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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Hugh G Rection's picture

Sounds like consensual rape to me...

HoofHearted's picture

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

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/

InconvenientCounterParty's picture

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

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.

 

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

Jack Sheet's picture

With those tits you are exempted from captcha...

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.

BlackSea's picture

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

Ghordius's picture

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

agent default's picture

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

there fixed it for ya

LawsofPhysics's picture

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

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.

Bansters-in-my- feces's picture

Vapourized collateral Bitchez...!!!

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

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.

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.

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.

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.

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.

topcallingtroll's picture

Yep

S and P finally grew a pair.

john39's picture

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

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.

SparkyvonBellagio's picture

Reminds me, we need yogurt.

 

 

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."""

 


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.

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

 

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.

InconvenientCounterParty's picture

Austeriy is consentual too. Just ask DSK.

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.

 

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??

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... 

gwar5's picture

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

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.

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.

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.

 

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.

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.

mt paul's picture

will not trade 

PM's 

for sheep heads...

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?

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!

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.

 

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.

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. 

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.

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.

 

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.