As Europe Stares A Break Up In The Face And PIG Bonds Plunge, Its Finance Ministers Are Holding More Meetings

Tyler Durden's picture

The next two days will be very exciting in Europe: as noted previously, tomorrow Greece will experience a general strike, another parliamentary square blockade (with or without an evacuation tunnel involved) and most importantly, an MP vote on the Troica's "bailout" measures. Yet the vote appears far from certain to pass affirmatively, just as the entire bailout hinges on some incomprehensible "voluntary" definition which may or may not trigger a "selective" rating agency default anyway. As a result the bonds of Greece, Ireland and Portugal are once again trading at all time record high yields as the market has zero confidence the Eurozone will succeed with this juggling act. In order to prevent a last minute breakdown of the Eurozone, its finance ministers are holding another emergency meeting later today hoping desperately that a deux ex machina will just fall into their laps: "Yields on 10-year Greek bonds climbed to 17.12 percent today, a record in the 17-nation euro-area's history, before an emergency session of finance ministers in Brussels. They’re seeking to narrow differences on how investors share the cost of easing Europe’s biggest debt burden and to wrap up a new financing plan at a leaders’ summit on June 23-24, a year after Greece received a first bailout." All this is just theatrics to avoid the impression, and reality, that Europe is now completely powerless: "Greece will default; it’s a question of when, rather than
if,” said Vincent Truglia, managing director at New York-based
Granite Springs Asset Management LLP and a former head of the
sovereign risk unit at Moody’s. “It’s a basic solvency issue
rather than a liquidity issue. Only a debt writedown will do." Which incidentally is as we have been claiming since January of 2010. But it seems that for the currency experimentalists, reality is something best postponed (even at a cost of trillions of taxpayer money).

For those curious, here is Goldman's Dirk Schumacher, who once used to be so cheery on the topic of Greek solvency, explaining what to look for at today's emergency ministers meeting. Dirk is no longer cheery.

Finance minister meet today in Brussels to discuss second Greek help package. The main issue is still the question of private sector participation, though there has been also no decision on the overall size of the package and how the package will be funded. Comments made by policymakers over the last couple of days seem to suggest some progress on that front but there has been no breakthrough yet.

One necessary condition for a compromise is that the Greek parliament approves the new medium-term fiscal plan. Moreover, a support for the plan by all political parties in Greece is seen, according to EU Commissioner Rehn, as crucial to reach an agreement on further financial help.

At the same time, Bundesbank head Weidmann wrote in an op-ed for Süddeutsche Zeitung that "there is nothing wrong with a voluntary maturity extension … However, the risks would outweigh the benefits in case of a forced maturity extension". The main risk, according to Weidmann, is that the funding situation of other countries might become more difficult in such a case. Weidmann, however, also stresses that "these risks would be unavoidable, if Greece were not to fulfill its part of the deal".

It is not clear why the difference between a voluntary and involuntary maturity extension is so crucial if it is indeed the contagion effect that the Bundesbank is worried about. After all, contagion reflects a herding behaviour among market participants that is not rooted in fundamental analysis and it is ex ante difficult to say what will be a trigger such an effect.

In any case, the German government is certainly aware of the ECB's stance on the question of private sector participation. Deputy finance minister Kampeter, speaking to Deutschlandradio, said that: "The fact is, we won't do anything that is against the expressed advice of the European Central Bank".

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Cassandra Syndrome's picture

There are rumours doing the rounds about Portugal defaulting tomorrow. Source is a report from High Frequency Economics.

Quintus's picture

Why tomorrow?  There's no major event due that would trigger a default, as far as I know.

Cassandra Syndrome's picture

It has around €5 Billion of Bonds maturing tomorrow.

lizzy36's picture

The 1 & 2 yrs yield just took out the all time highs they set May 9th. Lot's of nervousness on their redemption tomorrow

hugovanderbubble's picture

Honestly till Ecofin meeting no move...

I agree Portugal will need Haircuts yes or yes.

Dont trust those rumors,,,

(Too much money in Quarterly Expiration) Just follow the bonds and spreads...

qussl3's picture

I just love the magically levitating EUR, when i get bored at work, checking the spot is good for a laugh.


Instant Wealth's picture

..and when it all goes down the drain, markets will be closed.


Version 7's picture

Can't remember who said that a man goes broke slowly at first, and then all at once.

Apparently countries are no different (ok, maybe faster).

hugovanderbubble's picture

Its not levitating, its more than that...


If US suffer in exports....US GDP for 2012 will be negative, so they have been doing super road show all across Asian Central Banks promoting..."diversify fx"....

so Asean central banks supporting Euro...but in the long term they are helping US exports...


Cos US doesnt have internal growth, just PUBLIC and exports....


Welcome to the next bearish cycle till 1.100 (Big 38,2% retracement support), then ... The Fed will use the last bullet of ammo (qe3...) , its my humble opinion.


Markets are completly inflated and has been pumped with QE´s and no volume .


The biggest threat for US economy is to combat deflation and deleverage and not become Japanizated (80-2010)

qussl3's picture

The germans would kill any chance of US exports with the EUR at 1.1, wont be the least surprised that a more permanent resolution to this fiasco is Germany "encouraged" to go their own way and go back on the DM.

Corduroy's picture

Just default already !

We must move into the future and stop living in the past - what will be, will be.

HpDeskjet's picture

Majority of Dutch parliament is against more greek aid without restructuring at least some part of the debt

It is in Dutch, but the message is as I said

Reptil's picture

thanks.. (klinkt als "einde oefening")

Reptil's picture

Article has disappeared. Probably the real situation on the ground in the Netherlands is not of interest to the readers.... :-S

INSTEAD there's this crap:

Nout Wellink, one of the people that worked in 2010 to find a "solution" to "solving" the greek debt crisis, now says that in case a bailout is not supported, the risk of contagion will be greater so there must be 1,5 trillion put in the ECB.

My take:

If you can't do it through the right, then take a left turn around the problem. IMO it's clear that this is the start of a "Quantative Easing" type program, to put Europe in a simular position as the USA. It's politicians that said this is a "liquidity" crisis, and now face the fact it IS IN FACT A SOLVENCY CRISIS, now trying to convince everyone they were right in the first place. Instead of solving the issue, they're only going to throw good money after bad. If this goes trough it means a large sum of money is transferred from public funds (accountabillity) to the ECB, to spend on providing more "liquidity". I thought they were "tightening". Seems to me the Jack is out of the Box now....

Sudden Debt's picture



Zero Govt's picture

yes Committees is yet another 'institution' like Govt that is proven absolute shite at decision making

...remember adding another layer of committees (crones) in the non-Executive Board wasto over-see and ensure good corporate governance?

...much like Regulators, Accountants/Auditors and the Judiciary they sure add another layer of wages and another layer of waffling self-important crones to the excess fat at big public companies but please send in your suggestions how they added any value or stopped any ship from capsizing

...what a blessing the committee system is ...doing a fantastic job adding value at the EU i see and what tremendous problem solving too 

Problem: Debt. Solution: More Debt ...the absolute genius of Committee group-think

Corduroy's picture

The June 15 total solar eclipse belongs to Saros Cycle 130, which began on June 10, 1416 – the year that the Chinese fleet commanded by Zheng He reached Aden, and after looking around decided that the Middle East (and Europe, for that matter) was so backward as to be of no interest to China.

fredquimby's picture

It would be nice to hear some opinions out of Greece about the Greek situation rather than just Wall Street shills shouting and Goldman spivs spewing.


youngman's picture

Unfortunatly they lie thru their teeth....they lie on their taxes..their income...they lied to get in the EU..they will lie now to get more cash..then they will lie during the is the Greece way....

rufusbird's picture

Say anything, just to get those panties down...

oogs66's picture

How did Greece issue 26 week t-bills?  Forced Rollover already?

doesmybuttlookfatinthis's picture

It looks like the PIIGS are gonna be Greeced tomorrow.

Instant Wealth's picture

Here is a greek opinion:


A bad ending follows a bad beginning.
- Euripides

americanspirit's picture

The EU will succeed when piigs can flee.

AUD's picture

hoping desperately that a deux ex machina will just fall into their laps

They could start selling US debt.


BigJim's picture

Or their gold. I'm sure China & Russia would be interested purchasers.

The Greeks should default, go back to the drachma, and then privatise their assets to raise cash during the period investors lick their wounds and shun their bonds.

A Dim View's picture

I've lived in Greece for 6 years now & there was never any chance of saving the situation. It was doomed the moment the Bank of Greece let the cat out of the bag in august 2009. The whole revision of deficits etc was just a monumental PR exercise by Europe to cover its ass.

The culprits got off scott-free, the politicians sold their souls to save themselves & the public don't want to face the truth that they supported a corrupt system.

The banks who lent the money knew categorically that the finances came from the land of Makebelieve, but hey, commission is commission, so they trousered the cash & ignored it. Now the ferryman has arrived & they've ALL shat themselves & are blaming each other. It's 1 minute to midnight & the whole shebang, europe-wide, is about to blow...

topcallingtroll's picture

This is the most succinct account I have ever seen.

Now if you can translate it so the sheeple understand then perhaps even they might be more enlightened

gwar5's picture

World to Greece: Stop being pussies and default already.

Show the bankers how it's going to be and start printing Drachmas already to show the EU there's no going back.


topcallingtroll's picture

They don't want to default because then they would actually have to live within their means. 

They want the bailout money to keep coming.

nicxios's picture

If 'they' is the majority of the population, that's flat out wrong.

Reptil's picture just in: In the Netherlands the coalition party PvdA has put demands on Minister De Jager by demanding (transl: "eis") that the senior bondholders will also take a haircut. Also Ronald Plasterp said the minister "must stop telling fairytales that the banks are going to collect all their debt"

If the Netherlands don't agree to a further bailout, it's not happening: There has to be a unanimous descision.

Unless the ECB and Minister De Jager come up with a plan where a "credit event" is avoided and there's "voluntary participation" of the bondholders, the whole thing is toast.

source: NRC Handelsblad

ElvisDog's picture

Am I missing something? How does extending maturities improve the chances that Greece will pay back its debt? If they can't pay the interest now, how can they pay the interest now + 5 years?

Dick Darlington's picture

It's called kicking the can. The whole idea behind extending maturities has NOTHING to do with helping Greece. It's just yet another way to buy time and transfer the risks from banks into public balance sheet.

AldoHux_IV's picture

The biggest assumption that all these unworthy policymakers are making is that they can continue the sham that is the current financial system.  It will be the ultimate bubble to pop and it will be ugly for them.