"The situation in Europe has now reached the point that the major players have
shown their hands. And they are:
This is quite a turn of events. Prior to this, the ECB and Germany were seen to be working hand in hand (aside from the usual political spats) to save Europe. But between the ECB’s decision to swap out its Greek debt for new debt that won’t take a hit in the event of Greek default as well as its recent rejection of Greek debt as collateral for LTRO loans, it appears that the ECB is increasingly going to make Europe’s problems Germany’s problems.
Both parties have a lot to lose in this battle. Over a quarter of the ECB’s balance sheet is made up of PIIGS debt. And German banks have plenty of exposure to the PIIGS as well.
This is why both entities (the ECB and Germany) have made moves to firewall themselves from a European fall-out. However, it is Germany that appears to have realized the reality of the situation more clearly: that there is no “good” way out of this mess, that austerity measures only cripple economic growth and make defaults even more likely, and that the Great Euro experiment is coming to an end..."
at http://www.zerohedge.com/contributed/2012-09-29/either-greece-forced-out-or-germany-walks%E2%80%A6-either-way-collapse-coming?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+zerohedge%2Ffeed+%28zero+hedge+-+on+a+long+enough+timeline%2C+the+survival+rate+for+everyone+drops+to+zero%29
- Germany will not put up more money unless Greece essentially passes up its fiscal sovereignty.
- The G20 will not give more money to Europe via the IMF unless Germany and other EU nations create a “firewall” by putting more capital into the ESM mega-fund.
- The ECB has announced Greek bonds are not eligible collateral for its LTRO operations, so if banks need immediate liquidity, they need to go to national central banks (read Germany).
This is quite a turn of events. Prior to this, the ECB and Germany were seen to be working hand in hand (aside from the usual political spats) to save Europe. But between the ECB’s decision to swap out its Greek debt for new debt that won’t take a hit in the event of Greek default as well as its recent rejection of Greek debt as collateral for LTRO loans, it appears that the ECB is increasingly going to make Europe’s problems Germany’s problems.
Both parties have a lot to lose in this battle. Over a quarter of the ECB’s balance sheet is made up of PIIGS debt. And German banks have plenty of exposure to the PIIGS as well.
This is why both entities (the ECB and Germany) have made moves to firewall themselves from a European fall-out. However, it is Germany that appears to have realized the reality of the situation more clearly: that there is no “good” way out of this mess, that austerity measures only cripple economic growth and make defaults even more likely, and that the Great Euro experiment is coming to an end..."
at http://www.zerohedge.com/contributed/2012-09-29/either-greece-forced-out-or-germany-walks%E2%80%A6-either-way-collapse-coming?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+zerohedge%2Ffeed+%28zero+hedge+-+on+a+long+enough+timeline%2C+the+survival+rate+for+everyone+drops+to+zero%29
