The German Chancellor has lined up her banks for a Greek crewcut
Reliable sources in the Bundesrepublik suggested tonight that Chancellor Merkel has extracted a heavy price from the banks for reining in her ambition to keep the eurozone as we know it going. If nothing else, it seems the German leader has successfully insisted on her banks taking a 60% haircut on Greek debt. This is unlikely to prove a game changer, but at the very least it is good news for the Schauble Plan to help Greece restructure and remain in the eurozone.
German lenders were grudgingly accepting tonight that, in order to keep Frau Merkel’s eurozone ambitions in check (and retain the country’s AAA credit rating) they would have to swallow considerably closer haircuts than the 21% they expected based on the original July Greek bailout agreement. But not all of them are happy about it.
“We have been talking to each other about this for several days,” revealed one senior executive, “and as the Americans say, this is probably payback time. But I don’t imagine non-German lenders will be as open to the Chancellor’s ideas. Why should they be?”
It’s a fair question. French lenders, of course, simply cannot accept this route…otherwise their banking system will be blown over.
“There is growing anger here that the Germans are being selfish,” a Paris source told me this afternoon, “in forcing the issue to a point where they can afford it, but others can’t. There is no way that French banks could handle 60% losses without a massive asset sale. And to be frank, there is neither the time nor the market for that”.
The Slog’s view remains that, German crewcuts or not, the Merkel/Schauble approach is doomed. Not only would eurobank asset sales reduce funds to rebuild the EU economy, there are so many lenders outside Germany unable to take any kind of hit (let alone 60%) that no level-field deal could ever materialise. And of course – see Slog post about the Munchau opinion yesterday – without an unqualified ‘all for one and one for all’ attitude, the ClubMed sovereigns themselves could never be saved.
Meanwhile, as predicted here, in flagrant abuse of the Troika repayment guidelines, Greece has received its 8 billion euro tranche of walking around money. If ever – as the Slovaks insisted – there was good money after bad, this was it. Equally predictably, on the EU principle of continuous voting until Brussels gets the right answer, the Slovakian Parliament approved the EFSF fund expansion this afternoon. Vote early and often, as they used to say in Ireland.
Related: Poor ickle hard-done-by bankers