Friday, April 9, 2010

Another Weekend, Another "Regularly Scheduled" Emergency Meeting

Last week Friday we reported on a Fed announcement of an "expedited" meeting. WSJ's Kelly Evans was kind enough to clue EPJ in on the fact that "expedited" to the Fed simply means regularly scheduled.

After Kelly's heads up we followed up with "people who should know" who confirmed Kelly's take on the meeting.

This Friday, we are bystanders as the ultimate insiders, Goldman Sachs, got excited about a meeting that turns out to be a not so emergency event.

Erik Nielsen, the European strategist at GS, reported on an emergency meeting about to be held by the ECB, presumably about the Greek crisis. Turns out it's a meeting just to chill and "update." Here's Nielsen backtracking:
I have now spoken with a number of people with traditionally good assessment of these situations, and I am starting to think that the ECB GC meeting tonight most likely is a simple update (by Papademos to the rest of the GC) of today’s meeting of Eurozone min fin and central bank deputies – to get them all up to speed before next week’s Ecofin, where the final agreement on European terms [on a Grrek bailout] are likely to be hammered out (which will largely be an issue of what a non-concessional interest rate means in concrete terms.
Here is Nielsen earlier in the day:
EU agreement on Greece... markets are getting unnecessarily excited    The wire says that EU officials have reached an agreement today on the details of a package for Greece – it'll be a single "one-stop shop" between the other 15 Eurozone members, the EU's institutions, and the IMF.  So, it says “if Athens wants to tap the €20-25-billion fund, it will have to apply to both the EU and the IMF jointly. The EU's share of the finance will take the form of bilateral loans at a rate higher than that of the IMF but well below those prevailing in the market”.

In apparent reaction, Greek spreads are substantially tighter and the euro stronger.

In my opinion, this is a whole load of nothing, with the possible exception that the funding cost will be “higher than the IMF and below the prevailing market rate” – but I am not sure how much information there is in that – and I don't understand how “a below market level” can be called “non-concessional” and “encouraging a return to the market”, as the EU leaders declared.  Lest see on that one.

Apart from that, we knew that the Commission would be coordinating the bilateral loans (that’s in the treaty!) and the fact that it’s a “one-stop shop” where Greece would approach the EU and the IMF jointly is really not that surprising; after all a EU member has to first talk to the Commission before applying to the IMF, so … what’s the news?

But I am relieved to learn that “EU officials” have met to talk about Greece and agreed to coordinate.  Meanwhile, the key IMF guys remain in Washington.
Bottom line: The bailout looks shaky, But, bailout, or no bailout, it is a stop gap measure. The Greek problems are far from over even with a bailout and the biggie is not Greece but Spain, in July. And, at some point, there will be real emergency meetings that we will all be aware of.

(Goldman quotes via ZH)

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