Geithner's plan rejected by Germany with a bitchslap thrown in for good measure.
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Ambrose Evans-Pritchard
Germany and America were on a collision course on Tuesday night over the handling of Europe's debt crisis after Berlin savaged plans to boost the EU rescue fund as a "stupid idea" and told the White House to sort out its own mess before giving gratuitous advice to others.
German finance minister Wolfgang Schauble said it would be a folly to boost the EU's bail-out machinery (EFSF) beyond its €440bn lending limit by deploying leverage to up to €2 trillion, perhaps by raising funds from the European Central Bank.
- "I don't understand how anyone in the European Commission can have such a stupid idea. The result would be to endanger the AAA sovereign debt ratings of other member states. It makes no sense," he said.
Mr Schauble told Washington to mind its own businesss after President Barack Obama rebuked EU leaders for failing to recapitalise banks and allowing the debt crisis to escalate to the point where it is "scaring the world".
- "It's always much easier to give advice to others than to decide for yourself. I am well prepared to give advice to the US government," he said.
The comments risk irritating the White House. US Treasury Secretary Tim Geithner has been a key driver of plans to give the EFSF enough firepower to shore up Italy and Spain, fearing a drift into "cascading default, bank runs and catastrophic risk" without dramatic action.
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More On Geithner's Plan
The plan, cooked up by U.S. Treasury Secretary Tim Geithner, is to persuade European leaders to vastly expand the size of the emergency bailout fund known as the EFSF, or European Financial Stability Facility. His proposal, and I’m not making this up, would use leverage -- i.e., borrowing -- to increase the size of the already borrowed money in the fund by up to 10x. Read more on market expectations for expanded EFSF.
This is a little hard to believe, but it’s the truth. The funds from euro-zone countries in the EFSF have already been borrowed. And now the plan espoused by Geithner is to use that money as collateral to borrow as much as ten times more.
Why would they do this? Well dial back your mental time machine to the fall of 2008, if you will. You will recall that before TARP there was a similar U.S. plan to bail out the financial system, but it was judged to be too risky. So now it looks as if Geithner, who was the head of the New York Federal Reserve Bank at the time, is conspiring with the International Monetary Fund and others of like mind to recreate that massive weapon of financial destruction to aim at the debt crisis in Europe.
http://www.marketwatch.com/story/geithners-plus-sized-euro-bailout-is-stealth-qe3-2011-09-28
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Eurozone split over Greece's bailout term: FT
SAN FRANCISCO (MarketWatch) -- Euro-zone countries are divided over the terms of Greece's second 109-billion-euro ($148 billion) bailout package amid mounting concerns that Greece's funding needs have risen significantly over the past couple of months, the Financial Times reported Tuesday. As many as seven of the 17-member bloc are arguing for private creditors to take a bigger writedown on Greek bond holdings, the newspaper said, citing senior European officials. As things stand, hardliners in Germany and the Netherlands are calling on the private sector to take a bigger hit on Greek debt while France and the European Central Bank are resisting the move, according to the newspaper.
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We covered Germany's response in greater detail below:
