Tag Archives: Jean-Claude Juncker

IMF Will Force Greece Into Immediate Default Unless EU Agrees on Further Funding

According to Reuters, the IMF will make further release of financial aid under the current package dependent on a decision by the EU to secure funding for Greece for 2012 later. 

“We have violated all rules of law because we agreed that we really wanted to save the euro zone.”

Christine Lagarde

The EU leaders are all over the place discussing a possible so-called reprofiling of Greek debt, but a vote on a second loan package for Greece is not expected until the autumn. Greece will, however, run out of funding in July, which would mean that the country would immediately cease all public payments.

And the pressure is building in both Athens and in Brussels.

Reuters quotes the Dutch financial newspaper Het Financieele Dagblad that reports on the EU secretly preparing for a voluntary debt rescheduling – or reprofiling – despite increasingly dire warnings from the ECB and ratings agencies.

Moody’s warns that a reprofiling would constitute Greece to default.

Fitch also says that any maturity extension, including a voluntary one, would constitute a default.

And S&P is even more specific say that any changes to a bond that reduced its net present value would constitute default – leaving virtually no options.

No Consensus

One of the conditions for a new EU package is cross-party support in Greece.

But George  Papandreou could not get support from opposition leaders for his new austerity measures, the Greek newspaper Kathimerini reports.

The leader of the main conservative opposition New Democracy Antonis Samaras said he supports the privatisation plans but not the planned tax increases, calling for tax reduction instead.

Smaller parties were even more hostile towards the programme.

Greece’s creditors have been pressing the government to seek consensus for the deeply unpopular reforms before submitting to Parliament.

The government has a comfortable majority in Parliament and should be able to pass the reforms without the support of the opposition.

But EU officials including Olli Rehn says a certain degree of political consensus is necessary before agreeing on a new aid package, Reuters reports.

The European Christian Democrats, led by Angela Merkel, want to put pressure on Samaras to back a new IMF/EU programme, as they did in Portugal.

A Treuhand for Greece

Another proposal have also been put on the table by Jean-Claude Juncker, to set up a Treuhand-type privatisation agency for Greece.

The FT writes that the delay in the privatisation programme has pursued EU officials to press hard for a Treuhand solution, which would be an independent body, with oversight from the IMF and the EU.

According to the article, this was one of the central topics of the “secret” meeting in Luxembourg. a few weeks ago.

The Sisyphos of Our Time

Frankfurter Allgemeine Zeitung’s Athens correspondent Rainer Hermann reports on the newly promised additional consolidation measures in Greece.

He arrives at a depressing conclusion:

While acknowledging the efforts Prime Minister George Papandreou has undertaken Herman nevertheless sees parallels with the Greek mythology.

“The Greek government looks like Sisyphus”, Hermann writes.

“Whatever he did, he always had to start over again. This government, despite its good intentions, hardly has the power any more to accomplish what it has to undertake to safe Hellas.”

In Defence of the ECB

In his column in FT Deutschland, Wolfgang Münchau writes that he sides with the position of the ECB, specifically the demand to limit the degree to which politicians want to dump their own inability to solve the crisis onto the central bank. 

Adding that the ECB has acted flexibly in the past, as it is the job of a central bank to support the financial system in a liquidity crisis.

But as it is now becoming clearer that Greece faces problems with its solvency, the responsibility lies with politics, not with the central bank any more, Munchau points out. 

Meanwhile, German economic experts are going bananas over the euro rescues, and accuse the constitutional court of foot-dragging.

All Laws Have Been Violated

The German professors opposed to the EFSF accusing the constitutional court in Karlsruhe to drag its feet by not coming up with a decision on the constitutionality of the rescue fund, Süddeutsche Zeitung reports.

According to insiders more than 50 complaints have been introduced in Karlsruhe against the rescue of Greece and the creation of the EFSF.

But so far the court has not ruled and some of the opponents fear that further developments in the euro crisis will create a fait accompli which will make it impossible for the court to rule against the rescues. 

At the same time the court has almost no other choice than to rule that EU law was violated.

After all it was Christine Lagarde who told the Wall Street Journal recently:

“We have violated all rules of law because we agreed that we really wanted to save the euro zone.”

Legal experts agree that a negative ruling would prohibit Germany to continue to take part in the ongoing rescues.

One of the consequences would be that the bonds issued by the EFSF would immediately lose its triple-A-rating.

According to the Süddeutsche Zeitung, the court will rule before the summer break.

Welcome to yet another day of excitement in the Euro Zone Tivoli Park!

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The Masters of Lies

The Austrian daily newspaper, Der Standard, describe the eurogroup chief, Jean-Claude Juncker a “master of lies”, in the aftermath of this weekends not-so-secret meeting between the top EU leaders. The newspaper also see Juncker’s handling of the whole farce as “a fatal error that multiplies the scepticism of the citizens.”

“Juncker and his Round Table should be reminded that it was the small states in May 2010 that made the rescue package for Greece possible in the end.”

Der Standard

EU leaders, with Jean-Claude Juncker in the middle at the back.

Criticism is now mounting against eurogroup chief Jean-Claude Juncker for lying about a secret meeting last Friday of selected EU finance ministers in his native country Luxembourg to discuss the worsening Greek debt situation.

A series of furious attacks on the chair of the group of EU states that use the single currency have appeared in the European press over the last 48 hours, arguing that Mr. Juncker can no longer be trusted.

Ministers and their spokespeople across the euro zone had first denied, or refused to comment, on a report which appeared in Spiegel Online revealing that a secret meeting of senior EU officials was being held in a Luxembourg castle to consider a Greek exit from the euro.

The same officials later confirmed that the meeting took place, but that Greece returning to the drachma was never on the table.

Juncker had apparently invited finance ministers from France, Germany, Spain, and Italy, ostensibly under the aegis of the EU members of the G20 (although the UK, a G20 member, was absent), along with Greece, the European Central Bank and Olli Rehn, the EU economy commissioner.

Juncker’s spokesman, Guy Schuller, was quoted by Reuters as saying:

“I totally deny that there is a meeting, these reports are totally wrong.”

This absurd event comes just a week after the Luxembourgh prime minister admitted the that over the course of his career, despite his Catholic upbringing, he often “had to lie” in order not to feed rumours and that economic policy was too important to be discussed in public. “I am for secret, dark debates,” he quipped, according to an EUobserver report.

German press agency DAPD quoted him as saying:

“When the going gets tough, you have to lie.”

On Monday, Austrian daily newspaper, Der Standard, attacked the Luxembourg prime minister calling him a “master of lies,” also complaining that Juncker had invited the larger EU states but not the likes of Austria or Finland and describined the move as “a fatal error that multiplies the scepticism of the citizens.”

“Juncker and his Round Table should be reminded that it was the small states in May 2010 that made the rescue package for Greece possible in the end,” the paper writes in an editorial.

Germany’s Suddeutsche Zeitung states that no one can believe what the EU leaders, particularly Juncker, says any more regarding the stability of the euro zone .

“Seldom have we seen politicians acting as irresponsibly as they did on Friday evening. In Berlin, Brussels, Paris, Rome and Luxembourg, officials were silent, deceptive or just plain lied,” the paper thundered.

“Within a matter of hours, the governments of the euro countries managed to fritter away the last remaining trust the people of Europe still have in the bailout action.”

“Who in the future is supposed to believe that Greece isn’t interested in leaving the euro zone if Luxembourg Prime Minister Jean-Claude Juncker, who heads the Euro Group, is taking the lead on the deception?” the German paper writes.

A frustrated European diplomat told EUobserver the handling of the meeting was “amateur.”

Adding: “What happened is silly. How is anyone going to trust what we say now?”

Meanwhile, Greek authorities are going after Spiegel Online for reporting “false news” about Greece considering withdrawal from the euro.

The Greek prosecutor has contacted German counterparts, requesting assistance in tracking down those responsible at Spiegel Online for the initial report.

On Wednesday, European Commission President Jose Manuel Barroso is to visit German Chancellor Angela Merkel to discuss the Greek conundrum and EU Council President Herman van Rompuy will also be dropping in on the German leader to consider the next steps in the crisis.

This meetings will not take place in secret in a Luxembourg castle, but in Berlin – and will be official – at least that’s what they say…

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Greek CDS Spreads Jump To World Record

Nice work! Ladies and gentlemen off the exclusive core EU administration. Thanks to your ridiculous attempt to calm the financial markets by lying, you’ve just made the whole situation worse – for both Greece and all other members of the EU community.

It seems clear that Greece won’t be in a position to return to the capital markets next year, leaving a funding gap in the region of EUR25 billion.

Gavan Nolan

Late last Friday there were reports that Greece was considering plans to leave the euro zone. Jean-Claude Juncker, chairman of the eurogroup of finance ministers, called the rumours “stupid,” and others denied the fact that there was an extraordinary meeting going on. I generally advice people to not use the word “stupid.”

In the credit market risk appetite was on the retreat Monday, though unlike last week commodity prices weren’t the instigator.

It was – not surprising – the familiar and escalating euro zone sovereign debt crisis that triggered negative sentiment.

A crisis that now is about to turn into a political crisis, too.

It emerged over the weekend that a “secret” meeting of finance ministers and senior EU officials had been held on Friday, and Juncker acknowledged that Greece would need further financial assistance.

A restructuring of Greek debt wasn’t discussed, according to reports.

But though there is little chance of haircuts being inflicted on bondholders in the near future, a “soft” restructuring of voluntary maturity extensions is seen as a possibility by many in the market. This would buy some more time for Greece, although it would have little impact on solvency unless the maturity extensions were very long, credit analyst Gavan Nolan at Markit writes in his Intraday Alert.

And S&P seemed to agree. This afternoon the agency downgraded Greece’s long- and short-term ratings to ‘B’ and ‘C’ from ‘BB-’ and ‘B’ respectively.

S&P cited the “increasing sentiment” among euro zone creditors to extend maturities on the bilateral loans pooled by the EC. In S&P’s opinion, the creditor governments would probably seek comparability of treatment from commercial creditors, i.e. a similar maturity extension, according to Gavan Nolan.

The Greek government was quick to respond, stating that the agency is basing its decisions on market rumours and as such its “validity is seriously cast in doubt”.

The usual suspects.

But it seems clear that Greece won’t be in a position to return to the capital markets next year, leaving a funding gap in the region of EUR25 billion, Nolan points out.

Greek officials have admitted that it will have to use the EFSF to raise funds, and there is considerable uncertainty over what other measures could be taken.

Regardless of the merits of S&P’s decision, the CDS market’s view on the sovereign credit is emphatic. Its one-year spreads are trading in excess of 2000bp and its five-year spreads are around 1375bp, the widest of any sovereign in the world, Nolan concludes.

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  • Markit iTraxx Europe S15 98.5bp (+2.75), Markit iTraxx Crossover S15 360bp (+7)
  • Markit iTraxx SovX Western Europe S5 197bp (+8)
  • Markit iTraxx Senior Financials S15 140bp (+7), Markit iTraxx Subordinated Financials S15 242bp (+12.5)
  • Sovereigns – Greece 1375bp (+58), Spain 259bp (+16), Portugal 658bp (+26), Italy 165bp (+12), Ireland 680bp (+25)

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