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Game Over: EuroStat News Blows Up Greece - 3 Year Spread At Ridiculous 870 bps, 5 Year CDS Hits Record 565
We warned you (here and here). EuroStat reports that the Greek budget was really 13.6% of GDP and the Debt/GDP is more like 115.1%. Greek bond spreads explode to a ridiculous 562 bps on the news, 3 years are at 870, and 5 year CDS is at 565.
From Reuters:
Greece and Ireland
had much larger budget deficits last year than expected and the Greek
data may be revised further due to its unreliability, the European
Union's statistics office said, sending the euro lower.
"It looks like a terrible situation just got worse," said Nick Kounis, economist at Fortis.
Greece, now negotiating a three-year emergency loan package with the European Commission, European Central Bank and International Monetary Fund, had a gap of 13.6 percent of gross domestic product, rather than 12.7 percent as reported earlier, Eurostat said.
But the deficit may turn out to be even higher.
"Eurostat is expressing a reservation on the quality of the data reported by Greece, due to uncertainties on the surplus of social security funds for 2009, on the classification of some public entities and on the recording of off-market swaps," Eurostat said in a note attached to the data.
"Following completion of the investigations that Eurostat is undertaking ... in cooperation with the Greek statistical authorities, this could lead to a revision for the year 2009 of the order of 0.3 to 0.5 percentage points of GDP for the deficit and 5 to 7 percentage points of GDP for the debt," it said.
Greek government bond prices and the euro fell after the data with the Greek/German 10-year government bond yield spread up at 542 basis points from around 516 bps at Wednesday's settlement, surpassing the previous peak of 532 bps as the 10-year Greek yield hit a new high of 8.5 percent.
"What concerns me is the general uncertainty about the Greek official figures. This affects market perception about Greece ... that one can't rely on the Greek statistics and that the deficit is revised up and up and up," said Giada Giani, economist at Citigroup.
The euro fell to around $1.3372 from around $1.3410 before the data.
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"What concerns me is the general uncertainty about the Greek official figures. This affects market perception about Greece "..
Insert USA for Greece in above..when will Giada
report same? Soon very Soon.
My thoughts exactly; I didn't see your comment previously and posted basically the same thing below. lol.
It's game over for every country, you just didn't get the memo yet. The end has always been known, the exact time and insignificant details have not been known.
It's over guys, this will be happening to your country and/or state.
"Over? Did you say over? Nothing is over until we decide it is. Was it over when the Germans bombed Pearl Harbor? Hell, no."
Sheesh! To think that the Japs have been taking credit for this event for so many years.
HBO will have to reshoot The Pacific.
lol. Talk about one word taking all the credibility down the toilet :o)
Bada
Unfortunately it was over before it started. We know how this movie ends, lots of bodies.... won't be as pleasant as an Animal House movie.
LOL, perfect!
Now that the PIGS are toast - time to focus on the PUKES ( Portugal UK Spain)
Tyler, can you post a picture of the Greek yield curve?
Can Eurostat do an audit of US finances, and separately, the Fed? I think you can just fill in the blanks from this statement
"What concerns me is the general uncertainty about the _____ official figures. This affects market perception about _____ ... that one can't rely on the ______ statistics and that the deficit is revised up and up and up," said Giada Giani, economist at Citigroup.
And, as Greece's problems get worse, retail stocks go up even faster!!!
NFLX up $3.50 pre-market:
SNDK up $2 pre-market
Marriott up another 1%
Macy's up 1% pre-market, another new high:
And the U.S. Nightcrawler is still going up....
And don't forget bonds, as the slightest whiff of a stock market correction sends interest rates even lower, enticing even more speculation in consumer discretionary stocks:
Surprise suprise....
Greece blowing up and MSM is focused on Obama.
wouldn't want the markets to tank to early. It might send the wrong sign.
The Irish deficits are up because Eurostat decided to factor in the cost of the Anglo Irish bailout in the general government figures.
Again to repeat myself again if the Irish Government continues to take the weight of Irish banks external debt we are toast.
There will come a time when we will no longer have anymore blood to give.
I feel for you guys, it is most ridiculous that the Government continues to burden the people with the banks' stuff ups.
It is worldwide however, I would imagine that when the Canadian and Australian housing bubbles blow up, they are going to have to do the same. Bigger economies, yes, but big, big bubbles too. Bernanke would be proud!
There is this false argument going around this land that if we do not bail out the banks our ability to raise sovereign funds on the bond markets will be compromised.
This is plain hogwash , our interest rates are the second highest in the euro zone directly because of the banking subsidy.
What does not show up in the general government figures is the extraction of money from this economy via the banks who have to reduce interest on deposits and continue to raise mortgages - this reduces wealth in this little country and eventually this shows up in the government figures as a mysterious drop in tax revenue.
I am convinced that this is more then general government ignorance or corruption , the ECB is protecting its buddies who hold bank paper at all costs and if we murmur dissent they threaten us with euro expulsion into the great bond wilderness.
We are the lab rat of the euro experiment - first feed the little paddy rodent with as much as it can take then starve the fucking animal for as long as is possible.
I guess they will be surprised with the amount of pain we can take but when they are finished with us they may decide to bag and bin us as we will be no good for anything when this is all over.
Why is 870 bps "ridiculous?" Junk bond spreads are in that neighborhood (we own some) and thanks to bailout nation USA these companies have a hell of a lot better shot at recovery than Greece. After all Greece can't downsize its workforce, increase its prices, reduce its benefits to employees, or (clearly) issue bonds with no trouble at all. 1870 would be "ridiculous" but 870 seems a bit too low to us. Seriously.
Today in WSJ, traders of Greek bonds aren't sure if the yield moves mean much because the volume is so small!
Duh! Nobody wants Greek bonds and those that have them know they can't sell them. There is low volume in the market for firearms that explode when you shoot them also.
WSJ also has picture of union protesters blocking a ferry's departure during a 48 hour strike.
Greece must be allowed to fail and perhaps the chaos there will wake up other countries to what must be done to prevent sovereign defaults elsewhere.
None of us "wants" to give up government benefits/pensions but if we cut government spending dramatically (about 50%) now, there will be something there in the future. If not we will soon (few years) lose it all.
Chris Christie seems to get it in NJ. Few others I have read about really do (Ryan's plan is an exception). To me, this isn't about Greece (sorry the Greeks have to suffer to make a point, but they earned it). This is about the USA's future. Every govt pension (including mine) have to be slashed dramatically now or else (don't ask what I think the "or else" is).
None of us "wants" to give up government benefits/pensions but if we cut government spending dramatically (about 50%) now, there will be something there in the future. If not we will soon (few years) lose it all.
+100 This is unfortunately going to cause a lot of pain for a lot of folks, but not enough people have wrapped their heads around the idea of "unsustainable", and the very bad things that happen when you ignore an unsustainable situtation and let it unwind in an uncontrolled manner.
Game is over when savers will have Greek Dracma, Spanish Peseta, Italian Lira, German and French Franc...back in their accounts. But this is a "political decision", not a market one... PIGS are toast? Italy is toast since Soros pushed the Lira out of the SME in 1992. Just thanks to the LTCM guys it entered the main door of the Euro: not because of economic fundamental. Meaning: the game for everyone in Europe except Germany is over since years...but political miracles have the ability to extend the extra time.
If the EUR continues to struggle with its essentially structural/insoluble problem - the US Dollar will be left with NO competition . Then the US can do anything it wants. Keep rates at zero, fiscal spending etc. Only constraint will be oil prices. So some "administrative" measures will need to be applied to keep oil prices contained. Other than that - it will be pedal to the metal. What is the consequence? A Dollar collapse? Against what? Oh i knoe gold - but thats OK the US has more gold than any other single country - and if gold goes to 5000 - so what?
Exactly.
Bernanke and Geithner are just sitting there laughing.
They know that trillions in deficits can now be financed to infinity at 40-year low interest rates, as investors clamor for U.S. Dollars as there is no alternative.
The Perpetual Motion Machine continues.......
If default is inevitable for many, is there a benefit to defaulting first?
YOU'VE GOT IT: EUR/USD @ 0,90 WITHIN XMAS TIME...!!!
On a short term basis it looks like the European problems (Greece, etc) are making Treasuries look better on a relative basis. This might be a good time to begin selling US bonds due to price firmness.
Right so EUR/USD at sub -par will make Germany hypercompetitive so they can fight it out with the Asians to supply us American dopes with nice products. How will we pay for it? With Dollars of course - that uncle Ben will GIVE us. Everybody happy.
...everybodies happy except European Mammuth...like me!!! But your view makes a lot of sense to me: Germany...is Germany...and it is not a fake Euro which can equals Germany's economy to the non-existent economies to the rest of Europe. Anyway: will open a restaurant as soon as we will have the Lira back... USD always welcome!!!
Still not as bad as the US if you use proper US figures,... for e.g. adding in Fannie and Freddie debt. Throw in unfunded liabilities.... game over.
Sounds like a great investment since they are likely FDIC insured. I personally am waiting for the nigerian scam offering backed by the full confidence of he US government.
Then Wall Street will hum again. The most important element of the US economy? Huh? Yes - since we just consume products and give foreigners paper money Wall Street plays the key role in answering their question"what can we do with this paper money?". WS will provide 31 different flavors of paper with various enticing features to keep the foreigners amused as they gradually lose value ( sometimes suddenly- oops!). So the game can continue without an exponential increase in claims in the hands of foreigners. Since this is the main business of America we should have our best and brightest working on WS and be paid extremely well.
Stuart - the absolute magnitude of a country's liabilities are not the issue. Look these liabilities never get "paid back". They only grow as they must in a fiat banking system. The issue is the ability to finance the liabilities and maintain public confidence in the system. This requires the ability to maintain low interest rates and liquid debt markets and a financial system that can handle trillions/Quadrillions in trades. This is the main business of America. This is why WS makes all the profits in this economy.
reply to"primefool "
I totally agree in principle. However for governments to be able to "finance the liabilities" indefinitely, they must increase their income since the debt keeps increasing and interest rates cannot be negative. So the logical conclusion is that taxes must go up, and for that to work indefinitely, salaries have to go up as well, which means that inflation MUST increase, and increase exponentially since everything else increases exponentially as well. Of course this doesn't happen in real life and you can see this process taking place on a shorter cycle in the conventional business cycle where bad debt get cleaned out of the system before increasing again.
So the bigger logical conclusion to all this is that all governments bad debt will eventually get cleaned out of the system,and we'll start another grand cycle of debt ramp up. I just don't see how this process can go on indefinitely without 1) endless debt monetization from all countries and 2) endless global stagflation.
Just default already, DAMN!!!!