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Greece and the Greek Banks Get the Word "First" Etched on the Side of Their Domino
The Greek Tragedy is unfolding pretty much as I expected. Readers, at
least (if not Greek citizens) should be comforted to hear that things
are going as anticipated. From CNBC: Greek Bank Shares
Fall on EU Support Worries
Greek bank shares fell more than 4.0 percent on Thursday,
underperforming the broader Greek market, on worries Greece may be
forced to turn to the IMF to deal with its debt crisis for want of EU
aid."There are concerns over the lack of concrete EU support and because
Greece seems to be dragged towards the last resort, which is the
International Monetary Fund," Cyclos Securities analyst Constantinos
Vergos said.Shares in National Bank, which reports full-year results after the
market's close, were down 3.8 percent to 15.03 euros, withAlpha
Bank shedding 4.1 percent.
"The IMF scenario was off the table but now seems to be coming back,
raising question marks as to what this would entail," said analyst Nikos
Koskoletos at EFG Eurobank Securiries.
For those subscribers who didn't get to act on my Greek bank warning a
while back (see Banks
exposed to Central and Eastern Europe and Greek
Banking Fundamental Tear Sheet), don't fret. If I continue to be
correct, this is but the tip of the iceberg, subscribers see Greece
Public Finances Projections). The Greek PM is implicitly backing my
analysis: Papandreou Urges EU Emergency Plan After German Officials Suggest IMF Aid
March 18 (Bloomberg) -- Greek Prime Minister George
Papandreou set a one-week deadline for the European Union to craft a
financial aid mechanism for Greece, challenging Germany to give up its
doubts about a rescue package.Papandreou said he may turn to the International
Monetary Fund to overcome the debt crisis unless leaders agree to set
up
a lending facility at a summit March 25-26. The IMF option has already
been dismissed by European Central Bank President Jean-Claude Trichet and French President Nicolas
Sarkozy, who say it would show the EU can’t solve its own crises.
He's throwing the gauntlet down, and the gauntlet is made
out of US forged IMF metal. Greece is willing to diss the EU in order to
offer an ultimatum. Whose going to be the first to flinch?
“It’s an opportunity to make a decision next week
at the summit,” Papandreou told reporters in Brussels today. “This is
an
opportunity we should not miss. When you have that instrument in place,
that could be enough to tell the markets hands off, no speculation, let
this country do what it’s doing.”
After reviewing your austerity plan, it appears that you
are doing more speculation than the market!
Greece pinned its hopes on the Brussels summit as
German officials voiced qualms about an EU-led rescue, potentially
backtracking on a commitment hammered out by finance ministers just
three days ago. Greek bonds and the euro fell.Greece, which was brought to a standstill on March
11 by the second general strike this year, needs to raise about 10
billion euros ($14 billion) to refinance bonds that come due on April
20
and May 19. Papandreou said current markets rates are unsustainable.Brinkmanship
The yield on Greece’s 10-year government bond rose
12 basis points to 6.21 percent. The euro fell for a second day againstthe dollar, slipping as much as 0.7 percent to $1.3648. Credit- default
swaps on Greek sovereign debt rose 7 basis points to 295, the highest
in
a week, according to CMA DataVision prices.“There’s a good deal of brinkmanship involved to
get the EU and euro group members to come up with a more concrete
plan,”
said KlausBaader, co-chief European economist at Societe Generale in London.
“It’s also directed at capital Markets, to reassure markets that Greeceis not about to go into default.”
German Chancellor Angela
Merkel yesterday ruled out “overly hasty” aid pledges, shifting the
pressure back to Greece to fix Europe’s biggest budget deficit. Signs
of a split in the German government emerged after Finance Minister WolfgangSchaeuble endorsed the use of European channels at an EU meeting on
March 15....
The risk
premium on Greek 10-year bonds has more than doubled since the
beginning of November on concern about the country’s ability to bring
down last year’s deficit of gross domestic product, the largest in the
euro’s 11-year history.Papandreou’s government has passed three packages
of deficit reduction measures this year to try to convince the EU and
investors it is serious about bringing the deficit downto 8.7 percent of GDP.
I doubt this!
Soaring Greek borrowing costs threaten to erode the
fiscal gains made from forcing the country to make sacrifices including
wage and benefit cuts for public workers, Papandreou said.“We are under a basically IMF program, whether it’s
called that or not,” he told a European Parliament committee earlier.
“We don’t have on the other hand facilities that the IMF would give. Wedon’t want to be in a situation where we have the worst of the IMF if
you like and none of the advantages of the euro.”
Valid and honest point! For those of you who don't
subscribe, read up on my take on the Pan-European Sovereign Debt Crisis:
- The
Coming Pan-European Sovereign Debt Crisis
- introduces the crisis
and identified it as a pan-European problem, not a localized one. - What
Country is Next in the Coming Pan-European Sovereign Debt Crisis?
-
illustrates the potential for the domino effect - The
Pan-European Sovereign Debt Crisis: If I Were to Short Any Country,
- attempts to illustrate the highly
What Country Would That Be..
interdependent weaknesses in Europe's sovereign nations can effect eventhe perceived "stronger" nations.
- The
Coming Pan-European Soverign Debt Crisis, Pt 4: The Spread to Western
European Countries -
Depression is Already Here for Some Members of Europe, and It Just
Might Be Contagious! -
Beginning of the Endgame is Coming???
-
I
Think It's Confirmed, Greece Will Be the First Domino to Fall - Smoking
Swap Guns Are Beginning to Litter EuroLand, Sovereign Debt Buyer
Beware! - Financial
Contagion vs. Economic Contagion: Does the Market Underestimate the
Effects of the Latter? - "Greek
Crisis Is Over, Region Safe", Prodi Says - I say Liar, Liar, Pants on
Fire! - Germany
Finally Comes Out and Says, "We're Not Touching Greece" - Well, Sort
of...
- advertisements -
I understand Tyler must make some coin to keep the site up, but do we have to have Reggiemmercials everyday?
Ok, maybe I'm dumb, but no one wants to lend Greece the money. Wouldn't this be a time for the IMF to try SDRs?
http://www.telegraph.co.uk/news/worldnews/europe/latvia/7466920/Latvia-g...
Looks like Greece has got to go down for the benefit of them all.
Good stuff Reggie. Quite the conundrum, this 'bail-out' concept...to be honest, it is a bit beyond me. Kind of feel like I picked up the tab for a huge party, and I am just not sure how much it is, who kept ordering all the f'in Grey Goose and whether or not I am going to be able to afford it and/or what tomorrow is going to look/feel like when I wake up.
JR, you are correct why isn't Germany in a hurry or not really wanting to safe greece. It's because they lied to get into the EU and instead of fixing the lie over the course of those years which was their financial situation, they made it even worse and said essentially where in let the good times roll. There is no good options, only less bad ones. The best thing for the EU to do and Germany actually may want is to let the IMF come in and put them under extreme austerity plans under their watch and if things still don't go right over the course of the year then kick them out of the EU. This would show the world and the other PIIGS that the big money countries in the EU zone mean business and that you not IMF or the other EU countries (which by their own organization laws in the EU can't bailout another countries fiscal problems) won't bail you out of your financial situation.
JR as you said there's a reason why they have been talking from both sides of their mouths, it's because they (both Germany and France) truly don't want to bailout this country of 8 million people who conned their way into the EU.
This is literally the quintessential great European train wreck in slow motion.
The threat of sovereign defaults at this time is not an accident. There are not volcano-drought-flood-hurricane-disease causations at play. It is the work of game-makers.
The sources are persons...not generalities like governments, banking, corruption, etc.
Who benefits? Who games the systems? Who makes the rules? Who controls investigation?
Are they butchers? Bakers? Teachers? Electricians? Farmers? Doctors? Clerks? Middle-class? Poor?
Who are they?
It's the Olive Oil Cartel.
Lee S.
Bluto & Olive Oyl?
What's the fuss? It is all going to end BADLY. Who cares who goes first to the chopping block? They and we are all chickens with their heads cut off. Nobody will be spared. The question should be, how are YOU going to deal with it?
Ah, see? California should begin negotiations with the IMF immediately...
The idea here is that the time to bail out Greece - and buy some maneuvering room - has passed.
A modest show of support for the Greek government in 2008 would have stifled all the 'German- Nazi' talk and would have knocked the CDS crew for a loop. It would have given Greece the opportunity to cut energy consumption and come up with a payment/rollover schedule for the debt maturing this year and next. For Greece, that makes little, consumption cuts equal production increases.
Greece is 'rich' enough - and wastes enough - to cut energy consumption which is the biggest drain on its finance resources.
The Eurozone is a complex web of interlocking tax havens. Greece has a collection problem added to an entitlement mentality that exists everywhere on the continent. There are no mandated 5 week vacations in China, which is the competitor for Greek goods.
BTW, what Greek goods? Olive oil? Cheese? What does Greece make that the world wants? How about Spain? Olive oil? Italy has shoes, furniture, clothes, wine, fashion accessories ... and olive oil what about UK? What is made in Portugal that anyone else in the world wants? Olive oil? How much olive oil can the world consume?
This is also the problem, the countries (and US states) that are in the most trouble are net energy consumers, which rely on oil imports paid for with cash, becoming more and more dollars not euros or sterling. From an energy standpoint, the way forward is clear. Using less energy is unavoidable as there is little energy productivity from these countries (and states, too!) and that productivity is declining.
With the time needed for short- term reform past, what is left is austerity, driven home by shrinking availability of required fuel. There will be more and more strikes and more shortages. When the food starts running out - this in a relatively rich country, by the way - the trouble in the streets will begin for real.
This leaves out shortages of liquidity by banks having Greek exposure.
Not so good for the euro, I don't think.
The Bottom line you'll:
In a world wide depression, US and UK will suffer the most. Greece, Spain, Italy and Portugal the least. If you think hard, you can figure out why by yourselves.
In South America, Chile, Peru and Paraguay will suffer the least.
Venezuela and Brasil will suffer the most.
Argentina is the one that can cope best as they have been through it a few times.
Leo's passion and optimism, Reggie's unyielding logic and reasoning.
Pass the popcorn and the ouzo.
You do a great job reporting financial news reporting, Reggie. Keep up the good work!
It seems that we are just going to have to wait a bit longer to see what happens to Greece.
And Germany. And the USA.
Thanks for your reporting and commentary — a product of research and analysis . I appreciated your explanation of the value of Greece to the EU. As I understand it, the banksters hid the debt, but the banker situation is distinct from the Greek debt itself, which was accumulated by internal means of unfunded high expenditures in the way of massive spending for public sector jobs, pensions, and the like.
Reggie, Thanks for your work. I always enjoy it.
It is great to see work that is the product of thought and research and not of faith.
Picture a couple of dozen bums sitting in a big circle around a blazing campfire each with a pad of paper and pencil, writing IOU's to each other and passing around a jug of cheap wine (the US dollar) to take a hit off of. This is the state of sovergn debt today.
yes, and the campsite is ringed by hungry animals with big teeth, and the fire is getting dimmer.
An IMF bailout provides the greatest obfuscation of reality, and that is why I have always believed the IMF would get the nod.
http://www.zerohedge.com/article/greek-defaultbailout-flowcharting-domin...
Thanks for your reports, Reggie.
I learn a great deal...
i.
From GEAB # 43, French financial newsletter:
http://www.leap2020.eu/English_r25.html
Hat tip Hartgeld.com, my translation:
States that are worse the Greece in respect to
- public deficit to GDP
- need for financing in absolute terms
- probability for budget consolidation until 20012/13
Riskiest first:
1. USA
2. GB
3. Ireland
4. Netherlands
5. Japan
6. Spain
7. France
8. Portugal
Depending on the viewpoint Greece is not that bad.
F-U...P-I-G-S
Love US assholes who call the Europeans "PIGS". Buddy, look in the mirror, biggest PIG of all is the USA!
It doesn't matter who's bigger or smaller. All are being led to the slaughter. You are just fighting over who gets to be first in line for the scalding tank.
come to think of it, Blankfein could almost pass for a younger Ray Kroc
Reggie,
Question for you: Do you honestly think the Germans and the French will allow Greece to ignite a wave of sovereign debt default throughout Europe? Be careful with your grandiose statements, because while they may sound plausible, in reality they're highly unlikely. Most people here never visited Greece or Italy, have no clue about the size of the underground economy, and they think Greece is poor. Totally false: the state is poor but people are not declaring their real income.
Ah, Leo, ever the optimist. Well, sir, when Greece starts taxign the underground economy, then I'll place some credence in what you say. Otherwise, what you suggest is pure nonsense. Greece is in the problem it is precisely BECAUSE of the underground economy and their refusal to get their house in order.
Ah, and in the US, we have banksters hiding their crap off balance sheet. Give me a break, the US financial and political system is the most corrupt by far, and you are all shitting on Greece?!? if it wasn't for Greeks, you'd all still be living in the Dark Ages.
Ah, so, now we get to the heart of the matter: if it weren't for the existence ancient Athens, we'd all be worthless sacks of shit. What incredible logic. You have the mind of an adolescent. If Greece is so great, what are YOU doing here?
Actually Leo is wrong, if Greece Civilization wasn't around, western civilization would be based on Minoan civilization.
IMHO, anyone who refuses to see the criminal corruption going on in the USA, and points the finger at "PIIGS" is a "worthless sack of shit". :)
Oh please Leo. You are in error , after all we are talking about greece now. The usa problem is not being denied. We can only feast on one carcass at a time.
Make no mistake, the US is in the line for default. It's just a bit further down the line. It will likely be after the rest of the PIIGS go, and probably after the UK. Though Mr. Market may do an end run around all of us and go straight for the US. The point is that all of them are going to fail. The only question is are those states that are at least SOMEWHAT solvent going to go down with the ship?
The PIIGS got themselves into this situation, same as the UK, the US, Japan, and all the other western states on the brink.
Well, I for one, can't argue with that (not that I might not have said it a little differently). :)
Leo,
You are a good natured fellow, and while I can't say that I see eye to eye with you on some of the issues you raise, I respect your perspective. You add color to this place (even if that color is "black and blue").
And I do agree that the US has problems on a scale that is hard to imagine. But Reggie was talking about Greece, and they got caught cooking their books, lying about it, and can't cover their liabilities. Their time is up. The American's are an entrepreneurial lot, and continue to find creative ways of deferring the inevitable.
Karma visited Greece first. But Karma will be visiting a number of Treasury offices on its world tour (Iceland was awesome!)
Score: Noah 2, Leo 0
Yes, that is as unlikely as Europe starting a War which would kill millions. A War which was expected to last a few weeks and rally everyones spirits. A war which was really in no ones interests except the bankers and arms makers. WWI don't you know.
National pride over-rides logic at times. The collapse of the largest credit bubble in history is one such time.
Monday, you don't know shit about the WWI history. Please stop watching PBS controlled by BBC and other UK government agencies.
The purpose of the WWI was to destroy/ruing emerging superpowers Germany and Russia. Unfortunately, German and Russian leaders were too stupid to understand this Atlanta (British, France and the USA) ploy. As in any war, British & French miscalculated the amount of time and efforts it would take. Yes, Atlanta has ruined Germany and Russia but very shortly they had to deal with Nazi Germany and Stalin's USSR.
Now, we are in early innings of the WWIII when the same players (the USA, UK and France) would like to destroy once again Russia and China. I do not know about Russia but Chinese Communists are not looking stupid.
Unless the US makes a move in the next few years, it won't have the capabilities to win a WWIII since most of the Western hedgemony would have collapsed under its financial excesses. The US has the largest standing army but the cost of any large army is "feeding" it which is going to get too expensive soon.
Harbourcity,
You might want to check the relative manpower in the US and Chinese army.
Given the experience in Viet Nam, Iraq and Afghanistan by the US and Afghanistan by the USSR, how do you conclude that the US could win such a war as we speak? Care to estimate the number of troops necessary to occupy China in any meaningful way? Before asserting the relatively small area of highly industrialized regions as an argument, you might want to review the German experience in the 1940s in Russia.
In contrast, there is little likelihood the Chinese could successfully invade the US or Europe, now or in the foreseeable future. Wars are won or lost mostly by logistics.
Furthermore, I doubt TPTB have a sufficiently strong grip on us sheeple to survive the reinstatement of a military draft. Developing and sustaining multiple armies necessary to occupy China is unlikely to happen in the current or foreseeable US political environment.
Options are dwindling ...
Much as i hate to say it.. the fools in charge will take it to the nuclear stage. As we all know the folks in power dont have good sense and will do whatever it takes. There are signs of preparations for this . They certainly dont care about us, that is patently obvious. 9/11 and all the other things they try to hide are now coming out of the closet into public view. Also we are at a top in the market with many other problems concurrently.
I think the events we fear may come much sooner than we expect. If we are to do anything about this it need be fairly soon.
Leo,
the other side to your argument is that after a bailout of Greece there will be a bailout of (pick a name) and finally the numbers get too big for Germany.
If the Greek people are wealthy enough why should Germans pay?
In Germany is "austerity light" in place since 1989 when West-Germany started to pay for the East-Germany. Since then real wages are more or less flat while the money lost quite a bit of purchasing power.
Might be that another analogy is apt:
If a bomb can not be defused, a controlled explosion will be triggered after minimizing the possible damage.
For the current situation the analogy would mean that the credit mess is impossible to solve, Greece is used as trigger and the dominoes fall.
The big IF is that somebody in power must know or believe that there is no other possible solution for the credit crisis.
Because Germany decimated Greek (and other Southern European) manufacturing, or whatever little there was of it, with the EMU, and they profited the most from the euro and EMU. Don't kid yourselves, Germany will save Greece because it's in their best interest.
"Germany will save Greece because it is in their best interest."
Is it?
Perhaps in the short term, but is a financial partnership with Greece and the rest of Southern Europe in Germany's best interests in the medium or long term? I don't think it is.
To one degree or another, all of Europe has a real demographic and pension/healthcare problem, but Southern Europe has the disease on steroids. Perhaps Germany has looked at the tea leaves, and figured out that all of the PIGS are going to be a big, ongoing, and growing financial drain over the next 50 years, and they would be happier free of that ball and chain.
The current Greek melodrama is just a preview of everyday life in a decade or so, all across Europe. I think Germany is coming to the realization that they are better off alone with their deutche marks than married to the spendthrift yet fading PIGS.
Leo, you are not too bright.
The answer to the Greek crisis is very simple:
- Greece people will have to live within their means
- Greek bums will have to accept much low-paying jobs and work very hard
- To accomplish this, Greece will need back its "black colonels"
PS
The same goes for everybody else including Americans. Unfortunately for America and Europe, Asians and Latin American countries are not their colonies any more.
At this point we need to believe what our ears are hearing and what our eyes are seeing. Germany has given us every indication that she does not want to bail out Greece, even as the danger of Greece being lost to the EU grows, or, with the-less-than-ideal revelation, that the Eurozone has to have outside help (IMF and the Fed) and still is unable to solve its own problems.
If Germany needs Greece so much, what has she been waiting for?
Leo,
the competition is not only inside the EU; for Germany it is the former currency manipulator Japan too.
To compete against someone with artificially low currency (via the Yen carry trade) means at least not increasing costs.
Stratfor has a graph displaying labour costs in the EU since 2000.
http://web.stratfor.com/images/europe/3-15-10-Eurozone_labor_costs_800.jpg
Germany had the lowest increase of all countries reported there; unfortunately Japan and China are not in the picture.
Seriously, do you think Europe would be better off with Germany shipping more Jobs to Asia?
Leo, you are missing the issues at hand here. If Germany and France backstop Greece, who will backstop Spain, Italy, Portugal and the UK? There is a large amount of capital missing in the system, and shuffling chairs around is not going to make it reappear. I have tracked, traced and analyzed the finances of all of the major (and some minor) countries in the area and they are in trouble - particularly if mark their proclamations to market.
The underground economy is irrelevant if it is not going to pay Greek debt!