More evidence that there is no bailout deal

 

This is a extraordinary story. Here was the European Council making a political declaration that they would be ready to stand by Greece, and now Germany wants Greece to turn to the IMF for aid. We reported yesterday that Germany wants a bigger role in the rescue by the IMF, but it looks that the dispute with France and others is not about the IMF’s technical expertise, but about IMF money. Germany wants the IMF to make, or lead, the loan to Greece.

Bloomberg spoke to Michael Meister, the CDU’s influential finance spokesman, who has been a lead sceptic on a bailout all along, as saying: “We have to think about who has the instruments to push for Greece to restore its capital-markets access... Nobody apart from the IMF has these instruments.” He adding that attempting a Greek rescue without the IMF “would be a very daring experiment.”  

Bloomberg interprets the statements as a sign that Angela Merkel wants to stay clear of a bailout – in contradiction to the political statement she signed on February 11.

She told the German parliament yesterday: “The problem has to be solved from the Greek side and everything that is being considered has to be oriented in that direction.” Since the Greeks already over-fulfilled on the 2010 deficit reduction programme, we wonder what that statement means other than saying: Greece should go to the IMF.

 

Commission warns member states on over-optimistic forecasts

The FT has the story that the European Commission warned eight countries, including Germany, France, Italy and Spain that their economic growth forecasts for the next three years were too optimistic, putting at risk their ability to cut their budget deficits in accordance with the European Union’s fiscal rules. The others are Austria, Belgium, Ireland and the Netherlands. The countries should spell out exactly how they intended to meet their medium-term deficit reduction targets of 3 per cent or less of gross domestic product.

 

Strauss-Kahn against Tobin tax

FT Deutschland reports that Dominique Strauss-Kahn told the European Parliament in a hearing of the monetary committee that a Tobin tax is impractical, as it becomes increasingly easy to develop derivatives design specifically to circumvent any such tax. (For example a currency swap is an alternative to a classic spot or future forex transaction, and might difficult to tax, as the transaction is a private exchange of cash flows agreed by two parties).

 

 

Germany to use its intelligence service to track down hedge funds

This is the most ridiculous story we have heard in a long time. Germany wants to redirect its not very effective foreign intelligence service to track down hedge funds. (We would be surprised if they even founded their addresses and emails). After proposing an exit clause from the EMU, Wolfgang Schauble has had another great idea. He told the Bundestag that Germany may have to consider ordering “intelligence agencies to set up surveillance of who is getting together with whom for which kinds of speculative processes, and where” to protect the euro, according to Bloomberg.

 

Why did Zapatero postpone the hedge fund directive when there was a clear majority in favour?

Jean Quatremer writes that the reason is simply to help fellow socialist Gordon Brown in his forthcoming election. Once this is over – in May – the issue will conveniently and speedily return, and probably be decided. The controversy is about the European passport, which would require hedge funds with funds under management of over €100m to apply for a such a passport in order to conduct their business from London on an EU wide basis. Without such a passport they can still operate but require national approval.

 

Ralph Atkins on Weber vs Draghi:

A good analysis by Ralph Atkins on the upcoming heavyweight contest between Axel Weber and Mario Draghi for the top job in the ECB. Atkins makes the point that Weber has been a sceptic on political union, and has been very outspoken on a number of divisive issues, including bank regulation. Atkins writes: “Such a reputation for creating ripples might prove a disadvantage when Mr Trichet’s successor is chosen, however. One of the incumbent’s strengths has been his ability to keep a consensus on the ECB’s 22-strong council even as global events forced unprecedented swift and bold decision-making. Another risk is that Mr Weber is seen as representing a distinctly German approach. Such perceptions could help Mr Draghi, 62.”

 

 

---