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Angela Merkel just spoke in Germany, and it sounds like she had one of those moments, like when Hank Paulson got on his knees and begged Nancy Pelosi to support TARP. Or maybe someone told her that if Greece defaulted, then the ATMs would stop spitting out cash the next day.Suddenly she’s sounding very conciliatory and dovish.
Per headlines that are coming via Bloomberg, she says that private sector haircuts were always going to be voluntary (previously everyone assumed that she was insistent on private sector haircuts), and that if there were haircuts, there would be a contagion effect, hitting other weak states. She also is saying that a “controlled state insolvency” is currently not possible.
Bottom line: She doesn’t want to push for anything dramatic or substantive.
After Greece gets its next aid (presuming it passes austerity measures), then talks with private creditors will begin. Also: The German vote on Greek aid will be the week of July 4 (should be momentous!).
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