Berlin     04-03-2010

Rumours of an impending German bailout of Greece just won’t go away despite denials from the government in Berlin.

German government advisors suspect money speculators may be betting on ‘bad-news’ and thus creating a self-fulfilling prophecy -by creating it – and thus forcing a fall in the value of the Euro.

The ‘bad-guys’ in this case are the ‘The City of London and Wall Street’ which are being accused of calling very loudly – ‘ a concerted Power Play’ – for Germany to pay Greece’s debt, which would thereby greatly enrich currency speculators

Inspite of German bailout denials, speculation will increase ahead of Friday’s visit to Berlin by the Canadian educated Greek PM Papandreou.

A Greek bankruptcy would provide a major loss of prestige for the euro and, it seems that investors are still wary of buying any further Greek bonds –  ‘Beware of Greeks bearing Bonds’ !

Germany and France could buy or guarantee up to €30 billion in state loans and both Berlin and Brussels, want private financial institutions to be brought on board as well — and have indicated a willingness to go after financial speculators, who have been betting against Greece.

The Luxembourg PM Jean-Claude Juncker, has used some colourful language as he went after speculators.

He is reported to have said the he has ‘ the instruments of torture’ ready to apply to speculators ‘in the basement’ and says he will use them if necessary.

Bankers should not forget that new financial market regulations in many European countries are up for discussion this year – including Germany

Back in Athens, the Greek government has announced new austerity measures    aimed at raising additional money to curb its budget deficit and avert a possible debt crisis in the Euro zone.

The measures will come on top of wage freezes and  across-the-board tax increases which were announced a month ago. The aim of this exercise  is to raise 5 billion Euros for government coffers.  

A controversial move to abolish, or at least reduce  the so-called ‘14th salary’ — one of two additional monthly pay-checks that most public sector workers receive.

As a result of these serious fiscal problems Greece needs to raise at least 20 billion Euro to refinance debt maturing in April this year.

Left wing parties have criticized the government for pushing painful and socially unjust measures despite being elected last October on pledges to do just the opposite – namely to improve social welfare.

Meanwhile behind the headlines Greece has once again delayed a bond issue.