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S&P Says "Consensual" Greek Bailout Would Be An Event Of Default

Tyler Durden's picture




 

When we said over two weeks ago that the second Greek bailout is Dead On Arrival, we were, as sometimes happens, just a little ahead of the curve. S&P has just confirmed that a "voluntary debt restructuring" would be characterized as an event of default from the rating agency's point of view, which is the most disastrous outcome, as it would impair the collateral held by the ECB and be the true catalyst for a liquidity freeze, while anything ISDA decides on whether Greek CDS is triggered and if a rating agency default is an ISDA determination Event Of Default, is almost completely irrelevant, as discussed in our CDS myth debunking post over the weekend.

From Reuters:

Standard & Poor's reaffirmed a voluntary debt restructuring for Greece as currently foreseen by euro zone governments would likely be deemed a default, its head of European sovereign ratings told a German newspaper.

"Past experiences show that restructuring the debt of a country, whose creditworthiness is rated at CCC like Greece is currently, tend not to be voluntary and investors must sustain losses," Moritz Kraemer told Die Welt in an article due to be published on Tuesday.

Euro zone officials have told Reuters a second bailout plan for Greece is expected to fund Athens into late 2014 and feature up to 30 billion euros in aid from a voluntary private sector participation on the basis of the so-called "Vienna Initiative". S&P's Kraeemer said whether extending a bond's maturity voluntarily or not is of lesser importance.

"What's decisive is how does it compare to what was promised to creditors when they first invested their money," he said.

...and from Dow Jones:

"Past experiences show that restructuring the debt of a country, whose creditworthiness is rated at 'CCC' like Greece is currently, tend not to be voluntary and investors must sustain losses," Moritz Kraemer, head of European sovereign-debt ratings for S&P, told the daily.

Officials in the 17-state euro zone have expressed hope that private investors will take part in a mainly public rescue package for Greece, by voluntarily rolling over bonds. But under this "Vienna-style initiative," Kraemer said, whether to extend a bond's maturity voluntarily or not isn't the most important consideration.

"What's decisive is, how does it compare to what was promised to creditors when they first invested their money?" he told Die Welt.

The SS "We'll make it up as we go along" just hit the iceberg.

 

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Mon, 06/20/2011 - 15:37 | 1385968 Hugh G Rection
Hugh G Rection's picture

Sounds like consensual rape to me...

Mon, 06/20/2011 - 16:15 | 1386187 HoofHearted
HoofHearted's picture

And the CDSs are ONLY trading at 2000 bps? Seems like a steal with this "revelation."

Mon, 06/20/2011 - 15:38 | 1385970 Silver Bug
Silver Bug's picture

Of course this is a form of default, endlessly printing more cash to finance a deficit is essential a form of default as well. We all know this can only end one way. Get possession of your physical and ride the waves.

 

http://silverliberationarmy.blogspot.com/

Mon, 06/20/2011 - 15:54 | 1386085 InconvenientCou...
InconvenientCounterParty's picture

fiat currency is a rolling default which can be vectored by central banks.

Mon, 06/20/2011 - 15:39 | 1385972 redpill
redpill's picture

Obviously Greece needs to do more criminal investigation of these wretched ratings agencies that don't let them have their gyro and eat it too.

 

Mon, 06/20/2011 - 16:13 | 1386176 Strider52
Strider52's picture

"I did NOT have default with that...country."

"I think you'll have to define 'default.'"

 

best captcha I ever had: zero plus 19 equals

Mon, 06/20/2011 - 16:43 | 1386331 Jack Sheet
Jack Sheet's picture

With those tits you are exempted from captcha...

Mon, 06/20/2011 - 15:40 | 1385979 Cognitive Dissonance
Cognitive Dissonance's picture

It's only a default if you believe it is a default. Put the fear of God into the little buggers and they will call it apple pie a la mode.

Mon, 06/20/2011 - 15:52 | 1386048 BlackSea
BlackSea's picture

Patience.... That's the Deus ex Machina

Mon, 06/20/2011 - 15:55 | 1386089 Spastica Rex
Spastica Rex's picture

Or Potemkin's Village.

Mon, 06/20/2011 - 15:44 | 1385986 Ghordius
Ghordius's picture

...my pound, give me my pound...

Mon, 06/20/2011 - 15:58 | 1386111 agent default
agent default's picture

...my pounding, give me my pounding...

there fixed it for ya

Mon, 06/20/2011 - 15:45 | 1385990 LawsofPhysics
LawsofPhysics's picture

Fuck the rating agencies.  The greeks need to deal with greece and themselves, just like americans need to deal with america.

Mon, 06/20/2011 - 15:46 | 1385993 dracos_ghost
dracos_ghost's picture

What if they just cuddle? Or call 4 days instead of 3 days after the first date. Is that a default?

Why anyone listens to S&P anymore is beyond me. They should have to disclose all their clients and their positions when they publish this crap.

Mon, 06/20/2011 - 15:46 | 1385995 Bansters-in-my-...
Bansters-in-my- feces's picture

Vapourized collateral Bitchez...!!!

Eat shit Banksters....and like it.!

Mon, 06/20/2011 - 15:43 | 1385999 Hondo
Hondo's picture

As the banks are now controlled by the State what is really voluntary and what is not and how so????  S&P for onced did the right thing is calling a bankrupt country a bankrupt country...........now let's see if they can do the same with the USA, which is in fact a bankrupt country.

Mon, 06/20/2011 - 15:44 | 1386005 TooBearish
TooBearish's picture

In other news Trichet and Junker deem all sovereign CDs illegal and void all outstanding contracts, jail two BBV clerks for clearing customer sovereign CDs trades.

Mon, 06/20/2011 - 15:45 | 1386014 AldoHux_IV
AldoHux_IV's picture

After QE2 ($600 billion in euro bank bailouts), constant fiscal and monetary support for these institutions, the promises of fiscal soundness from broke countries run by corrupted politicians (who don't have the people's interest in mind), and countless bailouts these financial institutions still are very much insolvent and the system is very much far from being fixed any talk of further bailouts is pretty much going to be shortsided and fall very much short of fixing the greater issues.  All so these asshole officials can benefit a little longer by imposing all the fallout onto the people a while longer.

The plan is not going to work and it will fail no matter how much MSM and politicos say it isn't.

Mon, 06/20/2011 - 15:48 | 1386015 TooBearish
TooBearish's picture

In other news Trichet and Junker deem all sovereign CDs illegal and void all outstanding contracts, jail two BBV clerks for clearing customer sovereign CDs trades.

Mon, 06/20/2011 - 15:49 | 1386021 Hondo
Hondo's picture

As the banks are now controlled by the State what is really voluntary and what is not and how so????  S&P for onced did the right thing is calling a bankrupt country a bankrupt country...........now let's see if they can do the same with the USA, which is in fact a bankrupt country.

Mon, 06/20/2011 - 15:56 | 1386075 topcallingtroll
topcallingtroll's picture

Yep

S and P finally grew a pair.

Mon, 06/20/2011 - 16:10 | 1386178 john39
john39's picture

i somehow doubt that...  but what game is the S and P playing? and on behalf of whom? 

Mon, 06/20/2011 - 15:46 | 1386029 CrashisOptimistic
CrashisOptimistic's picture

A Citibank analyst some days ago made very clear the swap problem is pervasive and devastating.  Commentary since then seemed weak in comparison.

Mon, 06/20/2011 - 15:51 | 1386042 SparkyvonBellagio
SparkyvonBellagio's picture

Reminds me, we need yogurt.

 

 

Mon, 06/20/2011 - 15:48 | 1386044 Tense INDIAN
Tense INDIAN's picture

fuck greece default .........this Fukushima is giving me headaches....is everybody on this ZH board sure that they will be able to enjoy the fruits of their investments::

 

http://www.marketoracle.co.uk/Article28800.html

 

just look at the facts given :::

 

"""To give one an example of how lethal radiation is, one pound of plutonium evenly distributed into everyone's lungs would kill every man, woman and child on Earth. There are literally "tons" of radioactive plutonium (among other radioactive elements) that have been released into the air and ocean environments since March 11th."""

 


Mon, 06/20/2011 - 16:14 | 1386199 HoofHearted
HoofHearted's picture

So the solution is really quite simple. Don't breathe any of the air with that poisonous shit in it.

See, problem fixed.

Mon, 06/20/2011 - 22:13 | 1387467 StychoKiller
StychoKiller's picture

"What to do if you're trapped under a large boulder with no hope of rescue:  'Consider how lucky you are that life has been good to you so far.  If, on the other hand, life hasn't been good to you so far, which, given your present circumstances, seems more likely, consider how lucky you are that it won't be troubling you much longer!'" -- HitchHiker's Guide to the Galaxy

 

Mon, 06/20/2011 - 15:48 | 1386051 AldoHux_IV
AldoHux_IV's picture

After QE2 ($600 billion in euro bank bailouts), constant fiscal and monetary support for these institutions, the promises of fiscal soundness from broke countries run by corrupted politicians (who don't have the people's interest in mind), and countless bailouts these financial institutions still are very much insolvent and the system is very much far from being fixed any talk of further bailouts is pretty much going to be shortsided and fall very much short of fixing the greater issues.  All so these asshole officials can benefit a little longer by imposing all the fallout onto the people a while longer.

The plan is not going to work and it will fail no matter how much MSM and politicos say it isn't.

Mon, 06/20/2011 - 15:52 | 1386052 InconvenientCou...
InconvenientCounterParty's picture

Austeriy is consentual too. Just ask DSK.

Mon, 06/20/2011 - 15:54 | 1386061 edotabin
edotabin's picture

I still say this will be glossed over. The "multipolar, we all work together" theme and "illusions of false unity" must be preserved at all costs. Don't forget, the worse things appear now, the better it will look for the "togetherness" crowd when the hurdle is crossed. Even Obama is pressuring to keep this together. It is a trend that I am not sure is so easily reversible.

 

Mon, 06/20/2011 - 22:15 | 1387472 StychoKiller
StychoKiller's picture

Who, in their right minds, is "investing" in Greece??  More importantly, who in their right minds is gonna "invest" in any part of Europe after the Greek Implosion??

Mon, 06/20/2011 - 15:55 | 1386079 willien1derland
willien1derland's picture

The implications are enormous & the potential unintended consequences staggering - imagine the ISDA trying to negotiate not only CDS repayments, counter-party risk, but the trillions in interest rate derivatives as the ECB is not authorized to PRESS THE BERNANK's PRINT FIAT key & the BILLIONS of worthless Greek paper used to collateralize ECB operations is now annihilated - either way the ECB has devalued the Euro which is contradictory to the Bundesbank's constitutional mandate against inflation within Germany - Strap in Kiddies turbulence ahead... 

Mon, 06/20/2011 - 15:57 | 1386081 gwar5
gwar5's picture

Word games. ECB is desperate to exclude the "D" word from any resolution. It is what it is already.

Mon, 06/20/2011 - 15:54 | 1386086 vegas
vegas's picture

Can't we all just get along with the squid?

I mean, if all of us ZH trolls just sold all our PM's and "voluntarily" gave some [or maybe all] of that to Greece, why all of the 40 year-old socialist,university philosophy majors I'm sure would be happy and stop making such a mess of things.

A few hundred billion Euros? Excrement sack Bernank could gobble that up with chump change. You guys with PM's are just wayyyyyyyyyy to selfish.

Mon, 06/20/2011 - 17:34 | 1386485 Strider52
Strider52's picture

I contributed to Greece's GDP over the weekend: I bought some Peppercini's, noting the "Product of Greece" on the label.

Mon, 06/20/2011 - 16:08 | 1386092 Reptil
Reptil's picture

HAH! So much for another "cunning plan" to try con the markets with a political solution.

It's an involuntary contribution, but we pretend it's voluntary, and so we can slip through this crisis..

eehmm NOT!

 

Now there's no other outcome that either:

- involutary/voluntary default (since that doesn't frikkin matter it's INvoluntary)

- massive backstop of the ECB fund, with silent coöperation of finance ministers of the individual states. This will result in a political tragedy -Euripides worthy-  at home in the core states as there's no parliamentary majority support for this move (or any other support), could trigger even changes in government in the core states in short notice.

It will not be carried over the summer, like last year, when people returned to their homes, to find everything "had been taken care of". (resulting in the present mess of one year without real solutions from banks) Oh what difference ONE WEEK makes... (the 24th it's holliday time)

I think the banksters will push for option 2, but are overplaying their hand now. It's clear to many that this is not really a viable solution, and therefore cannot fly. They've brought this onto themselves, there is NO one else to blame, since, as everyone knows by now, greek will be greek, always, and giving the top greeks a bag of money, in name of a third party might have worked in the previous acquisition fase, but now, when it's settlement time, of course, suddenly, not.

 

Mon, 06/20/2011 - 15:58 | 1386107 Dick Darlington
Dick Darlington's picture

Now we need the German constitutional court to finally rule the bail out bonanza illegal (as it is) and we can start digging the old national currencies from naphthalene.

Mon, 06/20/2011 - 16:40 | 1386184 IdioTsincracY
IdioTsincracY's picture

Germany is benefiting big time from a EZ internal exchage rate that was set up in such a way to massively screw weaker economies.

Mon, 06/20/2011 - 15:59 | 1386113 mt paul
mt paul's picture

will not trade 

PM's 

for sheep heads...

Mon, 06/20/2011 - 16:01 | 1386119 A_MacLaren
A_MacLaren's picture

So if the Fed opens new swap-line to the ECB, and together, they dress Greece up in leather and fishnets, is this consensual S&M/B&D?

Mon, 06/20/2011 - 16:07 | 1386132 falak pema
falak pema's picture

Whatever happens to Euro zone...and the writing is on the wall...as RM has explained and others have confirmed...the only people not to listen to are those rating agency shills...S&P have as much credibility in this rip-off as the squid and the Papa-poulos-kalimera brigade!

Mon, 06/20/2011 - 16:07 | 1386134 surfersd
surfersd's picture

http://www.nytimes.com/interactive/2010/05/02/weekinreview/02marsh.html

Nice web of debt. It would be nice to see the same picture with the individual banks that are holding that debt within each country.

 http://seekingalpha.com/article/145854-top-25-global-banks-by-tier-1-capital

It says above that total Tier 1 capital for the top 1000 banks is 4.3 Trillion. What is the Tier 1 amount by bank for those that hold the PIIGs debt?

If I am not mistaken some of this Tier 1 Capital are assets that are already overvalued, when the chips start to fall make sure you have enough food to last you for awhile.

Ron Pauls first commercial should be a short tutuorial on how the FED and the ECB are absolutely f#@king the the poplulace.

 

Mon, 06/20/2011 - 16:07 | 1386135 DogSlime
DogSlime's picture

For what it's worth, Jack Straw:  http://www.bbc.co.uk/news/uk-politics-13839381

Mon, 06/20/2011 - 16:51 | 1386365 scratch_and_sniff
scratch_and_sniff's picture

He is talking like he already knows something we dont, maybe he does. He is right though about the uk media trying to normalise the scenario, the more i watch BBC the more i feel myself falling into a comfortable little land where everything is going to be alright, maybe thats just me though.

Mon, 06/20/2011 - 16:04 | 1386138 Caviar Emptor
Caviar Emptor's picture

Ain't nobody gonna default. 

Greece will get bailed, US will get the debt ceiling raised, QE3/Operation Twist will go through, and every country on earth that needs a bailout will get it (Piigs, East Europe, MENA). And of course, US, Germany, France, UK, Japan will continue to bail themselves. All coming true....since 2008. 

Mon, 06/20/2011 - 16:12 | 1386189 AbandonShip
AbandonShip's picture

Agree.  But I hope we're both wrong, would be great to watch a different movie for once. 

The math (compounding) will soon catch up and "risk premia" (as the Finance professors call it) will take on a whole new meaning.

Mon, 06/20/2011 - 16:16 | 1386208 Reptil
Reptil's picture

We'll see.. Europe is not the US of A. Different game.

http://www.guardian.co.uk/business/2011/mar/27/dutch-bankers-bonuses-axe...

Mon, 06/20/2011 - 16:04 | 1386140 Black Forest
Black Forest's picture

ECB, Merkel, Trichet, G-Pap etc. are going to redefine a default as something that only can happen when the sun rises in the west and sets in the east, and farts at high noon.

Take this for granted.

 

Mon, 06/20/2011 - 16:10 | 1386154 surfersd
surfersd's picture

One of these days gold is going to melt-up like silver did. Then margin increases will start, specs will be lambasted, but gold will build its new range above $2000.

 

Mon, 06/20/2011 - 16:23 | 1386226 Reptil
Reptil's picture

Restricting trading of paper gold, combined with a backstab by the banks of european middle class (favoring the banks), plus a little public awareness campaign here and there, might actually break the dam. The Swiss won't mind, actually. I think they got it now, that they're not excluded from the game.

Mon, 06/20/2011 - 16:07 | 1386156 IdioTsincracY
IdioTsincracY's picture

Revenues... anybody?!?

"Evading taxes is something you can freely talk about—and be proud of—at a dinner party in Greece."

Media reports are rife with accounts of corruption among tax officials. Ethnos, a newspaper, reported in mid-December that a 51-year-old Athens tax official had been arrested on suspicion of taking €1,000 from a pet-shop owner in exchange for not imposing a €3,000 penalty on the pet shop.

Meanwhile, in a government survey last year of 150 doctors in Kolonaki, an upmarket Athens neighborhood, half of the doctors said they were paid less than €30,000 a year. Thirty said they made less than €10,000.

"It is not possible for a taxpayer to declare an income of €15,000 while at the same time maintaining a big house, a big car, a recreational boat and sending his kids to private school," Mr. Papaconstantinou said Tuesday.

Repeated requests for comment on the survey of Athens doctors were unanswered by the Athens doctors association.

A taxi driver last week offered a business traveler a €50 receipt for a €40 ride, to enable the traveler to overclaim expenses to his company.

The condition was that this receipt be scribbled on a piece of paper and not a printed receipt from his meter, which would result in the payment being registered.

Dimitris Mavrogiannis, who owns an auto-paint shop in the New Kosmos district of Athens, says he usually issues receipts, especially as a lot of his work is for insurance companies, who insist on them. But he says he makes exceptions.

Mon, 06/20/2011 - 17:14 | 1386428 scratch_and_sniff
scratch_and_sniff's picture

Hey man, do you know how many Greeks declared a taxable salary of over 1mln Euro in 2010? ... 6. Yes, thats six out of 12 million greeks! And 85 people declared a salary over 0.5 mln euros...this is in a country where there is double the entire GDP in savings accounts, and when you consider that all the main greek banks have branches in the Balkans, thats obviously only a fraction of the wealth. They are in the top 30 wealthiest in the world, and THATS ON THEY'RE CURRENT TAX TAKE! If the government froze savings accounts for 3 years they could pay the debt off with a click of the fingers. Dont let the greedy fucks default, make them pay, it will force them to clean up their act. They took every handout and split the most of it between a few families that run Greece, along with paying for the bloated public sector.

Some might say, well what has it to do with the poor man on the street? …its up to him to sort it out, he wont sort it out by ripping off the other half of europe's pensioners and investors.

Mon, 06/20/2011 - 16:07 | 1386160 surfersd
surfersd's picture

One of these days gold is going to melt-up like silver did. Then margin increases will start, specs will be lambasted, but gold will build its new range above $2000.

 

Mon, 06/20/2011 - 16:14 | 1386180 lizzy36
lizzy36's picture

It is interesting to me that the world is desperately trying to hold something together that is clearly not working.

The issues w/r/t Greece are not new. The banks, EU, ECB, Fed, IMF and the G7 have all had over 18 months to prepare for this. Why is this a "shock"?

Lehman 2.0 possibility is now being invoked like 9/11 2.0. Will trillions of spending now be justified to avert the "possibility of consequences" that at this juncture should not be a shock?

We need the market to clear. If the ECB needs to raise more capital, because of their stupid policies, then isn't the money better spent there than on another bailout that will not work?

Mon, 06/20/2011 - 16:24 | 1386232 magpie
magpie's picture

Time to memorize the names of Generals and Colonels.

Mon, 06/20/2011 - 16:36 | 1386272 Widowmaker
Widowmaker's picture

"We consensually smack you around and rape you in the ass and you sign here that say's you deserve it.  This will keep us from punishing victims of God's work until Friday."

Mon, 06/20/2011 - 16:35 | 1386301 Caveman93
Caveman93's picture

Playing with my dominos now. It's gonna be a neat show!

Mon, 06/20/2011 - 16:52 | 1386369 mendigo
mendigo's picture

it is an incredible opportunity - the soft underbelly of the beast is exposed at this moment

greece and then ireland must drive that sword home and twist it

it cannot be killed, but the screams will be like an angels song

god speed

Mon, 06/20/2011 - 17:28 | 1386474 belogical
belogical's picture

Hmmm... wonder what they consider cash payment at the comex on silver futures?

Mon, 06/20/2011 - 18:04 | 1386610 Highrev
Highrev's picture

S&P has just confirmed that a "voluntary debt restructuring" would be characterized as an event of default from the rating agency's point of view, which is the most disastrous outcome, as it would impair the collateral held by the ECB and be the true catalyst for a liquidity freeze, while anything ISDA decides on whether Greek CDS is triggered and if a rating agency default is an ISDA determination Event Of Default, is almost completely irrelevant, as discussed in our CDS myth debunking post over the weekend.

That’s not what I got from this http://www.zerohedge.com/article/cds-doomers-politicians-and-media

and this http://tfmarketadvisors.blogspot.com/2011/06/restructuring-credit-event-and.html

Another outcome might be that the rating agencies finally are successful in making themselves completely, officially and irrevocably irrelevant.

 

Mon, 06/20/2011 - 19:32 | 1386852 zippy_uk
zippy_uk's picture

So is the Greek bailout going nuclear, or is the EURO going to get nuked ?

Mon, 06/20/2011 - 20:55 | 1387210 bullet357
bullet357's picture

Web bots hit another one right on the money.

June 21st starts  the fall of the euro. (two to four weeks later the U.S. dollar)

Mon, 06/20/2011 - 20:55 | 1387214 bullet357
bullet357's picture

Web bots hit another one right on the money.

June 21st starts  the fall of the euro. (two to four weeks later the U.S. dollar)

Mon, 06/20/2011 - 21:48 | 1387391 Buck Johnson
Buck Johnson's picture

You're on the money on that one.

Mon, 06/20/2011 - 22:02 | 1387436 Zodiac
Zodiac's picture

Remember, "consensual" means something very different to the Euros than it does to us.  DSK thought he was doing that lady a favor and that she should be pleased with the outcum. 

Mon, 06/20/2011 - 22:20 | 1387504 Barb Dwire
Barb Dwire's picture

Fitch just said the same thing. Rollover is a default. Euro to the moon!

Tue, 06/21/2011 - 02:54 | 1388126 Paralympic Equity
Paralympic Equity's picture

I just don't get it. After I red the same thing (that after S&P even Fitch sees it as a default) I thought that the markets will fall as a stone, but I was wrong because DAX and CAC now with EUR in full retarded mode.

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