Greece "Velvet Restructuring" Imminent, Blames Upcoming Second Bankruptcy On Citigroup Trader

Tyler Durden's picture

It appears rumors that Greece is set to restructure its debt are about to come true. According to Greek daily Ta Nea, reported by the Guardian, "the government was mulling "a velvet restructuring" that would include extending outstanding debt and a voluntary agreement with lenders to modify repayment terms." More: "Greece  is considering ways to restructure its debt – such as by extending the life of its loans – two national newspapers claimed on Friday, joining a flurry of recent reports on the prospect that Athens might be forced to default." Not surprising, this comes hot on the heels of continued lies about the stability and viability of the eurozone and the euro, which recently surged to nosebleed levels only to allow it to drop from the highest possible position when the realization that the dominoes are falling finally sets in. But never one to be bound by the confines of reality, where one is accountable and responsible for their actions1 (1: except all millionaires and billionaires bailed out by the Bernanke Put), Greece is now calling in Interpol to put the blame for its latest and greatest bankruptcy on a Citigroup trader: "A London trader working for US bank Citigroup  is to be questioned by investigators over an email at the centre of an investigation by the Greek authorities into rumours that Athens could be forced to restructure its national debt as early as this weekend." So, it is a trader fault for pointing out the market's reaction to what is so glaringly obvious even a caveman finance minister from Athens will realize it, and not the fact that one needs to apply a new Excel #Ref! patch in order to express Greek debt to GDP. The lunacy. The lunacy.

And here is the text of the trader email, which was basically a bond run, for those who want to spew blood from their ears:

MKT NOISE Over the last 20min, there seems to be some increased noise over Gr debt restructuring as early as this Easter weekend. Spreads are moving wider now with 2y spread +100 from +35 at midday, while Gr banks are at -4%, -6% vs +2% in the morning.

The last few days the talks over Gr restructuring/rescheduling have intensified, despite the ongoing denials by Gr and foreign officials.

If a credit event takes place it is crucial to see what the terms would be as a haircut would have a much different outcome vs an extension of maturities.

Well in that case Zero Hedge is about to be raided by the FBI and the KGB because we had the temerity to not only point out that the country will default back in April 2010 (proven right once already, about to be proven right for the second time) by showing the plummeting bond prices, but because yesterday we showed that according to the market the haircut on Greek bonds is to be 50% of par.

Of course, for Interpol to have any standing, someone in Greece would need to prove that cause and effect are actually inverted, but with all the soon to be unemployed philosophers to be rambling around Athens, we are positive this won't be a problem.

More on this unprecedented attempt to blame one person for decade's of one nation's horrendous fiscal (we would also add monetary, but of course Greece has no monetary policy being a slave to the euro) policy. From the Guardian.

The trader, who has been identified in Greece as Paul Moss, is expected to be interviewed in London by Interpol, working with Greece's cyber crime division.

"We have located the computer terminal at a company in London from which this very damaging email was sent," police spokesman Thanassis Kokkalakis said. "It contained very confusing misinformation that is now the focus of an urgent investigation. This man will be questioned and the findings sent to a prosecutor involved in the case."

Citigroup is insisting it has done nothing wrong . "We are co-operating with the authorities and do not consider there to have been any wrongdoing by Citi or its employees," the bank said.

With Athens poised to launch a €50bn (£44bn) privatisation drive, the Greek finance ministry said the email was now at the centre of "a possible criminal investigation".

Fears abound that the country's reputation may have sustained irreparable damage at a time when it is desperate to attract foreign investment. Greek bank shares fell by 4.6% on Wednesday, with traders citing the email as the cause for the sell-off – but market experts pointed out that the fall in shares had begun before the email was sent.

Anyway back to reality, where Greece apparently has about 48 hours before it sets off a domino effect whereby bank asset writedowns are about to escalate and result in the same shadow banking system "Ice-Nine" effect that nearly destroyed capitalism back in September 2008.

According to another report on Friday in Greek newspaper Isotimia, the government might seek to extend the maturities of its outstanding debt by an average of five years. This would happen after an agreement with its lenders, the newspaper said, citing government sources it did not name.

No final decision to propose such a solution had been taken and discussions were still at an informal level, Isotimia said.

Greece has been shut out of financial markets in the wake of its debt crisis last year. Papaconstantinou said on Wednesday he considered Greece's debt – expected to hit about 160% of GDP in 2012 – "totally sustainable" and that restructuring was not an option.

But given the sheer size of the country's debt set against a continuing economic slump, markets are increasingly factoring in a restructuring.

And while banks may have built up a sufficient buffer against total collapse immediately, one entity which certainly has not is the Greek social security fund which holds about €28 billion in Greek debt. In other words, pension haircut of up to 50% are coming. Let's see how the socialism-tolerant population processes that particular piece of new. Oh yes, those same Greek households about to say goodbye to their pensions are also on the hook for €6 billion of Greek debt. But we are positive their Tier 1 ratios are wonderfully overcapitalized as well, and with immediate access to the Fed's discount window when so needed.

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...high and tight, please.

French Frog's picture

If (big if?) this was to come out during the weekend when markets are closed, can someone enlighten us as to the effect it would have on the $ and Precious Metals please?


centerline's picture

A really interesting pre-market and market open.  LOL.

Ahmeexnal's picture

Thought criminals...all the bunch of ZHers.

golfrattt's picture

Euro would certainly take a hit, causing a small pop in the USD index and a pullback in commod's...

most likely. It'll be interesting to see if the story alone moves the markets negative on Monday...

topcallingtroll's picture

I know a fellow soldier!

Somebody is getting a crew cut!

Is that what we now call a 70 percent haircut?

Tail Dogging The Wag's picture

"Investors need to diversify, they need to own some real estate, they need to own some farmland, they need to own some equities, some cash, and some precious metals..."   Marc Faber —Investment analyst

Got real estate and farmland outside your home country yet?

Bleeping Fed's picture

Adding "velvet" means the restructuring won't be smooth as silk, but close.

luigi's picture

They seemingly cannot afford vaseline anymore...

Bahamas's picture

olive oil is even better lubricant

centerline's picture

I dont want to know how you know that please.

topcallingtroll's picture

Everybody knows that, silly!

Where were you when we were getting high?

luigi's picture

Too good to be used that way...

Olive trees could be the only valuable assets left to Greece for exiting this mess.

May I point on the odd coincidence of the again exploding Greece/European/Euro/Debt crisis on the werge of the U.S. 99 billions bonds auction of next week (

Like the French say (but they rarely learn from their own wise says) "a la guerre comme a la guerre"...


earnulf's picture

I just wonder what the rate on 100 year bonds for greece would be.

Catullus's picture

Keeping with the lebowski-Greek tragedy theme:

Daddy has no real money of his own.

Duuude's picture




Hephasteus's picture

Operation Velveeta?

Dick Darlington's picture

Paging the high priest of the europonzi in the cradle of cleptocracy: Please turn out the lights.

topcallingtroll's picture

I hate it when people make me snort coke, at least the liquid stuff. Gotta remember drinking and hedging can be dangerous.

Commander Cody's picture

The email is speculative.  The Greeks pointing to it as criminal are assholes.  Papawhatever is high on something.

Haircuts - bitches.  Riots, too.

topcallingtroll's picture

Free riot with each haircut!

Hurry, offer ends soon.

Oh heck. What am I saying. This is a permanent offer. Take your time.

Josh Randall's picture

Just another big Gyro up the wazoo - hope the Greek people don't stand for this  

Ray1968's picture

A Citi trader. Yup, that's the cause of ALL thier problems. Greece was an innocent victim of a rouge trader. Good job guys!

rufusbird's picture

It is better if it is a foreigner... (like the Russian Sergey Aleynikov)

El Hosel's picture

.... Meanwhile back at the ranch, the US President has ordered an "investigation" into the sudden rise in gasoline prices. So far there is  no mention of any investigation into artificially low interest rates, trillions in unfunded liablities, rampant corruption in all areas of the financial system, failure to prosecute blatant fraud or treasonus behavior among politicians and other corporate and financial elite.

Dick Darlington's picture

I'm sure they will find one email which is behind all that evil u mentioned. ;-)

Flounder's picture

Sounds like Obummer's speculator investigation ought to be tied into the interpol Citi email investigation to form a global task force called Operation Market Control.

downwiththebanks's picture

Or 'Operation Sucker,' for anyone that thinks a puppet of the banker-gangsters (more $ than anyone ... ever) is going to go after the banker-gangsters in any serious way.

And there's a 0% chance the AG from United Fruit does anything meaningful to punish speculation.  His FBI may kill a few Colombian unionists, but that's another matter.

Cassandra Syndrome's picture


I wonder who is exposed to Greek CDSs?

Dick Darlington's picture

Yep, that's somewhat an elephant standing in the china shop. But i'm sure the outcome will be that there's no credit event. After all, it's mostly bankers sitting in the "committee" deciding if the credit event occurred or not.

mick_richfield's picture

Hey!  "China shop"!   Good idea!  Maybe they can buy this country, too!

What's the Mandarin for "We promise to respect your unique 'culture'." ?


Dick Darlington's picture

Greece already tried to play the "China card" and look how well it worked. Portugal played the same card and look how well it worked. Now Spain has been playing the same card a couple of times and look how well it will work... The europonzi is on the verge of collapse and maybe Greece defaulting on their debt will be the final push off the cliff.

hedgeless_horseman's picture

So, by the same logic, if Hellenic bonds recover, then Greece would have sent a Publishers Clearinghouse team to Leo's home in Canada to present him with Nobel Peace Prize?

I guess we will never know.

jtaskinen's picture

Heh, just ask our new gment. There is little understanding for any further bail-outs. We simply cannot affort this largesse, we are broke as well. AAA rating is a joke.

Portuguese as furious, their ex-president called us gnomes...pretty arrogant posture given the situation.

I hope euro and EU for that matter collapses and this French power concentration excercise in Europe stops.

Hope Finland says no, this wakes people in Germany and they say "no". Why save banksters so that they can get another record bonus

Stormdancer's picture

Thanks for the first-hand reports :)  Is it something about living near lots of ice?  Finns and Icelanders seem to have a better handle on how to deal with globalist bankster psychopaths than anyone else so far.

Chuck Bone's picture

Does the fact that Interpol is getting involved in this not scare anyone else? Man, do you people in Europe have any sovereignty left?

jtaskinen's picture

No, we (in Finland) do not have very much sovereignty left, on a scale from 0-100, maybe 3.4. Socialist state is everywhere, especially in your vallet, monitoring every move we take. And all to our own good, it is good to protect people from their own ignorance and lack of self protection skills. Maybe 30 years of "education" has finally worked.

But good news is, that the US government thinks our tax model is fantastic. Very effective.

Now watch it coming next to you. Take your money and run for cover.

gwar5's picture

Obama signed an executive order on Dec 17, 2009 (in the middle of the night) allowing Interpol to work inside the USA without any constitutional constraints -- no warrants for search or seizure or arrest, and, without any FOIA compliance oversight. They could legally dissappear you in broad daylight and deny it. And, they are housed and work out of Eric Holder's DOJ, which is under direct White House control. The DOJ also does all the interrogations now, not the CIA. Very Soviet-like.

They are now the de facto the national secret police, gestapo, red guard or whatever you want to call them if Obama wants. He is now free to "punish his enemies" if he wants to. 

In January 2010, Obama signed another executive order (again in the middle of the night) giving himself authority over a "council of governors" (COG) in the event he declares "a national emergency." The council would include 2 governors appointed by the President, the US Military, DOD, CIA, NSA, and FBI. The council would have authority to deploy domestic or foreign troops on American soil to suppress domestic unrest. Presumably, this would be required if American soldiers refused to violate the US Constitution to deploy or fire upon fellow YUS citizens. The COG is rather detailed, and extensive, as if the COG is a governmental infrastructure to be maintained for an extensive period of time autonomously.



GodsofGreektown's picture

Coming to a state, province, or municipality close by....As the Spinners and D. Warwick used to sing, "Then came you!" The restructuring industry is where it's at.

Jo's picture

'Interpol' is about as scary as 'CBI' from The Mentalist'.

So no.

Broomer's picture

... result in the same shadow banking system "Ice-Nine" effect that nearly destroyed capitalism back in September 2008.

You say this like capitalism is still alive...

lizzy36's picture

Velvet restructuring, liability management exercise......

Seems like a great week for a Greek tragedy. After all the only thing the sheeple are interested in is the fairy tale: the princess, her prince, his bald spot and the over/under until their divorce.  

A Man without Qualities's picture

the situation for some pension funds is even worse than that.  They bought a lot of structured bonds with the sovereign as the reference credit, and so any default will create a loss equal to the loss on the bond plus the loss on the swap.  We could be talking big numbers here, say another 15 - 20% of notional, or maybe worse.  Of course, they should question who bought these, why and from whom and how much did they overpay.  Greek is a total fucking kleptocracy - nobody puts anything into the system and everyone tries to take something out.  When the break does come, it's going to stun people when they see just how broke the country is and just how bad the theft has been.

It's essentially the same shit with Portugal - they are very good at the public face of respectability, but behind the scenes, hidden in the second set of books, the picture is really ugly.

topcallingtroll's picture

There are a lot of people who dont understand the southern european culture. I had hoped it wasnt quite as bad as it looked, but i am now afraid it is as bad as many feared. It will take massive european subsidy to keep the haircut around 50 percent.