Slog’s Bankfurt Maulwurf claims victory and vindication
Germany, the Netherlands and Luxembourg had the outlooks for their Aaa credit ratings lowered to negative by Moody’s Investors Service this morning, citing “rising uncertainty” about Europe’s debt crisis, the risk of Greece leaving the eurozone, and the growing likelihood of massive bailout bills in Spain and Italy. On the whole, they seem like pretty sound reasons to me.
The IMF has, as I predicted, written off Greece. The Greek elite is, in turn, not even trying to hide how little effort they’re exerting to put their own public sector feathered-nest in order. The managements of Greek state-run enterprises seem to be so forgetful, they forgot to implement government decisions concerning wages cuts for thousands of employees at state-run enterprises (DEKO) and other state bodies and organizations. And the Coalition itself omitted to pass the legislation forcing them to do it.
The Troika arrives in Athens today, and will be vociferous in pointing out the non-compliance. (I doubt if they’ll bother to mention that all the forgotten public sector cuts have been dumped onto the already flatlining private sector). It is just possible that the Troikanauts will say “That’s it, no more money”, but unlikely: with Spain and Italy in bond-yield intensive care, this would be bad timing.
Spain’s two-year bond yield saw its biggest one-day move since the eurozone debt crisis broke out in early 2010, closing at 6.53 per cent. “Spain is close to losing access to markets entirely,” said John Stopford, a senior fund manager at Investec Asset Management. “It’s not sustainable to borrow at these levels for very long.” He’s not wrong: Spain is entering the Greek Twilight Zone.
“You have seen the events of the last fortnight,” said The Slog’s long-standing mole in Frankfurt, “and I have last Spring predicted that the eurozone would shatter by the Autumn. Also that the banks and lawyers would stop Känzlerin Merkel. All this has happened, and [my interest group] is now reassured that the risk to German solvency is receding”.
In Berlin-am-Brussels, this time there is no emergency summit, no grandiose fantasy plan, no Zen Bazooka. It is disturbingly quiet on that front. Draghi over the weekend referred to the euro somewhat unrealistically as ‘irreversible’, but the decision doesn’t lie in Frankfurt’s ECB: it lies with Bankfurt Germans and Berliner politicians. Mario’s assertion is publicly contradicted by the growing weight of German policymakers who state that Greece has reached the end of the road – and should remove itself from the eurozone as soon as possible.
Until last week, it was the end of the beginning of Euroblown. Now it is the beginning of the end.