Papademos and Lagarde….empty-handed

Six days on from last Tuesday’s ‘confirmation’ of a bondholder agreement, and Greek Prime Minister Lucas Papademos is confident once again.

“There is a little pause in these discussions. But I am confident that they will continue and we will reach an agreement that is mutually acceptable in time,” Papademos told CNBC at the weekend.

Well The Slog is sorry to rain on his parade two weeks running, but this too is vacuous bollocks.

First up, this is no longer just about Hedge Funds. As Friday drew to a close, the IMF’s Christine Lagarde gave the go-ahead for her press office to formally announce the outfit’s decision to accept that Greece is a dead parrot. Der Spiegel and many other sites have since run the ‘news’ that the IMF believes the ongoing free fall of the Greek economy has made the troika’s plan the save Greece obsolete.

The Fund believes that the Hellenic economy will shrink by 6% (not 3%), and an internal note concluded mid last week that the private creditors will have to bear much larger haircuts than the 50% currently envisaged….or the EFSF (aka Germany) will have to significantly increase the planned bailout.

As I posted later last week and also over the weekend, Hedge Fund bondholders are holding out for less than a 50% haircut – not more. And the German opinion leadership is now rapidly grasping what a fine mess Angela Merkel has landed them in.

If anything, the bondholder deal is further from an agreement today than it was last Tuesday. Not only has Papademos nothing at all to be confident about, his Troika just lost a prong – and the second prong is a busted bazooka.

As usual, the MSM are skirting round this gigantic elephant in the potting shed. But talking to Der Spiegel today, senior banker Hans-Werner Sinn spoke for many others when he confirmed German fears about lost influence at the ECB.  “All those nice words that the ECB works according to the Bundesbank model and that Germany as the biggest country keeps a special role are empty and hollow“, Sinn thundered. Twelve days ago, the Central Bank board redistributed portfolios, and the Belgian board member inherited the chief economist post from Jürgen Stark.

Meanwhile, Bild am Sonntag yesterday reported that not-well-thought-of finance eurocrat Klaus Regling is to increase the guarantees to foreign investors in the EFSF to 30%. Meaning this as a sweetener to indirectly boost bondholder confidence, Klaus is on the wrong page of his hymn-book here: investors are already demanding a much higher Eurozone guarantee as a precondition for their participation. And to date, the EFSF has attracted, um, no foreign investors at all.

And finally, The Slog is getting some as yet unconfirmed reports this morning that UK Prime Minister David Cameron is wondering whether he will, after all, simply not take further part in IMF fund-boosting. There is a 2% chance this is because he read my piece about Greek arms contracts being fulfilled, and a 90% chance that the 1922 Committee told him they and other likeminded MPs across the piece would humiliate the Coalition if they tried to give Fifi LaGarde any more spending money. So there’s another nice crisis bubbling away offstage.

I confess to being at a loss to understand what or who can now solve this impasse; but my water tells me that Merkozy (and also quite probably Mario Draghi) will eventually have to get personally involved.