Bloomberg was last night giving prominence to a story that’s also covered in tthe French press here this morning. It confirms that President Francois Hollande received an appeal from a range of Deupties (including some from the ruling Socialist Party and other political figures) to end the “financial blackmail” of Greece by its European creditors.
The ‘open letter’ to Hollande asserts that France “cannot be a docile reminder of the rules at a time when the house is burning..We are asking you to take the initiative to unblock the talks between the euro group and the Greek political authorities…we must give open support to the healthy measures taken by the Greek authorities, notably those addressing the humanitarian crisis in the country, and accept the principle of a restructuring of Greek debt, of which a large part is notoriously illegitimate….France’s place is at the side of the people of Greece.”
Although the appeal has been driven by the French Communist Party, French foreign minister Michel Sapin lobbied hard for a compromise last Thursday during eurogroupe sessions, and it does reflect a growing unease in Western Europe with both the legitimacy of the debt, and the tactics being employed by the Schãuble/Draghi/Dijesslebleom axis. Yesterday, Tory politician John Redwood published an explicit piece along these lines. And earlier last week, Der Spiegel in Germany argued the Greek case cogently.
The intriguing thing here is that both Bloomberg and Spiegel are favoured media for Angela Merkel leaks….and the former gives more prominence to the story than one would expect. Indeed, Schãuble himself remained uncharacteristically silent during Sapin’s cri de coeur at the eurogroupe. And the German Chancellor and French President spent a long time on the phone last Friday.
My own gut instinct remains that Germany especially fears bank failures in the event of Greek default (this is based not on direct exposure to debt, but bad derivative bets on Greek default – especially in the case of Deutsche Bank). I know this to be also true of one major French institution, but reporting restrictions in France forbid me to go further on that one.
Another factor to my mind is that, now we’re down to the short strokes in this idiotic and tiresome game of bluff, the rules surrounding Grexit are becoming better known – that is, even if Greece requested it, such a process requires two years notice on either side.
The Troika hasn’t blinked, but the top wallies are perhaps increasingly of the opinion that its occupants may be mad. That said, a compromise now would put both France and Germany on the naughty step in the place where the seating arrangements are limited to rocks and hard places. From here on, the eunatics are damned if they do, and screwed if they don’t.
I was discussing with two contacts yesterday afternoon CET about the likelihood of one last-minute attempt by the hobgoblins to “do a Rosneft” on Greece’s leaders and institutions. We all agreed it would be ineffective and therefore pointless. So stand by for it to happen.
Enjoy your Sunday. I’m off to cut some decking.