West’s governments face war of attrition in four dimensions

No doubt it is Sod’s Law, but at the very time when we are at last paying attention to the Murdoch cancer we’ve been growing for forty years, an enormous double-decker truck is rumbling towards us – and hardly anyone seems to have noticed.

Sources in Berlin are tonight confirming that Frau Merkel’s Government is retreating in the face of banking intransigence about Greek default. And in turn, US sources are talking about rising panic in Wall Street regarding an unwinnable war on two fronts: one against Washington’s inability to agree on a debt ceiling, and the other against horrendous eurobank insolvency insurance claims they’ll have to pay out on, as and when Greece defaults.

I agree, it doesn’t make sense: but bankers are bankers, and they want cream on the jam on their bread buttered on both sides: they have put Brussels on alert with a clear demand that taxpayers should cough up for 60 cents on every dollar of Greek debt…..while they pick up at most 10 cents of the hit; and they’ve told Wall Street that should this bargaining ploy fail, they want every cent to which the US insurance entitles them.

This has (as you’d expect) had the phone satellites between Washington and Berlin jumping out of orbit on the subject of who is or isn’t going to pay for what and by when. And the equally predictable result is that it is going to be taxpayers or bust. Otherwise, the US is screwed royally either way.

This is the scenario: Germany’s Wolfgang Schäuble is admitting, I understand, that the most the banks are prepared to wear as a hit is €2.5 -3 billion. The EU needs, over the next few months, to plough in around €120billion. The IMF appears to have told Brussels that without that commitment, they won’t put any more monies in – indeed, the IMF’s articles won’t let them. But if they don’t, then of course the win-win banks will call in their Wall Street insurance.

Meanwhile, the US debt ceiling that was a done deal ten days ago is now completely undone.

Push is coming to shove. And nobody knows what to do.