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Friday, February 10, 2012

You're On Candid Camera, Herr Schäuble

At yesterday's meeting of eurozone finance ministers, Portuguese TV channel TVI24 caught an exchange between a seemingly unaware German Finance Minister Wolfgang Schäuble and his equally unaware Portuguese counterpart Vítor Gaspar. Schäuble said,
"If in the end we need to make an adjustment to the [Portuguese bailout] programme, having taken large decisions about Greece...This is key. But then, if necessary, an adjustment of the Portuguese programme, we will be prepared."
Clearly code for extra bailout cash for Portugal. "That's much appreciated" replied a thankful Gaspar, prompting Schäuble to flag up an important caveat,
"Members of the German parliament and public opinion in Germany do not believe that our decisions are serious, because they don’t believe in our decisions on Greece.
Speaking after the meeting, Gaspar tried to play down speculation that Portugal will need a second bailout, and told reporters,
"When [Schäuble] mentioned the possibility to make Portugal’s [bailout] programme more flexible, he meant nothing more than what was repeated several times by eurozone heads of state and government: countries under a [bailout] programme, which are complying with their programmes, but due to reasons beyond their control may face difficulties in returning to the markets, can count on the willingness of their European partners to extend financial assistance if necessary under those conditions."
Not that convincing. If anything, Gaspar seemed to confirm what Goldman Sachs and BBVA have recently predicted: Portugal may not be able to return to the markets in 2013, and will therefore need an additional cash injection (€30-50 billion to cover its financing needs until 2015, according to Goldman Sachs).

Schäuble wasn't the only one caught on camera yesterday. Expansión reports that Spanish Economy Minister Luis De Guindos was yesterday caught telling EU Economic and Monetary Affairs Commissioner, Olli Rehn, that Spain's planned labour market reforms will be “extremely aggressive, with great flexibility in collective negotiation and reduced compensation for dismissal.” Spanish unions aren't overwhelmed with joy today.

Looking at it from the bright side, there's now at least some transparency in the eurozone crisis...


christina speight said...

Schaeuble was lucky . In Greece the Telegraph reports - -

14.16 The eurozone crisis just took a strange turn: the Greek police union is threatening to issue arrest warrants for the troika for forcing deeply unpopular austerity measures on the country.
In a letter obtained by Reuters, the Federation of Greek Police accused officials of "blackmail". It said that their key target was the IMF's top official for Greece, Poul Thomsen. The union said:
Since you are continuing this destructive policy, we warn you that you cannot make us fight against our brothers. We refuse to stand against our parents, our brothers, our children or any citizen who protests and demands a change of policy.
We warn you that as legal representatives of Greek policemen, we will issue arrest warrants for a series of legal violations ... such as blackmail, covertly abolishing or eroding democracy and national sovereignty

Rik said...

@Christina IMF has diplomatic immunity. Not that that will matter much in Greece.

Re Portugal.
1. Of course they cannot return to the market in 2013.
2. However extending it to 2015 or even more (not unlikely to be necessary) would mean that even more privately held debt will move into E-hands.
3. I would suggest a sort of PSI in combination with that if they want to go that road.Personally I would go for a straight haircut with Portugal. Combined with an extension.
4. Something like duration until 2018-2040 with the longer the relatively more attractive.
And do it on short notice.
Could be only in duration and rates (at least for now).

This avoids huge packages. And the possibility that if in 2015 still a haircut would be required it would be all E- and IMF-money.

Leading (the latter) to a situation that if it looks that Portugal doesnot make it and a lot of debt is moved into public hands, the remaining bondholders will demand 30-40% interest to compensate for the fact that they will assume that they will have to bear the haircut completely (like now with Greece).

alternative investment said...

This is not surprising that these assurances are being whispered into Portugal's ear. They will be cut off from the markets at least through 2013 and Europe is clearly deeply concerned that a Greek default would in inevitablty spread first to Portugal and from there to Italy and Spain. That is the reason behind these assurances.

Rik said...

@alternative investment
The reason is more that Portugal and its government is seen as a reliable/creditable party while Greece is seen like a totally unreliable/uncreditable/spoil for all pile of rubbish. At least something pretty close to that.
If you would ask a Northern European politician if they want Greece nuked or continue this way, off the record their preference will be nuked.