Words ought to be a little wild, for they are the assault of thoughts on the unthinking
- J.M. Keynes

Friday, 29 June 2012

Hopium Hit

This hopium shot took a long time coming. Feels so good for now.

The Summit statement (emphasis mine):
When an effective single supervisory mechanism is established, involving the ECB, for banks in the euro area the ESM could, following a regular decision, have the possibility to recapitalize banks directly.”

The statement: ‘When pigs fly, pork could possibly be handed out’ is not equivalent to any of the following: ‘Pork will be handed out’; ‘Pork is going to be handed out’; ‘Here is some pork’.

The next hopium high from the statement:
“We reaffirm that the financial assistance will be provided by the EFSF until the ESM becomes available, and that it will then be transferred to the ESM, without gaining seniority status.” 

We've been down this road exactly one year before when ESM seniority was scrapped for Portugal, Ireland and Greece. (Funny how that hopium shot faded). After that momentous decision which resolved the crisis came Greek PSI with...subordination! 
This current statement just smacks of ‘No subordination for our time’. 

In any case, FT Alphaville (quoting Citi) has already pointed out that I13 in the EFSF FAQs states (emphasis mine): “ESM loans will enjoy preferred creditor status in a similar fashion to those of the IMF, whilst accepting preferred creditor status of the IMF over the ESM (except for countries under a European financial assistance programme at the signing of the ESM treaty).”

The hopium has worn off too quickly. Please sir, may I have some more?

Further reading:
  1. http://ftalphaville.ft.com/blog/2012/06/29/1064761/a-ulysees-pact-on-eurozone-seniority/
  2. http://www.zerohedge.com/news/full-eu-summit-statement-all-its-conditional-wishy-washy-glory

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