(BN) *MERKEL SAYS GERMANY MAY PAY EU11 BLN INTO ESM THIS YEAR

In another day where the market sold off briefly on concerns about Greece, but has now gone back to rallying (at least until the European close), this little line deserves more attention.

For all the hype about ESM having “paid-in” capital – it doesn’t.  It has more than EFSF (which is at zero), but still relies largely on future promises of money as the method for tapping the bond market for its funds.

Based on the last thing I saw, an 11 billion contribution by Germany would imply a total size of about 38 billion this year (Finland may have to make some accelerated payments to get the collateral on their share of the latest bailout).  That means Italy would need to come up with 7.25 billion this year as their share of the contribution to ESM.  Yes, Italy is bailing itself out.

So now Italian banks can issue bonds to themselves, get Italian government guarantees, that they can pledge at the ECB to get the money to buy those bonds in the first place, then they can buy more Italian bonds so that the Italian government can fund the ESM so the ESM can buy Italian bonds if they run into trouble again.

In related news, a hedge fund raised $100 million based on their rainbow extrapolation model which they believe will allow them to more accurately predict the location of the end of the rainbow, dramatically increasing their likelihood of capturing leprechaun’s and their pot of gold.

Okay, that might be over the top, but real new money needs to come into the market (not just more printed ECB money) and real debt forgiveness has to occur (that will hit the banks and insurance companies).  Until that happens the rally is depending on some deep pocket to continue to lend and roll over debt regardless of the creditworthiness.

 

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BFW 02/27 14:28 Merkel Says Germany Ready to Speed Up ESM Payments

 BN 02/27 14:17 Merkel Says Advantages Outweigh Risks Tied to New Greek Program

BFW 02/27 14:14 Merkel Says Rejecting Greek Bailout Carries Global Risks

 BN 02/27 14:12 Merkel Says No 100% Guarantee of Success With New Greek Program

BFW 02/27 14:08 Merkel Says German Tax Officials Ready to Help Greece

BFW 02/27 14:06 Merkel Says Mastering Debt Crisis Will Take Years

 BN 02/27 14:27 *MERKEL ENDS SPEECH TO GERMAN PARLIAMENT IN BERLIN

 BN 02/27 14:25 *MERKEL SAYS FASTER ESM PAYMENTS TOPIC AT MARCH 1-2 EU SUMMIT

 BN 02/27 14:24 *MERKEL SAYS GERMANY SEES NO NEED TO BOOST EUROPE FIREWALL

 BN 02/27 14:23 *MERKEL SAYS GERMANY MAY PAY EU11 BLN INTO ESM THIS YEAR

 BN 02/27 14:23 *MERKEL SAYS GERMANY READY TO SPEED UP ESM PAYMENTS

 BN 02/27 14:16 *MERKEL SAYS POLITICAL UNION TO RESTORE CONFIDENCE IN EURO

 BN 02/27 14:15 *MERKEL REJECTS ‘ADVENTURES’ WITH GERMAN INTERESTS

 BN 02/27 14:14 *MERKEL ASKS GERMAN LAWMAKERS TO PASS SECOND GREEK BAILOUT

 BN 02/27 14:13 *MERKEL SAYS SHE WEIGHED PRO AND CON ON GREEK BAILOUT

 BN 02/27 14:13 *MERKEL SAYS REJECTING GREEK BAILOUT CARRIES GLOBAL RISKS

 BN 02/27 14:12 *MERKEL SAYS GREEK EURO EXIT WOULD HAVE ‘UNFORESEEABLE’ RISKS

 BN 02/27 14:10 *MERKEL SAYS SIGNIFICANT IMF ROLE ON GREECE IS PRECONDITION

 BN 02/27 14:09 *MERKEL SAYS WAY FORWARD WITH GREECE IS LONG, RISKY

 BN 02/27 14:09 *MERKEL SAYS NO 100 PERCENT GUARANTEE OF SUCCESS WITH GREECE

 BN 02/27 14:08 *MERKEL SAYS GREECE HAS MADE PROGRESS IN LAST TWO YEARS

 BN 02/27 14:07 *MERKEL SAYS GERMAN TAX OFFICIALS READY TO HELP GREECE

 BN 02/27 14:07 *MERKEL SAYS GROWTH, COMPETITIVENESS ALSO GOALS FOR GREECE

 BN 02/27 14:06 *MERKEL SAYS AUSTERITY ‘UNAVOIDABLE’ FOR GREECE

 BN 02/27 14:05 *MERKEL SAYS GOAL IS ‘STABILITY UNION THAT DESERVES THE NAME’

 BN 02/27 14:05 *MERKEL SAYS ‘EUROPE WILL FAIL IF THE EURO FAILS’

 BN 02/27 14:04 *GERMAN CHANCELLOR MERKEL SPEAKING IN PARLIAMENT IN BERLIN

 BN 02/27 14:04 *MERKEL SAYS OVERCOMING DEBT CRISIS IS LONG STEP-BY-STEP PROCESS

 BN 02/27 14:04 *MERKEL SAYS NO QUICK, EASY SOLUTION TO DEBT CRISIS

 BN 02/27 14:04 *MERKEL SAYS MASTERING DEBT CRISIS WILL TAKE YEARS

 BN 02/27 14:03 *MERKEL SAYS DEBT CRISIS BIGGEST CHALLENGE TO EU UNITY

 BN 02/27 14:02 *MERKEL SPEAKING IN GERMAN PARLIAMENT ON GREEK BAILOUT

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Merkel Says Germany Sees No Need to Boost Europe Firewall

2012-02-27 14:30:34.96 GMT

By Patrick Donahue

     Feb. 27 (Bloomberg) — Chancellor Angela Merkel said

there’s currently no need to increase the lending capacity of

Europe’s bailout mechanisms, citing lower borrowing costs for

indebted euro states.

     “There’s no need now for a debate on increasing the

capacity” of the temporary and permanent bailout funds, Merkel

told lawmakers today as they prepared to vote on a 130 billion-

euro rescue package for Greece, the second in two years.

     Merkel said euro leaders this week will discuss moving up

capital payments for the permanent fund, the European Stability

Mechanism, and that Germany is willing to pay in 11 billion

euros this year if other countries speed up payments as well.

 

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To contact the editor responsible for this story:

Patrick Donahue at +49-30-70010-6220 or

pdonahue1@bloomberg.net