End of the line for the euro 4/4: Shanghai endgame
17 August 2011
In the last episode of the political fiction published by Le Monde, a journalist for the Wall Street Journal finally catches up with the source of the document that has rocked the Eurozone and sowed panic in stock markets all over the world. Excerpts.
Shanghai: 9 AM, Sunday 10 June, 2012. Alice J. Singer watched the businessmen from Brazil, the US and Korea to and fro across the lobby of the Shanghai Sofitel, reflecting that the entire planet of global business was passing before her eyes. The décor was bland. If not for the exotic features of most of the guests, she might have been in an upmarket hotel in Frankfurt, the latest in a string of cities that she had been instructed to call home.
She had been bored out of her mind for the first few months until she encountered Matt, a stock trader for Goldman Sachs who had learned to appreciate all of the ins and outs of the provincial German city without ever losing his New Yorker’s sense of humour. He was the one who had made sure that all of the city’s doors would be open to her, and he had also been the one who told her she should meet Ingo. "He really wants to talk to a correspondent for a major English language newspaper,” he said. That had been three weeks ago.
To date, she had spoken to Ingo twice. Initially, he had seemed paranoid, insisting on all kinds of crafty tactics. But Matt had been right: he was more than worth the effort. Ingo had led her to the source of the financial tsunami that had swamped the ECB for several weeks. When she first heard his story, she could not believe her ears. Then on the day of their third rendezvous, Ingo did not turn up. A couple of days later, she received a message from Shanghai: "I will only speak to you, and only face to face." Fortunately, she already had enough information to convince the editor in chief to send her China for an other meeting with her informer. And that is how she found herself on a Sunday morning waiting in a hotel lobby some 9,000 kilometres from the place she now called home.
“Hello, Ingo. What a surprise!" she said smiling.
In the street, they headed towards a park to escape the din of the traffic.
"I still haven’t understood how you came to write the document you showed me, Ingo. What motivated you to write a fake coalition agreement between the CDU-CSU and the FDP?
“I got the idea from Markus, a friend who works for a role-playing games publisher in Hamburg. One night when he was visiting Frankfurt, I explained to him how I spent my days dreaming up various political scenarios with my colleague Johannes on the Reuters chat service. He was very enthusiastic. He said: "Put together a political-financial game on the theme of the fall of Merkel, and I will pass it on to my boss. You’ll be a huge hit." I immediately called Johannes in London, and we started work on materials the same evening. That is when I drafted the coalition agreement. I even designed a 100-deutschmark note with a portrait of Adenauer against the backdrop of the Waschmachine."
During the weeks that followed, text and image files flew between Frankfurt and London as the two friends developed a host of dramatic scenarios, including stock market crashes, which were to feature as part of the game. Then on 19 May, Ingo came upon a Spiegel Online article which cited and published a draft coalition agreement which he himself had written as evidence of an anti-Merkel plot.
"From then on, I was very worried. I didn’t understand how our documents could have wound up on the Spiegel website, and I had no idea why they had been presented as genuine."
“Had anyone called you?”
“No, no one.”
“But how did the documents leak out?”
“Maybe our computers were hacked. We didn’t take any precautions. For us, it was only a game."
Before leaving Europe, Alice had spoken to Johannes in London, who put her on the trail of colleagues in the hedge fund where he worked. Someone had obviously manipulated the folder where he kept the fake documents and then disappeared.
"When the article was published, I thought of going to the police. But Johannes said: "Just drop it. They’ll think you are a mythomaniac."
“Do you think you might be charged for manipulating the market?”
“Not in here in China.”
“Don’t you want to go back?”
“I’d rather stay away from the explosion, thanks."
Alice now had all the pieces of the puzzle. Her main goal in going to Shanghai had been to record one more interview and to recover a USB key with all of the documents.
"Thanks," she said, placing the device carefully in her handbag.
She now knew even more than Ingo himself. From one of her newspaper’s sources in London, she had learned that a senior manager at the fund where Johannes worked had forwarded the documents to the Foreign Office and MI6. Sometime later, there had been a CIA report to the effect that the documents appeared to confirm data from its sources in German political circles.
At 10am, Alice went back to her room at the Ibis. She still had two hours to finish her article, which just needed a few more quotes. She had promised New York it would be ready for midday Shanghai time, by then it would only be eight o’clock in the evening on the East Coast of the US. She was momentarily fascinated by the idea that her article would be read in Frankfurt or Paris on Sunday morning, long after Sunday morning in Shanghai was over. It had never occurred to her that the Chinese had an 11-hour head start.
Shanghai: 7pm, Sunday 10 June, 2012. While Alice registered for the next flight from Shanghai to New York, in Paris, where it was 8am, French Agriculture Minister Bruno Le Maire savoured a few moments of calm in his Parisian apartment. Later that day he was to travel to Evreux to vote in the general elections, accompanied by his wife and their two sons. He was not worried about his seat in parliament.
He leafed through a pile of weekend newspapers which had been freshly delivered by gendarmerie dispatch rider. The French titles seemed to focus solely on the risks of a surge in support for the Front National, the scenario of a minority government, J.P. Morgan’s takeover of the Société Générale. Feeling slightly queasy, the MP picked up a copy of the Wall Street Journal. His attention was attracted by an enigmatic front-page headline: "Leaked Document Fake," from the paper's special envoy Alice J. Singer in Shanghai.
"The supposed plot against Chancellor Angela Merkel, which caused a dramatic slump in financial markets over the last few weeks, has turned out to be an elaborate hoax. Based on a rumour traced to a trading room in Frankfurt, via a series of remarkable coincidences, the story was accredited by senior operatives in European and US intelligence services before being published on May 19 by Spiegel Online. However, the document allegedly detailing a secret coalition agreement, which was made available by the German website, has turned out to be a fake... The WSJ has met with the man behind the story that brought Spain to the brink of default, who has now fled to Shanghai... "
The article, which filled three columns, was punctuated with shocking revelations from the trader.
"The affair clearly served the interest of a number of hedge funds, which have reinforced their short positions on peripheral country sovereign bonds and vulnerable European markets over the last few weeks. These funds, which had access to confidential information that had been erroneously disseminated by government sources, would certainly have lost their investment, had it not been for the May 11 decision by the German constitutional court, which led to a drop in the market... In what one analyst described as as ‘a particularly amoral and ironic coincidence,’ market positions based on false sources were in fact rewarded by the court ruling, although the decision came too early for them to realise truly big gains. Nonetheless, it is reported that Paulson & Co, managed by John Paulson, may have accumulated several million dollars in the course of this quarter... "
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