Germany Sets Greek Restructuring Deadline: End Of Summer

Tyler Durden's picture

In a very unstunning development which would expose all those Greek and EU proclamations about a solvent Greece for another relentless barrage of lies, it appears that Germany is now resolved to not only restructuring Greece (and with certain Greek bonds trading around 60 the market has effectively thrown in the towel), but has provided a timeframe in which this should occur: "German government sources said on Monday Greece will likely restructure its sovereign debt before the end of summer, putting a time frame to recent speculation that sent the euro to its lowest in two weeks. "Decisive voices within the federal government expect that Greece will not make it through the summer without a restructuring," one high-ranking coalition source told Reuters. "That does not mean that the federal government is striving for (a restructuring) but such a step will probably not be avoidable," he added, echoing views from other coalition sources." Supposedly the thinking in Europe is that banks should have built up a sufficiently large capital buffer to where the permanent impairment of Greek senior debt will not lead to another bank run. The question however is how well has Europe considered any other unpredictable consequences, which by definition, are "unpredictable." Recall that the financial system nearly ended after the Lehman bankruptcy following the freeze in money markets: a side effect that nobody had expected at the time. What will happen this time around when Greece becomes the first "Lehman" in the sovereign realm, and just how many trillions will have to be invested to undo "unforeseen" consequences?

More from Reuters:

The sources did not say what sort of pressure, if any, would force Greece to change its oft-repeated stance that it would not seek to restructure its debt.

They did not specify the form a restructuring could take.

The comments sent the euro to its lowest level against the dollar since April 7, according to Reuters data.

Athens on Monday reiterated it had no plans to restructure its debt, a move its central bank chief said would be catastrophic, but markets continue to speculate that some form of restructuring is on the cards.

The IMF, European Central Bank and European Commission will examine in June whether Greece has met the prerequisites to receive the next tranche of its 110 billion euro bailout package.

In an interview in Die Welt published last week, German Finance Minister Wolfgang Schaeuble said "additional steps" would need to be taken should the progress report in June conclude there are doubts about the fiscal sustainability.

Schaeuble added then, however, that any restructuring would have to be voluntary if done before 2013.

Either way, once can safely predict that should Greece be restructured by the end of August, then Portugal and Ireland will certainly be in the same camp by the end of the year as popular anger at inequitable treatment threatens the local political regimes. The only question is whether this upcoming peripheral Tsunami (which will also most likely require the bailouts of Spain and Italy) will also pull the core into the vortex. Regardless, the experiment in EURUSD levitation on nothing but bad news is about to end with a thud.

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EscapeKey's picture

 Supposedly the thinking in Europe is that banks should have built up a sufficiently large capital buffer 

Not necessary, they've offloaded each and every bond onto the ECB.

The entities which will hurt are the pension funds.

Quintus's picture

Yeah.  How much Greek Debt has been stuffed into local banks and pension funds to make it look like there was a market for that junk.

Greek pension funds take haircut = more Greeks riot in streets.

topcallingtroll's picture

I dont think the greeks were stupid enough to eat their own cooking. After all, they worked in the restaurant and knew better than to risk their own health.

topcallingtroll's picture

Yeah it appears now they have been quietly planning this for a while, public statements to the contrary.

Alcoholic Native American's picture

Austerity is for losers.

Sudden Debt's picture

It's like they asked for a solution on how to handle their debt problem to the makers of TheOnion...


Monthy Python would be my second guess...




topcallingtroll's picture

Hey belgium dude. Give us a european view of the greek mess.

EscapeKey's picture

The UK view is that people are pretty pissed off with having to bail bankers out, not just in our own country, but also abroad. We have to contribute to a continuous amount of bailouts, despite being borderline broke ourselves.

topcallingtroll's picture

But it is greek citizens who will get mad when you.end their subsidy and cut up their credit card. Arent some pissed at subsidizing greeks too?

EscapeKey's picture

Well, afaik most just "blame the bankers" rather than aiming their anger specifically at the Greeks, Portuguese, Irish, ... Never underestimate a convenient target (not saying they're not guilty, but it's a lot easier just directing all anger at a scapegoat, than accept that states effectively have gone bankrupt through unsustainable deficit spending).

Sudden Debt's picture

Nobody actually gives a fuck, all is well in lala land :)


But the smart peopel are protecting themselves for inflation bigtime. The housing market is actually profiting from it because that's the easiest way to invest your money and keep it a bit safe.

Forecast for inflation are expected to be twice as much as it was in 2010 (2.7%)

Defaults on the PIGSS would actually be a good thing. Everybody is talking about a lockdown from the financial markets but if they would actually restructure, my guess is that it would only tak 3 months before they could enter the bonds market again and sell at a very good rate.

And that will cause the house of cards to fall even faster and push about 7 to 8 EU countries in default.



Confused's picture

I was just speaking about this with some of my German friends. They all seemed rather concerned.

But from the looks of the NYT article this morning, we are aiming to keep the Germans in line. What a load of shit.

topcallingtroll's picture

Hey belgium dude. Give us a european view of the greek mess.

topcallingtroll's picture

Austerity is the financial equivalent of ignoring gravity. It is the splat you hear and feel when you cavalierly dismiss forces of nature.

topcallingtroll's picture

What about moral hazard as the outraged irish and.portoguese demand their own restructuring.

This is going to to watch. Pull up a chair and pop a cold one.

We need zero hedge where we can hang out, get drunk, debate, and watch the show.

Urban Redneck's picture

I wonder how many of the big exporters have been calling the Bundesbank to complain about the Euro recently.

topcallingtroll's picture

Good point!

Surely the world doesnt run that cynically does it?

( sound of silence, then cue lone cricket)

heyligen's picture

So prepare for the great Greek flu this summer. Highly contagious (difficult to contain, Bendonkey). From Greece to California and beyond.

Josh Randall's picture

Nice, Summer is always good for a financial Blitzkreig

milanitaly's picture

Now we have discovered the real goal of banks' "stress tests".

To have time to face what ECB knew very well: the restructure of Greece debt.




topcallingtroll's picture

They made public announcement of support and stability to quietly get all their ducks in a row and let the big players offload their bonds.

The ecb and emu will never have credibilty with ireland portoguese or spanish reassurances that all is well.

They have now lost their credibility. No one will ever believe them when they say contagion is contained. We will all assume they are quietly helping the big players offload their positions.

mynhair's picture

Will the Acropolis auction be held online?

StychoKiller's picture

If they could get Mike Holmes™ to rennovate the Parthenon, Greece could name their price!

Hansel's picture

So they admit a restructuring is needed, but they are going to kick the can for 4 more months anyway?  F'n procrastination planet.

milanitaly's picture

Give German banks time to sell the last greek bonds

i-dog's picture

German bankers don't want their summer on Santorini spoiled.

monopoly's picture

The ooze just keeps slowly moving forward. Cannot believe so many sheeples have no idea what is occuring on this planet.

And why would anyone have 1.00 deposited in C.


And they just cut our debt outlook to negative. It is starting.

Flounder's picture

I agree with George Papa.  Why not extend the maturities out to infinity and make interest payments by selling more Greek infinity bonds?  Nobody ever gets their principal back only an income stream of German based euros.  What could go wrong?


Seasmoke's picture

is this called extend and pretend or kick the can

topcallingtroll's picture

As the chinese say .....same bed, different dreams.

StychoKiller's picture

Seems more like different bed(s), same nightmares!

giovanni_f's picture

ECB has ouzo bonds on its balance sheet. I am curious what bond restructuring restructuring will mean for the Euro


kaiten's picture

"What will happen this time around when Greece becomes the first "Lehman" in the sovereign realm, and just how many trillions will have to be invested to undo "unforeseen" consequences?"


Nothing will happen because since Lehman central banks (re-)discovered the magic of printing presses.

sangell's picture

Guess wants to get its EFSF contribution paid back now before G-PAP can do an Ireland with it and pour every EURO he can get his hands on into Greek Banks.