US Treasury Secretary Geithner may yet wind up being Greece’s saviour.
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?
Stay tuned.
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