Schaeuble wants IMF out and bailouts ‘a la carte’ with Germany only to gain

Joaquín Almunia, Vice-President of the European Commission in charge of Competition, received Wolfgang Schäuble, German Federal Minister for Finance. The host is obviously bewildered with what he hears from his German visitor. (EC Audiovisual Services).

Wolfgang Schaeuble, the German Minister of Finance issued an appeal yesterday to European partners to do together whatever it takes, in order to push the International Monetary Fund out of the European Union. Four years ago it was again Schaeuble and Germany the ones who demanded the cooperation of IMF in the first bailout of a Eurozone country, at the prologue of the Greek tragedy in the winter of 2009-2010.

It’s unbelievable how narrow and short the field of vision of this man is, when it comes to money. Back in 2009 Germany wanted badly the know-how, the cooperation and the considerable contribution of the IMF amounting to the one-third of the money needed to bail out Greece, in a loan facility then totalling at around €120 billion.

Today when the IMF says it’s time for Germany to start spending for the rest of Europe, Berlin wants the IMF out. Incidentally, the German Finance Minister speaking at the Economic Council of his CDU political party yesterday said that, “there is a growing discontent over IMF’s implication in the European financial affairs and we Europeans should work together, to place the situation under our own exclusive control, so as we won’t be needing help from the IMF”.

Germany only to gain

However there is more to it. The IMF in its latest report on Greece, which was published last week, said that the Greek sovereign debt is not any more sustainable and needs to be given a new haircut, the third in a row. After the last two haircuts, performed only on the privately held Greek bonds and the PSI (Private Sector Participation) operation in March 2012 to cut down the Greek sovereign’s obligations, most of them are now officially held by Eurozone governments, central banks and the ECB.

In reality the German exchequer today holds directly and indirectly – through ECB and Bundesbank – something less than the one-third of the Greek debt. When the moneybags in Berlin heard that the IMF considers the Greek debt no more sustainable and recommends a haircut, they want to push the Fund out of Europe, because it is now their own holding of this country’s bonds in line to be cut down. Germany agrees only to bailouts that leave a profit for Berlin.

Let’s tell the whole story. The IMF report on Greece also revealed that Germany had actually delayed the first Greek debt haircut by one year, thus increasing its cost and reducing effectiveness. Berlin did that in order to give the opportunity to German commercial lenders to get rid of their primary Greek debt portfolio they had accumulated in the good times. In reality Germany gained tens of billions of euros from the Greek bailouts and the delayed PSI operation.

Haircuts ‘a la carte’

When this PSI operation finally got the green light from Berlin in March 2012, it was only the Greek lenders and the country’s social security funds still holding those toxic bonds. Consequently, after the PSI, the Greek banking system and social security funds went bust. Berlin had already taken care that the German lenders had got rid of their own Greek debt portfolio, with the financial help of the ECB. In this respect the most favoured ‘private’ German lender was the Deuthsche Bank.

With that kind of political help from Berlin and Frankfurt this major German bank managed not only to get rid of its Greek toxic assets, but to even conclude successfully a capital increase last month, raising fresh money from the market to the tune of €2.5bn. Not to forget that Deuthsche was the largest creditor to Greece’s sovereign and private borrowers, making billions in the good times and getting a swift and taciturn bailout when the crisis came. And all this despite the fact that Deuthsche was responsible for Greece’s over borrowing.

At the end poor Greeks paid the bill of Deuthsche Bank’s imprudent lending to Athens. In reality the country’s bailouts saved the German banks at the expenses of the Greek pensioners. Athens was obliged to pay Berlin interest rates reaching 5%, at a time when the IMF was lending to the country at 3%.

Unquestionably, Germany has gained tens of billions directly and indirectly from the two Greek bailouts. Now that the IMF tells the whole story and asks Berlin to finally undertake a part of this cost, at least the share which corresponds to the indirect bailouts of its own lenders, Schaeuble asks his European peers to throw the Fund out of Europe.

This person was the architect of all those financial operations and hopefully the German people will send him home in the forthcoming September elections. Europe cannot tolerate any more such a chauvinistic behaviour and Eurozone has to get rid of this person who represents the most backward circles of Germany.

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