Chillin' out till it needs to be funded
Even as Angela Merkel again timed here political apology to Greece for the last minute, the default discussions for Greece with Bondholders now safely include options for the EUR 4 0 bln that is held by ECB .
ECB can either get Greece the loan to buy back the loans at 80, a haircut of 20 giving 10 bln in breathing space on the EUR 260 bln in play, or it can otherwise accept a haircut on its Greek holding for that 10 bln. If it does not other sovereign holdings will have to fight ovever the extra hole they have to carry on the bonds ECB could also find a way to transfer the 40 bln Euro in GGBs to the EFSF , in both cases allowing EFSF to bail out Greece against the collateral/bonds
Angela Merkel promised she would not allow Grece to be pushedout of the Eurozone, even as the Dutch Commissioner threatened the same and the Luxembourg Commisioner and currently EU commisioner clarified that the comment asking Greece to ry living outside the Eurozone was not asking anything like a member leaving the European Union, even as government s come to terms with the haircut they will have to absorb in the final Greek settlement
Meanwhile China is busy winging itself out of Iran commitments getting Oil from Saudi Arabia ( 200000 bpd) and the new pipeline it shares with Canada that Obama rescinded last month, none coming to extra Euro for its largest tradng partner. The latest IMF estimates suggest China could lose half its growth to the blaze of governance Accidents in Europe even as German exports fell by 4.3% for December 2011.
The ECB surrender then, was always on the cards..