Handelsblatt Illustrates German Opposition
At right is the front page of Today’s Handelsblatt (April 29), a business newspaper in Germany of about 150,000. It competes with the German editions of the Wall Street Journal and Financial Times.
On a normal day, the Handelsblatt cover looks like the example at bottom — full of words and stories. Today, however, their cover is all black to powerfully illustrate the extreme distaste and opposition to a Greek bailout. They called yesterday “black Wednesday” in reference to German Prime Minister Angel Merkel’s change of heart regarding the need for a bailout of Greece.
Markets are rallying (again) on the idea that Greece will be bailed out and once and for all this issue will be put behind us. We say “again” because this is the fourth or fifth time risk markets have rallied on the idea a bailout is coming and this story will be over. In all those cases, they were disappointed.
- Bloomberg.com – Merkel Pressed to Enlist Banks in Greek Rescue as Bill Drafted
German lawmakers considering a bill to aid Greece challenged Chancellor Angela Merkel to involve banks in the rescue, refusing to back down after her government said that would send a “fatal signal” to markets. The main opposition Social Democratic Party threatened to withhold support for aid next week when the bill is fast-tracked through parliament unless banks are asked to contribute. Members of Merkel’s Christian Democrats said the government should ask banks to voluntarily accept losses on their investments. - Der Spiegel – Euro Fears Force Merkel To Act
After weeks of hesitation over the German response to the Greek crisis, Chancellor Angela Merkel is suddenly calling for swift action. “It is clear that the negotiations must now be accelerated,” she said Wednesday at an appearance with Dominique Strauss-Kahn, the head of the International Monetary Fund (IMF), in Berlin. A serious-looking Merkel called for an agreement to assist Greece “within the next few days,” adding: “We will not back out.” Observers were surprised by Merkel’s strong words. Until now, the chancellor has not exactly come across as a driving force when it comes to action on the Greek crisis. Merkel has long been reluctant to promise the Greeks billions of euros in European aid, something which has earned her the nickname “Madame Non” in the European Union. At home in Germany, however, she has been feted by the tabloid press as the “Iron Chancellor” because she had rebuffed the “bankrupt Greeks.” - Marketnews – EBRD Head Warns Against Banks Absorbing Costs Of Greek Rescue
The president of the European Bank for Reconstruction and Development (EBRD), Thomas Mirow, warned Friday against making banks shoulder part of the aid for Greece because this would weaken them again. “Therefore a bailout that would include the banks could be more costly for taxpayers than a straight bailout by states,” Mirow, a German national, told reporters on the sidelines of a conference organized by the Aspen institute here. “This is what one has to be very careful [about],” he said. A senior member of German Chancellor Angela Merkel’s CDU/CSU-FDP government coalition said Thursday that there should be discussions with Greece’s creditors about a voluntary haircut on their claims. “We should talk with banks and other investors about voluntarily forgoing their claims” against Greece, Leo Dautzenberg, the CDU/CSU’s parliamentary financial policy speaker, urged. Nobert Barthle, the CDU/CSU’s parliamentary budget speaker, said on Wednesday there was significant resistance inside the CDU/CSU parliamentary group against aid for Greece without participation of the creditors.
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April 30th, 2010 at 2:44 pm
bondholder’s take a haircut- pleeeeeease- that’s so old school-
this is the new world where losses are never realized
April 30th, 2010 at 2:47 pm
Let the Germans be discontent, if they do not want EU and the euro to collapse, they have no option but to give something back for all the money we spend on their industrial products, many of them deeply flawed (expensive submarines that cannot stand stormy seas is just one example). And for their lubricating the wheels of a deeply corrupt state. It is not about solidarity, it is plain economics/common sense.
In all likelihood, the bailout will happen this weekend following Mayday. Everything is ready in Athens. There will be a meeting of all party leaders, there will be the grand televised announcement, there will be protests in the streets. If all goes well the Government will survive long enough to see through the social mess/hell the Left will raise in the few weeks/months to come. Then it will be summer and you cannot beat Greek summer. And then it will be Fall, probably in more than one senses.
But in the end, this too will pass.
April 30th, 2010 at 2:50 pm
@ahab: But if nobody is forced to ever realize a loss, is it really a loss?
Answer: Not until that loss reaches the “nobodies”. The elites don’t talk losses. Don’t you know anything? They just pawn them off on the taxpayer. That’s how it’s done now.
April 30th, 2010 at 2:50 pm
…..”don’t TAKE losses.”
April 30th, 2010 at 3:20 pm
Time is the only hope for truth.
April 30th, 2010 at 3:22 pm
The Economist cover this week is also an instant classic:
http://www.economist.com/printedition/
April 30th, 2010 at 3:24 pm
Who says the German public wanted the Euro in the first place?
Threatening the German public with the collapse of the Euro isn’t much of a threat from their perspective.
April 30th, 2010 at 3:26 pm
Does anyone know whether US taxpayers will wind up funding a Greek bailout by virtue of giving funds to the IMF?
Does anyone know the mechanism for that happening?
Something tells me all parties are waiting for someone to blink.
Seems to me the bondholders should indeed take a haircut. Default. Reset. But does not seem likely in these times. The elites must be protected.
April 30th, 2010 at 3:29 pm
Greece bailout is not such a big deal since Greece is just a tiny percent of the EU economy. But with the sovereign bailout precedent what happens when Spain needs it? There’s no way Germany can bailout Spain – its too big.
At some point they will take the path of least resistance and the ECB will compete with Bennie to see who can print more. The stealth tax of inflation via currency devaluation will be pursued as its the easiest path politically.
April 30th, 2010 at 4:04 pm
What I have been able to ascertain is that Euro has bigger problems than Greece. In fact the whole world can play, “hide the wheeny,” only as long as the are able to prime the pump. For some reason they they feel that things will get flowing without looking to see if there is anything of substance coming out the other end. “RECESSION OVER!”
April 30th, 2010 at 4:21 pm
@dsawy, if the germans didn’t have the euro they’d have to consume their own output.
@alfred e, once the few % of bond investors like gross and soros are out the way then the reality is that the bond markets are our own pensions.
not to say we shouldn’t take a nice haircut on what we have promised ourselves but lets get real about who will really be feeling the pain of a widespread soveriegn bond crisis. I love how people think we can let the banks get stiffed and somewhow all the good guys walk off with their savings intact.
April 30th, 2010 at 4:36 pm
They should not be discussing the banks “forgoing their claims”, they should discuss having them refinance their claims into 30 year loans with a low fixed rate. The banks cannot handle large booked losses, but they can handle slowly bleeding the money.
April 30th, 2010 at 4:36 pm
Since the Greeks cannot perform on any true promises of austerity, Merkel simply needs to make the gifts conditional of Greek performance.
April 30th, 2010 at 4:43 pm
One way or another, the politicians will find a way to create the illusion that the problem has been solved, or at least put off into the future.
April 30th, 2010 at 4:50 pm
Just automatically convert any bond on its due date to a 30-year 4% bond (or 10 year for the shorter notes). They will not be able to get any new bonds, so they will be forced to match outlay with taxes.
April 30th, 2010 at 5:10 pm
The month of May is going to be a verrrry interesting month in the realm of EU finance …
I don’t believe they will be able to kick the can into June. But maybe they’ll surprise me — they’ve been a resourceful lot thus far, in fabricating various schemes that last only a week or two before coming apart at the seams.
And sure enough, within a week of the previous patch coming apart, they have another one crafted from only the sheerest fantasy, that lasts no more than a week or two before it needs repair/replacement.
April 30th, 2010 at 5:12 pm
The ECB are going to QE.
April 30th, 2010 at 5:54 pm
Greece is interesting. What the world does about it, not so much, because really, not much can be done in the face of her demographics. According to the CIA World Factbook, it has a population of about 11 million whose median age is 41.5 years, with a total fertility rate of 1.36 children per female, and a population growth rate of 0.146%, all of which is from immigration.
Greece, like so much of the rest of the developed world, is rapidly aging and dying. Greece, and the rest of the developed world, is growing old and dying. It is yesterday. Germany, bless its heart, is comparatively worse off than Greece so far as demographics go. It has about 82 million people, with a median age of 43.4 and a total fertility rate of 1.41 children per female. It’s population growth is however, negative, contracting about .044% per year, because it gets fewer immigrants.
All of economic science and theory assumes a positive population growth rate, if not explicitly, then implicitly. But what happens when societies age, fade away and then die? No economic theorist has the answer because his models all assume populations grow. But they don’t. Not forever. Look at Japan. Explain how Japanese zirp hasn’t cause inflation. Hint: It has something to do with demography and the velocity of money/metabolism as the organism ages.
Which is why it doesn’t really matter what is done about Greece, or any other aging, dying society. Germany rescuing Greece is like two old codgers helping each other across a street. Okay if that’s all you’ve got, but wouldn’t you rather have a young Boy Scout to do the job? No matter what Germany does, there is no way Greece will be able to make good on the promises it has made to its people, not unlike the rest of the developed world, as it grows old and dies. But it will take a long time until the reality that yes, we are dying, and no it won’t be pretty, really sets in.
April 30th, 2010 at 7:49 pm
Very Nice, BR. As a small US business who deals with German Clients it’s always good to see stuff we can’t catch as to the “Sentiment.”
Thanks!
April 30th, 2010 at 7:51 pm
The Germans were a big exporter before the Euro. They’ll still be a big exporter after the Euro is gone.
The “elite” of Europe have convinced themselves that the Euro is necessary. They haven’t done such a hot job convincing the man in the street of such necessity, and this episode of rampant malfeasance isn’t going to do anything to improve the reputation of the Euro advocates.
April 30th, 2010 at 11:01 pm
@dsawy:
So that’s your argument why a breakup of the Euro zone wouldn’t matter much.
Exports accounted for almost 50% of Germany’s GDP in 2008 according to Worldbank[1] In comparison, in the year 1995, it was about 25%. Without this increase in exports, how would have Germany’s GDP growth looked like, compared to the actual one, which already has been anemic (about 1.5% on average from 1995 to 2008)? So, now imagine what it will do to Germany’s economy, if the ratio of exports to GDP falls back to 25% (I don’t know whether the drop would be as big, but I guess, on the other hand, you don’t know that it wouldn’t.). Germany will still be a “big exporter” with such a ratio. However, I want to see the faces of all the German nationalists who rally against the Euro and dream about a come back of the old currency, once the consequences from such a drop in exports materializes for Germany’s industry and employment.
[1] http://data.worldbank.org/indicator/NE.EXP.GNFS.ZS?cid=GPD_35
May 1st, 2010 at 12:14 am
The Greek debt is a piss in a pot.
Greece is an experiment for European banks to recoup some losses from the derivative market.
Create general panic, then make a last minute deal to save the situation, sounds familiar?
A little like a $700 billion bailout.
Meanwhile the man on the street gets to work for less, pay more taxes, retire when he’s ready to kick the bucket.
Horseshit, let Greece default and watch those dogs from Deutsche Bank and Societe Generale shit themselves.
I hope the Greek street doesn’t settle and give them hell.
As for the Germans, let them get out of Euro-zone and find some assholes to buy their products, they certainly don’t consume themselves.
May 1st, 2010 at 7:42 am
A 25% VAT will stop any economy dead in it’s tracks. Apparently the Greek tax collection system isn’t too efficient if 25% VAT is their answer. That tax will have them marching in the streets
Ev’rywhere I hear the sound of marching, charging feet, boy
‘Cause summer’s here and the time is right for fighting in the street, boy
But what can a poor boy do
Except to sing for a bouzouki band
‘Cause in ancient Athens town
There’s just no room for another street fighting man
No
Hey! Think the time is right for a palace revolution
‘Cause where I live the game to play is compromise solution
Well, then what can a poor boy do
Except to sing for a bouzouki band
‘Cause in ancient Athens town
There’s just no room for another street fighting man
No
Hey! Said my name is called disturbance
I’ll shout and scream, I’ll kill Trichet, I’ll rail at all his co-directors
Well, what can a poor boy do
Except to sing for a bouzouki band
‘Cause in ancient athens town
There’s just no place for a street fighting man
No
May 2nd, 2010 at 2:07 am
@rootless: So you’re saying if the Germans bankrupt themselves and save the spendthrifts, they’ll be able to sustain their GDP growth from the last 10 years?
I somehow find this to be unwarranted optimism.
Here’s the hard truth: There are at least five nations within the Euro that are sovereign debt basket cases. The Germans cannot backstop all of them. The Germans could backstop Greece, but they can’t do Italy nor Spain, for example.
So they’re now in a position of bailing out the spendthrift nations (and I’ll get to this in a moment), or bailing out their own banks. Either way, they’re in for years of sub-par GDP. The difference is that in the “bail everyone else out,” they’ve made their own economic situation worse in the long run.
Now, as to the spendthrifts: The riots in the streets of Greece make it increasingly clear that the Greeks are children. The “austerity” plans by the Greek government don’t even begin to match with my definition of “austerity,” but obviously that doesn’t matter. What matters is that even the minimal spending freezes and trimming around the edges is causing riots and unrest in Greece.
The idea of bailing out Greece is deeply unpopular in Germany – and not with only the “nationalists” as you put it. Sorry, but 57% of the German public are not “nationalists” etc. That’s the polling by Die Welt this week on what proportion are opposed to a bailout. Another 33% will tolerate a bailout of Greece only with stringent austerity measures – and what Greece has offered to date don’t seem to meet many of the criteria being discussed in Germany.
Since the conditions for the bailout are unpopular in Greece, and the bailout itself is unpopular in Germany, yes, they should let Greece default and fail, and get on with the idea of ejecting Greece from the Euro-zone.
May 2nd, 2010 at 5:24 am
The Germans will cut loose Angela Merkel before she falls for this FEd-induced Shock Doctrine play. She isn’t about to employ Hank Paulson’s imaginary bazooka. Greece will realize its survival in the EU by self-financing in a mark-to-market actuarial haircut in real time of future obligations or they can sell their state treasures at auction. The remaining SPIIGs need to see this one play out or Game Over.
May 2nd, 2010 at 11:14 pm
“Since the conditions for the bailout are unpopular in Greece, and the bailout itself is unpopular in Germany, yes, they should let Greece default and fail, and get on with the idea of ejecting Greece from the Euro-zone.”
Every f-ing country in the world owns somekind of “public debt” bullshit, to whom?
The assholes speculating 27 times a day on the price of oil? interest?
They sure ain’t gonna pay for the spill down south, that’ll be “public debt” for a change.
Enough is enough, and yes Greece should default and so should every country in the world, default and screw the blood suckers who are now lending money to European countries so they can help Greece pay them back.
What are today’s politicians afraid off?
get rid of those finance elephants and just replace them.