Metternich With A Blackberry

By Simon Johnson

If watching the twists and turns in European politics – “should we bailout Greece?”, “should we bring in the IMF?”, “should the Greeks go directly to the IMF, cutting out the EU?”, etc – has your head spinning and reminds you of overly complicated and opaque episodes from the history books, then you have actually caught the main point.  European power structures and alliances webs are being remade before your eyes.

Is this all random – just the collision of disparate national interests with no coherent plans on any side?  Or are there some strong, deliberate, and very personal hands at work guiding key pieces into place?  

Prince Metternich worked long and hard to manoeuvre countries and people before and after 1815, cynically and cleverly building a system of interlocking interests that suited him – and his employer, the Austrian/Habsburg Emperor.  Is there a modern Metternich now at work?  Most definitely: Yes.

If you’ve followed the twists and turns of the global dimensions that emerged from the financial crisis of 2008-09, you’ll know that the IMF was transformed from an organization that was being euthanized by the G7 to an important element in the G20’s back-up financing for emerging markets (with the most dramatic turn of events in the run-up to the London summit in April 2009) – and definitely part of what helped stabilize confidence around the world. 

This sequence of events created a great opportunity for the IMF’s Managing Director, Dominique Strauss-Kahn (known to friends and foe alike as DSK), to relaunch his political career in France – he previously ran for the presidency but could not secure the socialist nomination, and taking the IMF job seemed to everyone (including President Sarkozy, who lined it up) as akin to being marooned on a desert island.  But DSK is – like Metternich – a master of the opportunity, a man who knows when to move and when to stand still, and someone always working a network of long-cultivated European political contacts (including socialists in Greece).

DSK’s objective is to cast himself as the savior of Europe – undoubtedly this would play well with the French electorate – and of course he is greatly aided by the serious underlying problems within the eurozone in general and for Greece in particular (back story is here).  As he controls the IMF absolutely and completely, he has access to the best global economic intelligence as well as the means to make large loans to countries at low interest rates.  He must of course bring others with him, but this is not hard – the White House, for example, could not care less about who ends up running Europe and at what growth rate, as long as it does not blow up.

President Sarkozy’s aim at this point is naturally to keep DSK and the IMF as far from the action as possible.  But Sarkozy has three problems.

  1. The Greeks have learned fast how to play international economic diplomacy – threatening to bring in the IMF in a way that would embarass the European leadership.  Without question, they are being coached by people close to DSK.  Watch the masters at work.
  2. German voters really do not want to be involved in anything that looks or feels like a bailout.  A low interest rate loan to Greece would really upset them.  The Germans could do something off-balance sheet (i.e., get their banks to provide cheap credit to Greece), but the German banking system is already so ridden with governance problems and hidden bailouts that this is not appealing to the elite.
  3. If you provide financing to Greece at anything other than low interest rates, the numbers simply do not make sense (we take you through this here.) Merrill Lynch pushed back against us this week with a report arguing that if Greece can borrow again at the level of German interest rates, everything would be fine – this is, of course, a legitimate point, but a cursory look at Merrill’s relatively sanguine research reports on Greece prior to the crisis (and also at their assessments of global credit markets prior to fall 2008) does not suggest that the “don’t worry, be happy” scenario is high probability.

Sarkozy is also an expert tactician and he is not finished yet – entering the weekend, the ball is definitely in his court.  Expect further “let’s do it without the IMF” options to surface now – in particular, Sarkozy will try to scare the Germans regarding how the European Central Bank (ECB) would be undermined if the IMF enters the arena.  Sarkozy can also commit, behind the scenes, to support Axel Weber for the ECB presidency – something top Germans want more than they want almost anything else in the world.

And what if Strauss-Kahn prevails and the IMF makes a loan to Greece, would this save the day?  Not necessarily – remember that DSK’s goal is to just to look good until he leaves the Fund to run more openly for the presidency, which is probably no more 12 months from now.  His incentive would be to put in place a relatively small program of funding that does not ask Greece to do too much up front; if this explodes later (as seems likely), that would not be his problem.

Sensible program design and dealing with the core underlying issues in a reasonable manner – including confronting the looming issue of “debt restructuring” – is not likely.  This is French electoral politics after all.

57 thoughts on “Metternich With A Blackberry”

  3. “His incentive would be to put in place a relatively small program of funding that does not ask Greece to do too much up front; if this explodes later (as seems likely), that would not be his problem.”

    It may not subsequently end up being his issue directly, but all the fingers would point his direction. And if the Greek situation cascaded out of control taking down some or all of its porcine brethren leading to a “second” Great Recession, the world would have a handy figurehead to hang responsibility on.

  4. Bond holders wouldn’t be happy especially if Greece comes up short in payments. Debt restructuring is the way to go forward if Greece wants to remain intact and keep the euro as their currency.

    “They could have avoided taking on private bank debts by forcing the creditors of these banks to share the burden – and this is now what some sensible voices within the main opposition party have called for, ……forcing creditors to take a hit.”

    A more ”sensible program design and dealing with the core underlying issues in a reasonable manner…” http://en.wikipedia.org/wiki/Simon_(phone)

  5. Does anyone know the timing of the rollover of the bulk of Spanish debt?
    IMHO this could be one of the key drivers for any realistic and therefore drastic action from European policymakers – or the absence thereof.

  6. Metternich? Why not bring Napoleon into this? Or maybe go a few decades later to Louis Napoleon and Bismark.

    The analogy is inapposite.

  7. The most sensible program is at this stage to let Greece orderly default and banks to take a haircut.
    http://mgiannini.blogspot.com/2010/03/money-creation-for-nothing-or-let.html
    The bureaucrats’ elites of the Euro-area have not been capable so far to give a solution to the Greek crisis, and that’s a pity. They rely only on announcement effects and self-fulfilling expectations based on non-existent plans. Yet, this is a good opportunity to stop the money creation for nothing and let Greece orderly default eventually under IMF aegis and as good as it gets (IMF loans would be even far cheaper for Greece than the current market rate or for EU governments in the case of a bail-out).

  8. You simply say, “That’s not true,” with no counter argument. ‘Congratulations.’ You’ve mastered the art of contemporary American ad hominem politics. But it contributes nothing except white noise to the discussion.

  9. You simply say, “That’s not true,” with no counter argument. ‘Congratulations.’ You’ve mastered the art of contemporary American ad hominem politics. But it contributes nothing except white noise to the discussion.

  10. I think the IMF is a dangerous group. Whenever you have an organization which can hand out an economic safety net or yank the economic safety net away you have much room for corruption and abuse of power. And who pays for IMF?? You only get ONE guess. Yes, the same dumb*ss country that pays all that money to the United Nations, so they can send 2 or 3 troops over to the safest regions of a war area to pass out inoculations and food packets while American troops die. In other words, sneeze and scoff at America anytime we need another country to do more than posturing French style when a war breaks out.

    I say, shut down American funding of the IMF. Let Germany and a few others give a small helping hand to Greece. If Greece can’t get out with a small helping hand from Germany and France, screw them. Any country that doesn’t put thought into its elected representatives and can’t balance a checkbook isn’t getting much of my tears.

    And by the way, the Euro (currency) will be much better off if they just let Greece sleep in the bed Greece made for herself. In other words, the Euro currency will not suffer much if Greece falls into prolonged economic suffering. Certainly less than the Euro currency would suffer doling out money to a country which can’t change things because they don’t even know who would run the country if they booted out the corrupt windbags they have now.

    This is what happens when you have a voting electorate in a democracy which can’t be bothered with reading the newspaper, or finding good quality news sources to choose their leaders. Remind you of any other democracies???

  11. Ted K.,

    I know this is all maddening, especially because it never ends; but in a world essentially run by lying oligarchs who work hard to keep the masses poorly educated and strongly narcotized with bread and circuses, it seems too harsh to blame the electorates first.

    As in the U.S., when was the last time a democratic voter anywhere was offered candidate choices that would have made fundamental differences of the type you’d like to see?

    Real elections–we can’t have that! Too risky for the elites….

  13. The last sentence of the penultimate paragraph is misleading. The Greek government has already in place an unprecedented austerity program that falls well in line with traditional IMF prescriptions, even for Fisher times, not to mention the current DSK/Blanchard era. So not much would be asked by Greece because the government has already done more or less what it would have been asked to do as a condition for the loan in the first place.

  14. This is incredibly ignorant and, more so than anything else, wrong. First and foremost, just as Kevin said, we don’t have much choice in the first place. Second, the current government was elected in October and had to deal with this mess – the previous government being the worse the country has seen in generations, amidst a recession as this one. It would have been tremendously exciting to watch what would have happened to the US had the crisis occurred in 2005, with a fresh term of Dubya ahead, or, better yet, with a classic no-spending conservative like Reagan.

    Second, and more important, there is no denying that the large blame for this mess has to fall on Greece itself. However, we are not alone in the blaming. We buy 17% of Germany’s defense production. We are 4th in the world in defense spending in ABSOLUTE numbers, all the while not having been in a war for more than 3 decades. There are two reasons why. One the one hand, we are essentially obliged to buy arms from France and Germany, having to pay for them with loans from French and German banks. On the other hand, we are Europe’s natural border, having to single handedly pay for border control for the whole region. Greece has the highest relative numbers of illegal immigrants, most of whom are actually trying to get to (guess) France and Germany.

    Just like Simon Johnson said in a recent article in Project Syndicate, we need a financial system that promotes risk sharing between the debtor and the creditor. When the German government makes us take loans from Commerzbank without doing its due diligence, they have to share some of the blame. FYI, the Commerzbank bailout amounted to 100 billion euros. Greece only needs 50.

  15. I’ve just finished reading an article in the French newspaper Le Monde about that subject:

    http://www.lemonde.fr/europe/article/2010/03/19/la-crise-grecque-menace-le-couple-franco-allemand_1321298_3214.html

    DSK is never mentioned in that piece, not once. It basically says that Germany wants austerity for Greece and by extension Europe whereas France wants solidarity and “relance” (stimulus?). The article ends by subtly suggesting that if every country were as thrifty as Germany, there would be no European market at all.

    The inescapable conclusion is: Le Monde is a pro-Sarkozy paper.

  16. It’s a French publication. What do you expect?? It was the same with the Greek Statue giving the finger (German pub.) and the Nazi emblem response (Greek paper).

    You think an American paper is going to give Gorbachev partial credit for the Berlin Wall coming down or say it was because of Reagan’s B-acting???

  17. This is response for Kevin Egan above,
    Let me ask you one question Kevin. Do you think Dick Shelby was the best choice for the electorate in Alabama??? No one else ran who was better than Shelby??–who does nothing for small depositors and consumers in Alabama and then goes to the American Bankers Association Conference to be cheered on by the fat-cats for wearing out seat cushions???? I’m more than happy to research it if you DARE to argue that one Kevin. Jerks run for office because somebody votes for them.

    I’ll tell you this, Goldman Sachs doesn’t make investments they don’t get solid returns on.
    http://www.opensecrets.org/politicians/summary.php?cid=N00009920&cycle=2010

  18. Ted, you’re making my point when you mention Goldman Sachs! Goldman owns *both* major parties! Is there any clearer lesson from the last dozen years, from the repeal of Glass-Steagall to the 2008 crisis to the current situation in Greece (where they helped hide the extent of indebtedness)?

    So there’s our choice: you can vote for the Goldman Democrat, or the Goldman Republican: that’s our democracy, what a beautiful thing! OK, you say, people should know better, and not stand for Potemkin elections: but I maintain that it’s unfair to expect that our downtrodden working and middle classes ought to pick up the cudgels of revolution.

    Why would they do that in our near police state? Who would lead them? Ralph Nader? Jesse Jackson? Ron Paul? Noam Chomsky? You, Ted K.? What are you waiting for? You’re angry enough…. But if you aren’t out there storming the barricades yourself, I just think you should slow down on blaming people who are certainly less educated and probably less fortunately situated than you are.

    Hey, I sign most of my posts on Hullabaloo like this: Third Party Now! Elizabeth Warren for President! It’s not terribly realistic, but notice that I endorse a person who is the champion of not blaming the victim. As Moses once said, Would to God that all the Lord’s people were prophets! But then and now, they’re not–by definition.

    Anyway, my two cents–peace and good wishes to you, Ted K., most of your anger is righteous; I’m only suggesting a gentle modification.

  19. You are really ignorant of the French political landscape to consider Le Monde as sarkoziste paper.
    Moreover, the arguments of the article are now widely shared from left to right. The core idea is to reproach to Germany his behavior: Germany refuses to accept her responsibility in the inbalances in the Eurozone and to accept that belonging to the eurozone not only implies advantages (such at the headquarters of the ECB in Frankfurt) but also some duties linked to the Maastricht treaty.
    Another important point to get is that historically the European Union is moving when the Franco-german couple is moving ahead, and this is a classic of french newspapers to discuss the state of those relations.
    In addition, it is not surprising to a French like me to see a lot of tensions coming out between european country. In a sense we are going back to the traditionnal fracture lines:
    North/South
    Catholic/Protestant country…
    Those lines never completely disappeared and if you look at most of the european discussion on any subject, each time you can find those lines in the different countries position.

    A last point maybe the most important, the Euro was imposed by the french president Miterrand who was really worried by german reunification to the german chancellor Kohl as a way to keep the German power under control and to avoid the rebuilding of a too strong nation. This acceptation of the Euro by the germans was a prerequisite to an end of the french veto to the german reunification.
    Unfortunately it seems that this was not enough to prevent germany of becoming again the major factor of instability in Europe.

  20. Simon Johnson concludes, “Sensible program design and dealing with the core underlying issues in a reasonable manner – including confronting the looming issue of ‘debt restructuring’ – is not likely. This is French electoral politics after all.”

    Gee, it sounds like capitalism to me.

  22. “If we can manage to put an end to casino capitalism in the financial markets, the European Stability Pact will function,” says Konrad. The only question is how to make it work. Konrad proposes “establishing impulses,” such as “massively” raising the equity ratios for banks. He reasons that when an investor, a bank, in this case, loses a bet it also loses a percentage of its equity capital, and the higher the ratio, the more a bank stands to lose by making risky investments.”

    This is coherent with what I am suggesting now: let Greece default and hit those banks which made wrong investments in the casino capitalism.
    http://mgiannini.blogspot.com/2010/03/money-creation-for-nothing-or-let.html

  23. “Metternich has earned the admiration of succeeding generations for his brilliant management of foreign policy. Henry Kissinger idolized Metternich and studied him closely. He wrote his Harvard University PhD dissertation, later published in 1957 under the title A World Restored: Metternich, Castlereagh and the Problems of the Peace 1812-1822, on the European negotiations toward the achievement of a balance of power after Waterloo, and praised Metternich’s role in holding together the crumbling Austrian Empire. It should be noted that Kissinger’s work has generated controversy in academic circles among such historians as Paul W. Schroeder, inter alia attracting criticism for the absence of footnotes.”

    http://en.wikipedia.org/wiki/Klemens_Wenzel,_Prince_von_Metternich

    “Say, have you read Thucydides?”

  25. You know, I can’t say what I want to say about Kissinger in a blog comment without sounding like a racist redneck or vulgar conspiracy theory jerk (neither of which I consider myself to be). All I can say is, there are certain people who feed gasoline to, and reinforce ethnic stereotypes. Kissinger to me, is a real standout in that arena.

  26. According to St. Simon, this Easter Sunday we will see the resurrection of DSK and the IMF. We can watch it in the Cartoon Network.

  27. so what your saying is that regardless of what everybody else thinks, there is a small group of elites running the world & most of us are just fertilizer for their games? then why have rules & laws? for example, all us commentors form a committee to democratically determine what this website represents. but while we r doing that, Simon is manipulating each of us behind the scenes to get what he wants even though hes not on the committee. thats insane

  28. ep3 wrote:

    “so what your saying is that regardless of what everybody else thinks, there is a small group of elites running the world & most of us are just fertilizer for their games?”

    One might come to that conclusion after studying history.

    “then why have rules & laws?”

    For the convenience of the Illuminati.

  32. IMF, ECB– bahh, how many battalions do they have? Greece should go to NATO and assert they’re under cyberattack. Threatening to withdraw from NATO unless the allies come to Greece’s aid won’t affect their EU economic ties but will shake up the United States (and Turkey too, of course). Washington would have to take the leading oar in assisting Greece, especially when our allies in Iceland, Latvia, Spain, Italy and Portugal jump on the bandwagon. That’s a lot of basing rights at risk.

    Since 9/11, US military lawyers have been arguing that cyberattacks on a nation’s telecommunication, banking and other infrastructure systems are the equivalent to an “armed attack”. The military (perhaps the only interest group with more political clout than Wall Street) seem to have the policymakers on the same page.

    During her NATO strategic concept speech, Secretary of State Hillary Clinton argued that “threats to our networks and infrastructure such as cyber attacks and energy disruptions” should be considered an Article 5 action, in which an attack on one is an attack on all.
    http://www.acus.org/new_atlanticist/clinton-cyber-security-and-energy-security-nato-priorities

  33. The USA is bailing out ITSELF. Not exactly a great comparison. We’re not running to Canada or Mexico going “Mommy!!! Mommy!!! I was lazy for 20+ years and thought I could build a great country with tourism, lazy workers, and badly informed voters!!! Mommy fix my booboo!!!!”

    Greece is lucky Germany hasn’t told them to go shove it yet.

  34. And before you point out China, those c*nts happily bought our currency (no one asked them or begged them to like 5 year old Greek children) because they don’t even trust their own currency. So don’t start with that.

  35. “The Age of Metternich refers to the period of European politics in between the final defeat of Napoleon at Waterloo in 1815 and the Revolutions of 1848. After the Congress of Vienna, the European powers collectively agreed to maintain the balance of power…This period was marked by the success of the old regimes in putting down popular uprisings.”

    http://en.wikipedia.org/wiki/Age_of_Metternich

  36. Bob Sacamano Mar 16, 8:24 PM said:

    “If by “deleveraging” you mean converting private debt to public debt at a premium to market, thereby rewarding foolish creditors and punishing future generations of Americans for their mistakes, all while leaving the aggregate balance sheet unchanged, . . .

    then yes, we’ve still got tons more deleveraging to do.”

    http://tinyurl.com/y8tccnm

  37. This is true, of course, and perhaps NYC was not such a great example. I was thinking about the old times when the individual northern american states were still in the process of unification, which is perhaps somewhat analogous to the condition in Europe today. Back then, was the federal government expected to bailout single member states that got themselves into financial trouble? Apparently, the case of 19th century Mississippi bonds serves as an example that this was not even an option:
    http://query.nytimes.com/mem/archive-free/pdf?_r=1&res=9F0DE5DE1F31EE3ABC4C51DFB566838B699FDE

    Today, state bailout seems to be the norm (or are they?)

    In Europe, the solidarity, or inter-connectedness between countries is now being tested: are Germany and Greece unrelated entities, or are they two “states” within a European “country”? The narrow legal answer is, of course, that they have retained their independence. Yet, perhaps successful unification depends – especially at early stages – on the ability to effectively deal with “stray” members.

  40. I know I post too much on this site, but I can’t figure out how to comment on yours tippy. Tom Levenson has really superb post on the healthcare bill. I highly recommend you and others go check it out. I think Obama has done “a man’s job” and I’m proud to call him our President. Let’s hope he, Peter Orszag, and the other bean counters try to make the bill even better over time.
    http://inversesquare.wordpress.com/2010/03/21/sometimes-one-can-rage-rage-at-the-dying-of-the-light-and-sometimes-one-must-laugh-mostly-outsourced-mcardle-edition/

  41. Well I for one am not voting for Ted K. When he uses the word “c*nt” in his post he delegitimizes everything he thinks and says.

  42. Filippos is right in this one. Prof. Johnson insists in his columns that Greece has no austerity program based on some numbers he got from the initial budget, which was drafted last November. There have been two “austerity packages” since then, one in January and one in February which changed the numbers significantly. Greece’s austerity measures, late as they may be, are real.

  44. dear sir,

    the last government allways seems to be the worst… but since greece joined the euro, with fraudulent statistics, there was a steady deterioration.

    it is true that greece procured a large number of gernman weapons, but most was surplus material at discount rates. AND NONE HAS BEEN PAYD FOR.
    the actual situation of the greece finance is a lot worse: there are outstanding bills for medical equipment and pharmceutics…. get your numbers straight!

    by the way, athens build the acropolis with money they stole from their allies.

    so nothing new with fraudulent statistics, smbezzlement and exploiting allies.

    please stop blaiming others for your faults and the “it was the fault of the other party” game isn’t helpful either :-)))

    i sincerely wish you good luck with clearing your mess- but only a miracle could help bringing down the sacrosant ways of greek clientelism.

    stachanow

    p.s. stop baiming others, start working

  45. you are basically blaming gemany for the spendrift behaviour of the catholic/orthodox euro members.
    if they continued with a behaviour that was suitable when they could devaluate their currencies in order to get rid of their debts and gain competitiveness lost because of wage increases, seems to be their fault….

    if blaming others would help even the us would be in great shape. i just wonder when obama starts blaiming china for buying us treasury bills :-))

  46. Let’s leave the acropolis and the sweeping generalizations out of this shall we? I am a Greek and, personally, I didn’t embezzle anything nor did I falsify any statistics. Assuminng that you’re German, I’m sure you didn’t burn any jews either (see, this game is ugly – it’s called racism).

    Let’s see what Heiner Flassbeck, Germany’s deputy finance minister at the time of the EMU has to say:

    ” Moreover, countries seeking to repress wages for domestic reasons should not join currency unions if they are not able or willing to convince all the others to do the same. Even worse, Germany has agreed to enter a currency union with an inflation target of close to 2 per cent and not an inflation ceiling of 2 per cent. Given this target and the high correlation between unit labour costs and inflation, it was a clear violation of the common EMU inflation target by the German government to put enormous pressure on wage negotiations, which resulted in a unit labour cost growth of close to zero.”

    Germany’s industry has kept it’s competitiveness by suppressing wages, a policy that was not shared by it’s EMU partners. Of course you might say that’s not Germany’s fault, and in part you would be right, but with the absence of common EU policy-making mechanisms and, considering the fact that the EU since the beginning has been pro free-trade among it’s members and protectionist with outsiders directing the largest volume of international trade by it’s members within it’s borders (Germany is Greece’s nr 1 trading partner), a trend that has been increased within the EMU, it could be argued that the EU and the EMU have been advantageous for Germany at the expense of it’s southern EU partners. Moreover, Germany has been since the beginning the most powerful EU country, directing it’s policy-making (such as it is) and making sure that all treaties and especially ECB policies are suitable to German interests.

    You see, neither the problem nor the solutions are simple (they never are).

  47. A brief excerpt from W.Münchau’s today’s column
    in the FT: Gaps in the Eurozone

    “At last we are heading towards a resolution, albeit a bad one. After weeks of pledges of political and financial support, Angela Merkel appears ready to send Greece crawling to the International Monetary Fund.

    Germany cites legal reasons for its position. In past rulings, its constitutional court has interpreted the stability clauses in European law in the strictest possible sense. These rulings have left a deep impression among government officials. It is hard to say whether this argument is for real or is just an excuse not to sanction a bail-out that would be politically unpopular. It is probably a combination of the two.I have heard suggestions that a deal may still be possible at this week’s European summit, but only if everybody were to agree to Germany’s gruesome agenda to reform the stability pact. That would have to include stricter rules and the dreaded exit clause, under which a country could be forced to leave the eurozone against its will. I am not holding my breath.But either outcome will mark the beginning of the end of Europe’s economic and monetary union as we know it. This is the true historical significance of Ms Merkel’s decision.”
    Maybe in the end, will Germany pull out of the Eurozone for a while ? Or maybe is the eurozone to blow up ?

  48. I left another comment but it’s still in moderation, probably for the best. Just a comment on your p.s. “start working”. Let’s see some OECD labour statistics for Greece and Germany, shall we?

    Average annual working time (2008, hours) Greece 2120 Germany 1432.

    Average annual wage (2008, USD, PPPs) Greece 26929 Germany 35292

    So, assuming that Filippos is Greek and you are German chances are he’s working 50% more than you for 23% less pay. That lazy spendthrift scoundrel!

  50. Greece may turn to IMF as Germany balks at eurozone aid

    Updated 19m ago – excerpts

    BRUSSELS (AP) — “German reluctance over bailing out Greece has raised the chances that the debt-laden country will be forced to turn to the International Monetary Fund for assistance, possibly by the end of this week.

    “A crisis that began over Greece’s borrowing costs is now metamorphosing into a more serious threat to the political and economic order in Europe as a whole,” said Stephen Lewis, chief economist at Monument Securities in London.”

    http://www.usatoday.com/money/world/2010-03-22-greece-imf_N.htm

  51. Filippos,
    http://www.zerohedge.com/article/biggest-greek-cds-speculator-has-been-uncovered-culprit-greek-state-controlled-hellenic-post
    Is this old news or part of the Greece’s NEW austerity program???? state-owned Hellenic Post Bank(TT) was the biggest speculator In Greek notional CDS. Hellenic Post Bank (in Athens) owned 15% of the $8 billion Greek notional CDS, for a total of $1.2 billion.

    I think you’re gonna have a hard time blaming this one on Germany or France. You can do your best though. Maybe German spies are hypnotizing Greek bank leaders to buy CDSs???

  53. “________ goal is to just to look good until he leaves _________ to run more openly for _________, which is probably no more 12 months from now. … if this explodes later (as seems likely), that would not be his problem.”

    This seems to have been standard practice for any high-flyer from middle management upwards for the past 20 years.

    And people wonder why there’s so much book-cooking going on at every level…

  54. Greece does not just have a short-term budget deficit, but a deep, structural balance of payments deficits of 12-15% of GDP. It is not just about 2010 loan maturities, but of fresh money needs for the years to come. Greece needs a 25-30% devaluation after re-adopting the Drachma as national currency. It cannot otherwise reduce economic demand without civil war. Then, and only then, can Euro-denominated loans be rescheduled by concerted European effort. Europeans cannot play the bad-cop-role. The IMF must do that, and DSK knows all this too well.

  55. Eurozone leaders agree to bail out Greece with loans, IMF

    Updated 5m ago

    BRUSSELS (AP) — “Countries that use the euro said Thursday they have agreed on a financial backstop for Greece that would combine loans from other eurozone governments and the International Monetary Fund, a move aimed at stopping the government debt crisis that has undermined the shared currency.

    The bailout program could be used only if Greece is shut out of normal market financing such as selling government bonds, and would require all 16 countries to agree on releasing the loan funds. It also calls for tougher rules to keep government finances from getting out of control and causing another such crisis — a key weakness in the euro that has been exposed by the current crisis.

    The plan is an attempt to stem a government debt crisis that has raised concerns that Greece’s troubles might spread to other euro governments with troubled finances, such as Portugal and Spain, raising borrowing costs and worsening the large debt loads governments have taken on as a result of three years of global economic turmoil.

    German, Portuguese, Spanish and Greek officials confirmed a deal at a Thursday summit of European Union leaders. They gave few details ahead of formal announcement of the deal. It is unclear whether the formal announcement would come later Thursday.”

    http://www.usatoday.com/money/world/2010-03-25-eurozone-imf-greece_N.htm

  56. I, for one, occasionally long for the early BBS days when we had to pay by the minute, and so developed tools to filter out ‘contributions’ from those who wasted our time.

  57. Europe’s three-headed monster

    Saturday, Mar. 27, 2010 – Globe & Mail – excerpt

    “On Thursday morning, I sat before the president of the European Union, José Manuel Barroso. He explained in exuberant English that Greece’s problems would be solved without the help of the International Monetary Fund.

    Next, I heard from the president of the European Union, José Luis Rodríguez Zapatero. He emphasized in brusque Spanish that Greece would require “fundamentally a European solution” with no help from outside bodies like the IMF.

    A few hours later, the room was occupied by the president of the European Union, Herman Van Rompuy. In patient French, he explained definitively and finally that Greece would be bailed out with the help of the IMF.

    Three presidents, three answers, three points of view. This is no way to operate the world’s largest economy and oversee the lives of 500 million people. Brussels has failed to take a seat beside Washington and Beijing because, at root, nobody can agree who the leaders really are.”

    http://tinyurl.com/yjgnxfh

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