German FM Schäuble Emerges as Key Figure in Spanish Bailout Talks

By Tom
Updated on

German FM Schäuble Emerges as Key Figure in Spanish Bailout Talks


Financial Times Deutschland has:


US Secretary of the Treasury Timothy Geithner meets with German Finance Minister Schäuble.

The Treasury annouced that they will meet Monday on Sylt and Geithner will afterwards meet with ECB-President Mario Draghi in Frankfurt. Theme: The economic situation in the USA, Europe and worldwide. Schäuble has denied a reported new aid programme for Spain.

Sild is a German island and a posh summer resort – they should have fairly nice weather for the meeting though.

There has been press speculation that the ECB was buying Spanish sovereign bonds on its own initiative; But Schäuble denies that. The 100 bio. EUR for the banks are quite sufficient in Schäuble’s view.

On the other hand ECB-President has stated that the ECB would do what it takes to defend the Euro.

Merkel and Hollande said on Friday in a common statement that the Euro would be defended with all means.


Schäuble is relaxed.

He said that the present interest rates of more than 7% would be painful for Spain: ”and they create a lot of disturbance; but the world does not end, if you have to pay a couple of percentage points more on a bond auction”. Spains short term finance need”isn’t so large”.

The Spanish government isn’t too desperate either – according to Schäuble – they have started raising the VAT and cutting pensions. The financial markets haven’t discovered that – but they will.

Schäuble said that he was relaxed even before he went on vacation and he has no respect for Moody’s Corporation  downgrade: “No country profit so much from the common currency as Germany!”


1)      German Finance Ministers are generally tough; but Schäuble munches rocks for morning cereals –neither is politeness something he makes a habit of. What he in effect says to Geithner is: ”I’m on vacation – so get lost!”

2)      The reality behind the statement is that USD/EUR is getting above 1.25 which naturally is a major concern to USA, as the already frightening German competitiveness is boosted by an effectively devalued EUR. What is Geither aiming to achieve? That Schäuble should feel sorry? Sorry? The man is having a nice relaxing holiday!

3)      A major fly in Schäuble’s sun tan lotion is that the banks are trying to play Germany on the financial markets. That is a very bad idea, as Schäuble will see to it that the banks are hurt – when he returns from vacations!

4)      It is very clear that Schäuble doesn’t in the least mind that Spain is reminded that any deviation from the agreements will cause a lot of pain – in Spain – and he is definitely NOT having his vacation in Spain! Schäuble has Spain exactly where he wants them and while he pays 1% interest on a 10 year Bundesanleihen he lends the money to Spain at 3% interest – no windfall; but a nice steady profit.

5)      The high oil prices obviously don’t worry Germany the tiniest bit. If I’m not wrong: Germany has entered a long term price agreement with Russia. Before he went on vacation!

Putin hinted as much, as he less than a month ago revealed that a large part of the Russian currency reserve was in EUR – or rather – German sovereign bonds.

The point is that Germany is perfectly aware of the US ability to set the oil price after whom they want to castigate: High prices hurt China and low pains Russia. Germany and Russia share a common interest in an agreed price for the next couple of years. I’m not saying it is so; but to dismiss the possibility would be unwise.

By the way: Did I make it clear that the German Finance Minister is presently on vacation?

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