Germany to Purchase Greece in First Leveraged Buyout of One Country by Another

Unique Solution to Greek Fiscal Crisis

[Editor's Note:  For a more charitable view of the current German economy see the post here.]

Chancellor Angela Merkel of Germany today announced that Germany would purchase a controlling interest in the country of Greece for an undisclosed amount of cash plus assumption of Greek debts.   The news of the purchase comes after weeks of speculation that Greece would have to default on its sovereign obligations, which would present some serious financial and economic problems to the European economic and financial community.

The purchase of one country by another is unique in world history, but according to leading financial experts, it makes sense as being the low cost solution to the Greek problem.  Germany, as Europe’s largest and most prosperous economy is well equipped to take over another country, as it did in a similar situation when it re-absorbed East Germany into the West German state.  Furthermore, as German banks hold substantial amounts of Greek sovereign debt, Germany faced the dilemma of bailing out its banking system or allowing it to suffer massive losses of capital.

German officials did not expect a strong citizen reaction to the news.  “It’s a hostile takeover, not a bailout” said one government minister who requested to remain anonymous.  “We know how to do those things”, she added.

The terms of the merger have not yet been disclosed, but financing is expected from Goldman Sachs and other large investment banks, plus several hedge funds who may also take an equity position in Greece.  It is expected that Germany will take over the operation of the Greek government, collect its taxes and replace olive oil with butter as a main ingredient for cooking and dining.  In heralding the new innovation in international finance a German government spokesman said, “This is the way we do things now, not like the old days”.

Additional funding for the acquisition will be accomplished by auctioning off the rights to the name “Macedonia” which Greece claims is its own in its dispute with the real country of Macedonia [Disclosure Alert:  This is real].  While the current country of Macedonia is expected to be a major bidder, other countries who wish to improve their names, like Mongolia and Zimbabwe and several former Soviet Republics who need more vowels are also expected to bid.

Germany said it expected to re-float Greece in a public offering in a few years, saying that if a money losing company like Skype was worth $8 billion, a money losing economy like Greece could be worth a couple of hundred billion.  If successful, the IPO of Greece could open up a whole new area for public placements.  Portugal, Ireland, Spain, Italy and Iceland are all said to be watching developments, and will consider taking themselves private if the market for countries continues to be strong.

The most common response from Greek citizens when they learned of the deal was “They want, they can have it”.

Follow Up:  From a Later Post on the Greek Situation

The European Central Bank says that Greece is solvent because the Government has assets to pay its debts.

 FRANKFURT, Germany (AP) — Financially troubled Greece can pay its debts if it is willing to sell off billions in state property and carry through on plans for budget cuts, a top European Central Bank official said Monday.

Lorenzo Bini Smaghi said Greece, with a debt of euro330 billion ($485 billion) and "marketable assets" of euro300 billion ($435 billion), is "solvent to the extent that it is willing to sell off some of those assets."

Now The Dismal Political Economist wrote earlier about how an LBO of Greece could solve its fiscal financial problems, but he did not expect European officials to take up that suggestion this quickly.  Of course, selling off those assets just puts Greece further in the hole, as The Dismal Political Economist pointed out earlier. 

More Follow Up:  A columnist in the Financial Times makes the point that Germany and others might want some control of the fiscal sovereignty of Greece and other in return for bailout funds.  Reality is encroaching on absurdity.

 

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