Soros bets against Euro

[Jan Klimkowski]

The Germans don't seem too happy:

Merkel ‘Buckled’ on Greek Aid Terms, Government Lawmakers Say

April 11, 2010, 2:36 PM EDT

By Brian Parkin


April 11 (Bloomberg) -- German government lawmakers slammed Chancellor Angela Merkel for signing up to a European Union plan that offers Greece loans at below-market rates, saying she backtracked on a demand that “subsidies” be ruled out.

Euro region finance ministers said in Brussels today they are prepared to give Greece 30 billion euros ($40 billion) in three-year loans at around 5 percent. That’s less than the current three-year Greek bond yield of 6.98 percent.

“Germany buckled under the pressure -- we shouldn’t kid ourselves that such loans are anything but subsidies,” said Frank Schaeffler, deputy finance spokesman for Merkel’s Free Democrat coalition partners, in an interview. “The loans would hurt the euro, help Greece only temporarily. We would be standing on very thin ice, legally, economically.”

Merkel dropped her demand that Greece should pay market interest rates after its bonds plunged last week, pushing the yield on its 10-year debt to a 11-year high of 7.5 percent. Merkel’s government has argued that German taxpayers’ money shouldn’t be put at risk to help a country that had lived beyond its means.

“It seems Merkel has lost the competition,” said Carsten Brzeski, an economist at ING Group in Brussels and former European Commission economist. “All that fuss and talk about not putting taxpayer money at risk has been made obsolete.”

Finance Ministry spokesman Michael Offer said the government wouldn’t comment today. He said it was agreed that only Luxembourg Prime Minister Jean-Claude Juncker, who chaired the meeting of European finance ministers and announced the agreement at a press briefing in Brussels, would talk today.

Poll Slump

Merkel’s coalition has slumped in opinion polls since her September re-election. That threatens to cost her Christian Democrats and the FDP their hold on Germany’s most populous state, North Rhine-Westphalia, in regional elections on May 9.

“The euro-group’s decision today opens the door to contagion,” said Hans Michelbach, the deputy finance spokesman for the ruling Christian Democratic Union, Merkel’s party, and its Bavarian CSU affiliate, in an interview. “It’s an invitation to speculators to make a killing on other euro-region bonds and a bailout spiral.”

The euro has slumped 6 percent this year as EU leaders struggled to agree on how to tackle Greece’s fiscal crisis.

Germany’s decision to agree to below-market rates may increase the likelihood of a legal challenge, according to the FDP’s Schaeffler.

The EU’s governing treaties have rules prohibiting the EU or its nations from voluntarily assuming liabilities of a fellow state, commonly known as the “no-bailout clause.” Four academics, who unsuccessfully sued to block the adoption of the euro, said last month that they would file a new case at the court should Merkel approve a bailout.

“European treaties don’t envisage member states plugging the deficits of their partners,” Schaeffler said.

http://www.businessweek.com/news/2010-04...s-say.html