Mario Draghi the key to means and motive…as usual
An exclusive leak from the IMF is today presented by The Slog as almost certainly the source of persistent rumours that have swept Europe about a massive bank account-bailin across the continent. These began following a piece in Greek newspaper HEMPHΣIA last Monday claiming that “active consideration” was being given to the idea.
The internal document is clearly dated ‘October 2013’ and judging from the ‘finished’ look of the print, almost certainly due for publication. However, the last public report on the European region was in April, and the IMF site shows no mention of this new one at all.
The text is notable in that there is very clearly an air of encouraging the EC FinMins to adopt the proposal. Given that the IMF is on the verge of having a loan written off for the first time in its history, they would say that: but the tone is interesting…and is self-explanatory as to why the document doesn’t appear to have been published:
While most informed observers have become immune to the cynicism of the Troika and the EC, some of the phraseology in this extract is indicative of intention unmoved by compassion: “and there is a belief that it will never be repeated”, “a large amount of experience to draw on” and so forth.
When first shown the document, I was struck mainly by the talk of a ‘household levy’ – which is different to the bank account idea floated in the Greek press earlier this week. But I understand from EU Brussels-based sources that the bank account option is the only one eurocrats and politicians will accept: it is seen as faster, more easy to effect, and “less visible” – which struck me as an interesting observation.
A fortnight ago, the normally watertight Mario Draghi made some significant comments during a press conference on EU economic performance. He remarked, “….the necessary balance sheet adjustments in the public and private sectors will continue to weigh on economic activity….” by which of course he means the unrepayable black hole of debt in the eurozone. Note also the words from the IMF analysis of the levy idea, ‘an exceptional measure to restore debt sustainability’. But Draghi continued, talking of ‘further decisive steps’, and making reference to:
‘…the funding situation of banks….In order to ensure an adequate transmission of monetary policy to the financing conditions in euro area countries, it is essential that the fragmentation of euro area credit markets declines further and that the resilience of banks is strengthened where needed….’
There is no smoking gun on this developing story as yet. But the evidence we do have before us adds credibility to the Greek media reports of earlier this week. To summarise:
€ Draghi’s greatest fear is the level of bank insolvency driving yet more capital out of the ezone peripheral States.
€ The IMF has a report as yet unpublished urging the EC to hit citizens with a levy before they can get their money out. As per the Draghi fear above, if the intention were known, it would of course be self-defeating.
€ Brussels sources confirm that such a levy is being considered, and would involve bank accounts not domestic taxes.
€ Christine Lagarde would do anything to anyone any number of times to avoid going down in history as the person who oversaw the IMF’s first massive debt write-off.