February 16, 2012 · 10:12 am

Wall Street…who gave it a map of the future?


A written document giving firm dates and detailed actions for a planned Greek default has been in the possession of two top Wall Street bank currency trading bosses since the second week in January. The Slog has separate but corroborative sources affirming the existence of the document, and a conviction among senior bank staff that – at least at the time – the plan represented “a timetable, not a contingency”. The plan gives a firm date of March 23rd for default to be announced after the close of business.

Senior bankers on Wall Street have been given detailed documentation setting out a timetable to Greek default, including firm dates and technical ‘orders’ about last use of the euro as a currency there. The revelation arrived at Slogger’s Roost last Monday, since when I have been trying to obtain corroboration. This arrived in the early hours of today (Thursday). One of the banks is Barclays Capital (Barcap) run by controversial figure Bob Diamond. The other must remain anonymous for the time being, in order to protect sources.

The document asserts that Greece will officially be declared in default by all the ratings agencies after the close of business on Friday march 23rd . At the weekend all Greek bank accounts will be frozen, with emergency measures detailed to prevent the flight of capital. Included in the paperwork is a list of very limited exceptions to the ‘no withdrawals’ order. All major banks ‘are instructed not to deal with euro exchange as of open of business in Greece on Monday 26th march. All Greek markets will close for one day ‘at least’.

As yet, I have been unable to establish the source of the documents. But one of my informants admitted, “I have strongly suggested to Greek business friends and clients that they sell up fast, do a sale and leaseback on property, empty bank accounts, and change to a hard currency.”

I have little doubt that such a critical path analysis leading to default in Athens can be easily brushed aside as contingency planning. But this is not the impression Slog sources were given: and its existence is bound to further raise suspicions in ClubMed about the real intentions of ‘EU Nord’, Washington and the Troika – especially the IMF. In particular, the alleged creation of the document both supports (and/or coincides closely with):

1. Washington going cold on further IMF funding

2. IMF intervention in the Athens debt talks

3. Persistent rumours surrounding Wolfgang Schauble’s plans

4. Evidence previously assembled by The Slog concerning Americo-German coordination

5. A string of delaying tactics by senior EU and Troika officials since mid January.

Reviewing the timeline of the Greek Debt Marathon, the back end of it is pretty obviously one of persistent sabotage from Berlin, Brussels, and the IMF:

1. It’s the second week of January 2012, and the bondholder deal is a few small steps away from lawyers crossing t’s and dotting i’s. Enter Schauble saying the haircut is nowhere near short enough. Bondholders’ leader Charles Dalloran walks out.

2. The Troika barges into the Athens/Bondholder talks, and they turn into chaos, then grind to a halt.

3. FinMinCom meets in Brussels and several encouraging noises are made about progress towards a deal ‘over the weekend’. Enter Merkel bearing demand to fire the Greek Government and replace it with an EU commissioner. This produces four more days of circular delay, following which Nicolas Sarkozy declares that the German demand was never a demand.

4. Lucas Papademos gets personally involved and strikes a deal with Dalloran. Then he extracts the support of all Party leaders for the deal. We’re almost there. Enter Schauble and Brussels saying no, your economy’s worse than we thought – we need a closer haircut and more savings.

5. The troika is now talking direct to the bondholders with Athens outside the loop. The creditors feel on the back foot. They agree to a lower percentage rate for the new bond issues and a 70% haircut. Venizelos meanwhile focuses on finding additional savings. Papademos intervenes again with leaders and creditors. We are now ‘hours away’. Mario Draghi says no, the haircut is too close for the ECB, and not enough for everyone else.

6. Draghi relents a little, the bondholders say they are “tentatively flexible”. We’re two small steps away from a deal. Enter Schauble moaning about £325m of savings unaccounted for…a thousandth of the total Greek debt.

6. Tempers get inflamed back in Athens. Greek leaders start muttering about doing what they have to do, getting the deal signed, and then having elections. Berlin and FinMinCom demand that all Greek Party leaders sign a document ordering them to stick to the deal regardless of election results. This loses another two days….but the bondholders are still keen to sign.

7. The German Bundesbank leaks a story to German newspaper Handelsblatt saying the Greeks will not be able to satisfy bondholder demands, and thus technical default is now a certainty. The story is traced back to the office of anti-bailout hawk Jens Weidmann.

8. Deutsche Mittelstands Nachtrichen runs a story claiming another 2.5 bn euro hole has been found in the Greek budget proposals. The story is deconstructed by The Slog and others and turns out to be complete bollocks. But the FinMinCom meeting in Brussels is postponed, and replaced with a conference call.

9. Merkel says she doesn’t trust New Democracy leader Antonis Samaras. Athenian leaders must now sign another pledge after the additional 325m euros of savings have been found and agreed. They all sign (Wednesday morning – yesterday – 15th February).

10. Yesterday afternoon, the EU finance ministers’ conference call begins to talk about cutting its losses. A firm proposal is tabled – by Berlin, it seems – to divide the next bailout tranche into smaller slices. The next Com meeting is put off for six days.

11. Schauble describes the Greek debt as “a bottomless pit”. Merkel joins the fray by suggesting the bailout be put back until after the April elections. This clearly makes no sense, as from March 16th Greece will be in technical default without more money. But Schauble adds that indeed, Greece should postpone its elections…..and “install a technocrat government similar to Italy’s.”

12. Wen Jiabao makes nice noises about what a fine place Europe is to visit, but van Rompuy and Barroso come away predictably empty-handed.

13. Thursday dawns with everyone wondering where we are. Venizelos accuses “forces trying to push Greece out of the eurozone”. German government spokesman Steffen Seibert calls this “false” and adds, “I can state quite clearly on behalf of the federal government that Germany has taken no such decision.” Nobody said you had, Ducky. Berlin briefs on amphetamines about Angela Merkel being ‘resolutely opposed to default’. A majority of market opinion leaders and bondholders think the EU is bluffing, reports the FT. But a French source tells The Slog earlier today he thinks Germany “is talking from a position of strength. There is no doubt in our minds [in the Elysees] that Berlin has the necessary plans in place.”

We’re but an hour into the working day EU time (1hr ahead of GMT) and already the main EU players are busy installing further roadblocks. Boss of radio Luxembourg Jean-Claude Juncker said, “Further considerations are necessary regarding the specific mechanisms to strengthen the surveillance of programme implementation and to ensure that priority is given to debt servicing.” An intention as vague as that could take forever to fulfil….or until March 23rd.

A senior German official quoted by Reuters has added: “Questions remain that are very important to Germany and other member states about the sustainability of the programme.”

Ultimately, not even the Germans can see into the future: this is get off the pot time….but only if you’ve been devious for some time about being on the pot in the first place. The Slog’s recent profile of Angela Merkel demonstrated beyond too much doubt that the Fuhrerine in Berlin is more than capable of being devious.

In the last three weeks, several EU officials have pumped out the line – over and over again – that Greek default is no longer the bogeyman people thought it was….or to be more precise, they told us it was. “It would have led to a credit crunch immediately and hurt us all,” said a senior eurozone official. “Now, the odds [of such a catastrophic impact] are something like 10-20%. It’s still possible, but it’s not a certainty.”

First of all Draghi pumps money into the banking system, then the Troika/Berlin axis slows everything down. Now awkward facts come to light about the existence of ‘a plan’ which would protect America – by dumping the Greek contagion – and help the eurozone by concentrating the bailout cash available to save the bigger players: Italy, Spain and France. An unpleasant phrase is doing the rounds in Brussels at the moment: ‘amputate and corterise’. It’s certainly beginning to look like that. And without doubt, that’s the way Mario Monti sees it.

Were I Greek, Portuguese or Irish, I’d be a worried man this morning.




    London Daily Telegraph piece cited as ‘on the money’

    February 19, 2012 · 2:53 am

    Draghi bond-swap seen as ‘ECB protection’

    Further doubts about Merkel public position on default

    Just before midnight GMT Saturday, within hours of Bruno Waterfield’s piece about German finance ministry Greek default preparations appearing at the London Daily Telegraph site, The Slog received confirmation from a New York based banking source that – whatever German Chancellor Angela Merkel’s public stance may be – plans have been firmed up on both sides of the Atlantic for “an inevitable Greek default some time in the third week of March 2012″.

    There is only one source I trust more than this person: instrumental in enabling several Slog scoops during the Strauss-Kahn saga of last year, I have never been given a bum steer by the informant. Having been made aware of the Telegraph piece – in which the secret (and damning) Troika report on Greece’s chances is again quoted – this senior banker finally agreed to talk on condition of total anonymity.

    “The [Telegraph] piece cites Wall Street rumours about preparations for default, and so now the formal German work is coming out, US planning will be assumed pretty soon,” the source began, “They’re kind of preparations, but really they’re plans. And I’d say your chances of laying your hands on physical evidence are slim. No government-sourced papers exist as far as I know. There were only two maybe three meetings, and the attendees were barely in double figures. But the position was made brutally clear: for well over a month now, the Obama Administration’s conclusion has been a dead cert Greek default. The job of the President, the security services, the Reserve and the Treasury is to protect the United States from the consequences of that, and that’s just what they’ve been doing.”

    This is the second corroboration of the Slog’s initial source of the story about plans having been discussed – including dates – in Wall Street. The person – also extremely well-connected diplomatically – added:

    “Angela Merkel’s public position is a necessary illusion. The pressure from Frankfurt to get onto the task of preparing for default has been augmented by Washington’s sense of urgency. I wouldn’t call it close cooperation, but Schauble, Draghi and now Monti are fully aware of it. Mario Monti in particular has, I understand, welcomed it. The action being taken by the ECB [The EU Central Bank run by Draghi] yesterday is a big clue”.

    The banker is referring to Draghi’s decision to agree a preferable bond haircut ahead of the other bondholding parties. Several puzzled observers wondered why the Central Bank had openly protected itself in this way, as this subordinates the other private creditors, and thus will more than likely trigger a default.Yesterday the bank was suitably vague about confirming the move.

    “Draghi is protecting his butt, pure and simple,” the informant continued, “he gets the money out from under before the truth is fully grasped. And the IMF has done the same…its contribution now is peanuts. Lagarde has been told to save her money. Good advice in my view.”

    Yesterday morning, a regular Slog mole in Brussels pointed out to me that Italian bond rates had been rising again “and so it became necessary for Merkel and Monti to sound gung-ho about a deal. Frankly, the chances of getting a straight answer out of any of these beggars is close to zero. There is just far too much at stake. But I now very strongly doubt that a deal will be done Monday….and if it isn’t, then putting the steps in place for avoidance of default become well-nigh impossible”.

    This view is shared by Bruno Waterfield’s piece: an EU diplomatic source confirmed that “The private sector involvement takes at least four weeks to issue the prospectus and to get subscribers, and without a deal on Monday then time will run out in March”.

    “There will be no deal Sunday or Monday,” the New York source asserted, “Once the ECB is in shape, and now Draghi is happy with the key eurobanks’ viability, the Athens Government will be encouraged to declare itself bankrupt. I would have to assume most of the smart creditors have already sensed this. Nobody apart from a few Greek negotiators has paid them any real attention for days now. I guess the German preparations have surfaced because the EU now feels fairly safe.”

    The Schauble preparations – confirmed for the first time by Waterfield – become a semi-final piece in the jigsaw of subterfuge and obfuscation that has been in operation since mid January. Says the Telegraph piece:

    ‘The sense that an endgame is approaching has been fuelled by the secret “troika” report, by EU, IMF and ECB officials on Greek debt “sustainability”. It found that even if Greece implemented all the austerity measures expected of it, and if it achieves highly optimistic economic growth targets, it will still fall short of what is needed, with debt likely to total 129 per cent of GDP in 2020.’

    Although the Telegraph goes on to say ‘the European Central Bank and the European Commission are, for now, lining up with Mrs Merkel to push for the rescue attempt to continue, fearful that the financial tsunami that would be unleashed if it failed would swamp the eurozone’, my US source refutes this.

    “They have to say that,” the informant comments, “for now. There can’t be seen to be any forensics left for people to find. But the Washington view is very clear: they see Merkel as the key US ally, and neither they nor Frankfurt would let her take such a risk. Look, if the ECB is protecting its backside, Berlin has no choice but to follow suit. If she pushes through and gets a deal on Monday, then it really will be proof that everyone in the EU is insane – including her. I just don’t buy that.”

    At the height of the hysterical rhetoric between Brussels and Athens last week, Evangelo Venizelos declared, “there are forces in Europe trying to push Greece out of the euro.” It’s very probable there were rather more of them than he realised.

  • nucleardc


    • Any attack on Washington D.C. will result in all power shifting to Chicago. I highly doubt you’ll ever see both destroyed at the same time regardless of what weapon gets used but we must remember that the State of Illinois is far bigger than the City of Chicago and thus I guess both could be destroyed at the same time but still unlikely. Illinois is the one State in the U.S. able to take control of the Public Key Infrastructure if anything happens to Washington D.C.

      -=> The Unhived Mind


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