Handelsblatt: Bilateral aid and EU aid to Greece off the table
The EU is working feverishly to solve the Greek sovereign debt crisis. Yesterday, in an article in the German-language Financial Times Deutschland, CDU/CSU Bundestag Fraktionschef Michael Meister (the equivalent of Nancy Pelosi in America) said that all options to ‘aid’ Greece were being considered including bilateral aid. Bilateral support now seems off the table because of EU rules against this type of intra-EU support. The German financial newspaper Handelsblatt reports unspecified government officials saying that even EU aid is off the table.
Handelsblatt reports (original in German, my translation below):
For the bilateral aid, the same is true as for EU aid: they are not on the agenda," it was said on Wednesday in German government circles. There are no plans for support of this kind. "The acquisition of debt by other countries (from the EU) is inadmissible; that says it all," said government representatives. The EU’s current ban on a joint rescue operation for a country also applies to the national level. "Basically, the bail-out ban is not only for European Community agents, but also for bilateral," it was said in the circles. "There’s no doubt about Greece’s solvency. There is also no financing needs now," it was said.
The article is quite long and is a must-read if you understand German. One question of particular note in these discussions is the American veto right at the IMF because the IMF is reportedly being pushed by the UK and Sweden as a bailout vehicle (I have also supported this option). I understand this veto right is causing problems for some French and German politicians in particular. The Handelsblatt article says (again, my translation):
The President of the Economic Council of the CDU, Kurt Lauk, however, urged the federal government to take action. "It’s not about Greece, it’s about the euro; naturally, the [German] federal government is needed there," said Lauk on Wednesday in an interview with Handelsblatt Online. So far, the EU Commission is not in a position to enforce the necessary [austerity] measures. Now, the IMF expert commandos, who have been in Greece the last few weeks in order to find possibilities for savings with the Athenian government, should draw up proposals for tasks and activities, "said Lauk. "Their implementation will, however, be a purely European affair," said the CDU politician. "Here, the leadership of Germany is certainly needed." And then we have to see who can help and how. The Americans have a right of veto in the IMF, said the CDU politician, adding: "It cannot be allowed that they have a say in European monetary policy."
I think these two paragraphs sum up why the EU is struggling to find a palatable solution to deal with this crisis.
See also Paris et Berlin vont présenter un plan commun pour sauver la Grèce from Le Monde which says a Franco-German proposal is in the offing for Thursday (hat tip Scott).
Could Greece be the next Lehmann? Which draggs Spain down too?
But unless there is an offical note, everything written is speculative what ‘politicians and finance ministers’ will come up with.
I see Greece as a Bear Stearns i.e. a solution will be found, but then the jockeying begins for the next in line. It’s the contagion that we have to worry about even if a solution/bailout is found. With Bear Stearns, it was on to the next target afterwards. Bailouts don’t work unless the underlying problems are resolved which require a bailout to begin with. And the problem is clearly too much debt.
Excellent analogy, Ed.
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