European leaders cut off aid payments to Greece and said a referendum in five weeks will determine whether the debt-strapped nation becomes the first to exit the 17-country euro area.
Crisis talks ended in the French resort of Cannes late yesterday with German Chancellor Angela Merkel and French President Nicolas Sarkozy withholding 8 billion euros ($11 billion) of assistance and warning Greece it will surrender all European aid if it votes against a bailout package agreed upon only last week.
“The referendum will revolve around nothing less than the question: does Greece want to stay in the euro, yes or no?,” Merkel told reporters. Sarkozy said Prime Minister George Papandreou’s government won’t get a “single cent” of aid if voters reject the plan.
This is truly amusing. Let’s go over the facts:
- There is no means through the EU treaties to expel a nation from the Union. They can choose to leave, but you can’t throw them out. Well, except one time-honored way — with guns. Was that a threat of war on the part of Merkel, or is she full of crap?
- Greece would be forced to spend only what it can take in via taxes if it refuses Germany’s terms. So what? Let’s put it more bluntly: Greece’s government can’t spend more than it takes in via taxes no matter what it does. But if they give Merkel the finger, they suddenly don’t have any debt to pay interest on any more, do they? So why, under those circumstances, should Greece pay one penny? A big fat middle finger erected in Germany’s direction yields a better result than an “agreement” from Greece’s point of view, assuming that GPap’s government and people accept the inevitable: That which you can’t pay for in the present tense you can’t have. If they won’t accept that then it also doesn’t matter as the entire house of cards will collapse around them anyway.
- If Greece gives Merkel the finger, many large German (and almost certainly French) banks blow up. There is no ability to backstop Italy, and it’s next — the cascade will bury all these bullies. Now who’s got whom by the short and curlies here? It sure isn’t Merkel with the button in her hand – no, it’s Papandreou.
Merkel and Sarkozy blew it by not insisting that their banks get rid of their leverage after 2008 — they instead allowed the plunder to continue, intentionally ignoring the fact that their banks had intentionally taken a ticking thermonuclear financial device on their balance sheets. Then they compounded their error by giving Papandreou the boogie stick while trying to threaten him and his people!
Germany and France and their people who keep returning these clowns to office deserve what’s coming. They, like we, refused to put a stop to the crap after the subprime mess first showed up and instead showered the banks with “free loans” and all sorts of “turn-the-other-wayitis” when it came to averting eyes. Their central bank, like ours, and their regulatory apparatus, like ours, played footsie instead of stomping on the necks of those institutions and their corporate officers. Oh sure, The Fed window helped too (how did that work out for Dexia, which was one of the big “hitters” at the window during the crisis?)
Now the sheer stupidity of Merkel and Sarcozy is on public display — not only do they have 2-7 off-suit they flashed their damn cards and everyone at the table knows they don’t have crap in the hole as well!
I find this entire exchange amusing beyond words, and even better, ironic. I have long written about the European banks being more an enigma and less transparent than ours, if that can be believed, and once we found out that Greece had played hinky games with the banks willing cooperation and assistance to lie about deficits and budget balance it was clear that they were all involved up to their necks as willing co-conspirators in the lies.
Well, so be it. You play with the bull sometimes you get the horns, and in this case they’re pointed right at your ass Angela. GPap has you and Sarkozy over a barrel and he knows it — he is now entitled to squeeze and there isn’t anything you can do about it but whine and threaten.
But unless you’re prepared to back those threats with guns, planes, tanks and boots they’re worth nothing.
Next up with another “boogie stick” that you two clowns handed out is Berlusconi; his banks are on the chopping block right behind Greece but if he tells you to stuff it then it’s not one or two banks of yours that blow up, it’s the entire EU that may come down around your ears.
Oh, and for those of you who think that the right thing to do here in America is simply sit back with the popcorn and watch the pretty fireworks in the east, please don’t be that dumb. As was clearly demonstrated with MF Global, exposure in our financial system is not as “de-minimus” as has been claimed repeatedly by our financial institutions.
This is a Lehman-style game spiked up with crystal meth just to make it interesting and is exactly what I expected when I said that the next wave of this crap was likely to originate in Europe..
Remember one thing when it comes to this sort of event folks: There is never, ever only one of these: