Greece [Will/Will Not] Issue 6%+ Debt This Week, Even As Evans-Pritchard Summarizes It Best: "Greece Is Drowning"

Tyler Durden's picture

Something funny happened on the road to a Greek bailout: nothing. Well, a few exceptions: Germany and the ECB are now enemies, nobody knows what the hell the Maastricht rules really are, the ratings agencies are discredited beyond repair as even the ECB says its own internal bureaucrats can do a better job at modelling the Greek AAA rating... Yet Greek debt is still yielding 6%+. If anyone will recall, the primary concern that various administration George Pap[...]'s had, was that Greek debt was "unfairly" yielding double where German debt is. So yeah, lots of talk, more non-bailout bailouts, and in meantime, Greek default risk is pretty much where it was two months ago. Which is why speculation that emerged toward the end of last week that Greece will promptly issue new debt, is now being squashed by G-Pap (fin min or FM, not to be confused with the prime min or PM). In the end, it is all irrelevant: as Ambrose Evans-Pritchard says, the end is close for Greece.

The Telegraph reports:

Greek finance minister George Papaconstantinou said no decision had been
taken, playing down earlier reports. While Greece can undoubtedly raise the
money, the issue is the interest cost.

It gets funnier:

The government said the rise in spreads since the crisis erupted has eaten up
savings from budget cuts.

Yields on 10-year Greek bonds were still 6.18pc on Friday, down 30 basis
points from their peak but still double German rates. Short-term debt is
cheaper but Athens risks a roll-over crisis in 2011 unless it stretches out
debt maturities.

Greek banks have been key buyers of state debt this year, using it as
collateral for cheap loans from the European Central Bank. Simon Ward, of
Henderson Global Investors, said ECB loans to Greek banks jumped by €12.5bn
to a record €59.8bn in February.

Earmuff time for a recently downgraded into near default RBS:

A chunk has been used to cover “an incipient run on Greek banks”, which have lost
€8.4bn in deposits since December. The ECB changed tack last week, saying it
would continue to accept BBB- debt as collateral into 2011.

Greece is now openly trying to be both Europe's Enron and AIG:

This reduces the risk that Greek debt will be disqualified. Experts say the
ECB is openly propping up the Greek banking system.

As for why nothing has been resolved on Greece, Evans-Pritchard covers that too:

Far from stemming contagion, the deal leaves Club Med exposed. Underlying
default risk has risen for Greece, Portugal, Italy and Spain, as well as for
Ireland, Slovakia and Malta even if credit markets keep missing the point.
The world's top holder of EU debt does understand. Greece is the "tip
of the iceberg", said the deputy-governor of China's central bank. "The
main concern today, obviously, is Spain and Italy."

The 'rescue' resolves nothing for Greece, either short-term or long-term. The
EU statement said "no decision has been taken to activate the mechanism."
Precisely. The joint EU-IMF facility can be activated only ultima ratio
– as a last resort – once Greece is shut out of debt markets and not until
eurozone stability is threatened.

“So they want Greece to reach the point of bankruptcy before they help us?”
asked Greek opposition leader Antonis Samaras

Greece is worse off than before. It cannot decide when to invoke the
mechanism. It has given up its right as an IMF member to go to the fund when
it wants, leaving it prisoner to Europe's deflation dictates. "The IMF
would be a lot softer than Europe," said Ken Rogoff, the fund's former
chief economist.

Lorenzo Bini Smaghi, an ECB board member, said the deal has at least averted "Europe's
Lehman". I agree that there is an equivalence of sorts between
America's sub-prime and the Club Med bust and that a European banking system
with wafer-thin capital buffers and a cupboard full of skeletons cannot risk
a Greek debacle at this juncture, but what exactly has been averted? Roughly
€22bn (£19.8bn) in joint IMF-EU funds might be available, some coming from
states in trouble themselves. This is not enough. No encore is likely.
Germany will not pay twice.

Erik Nielsen from Goldman Sachs said Greece must raise €24.7bn by late May.
The noose then tightens. Long-term debt amortisations are 7pc of GDP this
year, 10.2pc on 2011, 11.8pc in 2012, 9.7pc in 2013, and 10.4pc in 2014. "Greece
faces both a liquidity crisis and a solvency crisis. It is not clear that
European policy-makers fully appreciate the scale of the problems," he
wrote in a report, Here Comes The IMF.

Mr Nielsen said Greek data released last month show that the budget deficit is
16pc of GDP on a "cash basis", rather than the official 12.7pc on
an "accrual basis". The IMF is watching closely, having warned
last June that Greece's "cash fiscal data show consistently weaker
results than accrual data, which has been inadequately explained."
Translation: the real deficit is 16pc. Greece is drowning.

We could not have said it better ourselves, and the truth is it is game over for Greece. Yet just like the GSEs, and the TBTFs, recognition of the sad reality that the entire financial system is insolvent is merely delayed month after month, with the hopes that South Korea will keep pretending that North Korea did not attack it, and every other geopolitical catalyst remains dormant.

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Cognitive Dissonance's picture

"Underlying default risk has risen for Greece, Portugal, Italy and Spain, as well as for Ireland, Slovakia and Malta even if credit markets keep missing the point."

I call it first.

GPISISM

"gee pis is em"

Or GIPISSM

"gip is em"

I like the second one better. Come on guys, get the Scrabble tiles out and come up with some creative ideas.

tmosley's picture

If only Yugoslavia were still around, that acronym would work PERFECTLY.

Mr Lennon Hendrix's picture

I like that you have ISIS smack in the middle...sexy!

ZackAttack's picture

Not quite a word, but rolls trippingly: GIMPSIS

orange juice's picture

I think maybe German banks or somebody else holding Greek debt would step in knowing they could buy enough at high enough rates to destabilize their own countries and force EU/IMF action.  It's gonna be a 'who blinks first' type of deal.  None of this is good for this is good for the Euro, Gartman said in an interview Friday he expects the Euro ~1.10-1.15 by mid summer.

wesa's picture

How about MISSPIG?

deadparrot's picture

I'm looking forward to the pissing contest between France and Germany. France holds so many Greek bonds they must keep throwing good money after bad or find themselves in the same predicament as Greece. Kudos to Germany for being the lone voice of fiscal reason in Europe, and the world for that matter.

BlackBeard's picture

Deny.Deny.Deny.Deny.Deny.Deny.Deny.Deny.Deny.Deny.Deny.Deny.Deny.Deny.Deny.Deny.Deny.Deny.Deny.Deny.Deny.Deny.Deny.Deny.Deny.Deny.Deny.Deny.Deny.Deny.Deny.Deny.Deny.Deny.Deny.Deny.Deny.Deny.Deny.Deny.Deny.Deny.Deny.Deny.Deny.Deny.Deny.Deny.Deny.

Stranger's picture

.Deny.Deny.Deny.Disappear

rubearish10's picture

Well, when will we hear more "thru the markets" about other PIIGS? I mean, isn't a bit odd that the GREECE thing keeps hangin' around? Sort of like how our media and politicians handle stuff. Where's the hedgies rippin' thru euro state balance sheets and finding more evidence? They're the only ones who could uncover the truth, except for TD, of course.

Mr Lennon Hendrix's picture

Ah, ye annointed ones (Greasers), part of me wishes you would shut up so that all the other States could be shown to have massive debt problems as well (yes you US/Britain/Japan).  However, I am very proud that there is still some sensibilty in the world; take note America!

Stranger's picture

I will always remember the Drudge headline when Lehman collapsed.

It was a picture of the Lehman HQ with big, bright, red, italic letters underneath that spelled out: WORTHLESS

He is going to be using that headline again and again this year.

Miles Kendig's picture

No absurdity forsworn, no financial/political event of note to note and no expense spared in the vain attempt to maintain appearances.

Zombies On Toast's picture

This makes no sense. If it is known that 22 billion Euros won't be enough beyond the next few months why would EU-IMF agree to throw money down a rat hole? When it comes down to the final decision won't they just say no?

Ned Zeppelin's picture

Figure out what is the equivalent of Ben's printing press and that is what the EU will do. Guessing that means that the IMF, with its access to Ben's printer will be called in.  What can't be borrowed, must be printed.

The dike kept springing leaks, until there were so many the townspeople fled before the dike burst.

Lux Fiat's picture

The EU statement said "no decision has been taken to activate the mechanism." Precisely. The joint EU-IMF facility can be activated only ultima ratio – as a last resort – once Greece is shut out of debt markets and not until eurozone stability is threatened.

From my perspective, it looks like they took a play from Sweden's tough love playbook during their banking crisis.  This is not necessarily a bad thing, although it will be ugly for creditors (as it should be, oh my, moral hazard makes a comeback, or at least appears to).  And if Greece decides to keep the fiscal pedal to the metal, and turns into a gelatinous mess after slamming into an immovable German wall, then it might give the politicians and voters in the other MISSPIG'y states some backbone.  The US might do well to take a harder look at Sweden's example [again?] as well, before we have a repeat of the fall of 2008, only with fewer workable solutions or delaying tactics.

 

Cookie's picture

Ambrose is the msm guy who comes closest to telling the truth, and from my own quite extensive 'Fleet St' experience I guarantee he is limited by senior editors as to what he can and cannot write and keep his job. (and be unemployable at any other msm). They have this power, believe me, I've seen it. I was close friends for a while with an ex editor of the (UK) Daily Express, Paul Hopkins, who had unearthed John Stonehouse after his fake suicide. I was gob smacked at what he was able to tell me, and we shared many gallons of beer together.

AnAnonymous's picture

Really? I consider this man to be an efficient professional, knowing how to draw the most from its polemical niche, the Euro downfall.

This guy has made a sizeable part of his carreer predicting the demise of the Euro. He has congregated a suite of praisers and blamers to optimize his revenues.

Truth? Nope. Very astute management of his readership base? Absolutely.

I imagine quite easily his tombstone being engraved with "has earned his lifelong living predicting the end of the Euro, living off the back of it"

AnAnonymous's picture

Really? I consider this man to be an efficient professional, knowing how to draw the most from its polemical niche, the Euro downfall.

This guy has made a sizeable part of his carreer predicting the demise of the Euro. He has congregated a suite of praisers and blamers to optimize his revenues.

Truth? Nope. Very astute management of his readership base? Absolutely.

I imagine quite easily his tombstone being engraved with "has earned his lifelong living predicting the end of the Euro, living off the back of it"

High Wire's picture

Well that explains the new withholding restrictions on foreign bank accounts.

Privatus's picture

Productive Greek citizens should be heartened that the end is near for their kleptocratic state (but I repeat myself). Once the Greek sovereign goes bust, that's one down with Portugal, Spain, Italy and Britain to go. Non tax-eaters in these states should take cheer. The only crisis will be for those elites (and their enablers) who have signally mismanaged (and consumed) the sovereign fisc leading to the destruction of the credit of their respective nations. Seeing these parasites burn is a gift from heaven.

aus_punter's picture

I share your views, but in the interim undefined time period many of the "productives" will be bled dry

chindit13's picture

It appears the crisis has been solved without being solved.  The periodic rumors/announcements of "agreements" are merely a tactic used to create worldwide equity market rallies.

In point of fact, the answer is in the post.  Greek banks can continue to buy Greek debt (even if Fitch or Moody's drops it to BBB-), pledge it as collateral at an open arms ECB, and borrow against it. 

According to the article, Greek banks borrowed 12.7 billion euros in such a manner in February.  That makes the 24.7 billion euros needed by Greece by the end of May just another two February's worth of ECB borrowings.  The Greeks (or Portuguese, Spanish, Italians) may no longer be able to print money directly, but so long as the ECB is willing to do it for them---as evidenced by the willingness to loan to a country's banks accepting as collateral sovereign debt of the same country---there is no problem.

The bailout has already happened.  The rest is just theatre.

theworldisnotenough's picture

Is this bullish or bearish for precious metals?

Buyemall's picture

It is official

a book is open for 5 mill euro at least

7 year bonds

midswaps +310 bps is the guidance

the book will close before the us market opening

Blithering ORSA's picture

Greece should be bailed out.  On the condition that they agree to pay the rest of the EU a suitable stupidity reparation each year for the next 25!

Return2Sanity's picture

If you want a reliable fortune teller, keep watching Greece, the canary in the economic collapse mine. It appears that gold has been tracking the Greek saga pretty closely lately. If they're able to make severe budget cuts and keep the rioting under control, then the US will probably be able to do the same when our time comes, since Greece is even more left-leaning than the US. On the other hand, if Greece gets bailed out (and I'm not talking about the “sure, we'll scrape you up off the pavement AFTER you get flattened” promise they got last week), then the inflationary route starts looking much more probable for the Western world.

 

Leo Kolivakis's picture

The Brits love trashing Greece and the Southern European nations....perhaps they should look at their own pathetic state.

Attitude_Check's picture

Not just the Brits, but the EU, and US also.  Just because they are all glass houses, doesn't mean it isn't fun to throw stones!

Greece is in unenviable position of being the weakest, and the rest of the "pack" is now attacking it.  It is Greece's responsibility that it is the weakest link, and no one else's however.

jmc8888's picture

If AEP says it, then the QoE is about to pull support.  Uh oh.

AEP = mouthpiece for the queen

He'll get things right, but only from a limited viewpoint...the one he wants you to see and nothing more.  Or is that how he is directed to write?  He should just go back to pimping Mike Vanderboegh.  Whoops.

 

 

 

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