Выбор редакции

Spiegel On Schrödinger Schauble: When It Gets Serious, He Has To Lie

By now everyone knows, even the mainstream media, that in Europe if one is a member of the oligarchy, "when it becomes serious, you have to lie" as the unelected viceroy of neofeudal Europe Jean-Claude Juncker said once upon a time, back when Greece and Spain were still "fine." Everyone also knows that judging by politican commentary and statement, in Europe it has been very serious for the past 3 years, as the lies have not ended. In fact, the more insolvent a country, the more serious it got, and the more gruesome and unbelievable the lies emanating thereof were. The one place where lying was at least somewhat contained was Europe's paymaster, Germany, which now is actively vying to not only not cede banking supervision to the ECB, but is seeking to displace the central bank in the budget and FX central planning category with a push to be elected budget commissioner and FX tsar. Eventually it will get its wish, but more when we cross to that bridge. Which is why it is surprising that today, German financial magazine Spiegel calls out none other than German FinMin Wolfi Schauble for doing precisely what Juncker was caught doing 2 years ago. Lying.

From Spiegel:

German Finance Minister Wolfgang Schäuble has been inconsistent in his statements about Greece recently, and is now having to explain himself. But even as he has tried to clarify, yet another contradiction has appeared.


Wolfgang Schäuble is guided by two maxims in the euro crisis: He knows what is going on, and if something goes wrong, it's probably someone else's fault.


For example, the German finance minister tends to get upset when his European colleagues, the heads of government and representatives of the European Commission, once again forget about joint resolutions they've already reached, and everyone talks over each other at the same time.


Schäuble has determined the reason for this cacophony. He believes that, unlike himself, and perhaps Chancellor Angela Merkel, many decision-makers in Europe are overwhelmed by the crisis. He is convinced that they often fail to understand the details of bailout policy, and that this frequently turns communication in the euro zone into a "disaster."


But now Schäuble has followed their example. Unlike his European colleagues, though, he was man enough to create an unparalleled chaos of communication all on his own.

So what did the man, whom we correctly penned as Schrodinger Schauble many months ago, precisely for his ability to take both sides of the argument with uncanny precisions, so to finally expose himself to the German press? The object of "contradiction" - why the endless Greek money black hole of course.

On a tour through Asia in mid-October, the fateful question facing the monetary union was raised once again: Will Greece remain a member or not?


The drama began at a panel discussion hosted by the BBC in Tokyo, when Schäuble appeared with his confidante Christine Lagarde, head of the International Monetary Fund (IMF). Schäuble usually enjoys his meetings with Lagarde, but this time the two friends tangled with one another.


Schäuble repeated what the government in Berlin had been preaching for months, namely that a decision could only be made after the troika -- made up of the IMF, the European Commission and the European Central Bank (ECB) -- had issued its report. Lagarde disagreed, arguing that the stricken country needs more time to satisfy the requirements of its creditors.


Lagarde was merely expressing what everyone already knows, and what Merkel has already decided, namely that Greece should be rescued. But because the current restructuring program is unrealistic, the operation will be more expensive than planned.


Her response could have been an opportunity for Schäuble to explain his own view. But instead he perceived it as an affront, and stated that such speculations were not helpful. It was his way of retaliating.

That was the beginning. Then things got even more convoluted and apparently it was all Bill Murray's fault:

But on the next stop of the trip in Singapore, Schäuble had apparently changed his mind. At an event hosted by the Singaporean-German Chamber of Industry and Commerce, he said, in an inimitable mixture of German and English: "It will not happen that there will be a Staatsbankrott in Greece." A Staatsbankrott is a national bankruptcy.


The news attracted attention, especially in Europe. But by then Schäuble was already in Bangkok, and was irritated because he felt misunderstood. He said that it was impossible that he could have said anything in Singapore that contradicted what he had been saying all along.


Schäuble spent half an hour trying to justify what he had said in front of the journalists traveling with him. A speech to Asian investors, he said, simply had to be clearer than one he would give at home. Besides, he added, he finds it difficult to express himself as precisely in English as he can in German. In other words, it was clearly a case of "lost in translation."


But Schäuble knows that both arguments are unconvincing. News spreads within seconds from any place in the world, especially when two dozen German journalists are along for the ride. Besides, Schäuble's English had been good enough for his appearance on the BBC with Lagarde just two days earlier.

By then it was too late, and as one can see in the price of Greek bonds, his statement has lifted confidence that not only will Germany fund any and all Spanish and Italian inevitable failures, but will continue funding the Greek even horizon with crisp repo'ed EUR bills.

The truth is that Schäuble is torn between taking responsibility for European policy and taking domestic political factors into account. He knows that saving the euro is going to cost more money, but he also fears resistance within the center-right coalition government in Berlin and among the German people. This explains why he sometimes takes one position or another.


This was also the case when Jörg Asmussen, the German representative on the ECB Executive Board, revived the plan to create a repurchase program for Greek sovereign debt while in Tokyo. Under the plan, the Greek government would borrow money from the euro bailout fund, the European Stability Mechanism (ESM), money it could then use to repurchase old bonds at the current rate. Greek government bonds are currently valued at about 25 percent of face value. In other words, with every euro it borrowed Athens could take €4 of old debt off the market.


The idea had hardly been floated before Schäuble was behaving as though he were hearing about the proposal for the first time. He should have known better, because his people have been working on the same type of program for some time and have already developed concrete ideas. They've calculated that with a commitment of €10 billion ($13 billion), Greece's debt burden could, in an optimal scenario, be reduced by €40 billion.


But to achieve this outcome, talks would first have to be held with the biggest investors to ensure that they would truly settle for receiving only a quarter of their claims. Experts at the German Finance Ministry hope that once the operation is over, Greece will almost be in a position to borrow money on the markets again. But that would require Schäuble to explain yet another change of position.

In other words, the Greek default is as NPVed as it always has been, and any and all statements originating out of Wolfi were merely political lies, which it seems nobody in  Europe is pretending about any more. As for Greece, if and when a distressed debt buyback begins, which it most likely won't, perhaps the politicians will realize that to the rating agencies such an event is considered yet another event of default trigger, which means that in under 1 year Greece will have bankrupted twice without actually going bankrupt.

But that is the new normal. Is there any wonder why everyone in Europe is now merely engaged in lying instead of pretending to even believe there is a mathematical solution to an intractable problem?