimensions at play here…and judging by my mailbox, more with every hour!
    As you know, I’ve suspected Germany’s motives for weeks…especially when Berlin and Draghi weighed into the bondholder talks a fortnight ago. But Schauble has always said until now he wanted a Greek default WITHIN the ezone. That would make sense because this would set a precedent if the sky DIDN’T fall in.
    The mad folks in the Chancellery have obvious decided now they don’t want the greasies at any price…in which case this newe scenario makes eminent sense.
    More anon, hopefully….


  20. BT
    I think this is very close to where I am right now. If Merkel is so keen to help Sarko win, why would she drop him in it by doing this?
    The ONLY conclusion to draw from that, my dear Watson, is that Sarko, Draghi & Merkel feel the French banks are now sandbagged enough to withstand the post-Greek default Tsunami.
    I’m not at ease reporting this stuff, because (a) technically it’s at the edge of my comfort zone and (b) there are a hundred Machiavellian levels.
    My overall take, however, is that – while all diplomacy is a shower of sh*t, the EU and the US are more malign than most.


  21. @marcjf,

    No problem, it’s an interesting take on the situation but not having any contacts living in France to discuss it with I wonder just how accurately it portrays the feelings of the ordinary French citizens on the current Franco-German alliance.

    Anybody with any French contacts like to comment ?


  22. Jon
    I think it’s different this time. The US and Sarko are playing hardball to save their vertically challenged moron.


  23. I’m no socialist and the EU is corrupt as they come, its the one the Gordy got right, even if the reasons were nothing to do with the good of the country more spite against TB.

    I think the US is beginning to fall of the cliff as far as the socialist route too.

    To me TBTF will be the downfall of the system, capitalism needs failure, whether that is individuals or institutions at the moment only little people have to fail, the big players get bailed out (bit like paying taxes it seems too)


  24. Rui
    I spend half the year in France. Where I live in the SW, they’re more excited about Marine Le Pen than the EU.
    But I do have strong links with Germany too, and their anti-French sentiments vastly exceed vice-versa…in my recent experience….


  25. Pingback: Athens Burning | Frank Davis

  26. Could well be, I find myself thinking that he is still an unpopular leader and is well behind in the polls. Sandbagging simply holds that status quo. Cue merkel campaigning with him and making him look like her drug-addled pet.

    There going to be a legion of patriotic, belligerent and uncooperative leaders flooding Europe in the next 12-24 months making it excessively difficult for the current crop to maintain their grip (or lack of) on the situation.


  27. “No event in history has happened BY ACCIDENT. Every event, every war, every boom and every bust, has been anticipated and carefully planned in advance”.
    Everything that you see involving Merkel, Sarkozy, Papademos and Cameron has been planned, rehearsed and choreographed down to the last handshake.”

    I had a little chuckle at this. You really think those guys are competent enough to create and follow through on a grandmaster plan, correctly anticipating everyone else’s reactions, when in truth thy’re barelly able to walk and think at the same time? The lack of a coherant plan is the problem. An orderly default 18 months ago would have solved the whole thing.

    It’s a bit like the 9-11 conspiracy nuts. Heck, if it had been planned by the likes of George Bush and Dick Cheney, the planes would have missed. They’d have slid to a stop in a field somewhere around Ottowa.


  28. Maybe something or nothing
    Just seen an FT journalist on SKY news saying that the markets don’t take any notice of credit rating agency values
    If that is the case then why were France and are UK so apparently concerned about their respective “Triple A” ratings


  29. Perhaps Merky has done a deal with Sarko: “I’ll do some campaigning and help you win your election, and I’ll let Greece go to hell immediately afterwards.” Imagine that…


  30. As the FT guy (Wolf) said: ‘the politicians take notice but the markets don’t.’ Something about political virility (if that’s not an oxymoron).

    I actually don’t entirely agree with him but who am I…


  31. And the Chinese are pledging “support” to help the EU. All free of actual money.

    Maybe they thought if they sent barosso his commie sensibilities would win over the Chinese (even though they’re not proper commies anymore).

    Good plan fellas, now back to the drawing board!



  33. Wolfie is correct. The markets do their own research and discount the agencies who are always a day late and a dollar short. The rating agencies are whores paid for by the companies needing the ratings. The system is hopelessly conflicted, expensive and nearly useless.


  34. Half time from Wembley,in the Euro finals,Panothinaikos 0-Bayern Munich 1.A deceptive scoreline,as the BM manager,legendary Gerd Merkel has already deployed all her substitutes in an attempt to run the Greeks off the park,but the boys from Athens have plenty left on the bench,including talismanic striker Upyours Wedefault Youget nothing,the sensational late season signing from Cameroon,and the genius winger from Nigeria,who runs rings round international defences, Germans Sodu.The second half is just beginning and that’s a red card for the German keeper,I think the Greek boys may have the last laugh here ,oh yes an immediate equaliser from a offside position,the ref is English,the linesmen Swiss,and another red card for the BM captain,this time ,I can’t believe it,and back to the studio..


  35. I am fed up of waiting for the Franz Ferdinand moment, maybe it has passed & will only become apparent through the lens of history. I am amazed that the old boat is still floating in this world where the tiniest trigger can cause a typhoon. I admire their confidence that they have the banks sufficiently sandbagged, I don’t share that confidence though. I expect the unexpected, something has got to give. They have too many plates on sticks that they have to keep spinning, all at the same time.

    Merkel is doing well in German polls apparently, blaming the unter-menschen seems to be a proven successful political strategy for electoral success in the Fatherland.


  36. ireland ok? you cannot be serious man. tell you what cronshd this place seems to be in a very bad way. sales everywhere, discounts , bogofs, house prices dropping like a stone,PUBS CLOSING! halfwitted politicians that couldnt run a whelk stall. its all bollocks i tell you bollocks! atb cc


  37. What, you mean the same incompetents who couldn’t organize a chook raffle or a root in a brothel with a fist full of fifties?



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