Greek CDS Hits Ridiculous 1,900 bps On Total Chaos Over What Happens Next, Ongoing Greek Ruling Party Mutiny
This morning Greek CDS is trading at a spread of 1,900 bps: a level that seals the fate of Greece, whose bonds are being sold into a bidless market. Two primary factors have totally shocked the market: one is that, as Reuters, reports, Germany now "wants the deadline for for a second
Greek rescue package to be pushed back to September, reflecting the
problems Europe is having hammering out the details, EU and banking
sources said on Thursday." This means that Greece may well run out of cash in the interim, but it appears that Germany is now fine with that outcome. The other news comes from Athensnews.gr which reports that the exodus of MPs from ruling PASOK is now picking up: 'Ruling Pasok MP Yiorgos Floridis on Thursday tendered his resignation, the second ruling party MP to resign in the space of two days, followed by Ectoras Nasiokas, Larisa Pasok MP. George Lianis was the first Pasok MP to resign on Tuesday afternoon. In addition, veteran Pasok MP and former minister Vasso Papandreou asks for an extraordinary meeting of Pasok parliamentary group. Floridis resigned from his MP post, but did not declare himself an Independent, thus in effect "returning" the seat to Pasok." With the PASOK already slender majority in parliament in its current formation, these ongoing defections mean that, just as we warned, the mid-term fiscal proposal will likely fail in parliament and Greece will do what Ireland should have done, and what in fact Greece should have done a year ago, and voluntarily leave the eurozone. It also means that keep a close eye on the FRA-OIS and Libor-OIS spreads as today all liquidity hell can break loose now that a break up of the eurozone appears certain.
More on the German push for a delay:
One EU source told Reuters that German Chancellor Angela Merkel and Finance Minister Wolfgang Schaeuble favoured a delay.
"The argument goes: We don't know what to do, let's buy more time," the source said, adding that Berlin had its customary backing from the likes of the Netherlands, Finland and Slovakia.
A high level German banking source also told Reuters Berlin was targeting September as the point at which all the problems could be solved.
And as to why Athens is now becoming the Bounty:
Floridis, a former public order minister (2003-2004) and former deputy minister of finance (2001-2003), culture (sport portfolio, 2000-2001), and interior and public administration (1998-2000), said in his letter of resignation that he honors the Panhellenic Socialist Movement (Pasok) and its struggles, "but at this marginal time for the country, the national duty was defeated by the leader-oriented and partisan interest".
"Thus, will absolute awareness of the criticality of the moments, I submit my resignation from the post of MP," Floridis said in his letter, and blamed all the political parties of failing to reach elementary agreement in order to deal with the climaxing national crisis, due to the party-oriented nature of the effort, while he also warned that (early) elections, despite being the firm and irreplaceable democratic way out, "at this particular time entail severe danger for the country's economic viability".
Floridis further accused the government of "wrong choices in the economy and the state" and "inability of comprehensive planning", and a "clearly unequal and unjust distribution of the burdens and unprecedented inefficiency", and main opposition New Democracy of "investing in the government's wear and tear, with choices unprecedented for a conservative party of authority", and with the risk of the country's destruction as the "prize".
In the past days, initiatives for national understanding aimed at political stability had created the impression that such stability could be achieved, he said, stressing that only a transitional 'national salvation' governmental scheme could have contributed in that direction, with the mandatory participation of the two main political forces of the country (Pasok and ND).
"Unfortunately, the leaderships of the two mainstream political parties were once again beneath the national circumstances, in a politically unforgivable way," he said, adding that instead of a national rallying, what prevailed was a rationale of partisan and political pretexts, self-serving calculations and petty party pressures.
"There is no worse way to verify the end of a worn down and outgoing political system," he added.
Βriefing parliament on his intention, the third resigned MP, Ektoras Nasiokas said that "this is the least I can do to reverse today's condition of impasse, for the salvation of the country".
Expect more defections, and the EURUSD to drop below 1.40 very shortly on what is about to be a liquidity freeze of epic proportions.
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