Wall St – Schauble – Draghi – Monti connection alleged

London Daily Telegraph piece cited as ‘on the money’

Draghi bond-swap seen as ‘ECB protection’

Further doubts about Merkel public position on default

Just before midnight GMT Saturday, within hours of Bruno Waterfield’s piece about German finance ministry Greek default preparations appearing at the London Daily Telegraph site, The Slog received confirmation from a New York based banking source that – whatever German Chancellor Angela Merkel’s public stance may be – plans have been firmed up on both sides of the Atlantic for “an inevitable Greek default some time in the third week of March 2012”.

There is only one source I trust more than this person: instrumental in enabling several Slog scoops during the Strauss-Kahn saga of last year, I have never been given a bum steer by the informant. Having been made aware of the Telegraph piece – in which the secret (and damning) Troika report on Greece’s chances is again quoted – this senior banker finally agreed to talk on condition of total anonymity.

“The [Telegraph] piece cites Wall Street rumours about preparations for default, and so now the formal German work is coming out, US planning will be assumed pretty soon,” the source began, “They’re kind of preparations, but really they’re plans. And I’d say your chances of laying your hands on physical evidence are slim. No government-sourced papers exist as far as I know. There were only two maybe three meetings, and the attendees were barely in double figures. But the position was made brutally clear: for well over a month now, the Obama Administration’s conclusion has been a dead cert Greek default. The job of the President, the security services, the Reserve and the Treasury is to protect the United States from the consequences of that, and that’s just what they’ve been doing.”

This is the second corroboration of the Slog’s initial source of the story about plans having been discussed – including dates – in Wall Street. The person – also extremely well-connected diplomatically – added:

“Angela Merkel’s public position is a necessary illusion. The pressure from Frankfurt to get onto the task of preparing for default has been augmented by Washington’s sense of urgency. I wouldn’t call it close cooperation, but Schauble, Draghi and now Monti are fully aware of it. Mario Monti in particular has, I understand, welcomed it. The action being taken by the ECB [The EU Central Bank run by Draghi] yesterday is a big clue”.

The banker is referring to Draghi’s decision to agree a preferable bond haircut ahead of the other bondholding parties. Several puzzled observers wondered why the Central Bank had openly protected itself in this way, as this subordinates the other private creditors, and thus will more than likely trigger a default.Yesterday the bank was suitably vague about confirming the move.

“Draghi is protecting his butt, pure and simple,” the informant continued, “he gets the money out from under before the truth is fully grasped. And the IMF has done the same…its contribution now is peanuts. Lagarde has been told to save her money. Good advice in my view.”

Yesterday morning, a regular Slog mole in Brussels pointed out to me that Italian bond rates had been rising again “and so it became necessary for Merkel and Monti to sound gung-ho about a deal. Frankly, the chances of getting a straight answer out of any of these beggars is close to zero. There is just far too much at stake. But I now very strongly doubt that a deal will be done Monday….and if it isn’t, then putting the steps in place for avoidance of default become well-nigh impossible”.

This view is shared by Bruno Waterfield’s piece: an EU diplomatic source confirmed that “The private sector involvement takes at least four weeks to issue the prospectus and to get subscribers, and without a deal on Monday then time will run out in March”.

“There will be no deal Sunday or Monday,” the New York source asserted, “Once the ECB is in shape, and now Draghi is happy with the key eurobanks’ viability, the Athens Government will be encouraged to declare itself bankrupt. I would have to assume most of the smart creditors have  already sensed this. Nobody apart from a few Greek negotiators has paid them any real attention for days now. I guess the German preparations have surfaced because the EU now feels fairly safe.”

The Schauble preparations – confirmed for the first time by Waterfield – become a semi-final piece in the jigsaw of subterfuge and obfuscation that has been in operation since mid January. Says the Telegraph piece:

‘The sense that an endgame is approaching has been fuelled by the secret “troika” report, by EU, IMF and ECB officials on Greek debt “sustainability”. It found that even if Greece implemented all the austerity measures expected of it, and if it achieves highly optimistic economic growth targets, it will still fall short of what is needed, with debt likely to total 129 per cent of GDP in 2020.’

Although the Telegraph goes on to say ‘the European Central Bank and the European Commission are, for now, lining up with Mrs Merkel to push for the rescue attempt to continue, fearful that the financial tsunami that would be unleashed if it failed would swamp the eurozone’, my US source refutes this.

“They have to say that,” the informant comments, “for now. There can’t be seen to be any forensics left for people to find. But the Washington view is very clear: they see Merkel as the key US ally, and neither they nor Frankfurt would let her take such a risk. Look, if the ECB is protecting its backside, Berlin has no choice but to follow suit. If she pushes through and gets a deal on Monday, then it really will be proof that everyone in the EU is insane – including her. I just don’t buy that.”

At the height of the hysterical rhetoric between Brussels and Athens last week, Evangelo  Venizelos declared, “there are forces in Europe trying to push Greece out of the euro.” It’s very probable there were rather more of them than he realised.

Related: How US currency wars brought Iran back to the negotiating table.


  1. Great stuff, JW.

    You wouldn’t mind having a stab at the implications of all this for the markets/Euro/gold price would you? The more I learn, the more I am confused.


  2. Pingback: The document asserts that Greece will officially be declared in default after the close of business on Friday March 23rd. « Nicholas Arrand

  3. Harold Rosario at 4:15 am, and rmiglobal: Neither the Greek Government nor Frau Merkel want to be seen as the initiator. Greece’s puppet government wants to be able to say, “We were pushed”, while Merkel (the Troika’s catspaw) wants to say, “They put their collective necks on the block”. If it creates financial Armageddon – which I doubt it need do – they want to be looking the other way while it happens.


  4. @ Mike Spilligan

    The catch is that Greece is littered with highly educated people who can’t find a job and most are tri-lingual. They might have gotten away with this before the connected age.


  5. JW that phonecall must have come through late! 2:53 am – or was it the Budweiser ;-)

    The only excuse which comes to mind is that the EU never had to deal with such problems before and, therefore, lacked the necessary competence. That was in fact the case but when one lacks necessary competence, one is obligated to seek it elsewhere where it exists.

    [ … ] Another address would have been those who were involved in the Latin American debt crises during the last decades. In actual fact, those people even offered EU-elites their advice but they were politely ignored, arguing that what worked in an emerging country has no application for an EU-member.

    Klaus Kastner, November 2011

    Now: with Greece effectively out of the way, what are we to do with Portugal?

    As mentioned elsewhere in the quoted article above, Germany has hocked half a trillion euros through Target 2; Germany is not China and cannot afford to lose this sort of money. Somehow it has to be paid back. Merkel has been neatly maneuvered into a corner where any move she makes looks to her like a disaster.


  6. @MS
    “while Merkel (the Troika’s catspaw)”

    more like a pussycat’s paw? There are no claws in that fluffy thing. She just stands firm, arches her back and hisses. The Troika know there is no danger there.


  7. None of any of this subject makes any sense whatsoever.
    The markets generally know what’s happening.
    Meantime I’ll get back to the love nest while it’s still hot.


  8. I agree Danno that this makes little sense but I doubt the markets have priced this in or know what is happening. About 70% of trades are computer driven based on momentum algorythms. We have strong upward momentum at the moment as ECB/Fed/BoJ and BoEs’ presses flood markets with money. There is also suspicion that some computer trades are government inspired – ie the markets are being fixed.

    Even if a deal is done this weekend Greece can’t be saved so my expectation is that it needs to default. What I can’t work out is why there is such hopium about a deal. A deal is meaningless. It is like a bankrupt company doing a CVA and agreeing to pay back its creditors 30% when the figures don’t stack up. It needs to be 0% and a new currency IMO.

    The US seems to have recognised this. Maybe BUBA and the BoE has too. Maybe the ECB. The various politicios and commisars??? Reality has to intrude eventually.

    In these circumstances and with these players one would expect public misstatements to justifiably protect the financial system. But it is a very grey area when the savings and investments of very many millions of people are being gambled on the turn of a card – and by the same people who have demonstrated a combination of staggering incompetence alongside contempt for the democratic process. Playing with fire.


  9. So , how can we as minows make a bit of cash out of this ?Silver ? Selling the Euro short ?long ? Any suggestions for someone with a few $ to spare.


  10. While the Default day may be only a month ahead, the euro will likely plunge when markets open. The market priced in a deal on Monday. This doesn’t seem likely…


  11. Pingback: Greek Deal May Be Delayed Once Again (or Cancelled) - 5 Reasons | Forex Crunch

  12. Yep, the pieces are falling into place for a Greek default. The bit about its debt/gdp ratio still being unsustainable in 2020 must surely tell the elites ‘something’. Of course they knew most of this 18 months ago, so the last two years have been wasted on expensive money printing, bailouts and endless political half-deals. All funded by taxpayers. Merkel should be held to account for this by her electorate, who should not forget the undemocratic actions she’s been involved in.

    As others have alluded, Merkel is desperate not to be tainted by events, so she’s still walking around publicly talking about a deal… But Monday’s blabfest is likely to be another can-kicking exercise as everybody waits for D-Day and use the time to cover their asses.

    The Greek default should be No.1 on MSM by now but still no mention except the Telegraph piece last night.


  13. I would expect gold to fall sharply to $1550 an ounce and silver to $26. This is the point at which Gulf and Chinese buyers move into cheap physical (as per post MF Global). I dare say we will see further QE from the Fed, ECB and BoE which will be good for long term investors. Hope that the Arabs start demanding gold for their oil (as per Iran) and that’s when the dollar tanks. I see short term pain but long term gain in PMs (as per 2008 when gold headed south but then continued it’s bull run).


  14. Despite two years of strenuous efforts by the EU political elites, the unelected EU-cratocracy and Greek politicians themselves to wreak economic destruction on the Greek people and European taxpayers, it now looks likely that Greece will default on its mountain of debt. This decision could and should have been taken in 2010-1. Shame on them.

    The morning after default will be Day One of Greece’s recovery from this politically engineered disaster.


  15. Pingback: “Secret Troika Report” – Key for Greek Bankruptcy Announcement | Forex Crunch

  16. So Wall Street wins again,Greeks or otherwise can rot,and no credit event will occur because the ISDA has said so-so much for free markets.


  17. Pingback: The Eurozone is stabilising - Page 753

  18. The ‘fact’ that there is a plan to kick greece out the ez makes perfect sense as does the secrecy behind it. The markets most definately havent priced in the CDS chaos that will result and the subsequent bank collapses.
    Outlook on gold is positive longer term but unclear in short term. If we have another global margin call gold could fall like in oct 08 when the baby got chucked out with the bath water as funds dumped liquid assets incl gold to cover equities as they collapsed


  19. Pingback: “Secret Troika Report” – Key for Greek Bankruptcy Announcement | Forex Trader Website | The future of Forex is here…

  20. Yes gold may fall until Asia steps in agreed , BUT if there is sufficient panic in the air a drop in price may not materialise and especially as we have had a long consolidation in price since the 1915 high and subsequent correction. My advice would be to establish a half position close to 1700 if allowed, then grab more on pull backs. All physical of course. Right, back to my bacon sandwich.


  21. The banks must be jittery, I just got a letter from Barclays telling me that if they go pop my deposit is ok providing I have no more than 85k “I wish” and that was sent to me for the temerity of taking out £200 from an ATM! Obviously something flashed up red on a computer screen somewhere, they are obviously now on red alert over the possibility of a bank run.
    Do bare in mind that only an estimated 5% of all money in the world is actually in paper notes and coins, thats not a lot to go round if electronic systems fail.


  22. While Germany may not be following Hans Werner Sinn’s opinions (see interview in FAZ) they are following his logic – and that means that Portugal, Italy and Spain will follow Greece out of the euro. Germany can afford nothing else. Interestingly he spares Ireland – so this is north v south in Europe with France in the middle.


  23. US will negate the CDSs to support their banks and Frogs will have to bailout/nationalise one or two of its banks. One of the cancers is removed and nowon to Portugal.


  24. What ever happens there is no way the banks will allow a derivatives pay out, how many derivatives have been sold with Greek debt? Your guess is as good as mine? You won’t find the truth from the BBC, FT that is for sure?


  25. As nobody has done any proper external audits of the banks & the banks have been consistently marking to model & not to market, I don’t see how anyone can know how this will pan out. with so much at stake wouldn’t it not have been a good idea to find out what the situation really is?

    Nobody knows the full extent of the toxicity of RBS for instance, even though it’s almost a fully nationalised business with 45 billion invested in it by the British public. I know for a fact that they are still up to their ears in Irish sub-prime, through First active & Ulster bank & yet Mr. Hester says it’s all fine & so of course it must be OK.

    I once worked for British industrial sand as a trainee manager, part of my job was to put together month end statistics for the company accountant. We had the occasional eternal audit in which every figure was checked by strangers watched over by terrified staff. This was a long time ago & I don’t know whether this practise continues within private or public companies, but I do know it kept everything shipshape & cancelled out any chance of fraud.

    I am sorry to harp on about this but with so much at stake, there now, it seems to me, to be a shocking lack of accountability, & where there is, it has been shown that accountancy firms & regulators are not properly following their mandate & in some cases are guilty of fraud. Surely if we are in deep shit we need to know how deep, otherwise we cannot judge what proper measures are necessary to get us out of it.


  26. Just go out and buy some silver but don’t expect to make a ‘fast buck’ although you may be lucky. Gold and silver merely provide a sensibly safe way of preserving whatever value of the totally trashed paper money you have to hand. You are simply transfering the progressively downward spiral of paper money into a real asset.


  27. Agree. I recall an article on Market-Ticker months ago where Karl Denninger said that govts must demand that all banks mark to market and reveal the full extent of their books or face criminal prosecution. Nothing ever happened about it. I can only conclude that govts can’t face the reality of the catastrophe they’ve presided over.


  28. JW’s post prompted me to recall the futility of Government Ministers trying to prevent a run on a bank at the height of the Northern Rock crisis, beseeching depositors not to remove their funds as they were secure and backed by State guarantee.

    Depositers, shocked at witnessing a fully fledged run on a UK bank were understandably panicked by such an event but were finally reassured by the soothing words of the people in power and the status quo resumed.

    I suspect the lesson wasn’t lost on the movers and shakers with the soothing words balm being applied before the event next time.

    Given the events outlined in JW’s article, multi trillion magical $ swap lines will be announced to support the European financial systems prior to Greece opting for the exit, along with widely reported MSM experts deducing this is the best outcome for the rest of mankind, most praying that the lows of 2008 are avoided, others hoping those lows return giving a second chance for those with liquidity to profit, maybe for a second time.

    Life will appear to go on, Western currencies will devalue, stocks will gyrate and most will be poorer for the experience, eventually erasing the lessons learnt so the mistakes can be revisted.

    Que Sera


  29. @narxjf – not just “momentum algorythms” – from Deutsche Mittelstands Nachrichten:

    “artificial intelligence

    New trend: Economic Journalists are being replaced by robots

    Published: 18.02.12, 02:05 | Up-dated: 18.02.12, 02:32 |

    In the U.S. an algorithm has been developed that fully automatically produces financial news from stock exchange data. Thus, in the future robots will determine what automated traders – so-called trading algorithms – will buy and sell. In this way huge profits can be made with manipulated facts in split seconds, without even a single human hand touching a computer keyboard.

    As reported by the U.S. media website Media Bistro, 30 media companies already use the software “Narrative Science” for the creation of fully automated news. Amongst the customers are the business information service Forbes and, according to a report by the New York Times, the financial information service Hanley Wood.
    And this is how the price trend could develop on the timeline:
    14.30 and 0 seconds
    The U.S. Department of Labour announces the unemployment figures for January
    14.30 and 1 second
    The trading algorithms start to run. Taking into consideration the time needed for the order to arrive at the digital trading space, then one can assume that only professionals with a direct fixed line have made a move. The DAX rises 16.68 points within one second.
    14.30 and 2 seconds
    The DAX jumps to its highest level since August. The increase is now already 27.42 points.
    14.30 and 3 seconds
    While normal people are now slowly putting their fingers on the mouse, the DAX has expanded the plus to 38.98 points.
    14.30 and 4 seconds
    Whilst people have now read the new employment figures, the trading robot propels the market on to 6710.03 points. The plus is now 50.48 points – just in 4 seconds.
    14.30 clock and 10 seconds
    The DAX reaches an interim high of 6730.07 points, after the index in the meantime has gained 70.52 points within 10 seconds. Now, all who want to be fast follow, but they are really too late and cannot keep up with technology.
    With Narrative Science a journalistic examination of the correctness becomes pure fiction: they no longer have any influence on the trading. In general, the research requirements of complex themes, such as those of the questionable BLS figures, need hours, often days. For the markets these results, which in the end often bring other facts to light that are contrary to the published PR, are totally irrelevant. The gains are realised, the casino participants can rub their hands together.

    Here is the link an English write-up-


  30. swap lines are already in place. and yes QE is coming, this is just the type of event Mr. Bernanke needed to flip the switch again.


  31. Pingback: BREAKING NEWS: Greece Default Planned for March « American Endgame

  32. Pingback: “Secret Troika Report” – Key for Greek Bankruptcy Announcement |

  33. Anyway even in comedies they shloudn’t annaounce in andvance on way or the other the “default”.

    You propably say that it is a comedy.


  34. To let Greece go they must have some sort of contingency plans to avoid catastrophe. Perhaps James Rickards has modelled it with the APL and they think they can influence it?
    Perhaps even make money from it.


  35. Pingback: Secret Troika Report” – Key for Greek Bankruptcy Announcement | Los Angeles Bankruptcy

  36. Stevie
    A shocking lack of accountability is the cancer of our age.
    As to RBS toxicity and Irish subprime, take that number and multiply by 10 for Russia.


  37. I’ll try once more (with feeling!)
    When Greece defaults on the 20th! March those who sold CDS will have to meet their ‘event’ obligations -and of those who have not covered their positions they will either need to raise some dosh or become insolvent.
    Some of the income which they received by way of these CDS ‘insurance premiums’ was then gambled, sorry reinvested, in derivatives.
    Unlike simple options and futures contracts which should equal the number of available shares and are marked to market every day and thus of known value, these derivatives may be sold in unknown quantities.
    Excitable, desperate, squeaky-bums (hello JRC) are having to talk the market up to raise cash for their gambling chips to be worth something and as long as this buying spree continues the markets will remain relatively buoyant.
    i don’t give advice, but I’ll tell you what I’m likely to do: Over the next couple of weeks I’ll cash in all my market related investments. After the furore has died down I’ll go for US & UK index trackers for the long term.


  38. @JW:
    “A shocking lack of accountability is the cancer of our age.”

    How right you are. From Prime Ministers to Presidents to Civil Servants and everyone else in between with power.

    I’ve just had an idea for a new book:

    Title: “Nobody’s Accountable”
    subtitle: “The people who did it and got away with it.”


  39. I agree with nearly all the sentiments expressed here but for the life of me I would print 14B on the 20th and ensure that there was no default – has to be cheaper than all other alternatives. In the short run.

    It would be cheaper to write off (print away) all Greek debt. Then also Ireland, Portugal – big chunk of some others too. Before you know it we have 1970’s (1930’s???) style inflation – and OPEC would demand gold for oil.

    So maybe the German sound money stance is not so daft – but they seem to be the only ones that can afford it – and I’m not sure they really can with the rest of us trying to drain the aligator filled swamp…

    So maybe the long term tipping point has arrived. Can kicking might be over. The various powers have decided that the financial system will have enough readies to cope with Greece and that they will be sacrificed to demonstrate the dangers of going against the flow.

    There are a lot of very smart people involved in all this – many of whom got us to this point. I really hope the smart ones can persaude the politicians to take what may be the least worst course of action.


  40. The fact that Jpm have over $75trn exposure to derivatives alone and that global derivs are conservatively estimated by BIS at $650 trn, you can be assured that most large banks are loaded to the gunnels with these toxic little bastards to which one side of the equation will be an insolvent counterparty!


  41. Hope the Greek people refuse the hollowing out of their country by bankers and global industrialists, default and devalue the new drachma. Please have a read of the full Memorandum of Understanding demanded by the troika here – to understand what the 1% are planning. This has highlights such as reducing the amount spent by Greece on medecines and lowering the safety standards required for items such as baby food. They are using the crisis as a smokescreen to turn Greece into a third world sweatshop economy on our doorstep.


  42. Despite the blabfests going on about the 2nd Greek bailout, ZeroHedge says that only 19c of every Euro of bailout money would go the Greek economy. The rest goes to pay off debtors.


  43. Pingback: GREEK ‘DEAL’: It might be ‘agreed’ today, but it won’t be done. | The Slog

  44. Pingback: Greek Deal: It Might Be 'Agreed' Today, But it Won't Be Done

  45. Pingback: All Secrets of Forex “Secret Troika Report” – Key for Greek Bankruptcy … – Business Insider

  46. Pingback: Eurozone agrees €130bn bailout for Greece (5) | Jack's Newswatch

  47. Pingback: Gerüchteküche: Deutschland plant Staatspleite Griechenlands für den 23.03.2012

  48. Pingback: Eurozone agrees €130bn bailout for Greece (15) | Jack's Newswatch

  49. Pingback: 240 | Staatspleite Griechenlands für den 23.03.2012 geplant? « Syncomm Managemententwicklung

  50. Pingback: 240 | Staatspleite Griechenlands geplant? « Syncomm Managemententwicklung

  51. Pingback: Plans Revealed for Greek Default on March 23 | | Shift FrequencyShift Frequency

  52. Pingback: “Secret Troika Report” – Key for Greek Bankruptcy Announcement | Forex

  53. Hello all,
    New visitor here, writing to you from Athens Greece. Having seeing first hand this whole circus of Troika officials making statements every day, only to contradict their previous statements made earlier in the same day or the previous, I honestly do see a lot of truth in the claims of both this update and the original post. All of that would make a lot of sense. Even if I was to exclude from my thought process the topic of CDS and the fact that US Banks have bigger exposure to Greek CDS’s and the fact that they would have to fork out a big part of the CDS bill, let me interject a little bit of Greek Micro cosmos to this discussion. March 25th, happens to be the Greek Independence day (The day the Greeks started their revolution against the Turks in 1821). Obviously that is no big deal. Markets don’t care about all that. What is interesting is that last October 28th (the other National holiday-the day that Italy declared war in Greece and the Greeks fought back), there was an unprecedented show of anger and protests of Greek citizens against their elected officials. During all these holidays, MP’s visit their constituencies to attend parades and the like. Since the Papademos government came in Power on 11/11, there has been a great fear of what the 25th of March day of Independence, will look like for our politicians and Government officials, considering what happened in October. Considering that March 25th is considered of bigger significance compared to the October 28th date, I am afraid that if the plan mentioned in these posts goes forward, we will be looking at massive civil unrest and chaos. Not because the country went bankrupt, we already know we are in Greece, but the significance of that happening during the independence holiday, the fact that Greece has given up its sovereignty to avoid the “official” bankruptcy etc. I am also afraid that the plan could blow up on their face because only a martial law would be able to contain what will happen on that day (my opinion of course-maybe if the default does occur, everyone will loose the ground underneath their feet and no unrest will take place). Greeks are a feisty bunch, and have grabbed a hold of their ankles the past 2 years, in order to save their country, and none of that has taken place. I guess we have 3 weeks to find out. All I can tell all of you (mind you I am a Greek-American, and have only recently moved back to Greece from the US) is that you are next, no matter if you are in the US, UK or anywhere else in the world. This Banking crisis, that all of us have been called upon to correct through our sacrifices and our reduced standard of living, is not a debt crisis, it is a Banking crisis. Unless the whole system gets an overhaul, what happens to Greece will be nothing compared to what will happen in the “too big to fail” countries.
    John, Great post and I truly hope you are wrong, even though I think you are not.


  54. Its such as you learn my thoughts! You appear to know so much approximately this, such as you wrote the guide in it or something. I feel that you just could do with some % to pressure the message house a bit, however instead of that, that is great blog. A great read. I’ll certainly be back.


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