French PM Nicolas Sarkozy dashed off to Berlin this evening to wine and dine German Chancellor Angela Merkel.Sarkozy is likely trying to sweet-talk Merkel into accepting a new Greek bailout plan with ahead of a highly anticipated EU summit tomorrow.
The most likely option on the table right this minute seems to consist of three parts: (1) expanding the powers of the European Financial Stability Facility to recapitalize Greek banks by as much as €440 billion, (2) extending a credit line to eurozone countries not receiving bailout funds, and (3) using €71 billion to buy up to 20% of Greece’s €350 billion debt.
Merkel has voted down similar proposals in the past, but this time she’s under a little more pressure. Not only does everyone think she’s an idiot, but chatter about the possibility of a eurozone failure is becoming more widespread as Italian and Spanish 10-yr yields increase.
According to the Financial Times, she’s most likely to oppose a .0025% tax on all eurozone bank assets in order to support the EFSF bailout fund. The tax would raise an estimated €10 billion per year for the next five years.
If Germany doesn’t pay for the bailout, who will?