Bundesbank attacks Greek rescue as a threat to stability

German Bundesbank fired a warning shot to the side of Chancellor Angela Merkel (Angela Merkel), boycotting the joint plan of EU-IMF to rescue Greece, considering that this plan will undermine the economic stability, and probably illegal.

Ultra-hawk Axel Weber (Axel Weber), who heads the Bundesbank, said the decision to connect to the IMF could make matters worse by arguing that the EU can apply more stringent fiscal discipline. Photo: Reuters

Yield of two-year Greek bonds rose by 136 basis points in early trading to 8.3% from 5.2% last week. Later, the market has stabilized, when Athens declared a 40% reduction of budget deficit during the first quarter, suggesting that conservation measures are yielding results.
The document contains the Bundesbank diatribe agreement, approved by European leaders two weeks ago, it says that the joint plan was adopted without consultation with central banks and is the monetization of debt. "This agreement will lead to destabilization of the economy, like that should not be underestimated."
According Rundschau, a joint rescue operation between the IMF and the EU will turn the Bundesbank in the "press" for the purchase of Greek bonds. Such actions violate the European principle of "no salvation".
Hans Redeker (Hans Redeker), head of foreign exchange division at BNP Paribas, said that the report greatly strengthens the tone of criticism of the European Monetary Union in Germany. With professors already going to file a complaint with the Constitutional Court in order to stop the plan to rescue Greece. "Such actions severely limit its room for maneuver Merkel" - he said.
Ultra-hawk Axel Weber (Axel Weber), who heads the Bundesbank, said that the decision to connect to the IMF could make matters worse, arguing that the EU would be applied to more stringent fiscal discipline.
In the report acronym IMF (IMF) ironically painted as "Inflation Maximising Fund" (maximizes Inflation Fund), stating that the foundation fund "softened" under pressure Dominique Strauss-Kahn (Dominique Strauss-Kahn), French socialist and Keynesian. These actions shift the focus from the "fiscal cleansing" to the "growth-oriented" financial policy. Selection for such purposes reserves the Bundesbank can not be justified "- the report said.
At least, Mrs. Merkel will be extremely problematic to weaken its insistence on "market rates" on any loans for Greece. The officials spoke about the numbers that are close to 6%, to avoid moral hazard, but it angered Greece. She hopes to hold below 4.5%, as Portugal or Ireland. The representative of the Greek government said yesterday that his country had imposed "barbaric conditions" (barbarous conditions).
Jean-Claude Trichet (Jean-Claude Trichet), ECB president, minimized the rift between Berlin and Brussels, saying that the EU's assistance to Greece was "very, very serious undertaking, and nobody should be windy relate to the statement signed by the Heads of State" .
"Taking into account all the information that I have, I believe that Greece is not considered a default," - he said after the meeting of the Board of Governors. The Bank left interest rates at record low level of 1%.
Lourent Bilko (Laurent Bilke), European economist at Nomura and a former official of the ECB, said that Greece is actually located outside the market. "We believe a more likely course of events, which will force Greece to change the strategy and ask for help. In fact, there are no prerequisites to wait for "accident".
At Barclays Capital say that to restore confidence and funding needs, Greece should be at least 40-45 billion euros, which will help buy time for reform.
As expected, the ECB has postponed plans to tighten collateral rules, thereby eliminating the risk of loss of Greek banks vital security from Frankfurt for another year. In the analysis IOBE said that funding ECB Greek banks in the first quarter rose to 65 billion euros. The ECB will impose fines for "fat" on the lower classes of shares, but it will not address sovereign debt. This is an atypical aid Greece, Italy and other major debtors.

Jean-Claude Trichet President European Central Bank, to change the subject of the ongoing rift between Berlin and Brussels. Photo: Bloomberg

Kellow Julian (Julian Callow) from Barclays said that the sharp fluctuations in the Greek mask, and the good news: "contagion" has not spread to central Europe and Ireland. "Greece is now regarded as an isolated incident, since it came to a crisis with already very high debt. Ireland managed to avoid, despite how much it cost the banking sector ", - he said.
In any case, the euro looks much stronger after the events of the last two weeks. Analysts say that for the Greek default there are serious reasons, and if it happened, that in itself would have been losses for the currency union.

 

 

The Telegraph