Deal…what deal?

The situation in Europe has now officially become a farce.

While the Equity markets rocketed up between 4-5% last night because of a rumour that Greece, and therefore Europe, would be saved by a new plan to leverage up the EFSF, a large number of people who would actually have to approve the deal were denying such a deal even existed.

German Finance Minister Wolfgang Schaeuble told the cabinet on Tuesday:

.. there were no plans to increase the volume of the European Financial Stability Facility (EFSF) rescue fund or Germany’s maximum contribution

Finland and Dutch PM’s in a joint statement:

… rejected international calls for an expansion of Europe’s bailout facility however, stressing that profligate euro nations in the periphery should enforce budget discipline according to existing treaty obligations.

Spanish Economy Minister Elena Salgado:

“It is not on the table, nor has it been discussed,”

The EIB that was supposed to be running the whole thing:

.. the European Investment Bank just said that it has not been approached to take part in any bailout program involving the European Financial Stability Facility.

German Chancellor Angela Merkel’s junior coalition partner FDP General Secretary Christian Lindner:

“The woman Chancellor must make it clear very quickly that there are no changes to the Rules for EFSF.”

German Bundesbank chief Jens Weidmann has said:

“they would discourage politicians from taking tough decisions to cut budget deficits and weaken faith in the euro.”

Andreas Vosskuhle, head of the German constitutional court:

There is little leeway left for giving up core powers to the EU. If one wants to go beyond this limit – which might be politically legitimate and desirable – then Germany must give itself a new constitution. A referendum would be necessary. This cannot be done without the people

Even Merkel’s own party in the lead up to Thursday’s vote is struggling to come to a concensus on this:

In an internal vote on Tuesday, 11 deputies from Merkel’s CDU/CSU group voted against the motion and two abstained. Coalition sources said they expected between 2 and 5 FDP lawmakers to vote against and up to 6 to abstain.

If more than 19 coalition lawmakers vote against or abstain, Merkel will be dependent on opposition votes in a political humiliation that could weaken her ability to push through future rescues.

Let’s not forget the minnows:

Slovakia could yet derail plans to strengthen the euro zone’s financial rescue fund, after the junior ruling coalition party rejected a proposal from its larger partner on Tuesday aimed at winning its support for expanding the fund’s powers.

Or the raters:

Europe’s efforts to ramp up its fight against the euro zone debt crisis could potentially trigger credit rating downgrades in the region, a top Standard & Poor’s official warned.

And now FT has reported that once again a huge hole has appeared in Greece’s funding:

.. a split has opened in the eurozone over the terms of Greece’s second €109bn bail-out with as many as seven of the bloc’s 17 members arguing for private creditors to swallow a bigger write-down on their Greek bond holdings, according to senior European officials.

The divisions have emerged amid mounting concerns that Athens’ funding needs are much bigger than estimated just two months ago. They threaten to unpick a painfully negotiated deal reached with private sector bond holders in July.

With a poll in the German newspaper Bild showing that 76% of Germans are against providing further aid to Greece  and now the news that Greece may require even more bailout funds, all eyes are firmly fixed on the Bundestag for Thursday’s vote.

 

22 Responses to “ “Deal…what deal?”

  1. PFH007 says:

    You mean the fundamentals dont support this souffle?

    That G20 communique was, by all accounts, an astonishing rich ore body of ‘good intentions’.

    Dont dismiss the value of high quality good intentions, many a road has been paved with them.

  2. flawse says:

    For goodness sake DE STOP with the facts!!! I have some shares I want to sell to some poor sap who believes what he reads in most commentaries!!!

  3. Lenny says:

    Just stick Greece in the dealer drome and get them to choose a few suitcases.

  4. Sherlock says:

    A bit of steam came out of the US rally towards the end, as reality intruded. I think we may have a slightly down day today.

  5. Adrian says:

    The shock and awe promised by the G20 looked unlikely, and if you read how they were going to fund this it was never going to be a stable solution. When is the focus going to shift to one of the others like Italy, Spain, ….

    Like the saying goes “You can put lipstick on a pig, but it’s still a pig”

  6. The Lorax says:

    You mean the monster rally on global markets this week has been completely baseless?!

    I am shocked. Shocked to my core.

  7. Mav says:

    Somebody.. please take Mr Market out in to the backyard and shoot him. He has gone rabid.

  8. Stephanovic says:

    This is madness. I think the meth addicts I saw on tv last night are more sane than whoever was buying this rumour.

  9. Rod says:

    The J curve in gold isn’t going to be this quick. We’re looking at one of them there dead cat bounces in the lift going down.

    G20 are a joke. Swannie sitting by himself reminds me of Rudd walking around with no one talking to him.

  10. This really is a death by a thousand cuts

  11. marco says:

    I say set Greece afloat and save the ship they will survive they have for centuries

  12. Adrian says:

    DE, this is worth a read, and it’s good to see the default timeline.

    http://www.ritholtz.com/blog/2011/09/can-countries-default-on-their-debts/

  13. SvetlanaBabe says:

    Great post! So my cat has more sense than the markets?

  14. SCM says:

    Might come undone overnight if the Fins vote no on EFSF expansion. Otherwise the next night when the Germans do it?

  15. flawse says:

    Drums fingers and waits for Big Ben to seriously start spreading some wealth ….errrrr…sorry…money around!

  16. Jeff says:

    Yes, and you forgot: “Gambling at Rick’s? I’m shocked.” It doesn’t matter what officialdom publicly proclaims, the end game is the same: the ECB follows the FED’s lead and prints. Whether it’s through leveraging the EFSF, continuing to buy junk sovereigns directly (as they have been doing at a clip of $20 billion a week for the past 8 weeks), letting French banks borrow against Greek bonds, etc. Of course, the ECB is “reluctant” to go dont this path, finds QE “anathema” etc. Does anyone really believe they will let the financial system crash as an an alternative? My guess is they let Greece default as a political sop, then backstop everything else in sight.

    • Jeff says:

      Also, lol at the German Parliament opposing EFSF. It’s repeatedly noted by crisis-mongers that Merkel may be opposed by half or more of her coalition. What’s seldom acknowledged by these folks is those are the ONLY anti-EFSF votes in Parliament. The opposition parties (e.g. the Greens) not only support EFSF unanimously, they want to increase direct support for Greece, Portugal, are pro-Euro bond, etc.