Wednesday, September 28, 2011

Germany's Eureca Secret Plan For Greece: Is Greece East Germany?

The answer of course with regards to fiscal austerity, is no.

As Germany said that Tim Geithner's "leverage" plans was "stupid", French paper La Tribune reported that that Germany may have a secret plan to rescue Greece. The plan is simlar to what they did for East Germany,  putting most of the country’s public assets in to structure that would be privatized.

La TribuneLe plan secret allemand pour sauver la Grèce

The assets, not exactly sure what they are (banks, real estate, telephone, ports, ...) would be purchased for approximately 125 Billion euros.  Then the country’s bonds would be removed from the ECB and the EFSF. As a result of this accounting trick, Greece’s debt to GDP ratio would fall to under 90% (today it is 145%).

Thus Greece would be allowed to... borrow again.

You cannot make this stuff up.

They also talk about new "infrastructure" investment in Greece, around 50 Billion euros, to spurr growth.

Then perhaps they would do the same in Italy, Spain, et. al. (and would own the whole continent eventually?).

From the paper (Google translation):

"Is there a credible alternative to the plans being considered for the rescue of Greece, that would solve the issue of debt without causing failure, and sustained the country emerge from the spiral of recession and social disorder?

Difficult equation and do not include the plans being discussed today. This plan exists. Called "Eureca" was developed by consultants very influential with the government of Angela Merkel, led by Martin Wittig, CEO of Roland Berger. It is divided into six main phases, which can be summarized as follows:

1. Greece confine all of its public assets (banks, real estate, telephone, port ...) in a common structure, a sort of equivalent of the Treuhand in Germany established in 1990 to privatize some 8,500 East German companies, these assets are estimated at 125 billion euros, according to the valuations already known on a number of properties listed for privatization "official".

2. This structure is purchased by a European institution, financed by the states, whose head could be located in Luxembourg, close to that of the European financial stabilization. This structure is responsible for guiding the privatization of these assets, with a deadline of 2025 to unwind the transactions (which is much longer than the life of the Treuhand, which closed in 1994, although a number of operations were finalized during the year 2000).

3. The 125 billion euros and are released to Greece to buy back its bonds to the ECB and EFSF, which has the immediate effect of reducing the 88% debt / GDP ratio, rather than 145% today. Exposure of the ECB at the Greek debt is reduced to zero, which can only exercise a calming effect on European taxpayers ... Interest rates on Greek debt fell by 50%, allowing to return to Athens possibly on the market.

4. This European institution invests 20 billion euros in restructuring segregated assets to increase their value by about 50 billion euros. The amount of these investments can be increased from 10 to 15 billion from EU structural funds that Greece can not use right now. This injection of money into the economy, equivalent to 8% of GDP, loosen the noose around the Greek economy, and puts the country on the path of growth, about 5% annually over the past three or four years instead of 5% of a recession it faces today. With the increase in tax revenue thus generated, Greece is engaged in a program to repurchase its debt of around 1% of GDP per year, which makes the board, in 2018, to below 60% of GDP.

5. Privatization transactions to be unwound in 2025. If these operations emit a profit, it is paid to Greece, net of interest and management fees. If they give off a loss, Greece supports it, but economists Roland Berger calculated that, even if no privatization was carried out (which is an extremely unlikely event), the debt of Greece down again mechanically under 70% of GDP, which is an improvement over the situation today.

6. This plan wiped out the gains of speculators who do not believe in saving Greece and the euro area and betting on a collapse of the Greek bond prices, but also Spanish, Italian and Irish and who will have lower spreads CDS.

What are the chances of this program to be adopted by Greece and the European governments, working on other tracks? It relies heavily on a bet: that of collecting the bulk of the Greek public assets, a list much larger than that Greece has made public as part of the privatization plan of 50 billion euro in the agreement of July 21. It is the belief that privatization and out of central Greece (although the Greek capital are given a priority in transfer operations) will escape the risk of corruption and opacity.

The plan has other virtues: it offers a new path as Europe goes round in circles since the month of July on the Rescue of Greece in Athens it avoids an austerity of the most serious and gives time to implement structural reforms that the government is committed to achieving and it creates immediate growth and allows Greece to re-enter the market and it removes the prospect of a systemic crisis of Europe and It discredits the speculators. "Our recovery plan pursues a clear objective: to provide financial assistance to Greece to restructure its balance sheet and generate sustainable growth," said Martin Wittig, CEO of Roland Berger.

Even if the plan is "carried" by a group of consultants, it is very likely that it has not been designed outside the circle of Angela Merkel and experts from the troika. Roland Berger is also a good knowledge of the subject of privatization since it was also the group that was to maneuver in the conduct of operations of the Treuhand ... He will have to reckon with the opposition, however, banks and financial markets, the former because they probably have their idea on the privatization of assets Greek, the latter because the current situation of uncertainty allows multiple games and remunerative

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