Yesterday’s ‘2.5 billion’ Athens shortfall turns out to be recycled bollocks


Whether the world eventually sees them as reasons or excuses, Western media and top eurocrats were last night blaming a variety of factors for the cancellation of today’s FinMinCom in Brussels…..and thus the non-approval of the Greek austerity measures. The Slog has however (with the help of German sources and Sloggers) established that so-called budget ‘black holes’ thrown up last night are a largely German fiction, the leaks about bondholder troubles came from the German Bundesbank….and astonishingly, diplomat sources in France and Greece think Italy’s Mario Monti wants the Greek bailout cash to go towards economic investment.

The EU is rapidly turning into Every Man For Himself.

German Newspaper Deutsche Mittlelstands Nachrichten (DMN) broke a story last night shortly after 7pm GMT which appeared at first sight to lie at the heart of both Berlin government opinions about Greek untrustworthiness, and the cancellation of yesterday’s FinMinCom meeting in Brussels.

‘New EU Demand: Greece must save 2.6 billion euros in the short term’ said the headline. What followed was rather a long stream of specific Troika demands…occasionally laced with reprimands: ‘Too often we find out that Greece has not put into effect the appropriate austerity measures and reforms. A contract document has been seen by news agency The Associated Press [saying] the Greek government must make and implement savings of around 2.6 billion euros….’

Except that this was spin – and once again looked like a piece of Chancellery media placement. One looks down the list of diktats (and they are exactly that) and the remaining sum graciously left by the Troika for Athens to find all by itself and not just in one shop is…325m euros. It’s the same 325m euros Renn and Schauble have been blathering on about since last Saturday. The same one thousandth of the outstanding debt.

Some of the required cuts are mad (a billion euros off the Health Budget) and some hysterically hypocritical (300m off Defence – an amount  Berlin and Paris could wipe out tomorrow by allowing Greece to cancel Franco-German arms supplies in the pipeline). But basically, this is an influential German newspaper re-running an old story to suggest “Hey guys – the greasy Greeks screwed up again”. The politicians in Athens have in fact already signed off on all these savings: frankly, they could find the 325m euros somewhere in the folds of Venizelos’s skin. This is just an invention – perhaps allowing Berlin more time to organise an Alles in Ordnung default.

But in another sensational development, sources in Paris and Athens last night saw the hand of Italy’s Mario Monti in the machinations.”Monti thinks the money is wasted on Greece,” said an Athens informant yesterday evening, “and should be spent on EU economic growth instead. We think he wants the money for Italy’s future.”

“The decision [to postpone FinMinCom] was the result of an evaluation by the head of the eurogroup, Jean-Claude Juncker, that there weren’t sufficient elements of consensus to be sure that a meeting would be successful,” Italian Prime Minister Mario Monti told the Sky TV channel in Italy last night. But that is classic euro release-speak: accurately uninformative. Signor Monti has been consistently voluble for some weeks now on the subject of a changed EU focus from austerity (which in Greece has obviously made things worse) to economic growth – which would be good, given the continental economy beyond the Rhine is in neutral. I put this line about Monti writing Greece off to a Parisian diplomat last night, and was stunned by the response.

“We have heard the same,” he confirmed. “It may just be rumour. We have nothing concrete as far as I know just yet. But yes, Mario Monti is a quietly determined character. He is impressive, make no mistake. It does fit.”

The FT this morning points out that ‘Hardline officials in Germany, the Netherlands and Finland are increasingly urging a Greek default’, and they’re not wrong: but the overall tone of the Pink’un’s piece is that it is the ezone nations themselves who can’t agree what to do next. This also reflects what I’ve been hearing: going back to The Slog’s first post of yesterday, I have since then definitely established that the leak given to Handelsblatt (about Greece being unable to satisfy the bondholders) came from the German Bundesbank not the ezone’s central bank run by Mario Draghi, the ECB. It is highly probable, I understand, that the leak was forthcoming from an area not unadjacent to the office of Bundesbank President Jens Weidmann, a well-known anti-bailout hawk.

Herr Weidmann moved a little closer to the limelight – spookily, within minutes of the DMN story breaking – by officially ruling out Bundesbank participation in the bailout, adding “There has to be an administration that implements the measures, and a population that accepts them.” He is a firm exponent of the ‘take the money and run’ theory about Athens – and I am bound to observe, he is very probably right.

What’s gradually emerging is a picture of Germany placing media editorial poison, stirring up the bondholders, and finding new budget sums to query, in the hope of pushing Greece towards default, while still having some control over it by slowing everything down. But there is a degree of disarray among the 17 eurozone Ministers involved that may yet destroy the plan….and very few observers with whom I’ve spoken think anyone can ‘control’ a default in somebody else’s country.

Some of the Brussels/Berlin editorial poison was dutifully hoovered up by Reuters which, under the headline ‘Greek political leaders blow chance to seal eurozone deal’ began by asserting ‘party leaders in Athens failed to provide the required commitment to reform’. Technically that isn’t true: they’d signed off on the need to find another one thousandth of a cut. And Antonis Samaras – the opposition New Democracy leader – let it be widely known yesterday afternoon that he will sign the additional papers relating to this huge sum of money….now suspected of perhaps being under Venizelos’s left armpit.

Inflammatory statements by Samaras – also picked up by The Slog yesterday – had been used earlier by Berlin to raise doubts about whether Greece would  renege on the deal following elections. Elections, as we all know, are – literally – seen by the EU Gestapo as “potential accidents”, and thus to be avoided whenever possible. But this morning yet more revised papers will be signed in Athens about the 325m euro black pinhole – by Samaras as well – and then after that Berlin will have run out of excuses. But that’s OK because the meeting has been postponed until next Monday.

Just using my abacus finger-computer here, I calculate that Monday is six days away…and the 325m has been talked about since last Saturday. This is an awfully long time to spend looking in EvangeloVenizelos’s underwear.

Meanwhile, Mario Monti is quietly ingratiating himself with the bosses. He’s a smart Goldman-trained corporate who, like his namesake and compatriot Mario Draghi, can play office politics with the Big Boys. He told Sky later in last night’s interview:

One day, I don’t see why Italy would be considered less stable than Germany. In many areas we are demonstrating that we have adopted the culture of stability, for example with our pension reform, which many countries admire. If Italians continue to act with the maturity that they are showing now, I wouldn’t put any any limit on the spread going to zero.”

Great piece of up-talking there, Mario. And if you believe that, you’ll believe any old bollocks anyone comes out with.



  1. With all this political under-handedness across the EU and beyond, it’ll be interesting to see how the Olympics pans out! I bet some of these ‘games’ will start to get like a football match with a bit of argy bargy……
    Monti is wise to have pulled Italy out of the 2020 bidding.


  2. Germany placing media editorial poison, stirring up the bondholders, and finding new budget sums to query, in the hope of pushing Greece towards default, while still having some control over it by slowing everything down.

    So Germany is wrong to do what the UK and US are habituated to do with their media? Read what VJ said the other day, and you may begin to smell a rat: but then, I think you do. However I would wish that you could join the dots leading through all these sagas and when joined up spell “private banks”. This is not only the EU but pretty well every western economy. s

    Some have tried to sort themselves out, others (and I include the UK here) have simply ridden the wave of cheap borrowing.

    As to your EU officials, they seem to me more like Westminster bureaucrats: highly educated and highly unaware.


  3. Well, it certainly looks as though I was wrong and Germany is not going to dump the Euro, opting instead, as you have said, John, of squeezing out the Greek poison. The question remains just how many of the remaining PIIGS+ are yet more near popping boils that will also need to be squeezed out and will Germany be prepared to do it, assuming she can actually control pan-national financial events?

    On the other hand if it does all go pear shaped perhaps she is still betting there would be time to whip the old Deutsch Marks out, abandon the Euro singing ‘not our fault, not our fault’ and sticking one or two fingers up at France behind her back, maybe she is even banking on it (nasty pun there) in which case I wouldn’t be wrong after all.

    God alone knows, and I doubt He even cares.


  4. There is some superficial logic in dumping Greece and diverting the bailout money to Italy. How it would work out in practice is another issue…Italy also has a track record of promising the earth and delivering a bucket of mud. I s’pose we’re seeing the EU High Command and paymasters go through the necessary motions of squeezing Greece until the olive oil oozes out for a solid/irreversible commitment to compliance with bailout conditions, hence all the media leaks. And underlying this is their strong nagging doubt that the Greeks will take the money and run, because the sheer depth of austerity being demanded is likely to cause even worse social anarchy. The risk of Greece’s Parliament being ransacked must exist, given the Athens police are losing faith in keeping order.

    Two facts to think about at this time:

    1. The EU elites claim it was about bringing Europe together, as one.
    2. Europe is more divided today than at any time since 1945.

    And the EU idealogues still don’t get it…


  5. @ Gemz .. the British press has many faults , but saying that Greece will fail .., well for once they seem to have been telling the truth . Even the most pro-German poster cannot possibly condone the deviousness of Merkeschauble et al in this sorry tale . The German banking system needs the cash as much as the French banks .


  6. @SD

    the problem is not so much Greece as a Europe-wide loss of competitiveness. Whatever das Merkenschäuble is up to, it will be to protect German industry.


    Because it pays the taxes that bail out banks. Disregard that detail and you have Britain. Printing money in an attempt to bridge the gap underneath its Wil-E-Coyote act above the canyon.

    Whatever you say about Germany remember this: German workers have seen their incomes fall in the last ten years. Greeks have seen theirs rise. German industry has become competitive, Greek industry has lost its competitiveness.

    Put two and two together and you see why Germany is bailing out Greece. Take a careful look at Britain and you will see a situation not dissimilar to Spain – save for the fact that overvalued houses and rickety banks are propped up with funny munny whilst ordinary Brits go about wondering where their next dime is coming from.


  7. Sir Mervyn King has also said that he expects the recovery of the economy to take “a zig-zag” path. Now where have I heard that before; Oh yes! Make smoke and zig-zag. Rule of thumb: If a policiticain (or banker) says something, then assume his only intention is to deflect your attention from what is actually happening. If he says good, invariably it means bad. It is called politics and is a complete stranger to the truth. But keep up the good work John, you will be proved correct in the end…although the end never comes in this global never, never land.


  8. [OT] Merv and his Inflation Outlook press conference:
    – Merv now calls QE the “asset purchase programme” but he avoided admitting that QE has almost entirely been spent buying up govt gilts from the banks on the secondary markets. Thus QE is a backdoor way of funding govt spending and keeping yields down. It’s working!!!
    – He went on to assert that if IRs were raised to 4-5% it would reduce asset values, but avoided stating which assets he was referring to.
    – He didn’t say – and nobody asked him – why the govt have not suspended or abolished the taxation on interest income to partially compensate savers for the ultra-low returns they’re getting. Current IRs are seriously damaging spending in the economy, but this is ignored.

    Sorry Merv, I don’t buy your bluster.


  9. I’m getting confused. (to say the least). Can someone brighter than me with the figures please tell me if it’s true the UK is borrowing more money than iDave’s and Gideon’s “cuts” so that we can subscribe it to the IMF bailout fund. But now the EUrostocracy think the money, including our borrowed contribution, should not go to Greece, but should instead go to fund Keynsian programmes to promote socialist visions of “growth” elsewhere. And all this whilst our children, grandchildren and beyond have to cough-up the future interest and loan repayments? WTF?


  10. I would suggest that Monti knows that Italy could become very dangerous if it was forced into a similar situation to the one that Greece is now in. Even soccer clubs are divided on an extreme left or right basis. Might be a bit too close to home, especially for the IMF, unlike their previous projects that were too faraway to worry about when they exploded. I read somewhere that it will be long term refinancing operations for the big boys & the little piigs to be dumped, maybe the Irish lapdog if it continues to behave, might be allowed to snuggle up & get a few scraps that fall from the main table.

    The UK needs to be very careful, I think.


  11. MarK cannot rig the gilts market,mortgage rates,rob the savers for ever with QE.There will be a run on sterling within 6 months,base at 3 percent, house prices down 20 percent,real government spending cuts,and a bull market.


  12. Here’s a link that shows JW is not alone in his musings. It comes from Greece and Frankfurt. It is also elegantly written.

    Here’s an inadequate summary for those not prepared to read another long blog: The German Plan A (which will in the end shoot Germany in the foot) is described as “cauterise and print”. Amputate Greece, probably Portugal and possibly Ireland, too) in the mistaken hope of containing contagion while allowing the ECB, despite Buba Wiedmann’s misgiving, to print enough money to save the banks. When Weidmann turns on and attacks La Merkel, it will be known as the Fan hitting the shit”. printing enough money however shoot.
    and here’s the link:


  13. Surely if Italy were to be put in the same postion as Greece (will be) it would be able to make cheap motor cars. Can’t see that being acceptable to Germany. Means that the economy would have to be trashed prior to exit.


  14. @KFC

    in the case of the UK, the banks are not writing down their assets (= current market price is lower than their books suggest) and whilst unable to support themselves are able to borrow v. cheaply from the BoE that is effectively printing money to help them.

    That is having a serious effect on people like BT who have investments but little return on them.

    Once the markets wake from their euro-dazed party, they will realize there is money to be made by shorting sterling. That is when the fun will start.


  15. @KFC

    I meant also to say that another effect of the QE is that many homeowners who would otherwise be in trouble and hand back the keys to the house (or be repossessed) are being kept afloat by this cheap money.

    The longer it goes on, the bigger the bang will be when this bubble pops. That is a very real danger for Britain. You should have lanced that boil five years ago, but just in the way JW accuses the EU of not doing things, he is sitting right on top of the very same thing but dressed with a British flag instead.


  16. Ths bail out money probably doesn’t exist yet – it is not sitting in an account waiting to be sprayed Keynsian fashion all over Italy. The EFSF and ESM have little capital and the 130B money for Greece was going to be paid over time.

    There is another round of ECB LTRO money printing before 20 March which will give the EZ banks a fighting chance staying liquid/solvent when they are forced to write down losses on their investment book for Greece. Someone has done the maths and with the ECB now printing (more so proportionately than the Fed or BOE) a calculation has been done which shows that (a) Greece is a basket case and will never recover inside the Euro and (b) the can can be kicked further re club med – so France’s banking system lives another day.

    Personally I think that Greece needs to default and that it will not be controllable – there is now a recession in the EZ, the USA is churning out misleading stats (still in recession) and China is in a mess – never mind Japan. The CDS ripples will cause credit crunch III and the money printing will ratchet up again.

    If I were BUBA and wanted to avoid high or even hyper inflation I’d be looking to get out of the Euro asap. This is clearly not Merkel’s plan (???) so maybe keeping an eye on events in Germany is now the thing to do. A new variety of “Kremlinologist” is needed! [ Eurologist??- pun intended]


  17. BT
    Spot on. Had middle class Silvers been left with decent interest earnings, they ould’ve kept the economy going at 50+% efficiency, because they don’t need credit.
    But not, the banks had to be saved…..


  18. BuPi
    Nothing unbright in that question. Since May 2010, we have ‘saved’ £10bn – and whacked £365bn into QE. In that same period, we have stumped up £14.5bn to the IMF and EU.
    And as for EFSF monies going into growth, yes you’re right on the money: if the IMF contriubted to that, I have a feeling it would be contrary to its articles.
    Mind you, it’s never held them back before.


  19. Just back from the doctor. Good news! He says it isn’t tinnitus, just the sound of euro-cans being kicked down the road. Andrew Lamsley will make a statement to the House later today before. Apparently the complaint has reached epidemic proportions


  20. John, this is off topic just a bit. Having found The Slog only in the last year or so I’m wondering if you ever covered anything on the ‘Quants’ controversies, and if so, is anything of yours on this available in your archives? Computer trading, hyper-automisation, hedge funds employing autistic mathematicians and so forth?

    Or do think all that was just more bollocks of another variety?


  21. @Jon
    if Italy had its own currency back, it would fall in value sharply. That would make all imports 30% more expensive immediately. It would also render many auto makers unprofitable at a stroke.


  22. Pingback: EZONE MESS: The rise and rise of Mario Monti | The Slog


  24. I guess you’re feeling very holier than thou, great british something worse than poison… you think you have the right to compare people to boils and pigs… A pox on your kind I say.. and that’s me being polite…


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