Germany Makes It Clear That It Calls The Shots On Greece

on Jul 26, 2012
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>>The president of the ECB said the ECB will do all that is necessary to maintain the euro and the German government will do all that is politically needed to maintain the euro […] The ECB makes its contribution and the German government makes its contribution.

These words attributed in The Telegraph’s blow-by-blow coverage of the Eurozone crisis on Friday, 27 July – opening day of the London Olympics – to Germany’s ‘deputy chief government spokesman’, one Georg Streiter. And yesterday ECB head Mario Draghi did indeed say, at a conference in London – doubtless he’s staying on for the opening ceremony, that Europe’s fiscal policy-maker would indeed do everything needed to protect the euro, though he qualified that promise with the words ‘within its mandate’.

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!m[](/uploads/story/197/thumbs/pic1_inline.png)And therein lies the tricky bit. As Herr Streiter appears to have been at pains to emphasise, albeit in softly-weighted bureau-speak, the ECB’s role is not a political one, rather it’s fiscal. And whereas the monetary imperative might well swing towards keeping the ‘peripherals’ in the single currency – whatever the cost in bailout funds – political expediency might not be averse to casting at least one of them to the wolves. And which better candidate for sacrificial lamb – at least in the view of the Federal Republic of Germany – than the Hellenic Republic of Greece, which after all started the whole sordid business off back in 2009?

And of course, unlike the ECB, the German government has the option – and the wherewithal – to play both political and fiscal cards. Such is its clout within both the politics and the cheque-writing in the Eurozone that not a Euro-cent more of bailout will be deposited in the National Bank of Greece without ‘made in Germany’ stamped on it. The question is therefore, at what point precisely does said Germany pull the plug? If one was an investor, in quite a range of investibles, it would be quite useful for one to know the answer. If one assumes that the Greek government will not unilaterally exit the single currency – will instead require to be pushed tragically off the precipice – knowing when the Germans have had enough would enable one to take positions in, for example, Greek exporter stocks. For as the new drachma crashes and burns its way to some unimaginably low rate to the euro, any enterprise which makes in Greece and sells in Euro-land is going to be in windfall territory.

Perhaps the most that can be assumed is that Germany won’t do anything ‘politically needed’ – with reference back to Mr Streiter’s portentous words – to pull the plug on Greece at least till the Olympics are over. It would be most unfair to Britain’s weeks in the sun – well, we can but hope – and even though the Brits are not in the Eurozone they need to be kept on side as a matter of expediency. And expediency is very much the name of this particular game. So quite possibly, to be uber-PC, Germany will stay her hand until after the Para-Olympics also, which takes us out to September.

Which just happens to be when the ‘troika’ – the EC, ECB and IMF – people are due to report on this week’s visit to Athens. It’s clear beyond words that the Greeks haven’t given – or been able to give – them what they want, in terms of demonstrable adherence to the bailout. Greece may or may not be minded to jump but come September we could well see the Germans shove.

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