Merkel ‘split with Schauble’ over default a distraction

Berlin ‘not in the loop’ claims Bankfurt source

Allegations of White House ‘hardball’ to get US bank cooperation

Second source claims similar plan exists for Portugal

Can I begin by reminding all visitors to the site that you can give me confidential information in relation to the Greek default date (D-Day) story – or any other investigative piece – by emailing

The reason I open with this request is that, while further allegations are reaching my mobile phone and mailbox following yesterday’s main piece, I still lack concrete proof of the validity and source of the documents held by Wall Street banks in relation to a seemingly planned/forced default by Greece on 23rd March 2012. Further enquiries have revealed allegations that first, “the White House played hardball in several meetings with top bank currency traders” to ensure that “the Greek thing didn’t get out of control and ruin Obama’s chances”; second, Portugal is described as being “in the frame” for a similar process; third, the documents are from the Federal Reserve not the Treasury; and lastly, both the IMF and senior members of the German Government are in the loop.

It seems to me there are black arts at work here, and I’ve no desire to be suckered by them. Some of the media information out today since The Slog’s original piece is potentially conflicting, as indeed is some of the history surrounding this story. The biggest of these is the ‘split’ now alleged to exist between Merkel and Schauble about “what to do with” (lovely choice of phrase, that one) Greece. The story put out – and run by the London Financial Times this morning GMT – is that Schauble wants Athens to default, and Merkel doesn’t.

I think the story is bollocks. Superficially it rings true, but in reality this is an obvious attempt to deflect the flak away from Merkel after yesterday’s outrage at Berlin’s suggestion of postponing elections in Greece. It’s an absolutely classic Merkel tactic, and severe doubts about it have been confirmed by diplomatic sources in Paris since lunchtime today (Thursday). Wolfie has been a  bit careless with his fingerprints on this one, but the telling mistake in the spin was to suggest that he’d said the things in confidence – ‘Berlin officials said these statements reflected remarks Mr Schäuble had made behind closed doors’. Absolute tosh: Schauble’s chums were briefing for Germany about it from Tuesday night onwards. The piece is simply designed to make Merkel the good cop. She has dumped on the Finance Minister before, so this is nothing new.

Now of course, should she wish to distance herself from a US D-Day plan to limit contagion, this is exactly what you’d expect the Fuhrerine to do.

But on the other hand, I made contact with my regular Frankfurt informant – the Bankfurt Maulwurf – this morning. This is a person I have found absolutely straight – and accurate – over the months. If he doesn’t want to comment, he says just that. This was his response:

“While I would believe anything of the Americans, I am extremely sceptical that the Federal [German] Government is involved in such a thing [the default conspiracy]. Frankly, I would’ve known by now. It is just possible that a maverick German banker group is cooperating in such a scheme, but I very much doubt it.”

So – confusion. When my Mole says  he would “believe anything of the Americans”, he is I think referring to the Iranian currency sting (reported here and elsewhere) being employed as a vice on Ahmadinnejhad’s balls. But he is pretty insistent about Berlin not knowing anything about a US-derived plot to keep Greek default controlled and manageable.

Mind you, he is a German and he’s very patriotic.

Tracking back over related pieces from solid sources last night, I came upon a piece by Felix Salmon at Reuters from January 17th, in which he fingered March 20th as D-Day for Greece – because he felt that day’s bond issue would fail. And again he noted that default would be less of a trauma, ‘because many of Europe’s biggest banks have quietly sold their holdings of Greek debt to aggressive hedge funds’ – a point made here last week. Felix is a good journalist who seems likeable and very switched-on. Added to this is Forbes contributor Tim Worstall, who wrote recently that ‘if the current private sector holders don’t all sign up, if there’s any significant number of hold outs, then the math of the whole deal doesn’t work anyway. Greek debt won’t be reduced enough to make it sustainable. So Greece will have to default.’ But as I noted yesterday, the Troika seems to have been encouraging holdout for nearly three weeks now: why in God’s name would you do that if you were genuinely trying to avoid a default?

I  suspect very strongly – and have done for a fortnight now – that Mario Draghi’s superb window-dressing in recent weeks has got the key eurobanks in enough shape to withstand even a badly controlled Greek default. And I am fairly certain that all the key Troika players know this: so once again, ‘cauterise and amputate’ continues to make sense….and would obviously be applied to Portugal next. And talking of Troikas, this brings us back to the IMF and our old political doyenne, Christine Lagarde.

I mentioned at the outset of this post that new information has suggested IMF involvement in the ‘Obama playing hardball’ allegation. But I can’t prove – or even substantiate – either of those assertions. However, veteran Sloggers will have followed this site’s close coverage of the Strauss-Kahn saga, and the evidence therein of Lagarde’s installation as ‘our gal’  by Geithner and the Obama White House. She lived in the States for many years and is, like her former boss Nicolas Sarkozy, unusually pro-American. So the allegation makes a great deal of sense.

But as of this afternoon 3 pm GMT, these don’t add up to a hill of beans. I am in no doubt that the US – as it always does – is pulling out all the stops behind the scenes to maintain its hegemony in the global financial game. And my gut tells me that, very probably, the IMF, Brussels and Berlin bigwigs know at least some of this stuff. However, ‘Sources implicate Obama White House’ is as far as I can go.

There are two key things that worry me somewhat:

1. Nobody as yet in the MSM has turned up with one or more originals of the documents that form the spine of the story. ow of course, they may all be in the shredder by now; and nobody has denied the story – but then why would they bother until it had more substance? I will continue to dig into this, but if anyone has anything more concrete to offer – the email address is at the top.

2. None of the Athens MSM have gone with the story – although one Greek radio station is going to interview me tomorrow. More than one Athenian contact has told me “they wouldn’t run it – they’re too scared” and I can believe that too.

Set against these concerns is the compelling circumstantial support – both in motive and behaviour – for the idea that both the EU and the US are working very hard to play for time and minimise contagion via some form of ‘control’ over the Greek default. I am also 100% cast-iron on the story that Mario Monti has been pivotal in persuading the Troika to amputate Greece, and give the cash to the healthier parts of the EU body: so many sources have confirmed it now, I cannot believe that even Signor Monti has pr guys that good.