EUROBLOWN: Merkel ‘fears Greek distractions will torpedo currency union’

Summit signposts: Hollande’s eurobond, and Greece’s banks.

Can Hollande offer what Merkel wants?

The poker game that is non-negotiable bailout terms v Greek exit threat continues, but most of the propaganda is now coming from Berlin-am-Brussels. A German source suggested last night that Merkel is adamant that Greece must not derail the dash to Fiscal Union. If Francois Hollande gets his way, however, the Greeks will not be required to call the EU’s bluff – or vice versa.

“It’s the Big One,” as arch unconscious double-entendre expert David Coleman was wont to remark. The EU summit that begins today is an  important one for eurowatchers. Whether it will achieve much is another matter entirely. But either way, the session will be dominated by The Greek Question….something that is, allegedly, now getting very severely on the Fuhrerin’s nerves.

Some of you may have noticed that over the last week I’ve been edging out onto a limb regarding Greek exit from the euro. That’s to say, if one applies the Slog first principle of watching behaviour and ignoring rhetoric, all the signs suggest to me that Greece will stay in. The reason is simple: neither side wants it to leave the eurozone.

A few weeks back, there were clear signs of a change of heart among the Greek electorate; but on closer examination, it only ever went as far as the bailout terms in relation to ‘rebellion’: even Alexis Tsipras has had to accept that probably around three-quarters of the voters want to stay in the eurozone. In the latest opinion poll anecdotes I’ve received, there is evidence of voters now returning to New Democracy, with Syriza on the Left also doing well….and Evangelo Venomzealot’s PASOK holding steady. This suggests to me that, come June 18th, there will be a pro-bailout majority in the Parliament. (But don’t rule out Merkel and Schäuble doing something unutterably dumb in the meantime).

At the other end of the tug-of-war, there is a lot of blustery propaganda in the air, but again, actions speak louder than words.

Greece’s banking system is being propped up by an estimated €100 billion or so of emergency liquidity assistance (ELA) provided by the country’s central bank — but it is being approved secretly by the European Central Bank in Frankfurt. A careful look at last month’s ECB statements also shows that an unexpected €121 billion increase in the innocently titled heading “other claims on euro area credit institutions” just went flying out of the rapidly-emptying coffers. The total figure is closer to €140 billion….but most of it went to Athenian banks.

“Cutting off ELA would be the way to push Greece out of the eurozone — if that was wanted, or if Greece really wanted to leave. But I don’t think the ECB is going to take that decision,” said Laurent Fransolet, Barclays analyst. I think Monsieur Fransolet is right on the money – if the situation in Athens remains within Draghi control. (See more on this below)

Greece’s position has also been considerably strengthened by the election of Francois Hollande. Before that event, the diabolical duo in Berlin were merely outnumbered: now, they’re surrounded. This hasn’t stopped Der Spiegel (whose editorial position is now openly for kicking Greece out of the eurozone) from running the usual Finance Ministry plants – like this one from yesterday:


‘Despite official claims to the contrary, the governments of the euro zone are threatening to kick Greece out of the currency union. At a meeting of euro-zone finance ministers last Monday in Brussels, it was made clear to Greek Finance Minister Filippos Sachinidis just how serious the situation had become. “If we now held a secret vote about Greece staying in the euro zone,” Euro Group Chairman Jean-Claude Juncker warned his Greek colleague, “there would be an overwhelming majority against it.”

I do have a slight logic problem with Juncker’s ability to hold a secret ballot and know the result in advance, but spend too much time working for the Commission, and this is the sort of brain damage that occurs. Anyway, it’s bollocks: the majority view among finance ministers is not what mattered until now: Wolfie Schäuble’s view (when approved by Mrs Rochester in the Chancellery attic) was all that mattered.

Again, the entry of Hollande into the equation changes all that. So Berlin has been ratcheting up the rhetoric via Der Spiegel which, in yesterday’s piece, moved into overdrive with this bit straight out of a Second Year school newspaper:

‘Other participants in the meeting also had harsh words for Sachinidis, with particularly strong criticism towards Athens coming from Portugal and Ireland, countries that have also accepted bailouts in the crisis. The countries say it is unacceptable that they have made serious efforts to fulfil the European Union’s guidelines for consolidating their budgets while Greece incessantly breaks its reform agreements. It was the Greeks, they noted, who poured oil on the flames and repeatedly caused the whole euro zone to catch fire with their repeated negligence, other ministers added.’

That would’ve made even Goebbels cringe: harsh words, incessant rule-breaking, pouring oil on flames, whole eurozone catching fire, repeated negligence repeatedly repeated….‘other ministers added’. Dear oh dearie me: synchronised Athens-bashing.

Taking the opposite view to mine, Bloomberg this morning argues that

‘This logic [Slogic?] underestimates a crucial element of the euro area’s political economy: in a union of partially sovereign members without a supranational authority, concerns about moral hazard — the possibility that leniency towards Greece will encourage other countries to misbehave — still carry a lot of weight. Euro-area leaders are not bluffing when they threaten to cut off support from the European Central Bank – and let the Greek government run out of money.’

There is some evidence to support that view. Yesterday Mario Draghi (I understand) flatly refused to give further liquidity help to four Greek banks. But it would be a mistake, I think, to see that as a bargaining chip: he did it because, quite wisely, he regarded it as good money chasing bad. Signor Draghi faces a genuine dilemma: he most emphatically does not want Greece to quit the euro (if more people did the sums, they’d understand why) but in turn, he cannot empty the ECB to save one country’s banks. The Greek banking system is on a knife-edge, and if it collapses even partially before June 17th then everything could change.

Here too, the logic is clear – at least to me: if you stay in the damned euro and your banking system collapses anyway, what on earth is there left to fear about leaving the euro? Draghi and Brussels have a real problem here.

Finally, I stick with my geopolitical view on Greece – and also my experience of tracking how and why Geithner’s amputation plan for Athens went wrong: the eurocrats are now fully awake to the reality of the staggering mineral and energy wealth that lies under Greek territorial waters. They really do fear that the Americans would like it for themselves….and they’re right. (So would Recep Erdogan, but that’s a topic or another day.)

I sense that the German era of neurotic moralising is about to draw slowly to a close. As of next year, Geli und Wolfie may well be in enforced retirement, and – let’s face it – Hollande and the German SPD leadership would get on like a house on fire. Even if it had been set alight by those beastly, greasy Greeks pouring their nasty olive oil onto the flames and setting everything alight in a repeatedly repetitive manner.

A the end of this argument, however, there seems to me – still – absolutely no way the eurozone can survive. Spain is a basket case, Italy is heading in the same direction, Ireland could still vote against Fiscal Union, and Greece’s debt (even under the bailout schedule) is unrepayable. As for the EU, I think things are looking a lot more hopeful for the europhiles than they were six weeks ago. What comes out of this week’s summit sessions will tell us quite a bit about that. Let’s wait and see.

78 thoughts on “EUROBLOWN: Merkel ‘fears Greek distractions will torpedo currency union’

  1. Just for laughs…….. Alexis Tsipras called Hollande …Hollandreou !
    He ( Hollandreou ) the main time refused to meet him as Tsipras is only the head of a political party and not head of state ( Hollandreaou said ) , and the main time he met Venizelos who is the head of a political party as well only third in the last elections . I love socialist politics !

  2. We are getting back to the fact that it is all and only about money, and new ways of taking it out of taxpayers pockets. So, we have the choice of facing the reality of many countries being bankrupt, or further distraction by becoming a federal state. We can not carry on borrowing so much and spending so much and producing nothing.

  3. Let’s be honest here if the Irish vote “no” they will just ignore it and carry on regardless.
    I see on the front page of the FT, Germany is refusing to share the debt burden.

  4. Excellent piece.

    Whatever deal the Eurocrats manage to bind together with what remaining string they have, it doesn’t change the underlying issues:
    1) The eurozone is not a single economy, hence a single currency cannot be made to work.
    2) We don’t earn as much as we spend.

    @kfc1404: Exactly, I’ve been living in austerity my whole life, and it has served me well

  5. Just like ‘football is a game of two halves, and then the German’s win’, the Euro is something the German’s are completely committed to and will not drop.

  6. Neither the Sprouts nor the Greeks want to leave the Euro? I didn’t realise they had a choice. At some point you have to accept that this is still a real world, not a hypothetical one.
    and the solution is political union? If they have political union, the Krauts have to bail out the Greeks. (the ECB can’t just print the money, shirley?)
    The Greek banks probably fail either way.
    Who selected -or elected- these numpties.
    ‘Diplomacy’ the art of getting nothing right, but offending the fewest participants; and someone else picks up the tab.
    Break em all up.

  7. For some weeks now, the straight talking Paul Mason has been conspicuous by his absence from the BBC’s Newsnight, but he twitters in frustration this morning:” I’ll blog later from Brussels but I am sick of “comment and analysis” – without action we going in circles as money ebbs out of system.”

  8. It makes sense that they will try to kick the can down the road again till Aug, 15th – end of Olympic Games. I guess eurozone meltdown, bankruns etc will not have a nice effect on the games.
    Maybe they would even want to kick it further, till the end of the year, so that the yanks decide who’s gonna be the next resident in the WH.

  9. Are we focusing on the tree and forgetting that its part of a forest? The firewall has not worked; JPMorgan can attest to that, the meeting over the weekend also shows signs that the game is up, we have played extra time… and its now penalty shootout time.

    “that an unexpected €121 billion increase in the innocently titled heading “other claims on euro area credit institutions”

    IMO the thief got caught out taking the wrong bag and now has to put the cookie back in the jar, otherwise

    a) it wont only be JPmorgan that will be in the headlines this month…
    b) the runs runs runs will start to happen to all that attended in Chicago. Yes they are shiatting themselves and rightly so…
    c) It wont be Greece that will end up like argentina rather it will be spain

  10. Yet in these austere times,the chartering of luxury yatchs in the med is on the up.Unfortunately,the usual route of Cannes,Monaco and Portaforino are no longer requisite.Many charters are demanding floating around the Greek Islands and further afield,with a funny little fishing rod in tow.They even meet up with friends on large yatchs for drinks well away from prying cameras.Are we expected to believe that Chinese,Russian and American ologarchs have all suddenly fallen in love with the Med all at the same time?Thees same characters are desperate and willing to shell out$175,000 per week plus bonuses to the staff for these floating palaces,whilst clandestine meetings occur.Greece’s mining and mineral wealth is now well known,but who will be the first gas/oil rig to plant its foot?Many suggest Saudi!

  11. Breaking news: Didier Drogba will join Joey Barton upfront tonight for Brussels United v Germany in the Euro Can Kicking final. Pundits say it will certainly be decided on penalties following a no-score draw. The BBC has refused to screen the match after threats it will turn into a bloodbath. Only brain dead registered football hooligans will be allowed into the stadium.

  12. You can if you ‘mutualise’ the debt and the wealth producing countries are prepared to finance the others. For ever. That’s where Brussels is headed, and nothing will deflect them from that course. Of course we know that the moment the pressure’s off, the net spenders will relax their feeble grip on spending and – well you know what will happen. Europe, in my opinion, is not yet ready for federation, and won’t be any time soon. The financial and philosophical differences are just too great to bridge. And Europe does not exist in a bubble…

  13. @kfc: Well spotted! I’ve also been wondering for months why it’s called ‘austerity’ when everybody applying it is still overspending big time …they aren’t even bringing spending into balance. UK included. We have to conclude that the elites truly believe that living beyond their means is a right granted to them by God.

  14. The europatient has chronic heart failure. Warfarin (QE) hasn’t worked, beta blockers (austerity) haven’t worked and the lungs are so full of fluid (debt) that the patient can only take a few steps before becoming breathless. The necrophiliac nurse Merkel insists that the electrodes be applied again and again to get back into sinus rhythm but it isn’t working and pulse is weakening. Other organs are showing signs of collapse and the only growth we’re likely to see is one that will require an oncologist, DNAR.

  15. I thought the ELA allowed EZ members to print their own Euros under emergency circumstances. So why does Draghi need to give his approval? Can’t Greece just keep on printing?
    It looks like a neat solution which Murky can claim she played no part in.
    … … …
    It does look like Murky is still wrestling with how to give the nod to the ECB printing money big time whilst not alienating her electorate. Tricky.
    But she’ll find a way…
    … … …
    I agree that Greece leaving the EZ is virtually everybody’s last option.
    Other issues – like the massive economic divergences, complete absence of fiscal responsibility by member states and 17 different cultures – are trivial to them. It looks like Murky and others now see this as an opportunity to roll out political and fiscal union one way or the other, and then to crow about Germany’s growing influence.
    … … …
    The Eurozone is such a shambles with so much chaos, it must be time for the Labour Party to recommend Britain joins. Enter: Mr Tony Blair.

  16. The patient needs an MRI to see if it’s brain is still alive! And maybe double doses of poppers.

  17. Pingback: The Eurozone is stabilising - Page 1013

  18. It is not the politicians who decide it is the BANKS.

    The problem is present and growing all over EU even to the North i.e. Holland etc , they thoroughly hide it.

    Remember at the end AUUSTERITY and POVERTY for everybody this is the plan.

  19. @BT There comes a point where further treatment is indecent! A massive dose of diuretic (debt forgiveness/allowing a proper capitalist correction) would be beneficial but the kidneys are already weak and the gangrene in the extremities is spreading. MRI (Merkel’s Righteous Indignation) unlikely to reveal anything useful and our last rites are disappearing fast..

  20. @BT: “The Eurozone is such a shambles with so much chaos, it must be time for the Labour Party to recommend Britain joins. Enter: Mr Tony Blair.”
    Spot on IMHO. It’s gonna happen, I just know it….

  21. @Γιώργος: I agree with you that the disease is spreading to northern member states (eg NL). It’s like a cancer but the patient is in deep denial.

    But I don’t think pan-EZ poverty is actually the intention of current insane policies. It’s a consequence of the elites having a bigger agenda (creation of the fascist USE) that they will not deviate from, whatever damage it causes to their electorates.

  22. @kfc: Indeed. There isn’t a single political elite in the whole of the EU who comes close to Blair’s spinning skills and ability to pour out claptrap.
    From an EU point of view, he would be just the man to lead them to the socialist promised land. I bet he’s champing at the bit to get his hands on the EU levers of power. And I believe that Cameron secretly admires him… The stage is being set.

  23. @BT: Yes indeed. It will be interesting to see how Van Rompuy and Barroso react to this, can’t see them letting it happen without a fight, can you?

  24. Pingback: John Ward – Euroblown : Merkel “Fears Greek Distractions Will Torpedo Currency Union” – Summint Signposts : Hollande’s Eurobond, And Greece’s Banks – 23 May 2012 | Lucas 2012 Infos

  25. Well the Greek people would probably welcome being ruled by someone competent – as long as it wasn’t the Germans! They couldn’t do worse than their own useless leaders and at least the trains would run on time.

  26. Sometimes the only way to understand a complex situation is to use an analogy. The only one that comes to mind is to liken Greece to a junkie, and the Euro as his street drug. The dealers? Surprisingly, on reflection, I think the French and German governments who charmed Greece into their EU web, loaned Greece the money to buy German and French expertise in arms and infrastructure and in that way got them hooked.
    Greece has been broken by its addiction but doesn’t want to go cold turkey. She is now defying her dealer to do his worst. In the real world, the dealer would beat the living s**t out of the junkie who couldn’t pay, then suggest an alternative …..We could extend the analogy into Greece sliding down into mugging and prostitution to pay for its habit, and that’s horrible to contemplate. They will I think be forced to grovel and, not sell, but give their material wealth to the dealer.

  27. This week in Culture Club we will be discussing Tolkein and Monsters Inc. Next week, Steinbeck and (groan) Stephen King. Boy George is not available.

  28. Pingback: EUROBLOWN: Merkel ‘fears Greek distractions will torpedo currency union’ | Machholz's Blog

  29. Solution is simple…

    Name the entities that enabled the unqualified entry of Greece into the EU.

    Drain their Bank Accounts to Zero and then supplement the remaining Deficit from The ECB.

    Advise Greece that it had only one chance and it blew it so better go away once and for all…

  30. Maybe it’s a case of Eurectile Dysfunction, for which I cannot imagine Frau Merkel ever delivering any sort of cure, even if dressed as a classic ‘Carry On’ nurse, starched uniform, stockings, upside-down watch etc.
    (Oops, did I perhaps reveal a little too much there ?)

  31. It has long been Blair’s optimum outcome, he’s just been biding his time – that cynical Catholic conversion told you all you needed to know about the lengths to which he will go to garner the support-base for when the time comes.
    He’s currently wheedling his way back into UK Labour la-la-land, preparing the ground for his elevation and enthronement. With Presidentess Cherie at his side, what can possibly go wrong ?

  32. @Bankrupt. If I was a conspiracy theorist I would say that Van Rompuy, he with the charisma of cold mashed potato, was planted to make the undeniably charismatic Bliar look like The Second Coming when he steps in as EU President.
    I am trying hard not to be depressed at the thought of Bliar back on the scene but I fear the worst.

  33. @Runner Tough love? Trouble is TPTB can’t distinguish between authoritative and authoritarian.

  34. @Mudplugger
    Sid James, as Henry VIII …”Well I’m off back to my palace.”
    Joan Sims, as Anne Boleyn … “Hampton Court?”
    Sid … “No I always walk like this.”

    Thanks for the memory, Mud

  35. @kfc: Right. I believe that Barroso and the Garden Gnome are already positioning themselves to fight over which one becomes the new super-unelected EU Fuhrer. When Blair enters the battle, my guess is that he’ll wipe the floor with both of them if he agrees to drag Britain into the dysfunctional Eurozone, which he’ll happily do. And whoever’s running the Labour Party will go along with it if he supports them to stay in office, which he’ll happily do. It’s a slam dunk.

  36. @MaxC: You may well be right, many conspiracy theories often have truth in them. When the EU President of the European Council of Ministers job was first (quietly) introduced under the Lisbon Treaty, it was generally believed to be the top-job in the EU, higher up the slush-sucking pecking order than the EU Commission President. I recall that Blair was involved in the selection process but the Garden Gnome got more votes but that was before the EZ crises reared its ugly head. But the Garden Gnome is obviously incapable of doing anything useful – he’s just a decoration – so now they want a new top-boss and Blair could well be their choice, even though a few EU member states have reservations. France is key to this and with the socialist Hollande now in the Paris job, Blair’s fortunes must be rising. As I said earlier, Cameron apparently privately admires him too. Doubtless if he gets this top job he’ll have his own plane ‘EU 1’ in which to hold mile-high parties for his Miranda cronies.

  37. Not quite. It was France and Germany, Kohl and Mitterand. Keep the Turks and the Maghreb at bay. Deal done with Thatcher vis a vis opt outs in the mid 1980’s.

  38. @Mudplugger: Quite so. I hadn’t linked his conversion to Catholicism as part of his longer term agenda, but it seems about right. We should never forget that Catholicism has long been tained by its links to Nazi fascism. And the current Poop is German. It all begins to slot into place.

    For sure, I spotted some while ago that Blair’s current job was never a real job…just one to keep him on side and on tap with the global political elites. His star is rising. Before we know it, he’ll be orbiting Uranus again!

  39. SITC
    I saw that, it was retweeted for me by Ed West. Going in circles would be an excellent title for a book about European History from 1175-2012.

  40. @ Pudmugger-

    Nice pun – top Marks!

    I once saw a poster for a medical seminar on Erectile Dysfunction – sponsored of course by Upjohn!

  41. Γιώργος
    You need to tell me how you know this is The Plan, who authored The Plan, and whether The Plan has any point.
    I think there is no plan. There never has been. That’s the problem.

  42. Football is a game of two halves, after which the Sprouts lose on penalties, and the Krauts demand a replay.

  43. From that article: “The ECB can in fact stop the NCBs from providing specific ELA assistance if it is deemed to interfere with the ECB’s overall policy actions.”

    Oh! That’s alright then! And if ELA printing does not interfere with the ECB’s overall policy actions (which in this case might be to increase the EZ supply of money to banks), what then? hhmmm.

  44. Yeahbut…the EU is fast moving into the world where the trains will not be running on time. Simply that the newspapers will be told to report that the trains are running on time, a-la the UK NHS under Mr Blair.

  45. I was called upon to explain to a chap who has far better things to do than follow Euro bollocks and what might be the final outcome of total meltdown. Not wishing to terrify the fellow I suggested it might be like the post war austerity of the 1950s …which may be true, but in essence a pointless exercise because he wasn’t born until the mid seventies. However, he did ask most sympathetically :” Would that be such a bad thing?” I said No. I eagerly await other thoughts from those who remember sacks of coal, ration books and dandelion and burdock

  46. Just wondering if the next distraction from the euro problems, the middle east war, will be before or after the Greek elections.

  47. JW might be stretching it a bit to extrapolate ‘Mr Windsor’ from the pseudonym ‘HarrysDad’ – check the DNA.

  48. This fascinating game playing continues… according to the telegraph:

    { The Bundesbank says a Grexit would be “manageable”; for the first time one of the most important players in the debate is saying it could even be the lesser of two evils. }

    Clearly they are trying to outwit the Greeks, who think they are holding a gun to the head of the Germans…. “go on then, pull the trigger, see if we care” is now their position.

    The frustrating thing is, whatever happens, you can be sure we are all going to be poorer at the end of it, as the debt deflation has barely begun.

  49. Sadly, we can’t go back to sacks of coal (real flames, health & safety, Green Lobby, CO2, all that bollocks), can’t do ration-books (forgery problem, making Postal Votes look honest) and dandelion & burdock would involve culling wildflower meadows, thus harming the natural habitat of the lesser-spotted-bonking-newt and other irrelevances.

    But rickets, scurvy, TB ? No problem – it’s already rife in Bradford.

  50. If the Greek people, in the next election, re elect PASOK and ND, the same two parties that got them in this mess, then they deserve to be an enslaved nation. EOM

  51. Seriously? Our system of money is based on debt. It will have to be deflated by either assets and investments being reduced in value, or by inflating of the money supply. Either way, anyone who has wealth linked to the money supply (e.g. property, pensions) is going to be poorer in real terms at the end of it.

  52. You do realize that Germans always stick to to the plan, no matter what might happen, that is how they lost two world wars. I believe that as long as the “dynamic duo” are in charge of things they will continue to listen to Frank Sinatra singing my way, After all their interest rate remains at 0%. so why worry ????
    Is is not just the Greek Economy and the Greek people that will be enslaved. In the End all European countries will pace the German way.

  53. @Jon Earle: OK. My understanding of debt deflation is simply reducing the amount of debt outstanding. Agreed, this can be achieved by inflating the money supply or it can be achieved by reducing economic activity as people reduce spending to pay down their debts. If the former, we all lose. If the latter, the govt lose by lower tax receipts, the people with debts lose as they reduce spending on new stuff and corporate profits go down as a result. But also in the latter case, inflation should come down.
    Personally, I think the worst solution is to inflate the money supply, but it’s always the route most favoured by politicians.

  54. @OAH: I take it you don’t like Blair too much? Why not let us know what you *really* think of him… ;-)

  55. B.T. When you allude to His Haughtiness Blair ‘orbiting Uranus again’, are we right in thinking this references to a certain unreported event in the Beaconsfield election in 1983 and a public convenience in that area ?

  56. Kfc1404: ““Can anyone remember when we started calling living within your means “austerity”?”

    Wrong wrong wrong wrong and wrong. Don’t buy into that ruling elite bullshit.

    Austerity as practised in the EU is NOT about countries living within their means. Not in Ireland anyway, and I suspect not anywhere else in Europe.

    There are more millionaires in Ireland now than there were at the start of the financial crisis……

    A country that lives within it’s means taxes everyone fairly, i.e. as little as possible, and spends that revenue equitably and to the benefit of the entire society. But austerity EU style to me seems to be about repaying past reckless overspending in such a way that nations take as much as possible, and then some, from ordinary working class people, cutting vital services along the way, but without ever, ever threatening the living standards, and therefore influence of the top couple of percent.

    Ireland’s means, and I also reckon Italy’s, Greece’s, Spain’s etc too, are considerably more than the established political parties will admit.
    If the “income elites” in Ireland were taxed at even half the rate I am, Ireland’s so called sovereign debts would be paid back in a few years.

    They won’t though. So folk like me will suffer “austerity” for a long long time

    Austerity is a financial smart bomb targeted specifically at ordinary workers, limiting collateral damage to the rich and super rich.

    Tell me, are Greek arms dealers/agents suffering the same degree of “Austerity” as Greek pensioners?

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