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Quote of the day as Germany tells the ECB to go **** itself.

Euro Scream (after Munch)

A wonderful quote of the day in the comments from this article at ZeroHedge regarding Germany’s seeming about face on the Greek rescue plan this weekend after an anonymous official suggested that the Friday agreement between Merkel and Sarkozy was now off the table again :

Teutonic twat tweets titanic twits twilight.

From the article itself, the next few days and weeks should prove very interesting indeed as the pieces are shuffled around the board in the latest round of “kick the can down the road” :

The one catalyst which sent the EURUSD (and thus its first derivative, the SPX) surging on Friday was the Guardian story that Germany, Sarkozy and most importantly, the ECB, have reached a consensus over the form of the second Greek bailout. In the immediate aftermath, Greece, sensing European weakness, announced that it would seek to pass the Troica plan however with substantial changes, a development which prompted us to say that “now that Merkel has effectively thrown in the towel to her, and the CDU’s, political reign by agreeing with the ECB’s and France’s demands, a move which will be brutalized by Der Spiegel in T minus 5 minutes, the fact that Europe blinked to Greece’s bluff, just may mean that every demand out of Greece will be met.” Well, sure enough here is Der Spiegel, however instead of seen as bending over to Greece, Germany appears to have had a dramatic change of heart, and told not only Greece to take its demands and shove them, but the ECB to go fornicate itself.

The “tweeting teutonic twat” is anonymously quoted in this AFP article :

A German compromise plan to resolve a dispute with the European Central Bank over the Greek rescue that was reported by Der Spiegel magazine is no longer on the table, a government source said Sunday.Der Spiegel had reported ahead of its Monday issue that the German finance ministry called for a beefed-up version of Europe’s temporary bailout mechanism lending to Greek banks to insure they have adequate collateral with the ECB.

It would boost the effective lending capacity of the Emergency Financial Stability Facility (EFSF) to 440 billion euros ($629 billion) and see member states double the amount of guarantees they provide the fund.

Germany’s share of guarantees would climb to 246 billion euros from 123 billion euros, according to the report.

But a German official, who spoke on condition of anonymity, said that while “several options” were being debated to involve private creditors in an Athens rescue, the reported proposal was “no longer on the agenda”.


Things seem to be moving quite quickly from this Reuters update this evening :

European governments weighed withholding half of Greece’s next 12 billion-euro ($17.2 billion) aid payment, seeking to keep the country solvent while maintaining pressure on the government to slash the debt that pitched the euro area into crisis.

Euro-area finance ministers may authorize only a 6 billion- euro loan to tide Greece through bond redemptions in July, while further aid hinges on Greek budget cuts, Belgian Finance Minister Didier Reynders said.

Even if Greece does get the full €12 billion payment, there is a small maths problem which even Schrodinger would struggle with unless you consider Greece to be both alive and dead at the same time :

Here is a simple summary of the Greek bailout math explained with just 2 numbers.

First, the country has to do the impossible. As Citi’s Jurgen Michels summarizes: “Once the whole new cabinet is announced, parliamentary discussions ahead of the vote of confidence will probably  start on Sunday, with the vote actually taking place next week on Tuesday evening. Even if the new government manages to pass the vote of confidence, it will still have to submit to Parliament the new austerity package for approval, probably sometime later next week or the week thereafter. This will be key for the smooth disbursement of the next tranche of EU/IMF loans, of €12bn.” In other words, the Greek government has to pass 2 near-Sysiphean tasks before it can even hope to sniff the IMF’s €12 billion in rescue funding.

That’s number 1.

Number 2 comes from the chart below, which shows the debt and interest payments through August. This number is €18.2 billion. This number does not include the billions in deficit spending that will also have to be funded somehow over and above debt paydown.

Ergo, the math for a viable Greece is as follows: €12BN > €18.2BN  + X.

Simply said, unless somehow Greece discovers how to tax its citizens and actually record net revenue in July, the best the ECB can hope for before it has to mark its tens of billions in Greek bonds to about 45 cents on the dollar, is one month.

There definitely seems to be a small problem there of a >€6 billion gap in the finances in the next couple of months.

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