A few airy vapours emerged in the way of rationales for US Federal Treasury Secretary Tim Geithner’s session with German finance minister Wolfgang Schäuble today. The two men ‘expressed confidence in euro-area member states’ efforts to reform and move towards greater integration’, ‘welcomed the Irish example of placing successfully longer-term bonds last week and Portugal’s continued success in meeting program commitments andzzzzzzzzzzzzzzz…..’
Bazooka Geithner was scheduled to travel on to Frankfurt Monday afternoon for a session with European Central Bank President Mario Draghi, and no doubt at that time they will talk about Borussia Dortmund’s women’s soccer friendly against Inter-Milan’s mixed-sex 2nd XI next Thursday. It promises to be a storming game, but most people watching ClubMed developments (especially those in Athens) could be forgiven for suggesting that Greece’s future location as a sphere of vital influence was the main reason Mr Geithner was talking to two of the most powerful financial players in Europe.
The eurozone has been a pimple on the backside of global money for two years now, but while the buttock-blemish just keeps on getting bigger, nothing seems to bring it to a head. My theory is that the problem is now so big, it has expanded far beyond the fiscal arse, and is about to launch an assault on the head: but whether I’m right or wrong, there’ve been so many jigsaw bits, clues and signs falling into place of late, you’d have to be Mr Magoo in a tank not to notice them.
What’s going on here is a high-stakes poker game between Washington and Berlin. And once again, we are talking Greek default into the welcoming arms (in every sense) of America v Merkel’s FiskalUnion vision wherein Greece stays in the eurotent…along with its strategic, mineral, and energy importance to Brussels.
Here are some examples of what I mean.
“One thing that’s started happening among eurobankers is debt syndication,” a Madrid based debt expert told me late last week. “The situation here has gone beyond critical…Spain is a cert for full-on bailout. And Greece is running to fall backwards. So senior bank executives are looking to spread risk: they’re happy to lend the same target sum, but to five clients not one. And preferably across three EU States. I asked two guys last weekend [21st/27th July] what they most feared right now, and it was Germany throwing the towel in. So in that outlook which, you know, I think is not unreasonable, you can see why the target setters have said ‘same goals but more borrowers’.”
The anti-Greek feeling among Bankfurters has been growing of late, I am certain. This tendency is also, we now see, shown to be far closer to the German public pulse than that of the Merkel inner circle. Early today Bild splashed the results of a poll by the Emnid research institute. They showed that over 70% of respondents wanted Greece to leave the eurozone if it couldn’t stick to its repayments schedule; while a technical majority of 51% (the first time I’ve seen one) felt Germany would be better off without the euro. The poll is significant, in that it shows any gentle shoving of Athens towards the Exit Lounge would give the MerkeSchäuble Coalition Government a clear electoral advantage next year. Equally important, it showed that Fritz in the street thinks doing nothing Brussels-style is not an option.
The one pair of cold eyes into which Tim Geithner hasn’t stared yet belong to Angela Merkel. Being a born geopolitician, she will still be mulling over what the greatest risk might be: Germany taking on board a Hindenburg of debt, or Berlin-am-Brussels losing the resources and power to have the deciding say in the Middle East….via Greece.
Yesterday I posted about Geithner sending special envoy Collyns to lick the Greeks all over, and reassure them of just how valued they will be as and when a return to the Drachma takes place. I’m confident that German intelligence is aware of the content of their discussion; and I’m told that this is reflected in reports coming back from Athens today about the Greek government finally resolving to draw a line in the sand about Troika demands.
What I suspect might be happening now is that the usual suspects among Greece’s elite of troughers are balancing the horrors of losing the Brussels gravy train against the potential of joining an American version with more First Class carriages.
What’s more, I’m reasonably sure that the Troika is in possession of Berlin’s knowledge about the American offer. This from Athens News yesterday (my italics):
‘…the atmosphere at the [Friday Coalition/Troika] dinner was “exceptionally good” and marked a change in the attitude so far of the representatives of Greece’s creditors….‘
A couple of hours ago (4pm BST Monday) Greek PM Antonis Samaras was due to hold talks with PASOK leader Evangelos Venizelos, and the minor Party Democratic Left’s leader Fotis Kouvelis. I’ve had wildly conflicting reports today as to who if anyone will object to what in the way of Troika demands. Kouvelis, however, is felt by many to oppose any more pension or salary cuts. And some sources think all three men will not budge on auctioning State assets. As this has been a consistent (and from their viewpoint, totally understandable) foot-dragging subject since the first Greek bailout, The Slog’s informants may well be right. However, Finance Minister Yannis Stournaras and Labor Minister Yiannis Vroutsismet met earlier today: Stournaras was the recipient of envoy Collyn’s alleged ‘total support’ message last week. So it’s very possible that the Greek side now feel they have more cards for when the next Troika session occurs.
Even the scheduling for that keeps changing. I was told last Saturday that it would be this evening, but now I understand it has been postponed. According to Athens News the story is that the Troika is digging in ‘until a package of measures is agreed’.
This is a very finely balanced diplomatic situation, but you have to take your hat off to Geithner this time: he seems to have learned the lesson of the EU Poland summit – viz, Yankee bombast doesn’t play well in Europe. Indeed, he is displaying considerably more craft and subtlety at the moment than Hillary Clinton over at State when it comes to Obamite Arab foreign policy. As everyone in the US tells me, love or hate the guy (to quote one trusted contact) “Tim Geithner is not just another money-f**king banker…he’s a cultured man who does see the higher game.”
Make of that what you will. The point is, it’s hard to see how the Federal Treasury Secretary can lose in this situation. If Germany embraces Greece as a preferable alternative to having the Pentagon crawling all over it, then Germany picks up the tab for whatever the eurozone downside turns out to be…and reassures the markets that Berlin is, after all, the final guarantor. This can only go down well on Wall Street. On the other hand, if Merkel goes with German public feeling (or is arm-locked into doing so) then Timmy can write in his memoirs how, in one all-or-nothing hand, he secured Greece as a US base for all time from which to exploit rare-earth minerals and exert fast-response influence on the Iran-Israel-Sunni Middle East farrago.
In conclusion, let me just add one thought that continues to intrigue me. The total Greek debt as of now is roughly $390bn. The US total debt is $16 trillion. For US bank collapses to start happening on the basis of a sum owed in the region of 0.7% of America’s national debt (collapses that could balloon US debt management costs enough to sink the entire country) strikes me a risk not worth considering for longer than 0.07 of a second.
This in turn leads me to ask three further questions. One, is Israel no longer deemed to be of value to the Obama Administration as an ally? Second – even more mind-concentrating – are the derivative multiple indices potentially accruing from eurozone meltdown so terrifying, the US would be happier ‘adopting’ a Greece outside the eurozone, rather than take the risk of a Greece inside triggering the nuclear reaction? And third, if that’s the case, what on Earth is Washington going to do about Spain and Italy?