The Greek "Ultimatum": Bailout (For The Bankers) And (Loss Of) Sovereignty

Tyler Durden's picture

So after one year of beating around the bush, it is finally made clear that, as many were expecting all along, the ultimate goal of the Greek "bailouts" is nothing short of the state's (partial for now) annexation by Europe. According to an FT breaking news article, "European leaders are negotiating a deal that would lead to unprecedented outside intervention in the Greek economy, including international involvement in tax collection and privatisation of state assets, in exchange for new bail-out loans for Athens. People involved in the talks said the package would also include incentives for private holders of Greek debt voluntarily to extend Athens’ repayment schedule, as well as another round of austerity measures." Thus Greece is faced with the banker win-win choice, of not only abandoning sovereignty, a first in modern "democratic" history, in the pursuit of "Greek" policies that are beneficial for Europe, or not get a bailout, which would only serve to prevent senior bondholder impairments. How could Greek leaders and its population possibly not accept such an attractive option which either leaves the country as another Olli Rehn protectorate, or forces it to not bailout Europe's overleveraged banker class. In essence Europe is now convinced, just like Hank Paulson was on September 14, 2008, that the downstream effects from letting Greece implode are manageable. But the key development is that the Greek bankruptcy, which from the beginning, and as Peter Tchir's note below demonstrates, was always simply a Greek choice, was just made that much easier.

From the FT:

People involved in the talks said the package would also include incentives for private holders of Greek debt voluntarily to extend Athens’ repayment schedule, as well as another round of austerity measures.

Officials hope that as much as half of the €60bn-€70bn ($86bn-$100bn) in new financing needed by Athens until the end of 2013 could be accounted for without new loans. Under a plan advocated by some, much of that would be covered by the sale of state assets and the change in repayment terms for private debtholders.

Eurozone countries and the International Monetary Fund would then need to lend an additional €30bn-€35bn on top of the €110bn already promised as part of the bail-out programme agreed last year.

Officials warned, however, that almost every element of the new package faced significant opposition from at least one of the governments and institutions involved in the current negotiations and a deal could still unravel.

In the latest setback, the Greek government failed on Friday to win cross-party agreement on the new austerity measures, which European Union lenders have insisted is a prerequisite to another bail-out.

In addition, the European Central Bank remains opposed to any restructuring of Greek debt that could be considered a “credit event” – a change in terms that could technically be ruled a default.

One senior European official involved in the talks, however, said ECB objections could be overcome if the rescheduling was structured properly.

Despite the hurdles, pressure is building to have a deal done within three weeks because of an IMF threat to withhold its portion of June’s €12bn bail-out payment unless Athens can show it can meet all its financing requirements for the next 12 months.

And the latest set of very timely observations from TF Market's Peter Tchir.

You Can Lead A Trojan Horse To Water But You Can't Make Him Drink

Restructuring in one form or another seems imminent rather than years away

Well, it seems as though this week's news flow has spurred the mainstream media into action.  Everywhere you look there are stories about the Greek credit crisis.  It is encouraging to see that more of them now agree with my view that a restructuring would occur sooner rather than later.  Only a month ago, almost every article and every piece of official street research made it clear that a restructuring was at least a year off, if not longer. I demonstrated why I thought that opinion was wrong, and although I haven't been proven correct yet, I am no longer in a tiny minority.  Restructuring (reprofiling or default or whatever you want to call it) will not be easy, but I remain convinced that it is the best outcome for Greece and in the long run will be the best outcome for Europe even with the short term pain it will cause. 

There is growing scrutiny of the ECB's actions and motivations

It has also become painfully obvious to everyone that the actions of the ECB are making any resolution more difficult.   Someone, other than me, has now called the ECB 'pathological' in their resistance to restructuring.  The ECB, led by Trichet, made a major mistake in their purchase of Greek bonds in the secondary market.  It is unclear what they intended to gain (other than a short squeeze) as Greece was not tapping the capital markets for new bond deals.  If Trichet worked at a real bank, he would have been fired by now, or allowed 'to pursue time with his family'.  Someone who was not part of the bad decision would be brought in to oversee the positions.  The ECB needs to change personnel immediately and bring in someone fresh to be part of the negotiations who can focus on what is best going forward and not on how best to cover up previous mistakes.

It is Greece's decision to default or not, NOT the ECB's or EU's

I continue to be confused by the fact that most people talk about the issue from the lender's perspective.  "Should Greece be allowed to default?" "Does it teach Greece a bad lesson if they let them walk away? "  "Won't Greece just default again if the ECB lets them walk away?"

The reality is the IMF, or ECB, or EU can offer money to Greece, but it is Greece's decision to borrow more to pay off old debts.  Only Greece can decide to make payments and not default or demand restructuring.  Other entities or countries can make it easier for Greece to kick the can down the road, but in the end, only Greece can decide whether or not to pay its bills. 

The people of Greece seem to prefer default.  It is fairly clear that this is not a short term liquidity problem, but a longer term solvency problem for Greece.  Greece has some assets it can sell, but as I have said time and again, they will still have those assets to secure new funds after a default/restructuring.  I continue to believe it is in the best interest of Greece to default and it is their decision, no one else's.  It may be bad for the rest of Europe if Greece defaults, but that really should not be the priority of the Greek government.

If Greece defaults, the creditors can then take steps to enforce their rights.  If a person fails to pay on their mortgage, the banks can enact their rights to foreclose.  If a U.S. company fails to pay its debt, creditors will suit, and the company and debtors will typically resolve the issue in the courts under Chapter 11 or Chapter 7.  There are similar statutes for corporate defaults in other countries.  The real reason that we are hearing so much about this from the lenders perspective, rather than the borrowers, is because it is not very clear what the lenders' rights are if Greece stops paying.

If Greece stops paying, the lenders cannot 'foreclose' on it.  There is no law that dictates how to proceed like chapter 11 does.  The bonds have very few if any covenants.  The lawsuits would have to be won in Greek courts and then enforced by people employed by the Greek government.  Good luck with that.

The reason the lenders have an almost irrational need to avoid a default, is they don't know what they will get if Greece does default.  There is no good way to analyze it.  Their ultimate recovery will be based on some threats of future lending, rights of set-off, and maybe some threats of trade sanctions, but unlike a mortgage or a corporate bond, there is no good way to analyze the potential outcome.  There is a reason 'vulture' funds focus on corporate debt much more than sovereign - there is a way to analyze the outcomes, it is not just guess work.

So people can continue to comment on whether Greece should be allowed to default, but that misses the point.  Lenders can make it easy for Greece to make payments, but choosing to default or not remains solely a Greek decision and they should do what is best for them.

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DK Delta's picture

Greece cannot accept the terms. It's leaders cannot be trusted. The country must revolt.

Ethics Gradient's picture

It's all part of Delors' plan.

The internet wasn't, though.

Use of Weapons's picture

Zuckerman did his part @ the G8 over this. Don't get me wrong; he's a toad, and deserves hurting, but at least he's still semi-authentic. In wankery.

The real story is a whole lot bigger - and involves "there's only 3 [6, but 2 ain't public, and 1 you'll never know about] intranets with over a million users in the world, and Sony got taken to the cleaners as a power-play".

Put it another way; it was argued that "gossip sped up by technology" wasn't a case for removing said technology, especially with all of the economic [data] benefits it brought. Accepted, and case carried [esp. once revenues were in; oh, and fuck Twitter for £25mil on an app that's crap - sigh. You weren't going to get cleaned out by the G8 anyhow, stupid cows for bowing to pressure & panic buying for security. Still, friend of a friend is happy. I say: stupid move now means no smart moves later - Twitter soon to be superseded].

Ahmeexnal's picture

Too late now. Protests have spread to Italy, France and hundreds of cities.

Merkel is packing her bags with gold bars and escaping to south american nazi safe haven, or to the Vatican.


The 'Indignants' gathered once more on Sunday in central Athens, joined by others in Milan's Piazza del Duomo, Champs Elysee in Paris and another 100 European cities holding simultaneous peaceful protests. Sunday's demonstration was the largest of the five consecutive protests that have taken place each night at Syntagma Square since Wednesday, with over 90.000 people participating. 
DoChenRollingBearing's picture

Barron's this weekend had their main article on Greece.  The article (by Vito Racanelli) says the bankers should just accept 50% on the euro now rather than 30% or less in the future.  Dexia (a Belgian bank) is on the hook for 3.46 billion euros!  Ouch!

While I have not addressed Greece on my blog, some 90 ZH-ers have asked to take a look.  Send me a gmail promising to behave if you would like to have a look as well.

Sudden Debt, I would really like to have you come by as I need experts (I claim no expertise in anything).

AnAnonymous's picture

Too late now. Protests have spread to Italy, France and hundreds of cities.


Funny. Another delusion. Two years ago, the voice of this site was Piltchard like, that the Eurozone was going to implode. Very US like.

In this US driven world, I took the other stance, that this crisis could be used to deepen the Eurozone integration, telling that it could lead to countries losing their capacity to taxation.

And here were are: we are nearer from Greece losing taxation power than the Eurozone implosion.

Once again, the propagandists are going to be revealed.

It is nothing new: Europe is following the US'path, that has shown what happens when a national people loses the power of taxation: elimination, disappearance from the face of the Earth. The US used that trick again and over again. It was expected that other people would be tempted to do so.

If this passes, it will be simply the end of the Greek people as it was known to become one entity into the new to come European people.

End of sovereignty for Greece. Real beginning of the European people as a sovereign.

Shredd the FED's picture

Here is a cartoon how it started, and how it will end... A long, but worth waching and sharing with others...  The American Dream By The Provocateur Network   Those who have no time watching it all, start waching from 22:50 min... But find some time in the future to watch it all...

Ahmeexnal's picture

Sarkozy has unleashed the ruthless french police onto peaceful unarmed civilians.

The protesters are reorganizing and will soon topple the fascist Sarkozy (the new Vichy) regime.


Facebook/Gog-Magog Google revolution version 2.0

KinorSensase's picture

I made it through the first half (watched it late-night), looking forward to the 2nd half.  It's pretty great to see more videos breaking down the whole situation in ever-more-accessible fashions.  This video is top notch, nice link.

Troy Ounce's picture

Do you really think the Greek will pay their hard earned money to a bunch of red necks?

Do you really think a Frenchman will pay his taxes to someone who does not give him the immediate benefit?

There might be a political and monetary union in the EC, a cultural union might only come when PIIGS fly.

There will never be European people as a souvereign.


AnAnonymous's picture

Do you really think the Greek will pay their hard earned money to a bunch of red necks?


Wrong way to introduce stuff. Once again, the role model is the US and it is better to refer to the US to try to infere what is going to be.

Just as Dutch, German, English, French aggreed to throw under the train the negroes in order to get access to liberty as white people in a "the slaves, they are them, not me" stance, the real question is to know whether or not

the French, the English, The German, The Dutch  and all the others (but Greeks) will support that an international institution consficates the power of taxation from the Greeks.

The answer is yes, yes, yes, yes, yes, yes, definitively, absolutely and finally yes.

If they can sacrifice others in order to alleviate their struggling in the short term, they will do. The history of the US. From all Europe, there will be a resounding yes, rationalized by "the Greeks can not behave, we need our money back" motto, "the fair thing" to do etc

After that, Portugal, Ireland etc until the point the majority of countries has lost the power to taxation. At this point, why should the others be treated differently?

By supporting this act, the others will provide the justification for the same treatment to be applied to them.

An old trick perfected by the US.

Dont fear, the US has shown the road and the US citizen nature is eternal.

taraxias's picture

I could write a long response to the drivel you keep posting here but I won't waste my time. I'll just say you are a fucking idiot.

Bobbyrib's picture

I think what he is trying to say is: 'Why would the Greek citizens accept the EU's proposal to give up sovereignty when they could just tell them to piss off and secede from the EU?'

You can all ready see they are protesting and have been for months. They seem to be the country least likely (unlike the Irish they continue their protests) to accept the terms of a bailout. Greece's citizens could choose to default (if there is a revolution in the end) even though the stooges in their government are willing to accept almost any bailout package thrown at them. To me (an outsider) it seemed as though the EU was rigged for some of the Western European powers (France, Germany, and England) to succeed while the other countries raised their standards of living by borrowing from these countries. Now that the bill is due it seems to me the Greek citizens don't want to pay.

JR's picture

You know, Ahmeexnal, the Second World War, which lasted six years in length, was almost 70 years ago and you may have read that the Germans were defeated.  It seems a bit out of date to use the word “Nazi” in conjunction with present day leaders of Germany, one of the more enlightened western nations. 

If I didn’t know any better, I would say you use the term in conjunction with the constant drum beat of Jewish hyperbole to attempt to keep the Holocaust Industry alive and foremost on the minds of Americans now paying a horrendous price for America’s Zionist foreign policy.  But, perhaps, I am wrong….

vxpatel's picture

she doesn't have to go that far away...

Lichtenstein is beautiful this time of year...

john39's picture

and what a plan it was...   use monoply money to take control of anything of value in the world.  any bets on whether they pull it off?  Safe bet, the next couple years are going to be interesting at the public wakes up to the power cult's naughty behind the scenes activities... the banking system is just the start.

trav7777's picture

the usury clan NEVER learns do they?  Pathologically self-deceptive.  Even the deaths of millions and no

Texas Gunslinger's picture

are they self-deceptive, or do they not give a fuck?

goldfreak's picture

but you were supposed to be a Christian Texasmudslinger  and you use the f word.

A troll has to remember what he said in the past and try to be consistent

HamyWanger's picture

Wishful thinking at best. Nobody will revolt. 

This article sums up what I've been repeating for one year now: no default, because it would mean the Pigmen have lost. 

Use of Weapons's picture

I've mentioned this a couple of times, but the buy-in level for real revolution has been costed at $11-12k / annum.

Until I see another ZH poster acknowledge this, and then cite the papers, I'll ignore most of them as not being in the loop.


Oh, and I didn't agree with the paper - Vietnam and other riots show otherwise; however, who am I to question the model the ME revolutions are being played off? Apart from "I told you so", when a large European country discovers the freedom and joy of 1936.

Lord Welligton's picture

"but the buy-in level for real revolution has been costed at $11-12k / annum."


You of course mean 90% of the population.

Then they get 10% inflation?


Meantime just feed as much as is needed.

ADirtyChapCalledWanker's picture

Ef Ísland getur gert það, svo getur Grikkland.

DK Delta's picture

There have been revelations that the Prime Minister of Greece and his family forced the Hellenic Post Bank of Greece to sell it's 1.3 bln in Greek CDS to a company by the name of IJ Partners, of whom Papandreou is presumed to have a stake. The value of these contracts is now estimated at roughly 27 billion dollars. Members of parliament have spoken out on the floor, including leader of LAOS Mr. Karatzaferis, and New Democracy MP Mr. Kammenos. 


This is enslavement of the highest order. Please read the document below and circulate it. It was the best I could do to piece together all the different pieces of news and information that exist on this from greek blogs, media and legal documents. If anyone would like to add or correct statements made within, please leave a comment on the blog post or respond to this comment on ZH.

Lord Welligton's picture

Whether they took a payment or not is not the issue.

The Greek politicians are treasonous.

ISEEIT's picture

As are ours.

What starts in Greece won't stay in Greece.

This is infectious and we lack the political nuts to deal with that fact. obama is a child, a frighteningly narcissistic child. America has her pants pulled down in front of the world. I'm embarrased.

We could be so much better.

i-dog's picture

"obama is a child"

He is NOT a child ... he is very carefully carrying out what he was groomed, trained, appointed and directed to carry out. And so have all the others before him ... and so will the next one (whether it is Perry or Obama).

"We could be so much better."

Not with an elected president under the current system, you won't. Not a chance!!

Vampyroteuthis infernalis's picture

I live in Texas and deal with douche-bag Perry. The thought of him being president makes me shit my pants!

BernankeHasHemorrhoids's picture

I loathe Rick Perry with every fiber of my being but is he any worse than this criminal Obama? I would like to see Obama publicly executed.

DoChenRollingBearing's picture

gmail me Vampyro if you would like to read my blog.  Newest article: "Which is the Best County in Texas?"  Other people who in on this can too.

Nacho.Libre's picture

I'm in Texas, can I get in on some of that action?

dcb's picture

this wouldn't surprise me at all. But, I don't ee it as being just greece. you can see it in our legislatoure as well all the time. folks taking side of corporations that are clearly against the best interest of our country, if not paid directly with a nice job when office is done. just today goldman bought another legislator, sending the clear signal, back us no matter how wrong and you will get paid.

trav7777's picture

is everyone ignorant of Argentina's history at the hands of international finance capital?

Fuck, they DID sell off all the State assets to the favored bidder, never the highest.  You had deep pockets like Petrobras trying to purchase O&G assets at market and yet the assets went for 1/3 to favored bidders.

The fuckin Presidents, Menem and de la Rua, had to be escorted out by military choppers because they took billions in suitcase money.

The elites WILL SELL the country out for their own benefit.  And their replacements will HONOR the contracts because they understand that this is how THEY TOO get rich.

Only once a Hitler comes to power, be he in the form of Putin or Chavez or Castro or any of a number of tinhats, does this crap stop.  And then they isolate him and practice economic and armed warfare, insurgencies, destabilization, etc.   They let nobody actually get an army anymore to go into Sudentenland

DoctoRx's picture

I would think that Putin has more than anyone.

A Man without Qualities's picture

Of that, there can be no doubt..

DoChenRollingBearing's picture

Yes, trav, they will do as they want.  Argentina is indeed a good lesson.

Youri Carma's picture

Papandreou is a British Agent!

Greece: The Curse of Three Generations of Papandreou’s
knukles's picture

The pigmen want to extend new loans.  The pigmen have publicly stated they want the loans secured by Greece's gold reserves.  The pigmen know that whatever the terms, Greece will ultimately default thereupon.  (Termed Fraudulent Conveyance in the private sector.)  The pigmen will then claim ownership of Greece's gold reserves. 

(The pigmen are the world's ultimate gold bugs.)

For not the first time in history, the Super National will own, lock stock and barrel, a nation.  (Ref, prior IMF involvement in Africa, Caribbean, etc.)

The pigmen shall buy on the cheap all functional assets of said country, raise tolls, user fees, tariffs, etc., thereby raping the citizens directly subsequent to have cleaned out said country's financial wealth (including gold reserves)

Prosperous business if you can get it. 
Rape an entire country.

On the Street, there's a term of art for such activity; after you've bleed everyting possible from the client, go back for even more; Skull-Fuck


macholatte's picture

And would the capital for the "loans" be fabricated from nothing, a mere bookkeeping entry on the ledger of some central banks, the IMF, whomever?

The Pigmen have zero risk, the Greeks risk everything. Then call the guys wearing the blue helmets to put down the Greeks. Where's the 300 when you need them?


Ricky Bobby's picture

"Where's the 300 when you need them?"


Lord Welligton's picture



And if any Greek is reading this welcome to hell.

You are now all slaves.

Arius's picture

first they came for the greeks....



DK Delta's picture

I see that you heard the speech from Kammenos