Herr Schäuble reacts calmly to the news from Austria and Greece
Ahead of any European MSM title, The Slog posted about HETA bad-bank goings on in Austria a week ago today. Yesterday, Frances Coppola wrote this piece at Forbes. These are some key points from her column:
‘Moody’s has downgraded the rating of the Austrian province of Carinthia [where HETA is based] with a negative outlook….The rationale for the downgrade is Carinthia’s liability for Heta’s debts because of the guarantees it issued during HAA’s pre-2008 lending spree. The scale of Carinthia’s exposure is eye-watering….[it] could exceed Carinthia’s liquidity resources, likely leading to increased financial leverage, and could require some form of extraordinary central government support….’
Coppola then posits a worrying scenario. Austria having already legalised its bail-in rules….
‘…..clearly, if losses rebound to the sub-sovereign via the guarantees, taxpayers cannot be said to have been protected…. Federal Finance Minister Schelling says that the Austrian federal government will not take responsibility for Carinthia’s guarantees….’
Given that the Bayernische Landesbank is already sueing Carinthia for $800m, what Frances is describing here is national units retreating back behind their stockades, and responsibility bouncing around all over the place when it comes to honouring guarantees. Whichever way you cut it, this is going to turn into both a bailout and a bailin…because bondholders and creditors alone aren’t equal to the enormous sums involved.
The day George Osborne stood up in the Commons to announce the bail in concept as a means of “protecting taxpayers”, I said forcefully that it would provide no protection at all. The Hypo/HETA farce proves the point. But equally, it both increases market nervousness about the euro, and suggests that events are moving beyond the control of the soi-disant ‘elite’ of the EU. Bloomberg notes that ‘Austria’s decision to wind down Heta Asset Resolution AG sent ripples through the financial system, causing credit rating downgrades in Austria and bank losses in Germany’.
Frances Coppola calls this “Europe’s Argentina”. Clearly – from the Troika downwards – the Eunatics have no more idea what to do than the Argentinians.
In Greece, on the other hand – although a tiny anarchist group has occupied Syriza’s offices – there are one or two signs that Varoufakis may well be regaining the initiative. Today is Eurogroupe day (again) and now Game Man is warning that Syriza may well call for a referendum or early elections if the eurozone rejects its debt plans.
In an interview with the Italian daily Corriere della Sera,Varoufakis said eurozone partners had not yet responded to Greece’s proposals to replace its current debt with bonds linked to nominal growth. There’s a very good reason for this: most members of the eurogroupe either haven’t read it, or have…but aren’t remotely interested in its contents. Troika2 is not about to take new ideas on board, because it can’t afford to let Greece escape to a better financial position.
This is all about power, and the expression of it. Wolfgang Schauble will run his Fiskalunion with a rod of steel, and Mario Dragula will take a cosh to anyone who gets in his way. Yanis Varoufakis is merely upping the ante by repeating the threat that got Papandreou stabbed in the front by Venizelos during 2010. This was the memorable occasion when Wolfie’s mask dropped to reveal an even nastier one behind it.”I forbid this referendum!” he screamed, following which Sarkozy took him to one side and suggested he shut up.
It’s going to be really interesting to see what trap the Blue Meanies leave for Red Yanis this time. Let’s hope he’s more awake than he appeared to be a fortnight ago.
The Slog 