Greeks Threaten To Turn To IMF. Eurozone Loses Credibility.

As Greece struggles to get funding for its deficit, the FT today writes Germany has taken a particularly hard line against rewarding past Greek profligacy. “The German government does not intend to give a cent,” said Rainer Bruderle, economics minister.

Merkel might want to bail out Greece for political reasons but Germany has a banking crisis of her own with Deutsche Bank notably, and a fiscal gap to fill. Her two coalition partners are also unwilling to countenance a bail out, with 71% of Germans dead against any financial help for Greece or others. Without any mechanism or funds, the eurozone is losing all credibility. If the EU cannot fix its own economic troubles, it is well on the road to a collapse. And it is only a matter of time, before that reality impacts.

The Greeks know that the EU offers nothing at all bar words of encouragement, and are now realising that the eurozone was a mirage, which has fooled them into a nightmare financial scenario. The FT writes Greek officials warned ahead of the meeting that they could turn to the International Monetary Fund for help if Ms Merkel failed to offer financial backing. IMF involvement has been opposed by eurozone leaders and the European Central Bank, largely because of the disastrous signal it would send about Europe’s ability to deal with its own problems.

Yet with Germany offering not one cent, it is clear that Greece will have to turn to the IMF. Whether that be this week or in a few months time is the only question. The Euro is turning into the funniest currency of all time. The first crisis it encounters and the game’s all over in weeks. The Euro’s a financial Eurovision Song Contest, which danced into existence as stock prices accelerated to all-time highs across Europe in the late 1990s, creating an atmosphere of ludicrous optimism. It was all based on froth, and by that I mean debt, which now is coming home to roost across the continent.

The world still prefers to be in denial with the FTSE today at an 18 month high, celebrating the sales of 5 billion Euros of Greek government debt in the bond market. The only problem is Greece needs 70 billion this year already, and its finances are still running away as government income collapses, spending is out of control and now interest rates are surging. It is a black hole, which a mere 5 Billion Euros isn’t even going to tickle. 500 Billion Euros might turn the tide, but not even the IMF can spare that amount.

This is no cosmetic crisis.

Markets have chosen not to notice today. As with US unemployment figures, the real underlying unemployment continues to deteriorate, and yet the false good news of a smaller decline in the Non-Farm Payroll than expected (yet to be confirmed) sent shares on a cheerful climb. At some point soon, not just Greece, Ireland and Iceland, but the world might start to take in the grim financial realities that have been created by a generation of debt, and barmy optimism. And nowhere was the stupidity and arrogance of the boom more clearly evident than in Europe with the creation of the Euro.

But don’t expect Greece to hurry for the exit. This from the WSJ –
In his research, Mr. Buiter returned to a theme that this column raised a week ago. The country most likely to leave the euro zone is not Greece, Spain or Portugal—but Germany.

He says German politics has changed. The “umbilical attachment” to the European Union and its institutions characteristic of the German political class for nearly five decades “is a thing of the past and unlikely to return,” he argues.


French President Nicolas Sarkozy said on Saturday.

“If we created the euro, we cannot let a country fall that is in the euro zone. Otherwise, there was no point in creating the euro,” Mr Sarkozy said during a meeting with farmers.

“We (must) support Greece because they are making an effort, or else there will be no more euro,” he added.

I can’t see France giving Greece any money!!! So Euro’s over. Sarkozy said.

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8 Responses to “Greeks Threaten To Turn To IMF. Eurozone Loses Credibility.”

  1. thedarknight says:

    Great. An Anglo-German alliance outside the EU would be just the thing.

  2. I do feel that political classes are always a little slow to pick up the wholesale shift of mood in the electorate, hence Cameron’s rather silly dance trying to satisfy left-leaning centrists who aren’t left-leaning anymore.

    In Germany, I thought that it was some sense of post-war guilt that created a wish to be seen as the “good guys”; perhaps this consensus is over, but Merkel’s corporatist policies haven’t spotted the shift, even though votes bypassed the CDU from the Socialists to the FDP in the last election.

    Germany has always been the most likely to leave the Euro; they were the ones who paid the bills, the first to be asked to bail, the lowest support in the Eurozone for the Euro when it was introduced, etc. True, their exports would be hit, but what’s the point in exports if you have to give them the money to buy it in the first place? It’s like being China but giving out free money, not loans, and if Merkel doesn’t get that, the German public will show her what they think of retiring 4 years after the Greeks.

    Angela Merkel is simply bonkers if she truly wants to bail Greece; it’s political suicide to save the ego of a creaking currency, whose central hope, that the PIGS etc would “Germanify” their economies before the first crisis hit, is long dead in the water.

    And you can be damn sure that those with applications to join the EU are all going to have a long, hard 2nd look at their options.

  3. tapestry says:

    Cameron’s problem is that the media are the gate-keepers and their leftwards lean is as extreme as it ever was, if not more so, as the public increasingly questions the sanity of their outputs.

    Cameron has to talk in Doublespeak, or his chances will be obliterated. By acting as an ineffective Tory, who the media can scorn from a feeling of their own superiority, at least he gets a hearing.

    If he turned on a full attack, he would never even be seen or heard.

  4. thedarknight says:

    Cameron has said that ‘we will never leave the EU’. He said it at the Romney Cameron direct. I think you will be disappointed if you expect too much from him. It’s the Tory government after next that will sort the EU out, when the right of the party gets into power again.

  5. tapestry says:

    I don’t think you can read too much into what any politician says. The fact that the ‘system’ is now trying to spit Cameron out tells you far more.

    Heseltine and Clarke are spouting Hung Parliament and leading the charge to reduce expectations of a Cameron victory.

    It’s not wishful thinking but calculated observation.

    If Cameron is a turncoat, then there are many others in the Parliamentary {Party who are not. The entirely negative eurosceptic view of the Conservatives is strategically seriously mistaken, in my view.

  6. ad fukal says:

    I have a nice hoard of “X” € notes.

  7. tapestry says:

    Those ones are the Deutschmarks. What’s the current exchange rate for the Drachma? In Germany they won’t accept anything other than a X, I hear, so not at any price. i.e. zero.

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