Weekend News Greatest Hits

1) Europe’s finance chiefs wrapped up two days of talks in Wroclaw, Poland, on Saturday. They said there would be no room for tax cuts or extra spending to spur an economy on the brink of stagnation.

2) The markets were not happy. Last night the Hang Seng index fell to its lowest close in two years. Europe is red, and US markets are red.

3) The finance chiefs also slapped around Treasury Secretary Timothy Geithner pretty well after inviting him into their special club for the first time ever. Maybe they were ticked off that he uttered probably the smartest thing he's ever said:

Europe projects an image of “ongoing conflict” between national governments and the central bank, hampering efforts to put the economy on a sounder footing, Geithner said at the banking conference in between meetings.

For once I agree with him. Trying to get 17 finance ministers together on the same page is like herding cats. Meanwhile the EU is burning.

4) German Finance Minister Wolfgang Schaeuble and Bundesbank President Jens Weidmann rejected using the European Central Bank to boost the euro-area rescue fund’s firepower, rebuffing a suggestion by U.S. Treasury Secretary Timothy Geithner that they lever up.

“We don’t think that real economic and social problems can be solved by means of monetary policy,” said German Finance Minister Wolfgang Schaeuble.

5) Now the attention swings back to Greece’s ability to avoid default. It hangs in the balance as international monitors prepare to assess whether Prime Minister George Papandreou can meet the conditions of rescue loans.

European Union and International Monetary Fund inspectors hold a teleconference today at 7 p.m. Athens time with Finance Minister Evangelos Venizelos. They will be judging whether Greece is eligible for an aid payment due next month and on track for a second rescue package approved by EU leaders July 21.

“We can’t move along without real implementation of fiscal reforms and we are late,” Venizelos said at a conference in Athens today. So it's not looking rosy in the land of ouzo either.

IMF and EU monitors suspended their review earlier this month after discovering an unexpected hole in the budget. Evidently, Greek officials are still playing hide and seek with other people's euros.

6) Meanwhile, new taxes can’t be “incessantly” imposed because of the inefficiency of the tax collection system, Venizelos said. They can't collect them, so why raise them. Akin to saying "I spent all the money I borrowed, so why pay it back."

7) More news: yesterday, German Chancellor Angela Merkel’s party lost a regional election in Berlin, the last of SEVEN state ballots this year that have seen the coalition parties punished amid voter anger over her handling of the debt crisis.

Wasn't SEVEN a really creepy horror movie? It still is apparently. Merkel will soon have to decide where her allegiance lies. With Germans or with the EU. Neither outcome assures smooth sailing.

8) Even more news: Greece's PM Papandreou canceled his planned week-long U.S. visit.

Papandreou had planned to meet officials including IMF Managing Director Christine Lagarde and U.S. Treasury Secretary Timothy F. Geithner on his trip to New York and Washington.

This could be the set up for the ‘We Can’t Pay’ excuse.

9) Fresh from Rikers Island Detention Center and keen to repair his image, former IMF head Dominique Strauss-Kahn said that forcing Greece to pay back its debts would unacceptably impoverish the country, and that everyone must be willing to accept losses on Greek debt.

“They can’t pay,” Strauss-Kahn said in interview yesterday with France’s TF1 television. “The efforts of European leaders have been too little, or too late, or often both too little and too late.”

10) Papandreou may soon be following Merkel into the horror genre. Higher taxes and cuts in wages and pensions in return for a 110 billion-euro package of loans from the EU and IMF in May 2010 have weighed on Papandreou’s standing with Greeks, with his Pasok party now trailing the opposition in polls.

Nine in 10 Greeks are dissatisfied with the government and opposition’s handling of the crisis, according to a poll of 1,216 Greeks by Public Issue for Kathimerini newspaper on Sept 11.

New Democracy leader Antonis Samaras yesterday repeated a call for elections, promising Greeks he would renegotiate the terms of the financing package if his party wins a majority in parliament.

“The biggest weapon the country has right now is elections and clear solutions,” he said. New Democracy needs “the clear mandate of the people to renegotiate” the agreements.

11) This could quickly develop into approach that Iceland took when its citizens overwhelmingly voted to reject repayment to Britain and the Netherlands. Stay tuned.

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Special thanks to Bloomberg for the raw material for this news mash up.