Step Aside ECB: China Becomes Lender Of Last Resort To Failing Greece, In Exchange For Petrobras-Like Shell Game

Tyler Durden's picture

Here is how you kill two birds with one stone, all the while confirming that Europe has been about a step away from a full collapse. Greece, which like Ireland, has been unable to peddle its bonds to anyone now that Bunds spreads are back to all time record levels, has just seen the last white knight of the Keynesian system come to its rescue: China. As Bloomberg reports, the European lender of last resort is no longer the ECB: "China has already bought and holds its Greek bonds,” Wen
said in joint comments with Papandreou today, which were carried
live on state-run ET-1 television. “It commits, very
positively, to buy new bonds to be issued by Greece." Yet herein lies the rub: in exchange for the Chinese last-ditch rescue financing, which by the way is so transparent that everybody, except maybe for the Norwegian wealth fund will see right through it, Greece, in what is an almost identical replica of the Petrobras shell game, will use the money to turn around and buy Chinese ships. "Wen said a $5 billion shipping fund will be set up to
tighten relations between the countries’ two maritime industries
and facilitate the sale of Chinese vessels to Greeks." Truly brilliant what Keynesians will come up with in the last days of a collapsing economic religion.

And one wonders just how far the reach for yield has pushed China - instead of buying US bonds, the country with the $2 trillion + trade surplus is investing in the sovereign equivalent of subprime. Which makes sense, when your cost of capital (i.e. artifical GDP growth) is 8%+, buying 2 Year US bonds at 0.4% just won't cut it any longer.

Greece received a 110-billion euro ($151 billion) bailout from the EU and International Monetary Fund in May to avoid default. The country, which has been locked out of international credit markets, plans to issue new bonds in 2011.

In the first visit to Greece by a Chinese premier in 24 years, Wen said he wants to signal a vote of confidence in Greece and the European Union in overcoming the international financial crisis.

“With our common efforts the total mass of imports and exports between the two countries in the next five years can double to $8 billion,” Wen said. He called on Chinese businesses to invest in Greece.

As for the JV in what could be the most oversupplied industry in the world, here is how China and Greece hope to confirm that all is well, despite a Baltic Dry Index which after its latest dead cat bounce, so vapidly extolled by those who have no idea about supply/demand mechanics in the Capesize sector which has about 5 boats of excess supply for every boat in demand, has been down for nearly two straight weeks with one or two day exceptions:

The two leaders will today visit Piraeus Port, Greece’s biggest, where Asia’s third-biggest container terminal operator has a 35-year concession to run some operations. China plans to deepen its Piraeus investment to move 3.7 million containers a year by 2015.

Cosco Pacific Ltd. won the concession to run container operations at Piraeus Port’s Pier II and build and run Pier III in 2009. Greece’s government owns 75 percent of Piraeus Port Authority SA, the company that manages the harbor.

Wen will speak in the Greek parliament on Oct. 3, Ambassador Luo Linquan said in an interview with China’s state- run news agency Xinhua.

For all intents and purposes, this is equivalent to Buffett buying a stake in Goldman, or convertible preferred in GE, just before the bottom fell off the market. The problem here is that after China, there is no other backstop left, period, unless one discovers some rather prominent printing presses on Mars, coupled with some intelligent life. Which, unfortunately for Greece... and Earth... would mean no Keynesians.

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snowball777's picture

Xirong at the gates!

midtowng's picture

I believe a Greek Tragedy tale would be more appropriate.

Rogerwilco's picture

A similar scheme worked well for Lucent Technologies, until one day it didn't. But we're so much smarter now, and this time it's different...

HarryWanger's picture

Triple digit gain on that news after CNBC spins it into "Chinese confidence shown with monetary support for Greece".

Time to crank up the machines and start the party!

snowball777's picture

China purchases austere slave shipping force, film at 11.

ToNYC's picture


I'm seeing China forgetting an interest payment for an air base that will make the Joint non-smoking Chiefs' head spin.

Mark Noonan's picture

Naw, won't disturb the Joint Chiefs at all - the curious thing about Greece is that it isn't strategically important to anyone other than the Greeks.  The only area of importance around there is the Dardanelles, and Turkey controls them.



MacedonianGlory's picture

Papandreou's Gvnt is a total failure.

One year ago Papandreou was protesting against Chinese.

Now he begs for cash.

He is the cause of Greece's destruction


A Broken Bear's picture

Really? You're blaming him and not the years of useless, lying and corrupt government they have had?

DosZap's picture

China, is /has bought up everything for sale, as far as it's needs for the next 50yrs+.

Meanwhile, back at the SHITEHEAD hole, we print.

One thing the Rare Earth lockdown did, was wake up the Pentagon.

We have HUGE resources of those RE's,just up until now, it's not been a priority to spend the cash to mine them.

Well, game on now.

scatterbrains's picture

Interesting...  What's a good way to play this "game"


morkov's picture

"we" bought India...remember the nuclear deal??? the biggest "democracy" with cast system still operating. That's not insignificant.

Oh regional Indian's picture

Yep, but India was actually bought, lock-stock and barrel a long time ago. The Unclear, unpopular, nuclear deal is just the icing on the take-over cake.

Also, India is not a democracy. It is a kleptocray of the worst kind. A thug-ocracy even. Some said it best on a ZH a while ago, China is the factory to the world and india is it's errand running back-office boy.

And the caste system does not exist as it was meant to. Like all other institutions (cultural or otherwise), it's current form is a perversion of it's origins.

The Petrobas shell game has also been played over and over by the developed world on India and the rest of it's "third' world ilk(what is the second world?, never found the answer to that one). Japan Overseas Development bank, USAID and it's ilk have been givign these loans to India for decades. Caveat, buy Japanese or American crap with the same loans.

Funny, begger nations giving other begger nations loans.

Such a joke, International "Development" aid. Golden chains at best, hangman's noose at worst.

Keep yer money, you need it!


JMcLeod's picture

The term Second World was used to sum up the communist countries, i.e. the Soviet block, China and Vietnam.



morkov's picture

i keep forgetting to mention "you" printed enough money to monetize Iraq's wealth and to be used by it's citizens...

outamyeffinway's picture

I believe Greece was supposed to bring their budget in line with the M treaty but were supposed to still meet their defense budget spending requirements....? Idiotic.

This is a very interesting development. Greece would be "siding" with China rather than the Western defense monopoly.

bankonzhongguo's picture

This is no different than the World Bank, USAID and GS usual suspects in being Economic Hitmen in the developing world since WW2.  Greece, a member of NATO, yada yada, is now going down the road of Guinea Bissau.  They will also be joining the USA.  Folks forget we make loans to Panama, Nicaragua, etc. on condition that they buy American M-16s, Humvees and Bell H-1 spare parts.

_deepfire's picture

While the EHM story you link to is entirely legitimate (from my POV), I don't see sinister motives parallel to the Chinese action.

They are merely engaged in practical alliance building, AFAICS.

DosZap's picture

Need some swampland in AZ?

ToNYC's picture


Don't be forgetting we pay BushArabia a healthy chunk of the extra 40-50 USD per barrel times 6 million per day so the white-robed Wahabbis can spend in on Eisenhower's warned-about Military-Industrial Complex.

60 Billion was the last deal announced September 2010.

hungrydweller's picture

+ 60B

The ChiComs side with western friendly nations while we side with IslamoFascists.  All the while, they continue to pick up hard assets with which to dominate the future world.  Our vaunted military will not carry the day this time.  Man are we stupid. 

Hondo's picture

Another loser for the Greek people who will now need permanent welfare

williambanzai7's picture

I have said before they should turn the Acropolis into a Chinese sauna.

Atomizer's picture

Ni Hao (A Gold Farmers Story)

Timothy Geithner Open To New Global Currency

If you cannot see thru this charade, there is no hope for you.

idoubtit's picture

Vendor financing.  I can't wait till Greece fu*cks China. 

DosZap's picture

They are gonna have to go BIG, to beat us at that game..........we WIN.

Kayman's picture

It might be a tad difficult to know who the fu*kee or the fu*ker is.

But certainly Wen will be introduced to Greek secks.

quasimodo's picture

No ticky no laundry, bossman

carbonmutant's picture

Actually this was a bailout of the EU... to keep Greece from defaulting and bringing down the whole house of cards.

i-dog's picture


Ding, ding, ding ... correct answer!


china to greece

"We're from china and we're here to help."



tom a taxpayer's picture

Chinese Trojan horse...the fall of Troy.

How sad for the proud Greek seafaring, ship-building nation.

The Chinese use a Trojan horse for the final Act of the Greek tragedy, a  downward spiral noted in 2000:

"The Greek shipbuilding industry, like the wider European industry, is in crisis due to competition from countries with low labour costs. Greek shipyards have been forced to make a series of structural changes which have resulted in lower employment levels, but which are gradually creating the conditions for Greek shipyards profitably to re-enter international markets. We examine the situation and prospects of Greek shipbuilding in early 2000, and the positions of trade unions and employers."


How sad for the proud Greek seafaring nation.

"The Greeks, more than any other people in the world, have remained, during their entire, very long history, mariners without interruption, they have loved the sea, they have thought of it as a beautiful element, and they believed it had godlike powers; whilst the others, such as the Phoenicians and the Romans, used it to conquer other people. The Greeks considered the sea a friendly environment and they were happy with the sea's caprices. Very quickly they came to realize that the sea could offer them a way of life, together with the joy of freedom and an increasing freedom of spirit."

Gromit's picture

Timeo Chinos et dona ferentes

(I fear the Chinese even when they make gifts)

Invisible Hand's picture


I watch all your stuff!  Dump Wallace and we can run away together!  The Invisible Hand never stops scratching ears...I promise.

By the way...Greece must be destroyed.  Wait, I don't have to say that, the Greeks will take care of it without any encouragement from me.

The US probably won't make it.  Germany won't make it.  China is doomed.  But when Greece slides back into the Stone Age, no one, especially the Greeks, will notice or care.  It's all been downhill since 479 BC (Plataea) and once the welfare from the Northern Europeans runs out, Greece is toast.  I wonder if the Iranians would have any interest this time?...Nah, I'madinnerjacket is way to smart for that...



London Dude Trader's picture


FT - Greeks rush through law giving tax amnesties

By Kerin Hope in Athens and David Oakley in London

Published: September 30 2010 21:49 | Last updated: September 30

2010 21:49

Greece’s parliament has pushed through legislation that in effect grants a tax amnesty to millions of citizens, in a move at odds with organisations overseeing the country’s bail-out.

The law will allow the government to collect about €2bn ($3bn) overthe next two years, far short of an estimated backlog of unpaid taxes over the last decade of about €35bn.


Leo Kolivakis's picture

Smartest move ever...China will make a killing and so will the Norwegians. The rest of the world is too worried about reputation risk to invest in Greece, so as usual, they will miss out. Ten-year Greek bonds are yielding 11%! What a fucking joke! I just visited the country and while things are bad, they are nowhere near as bad as the US media claims. And China should forge alliances with Greece, use their ports as a hub into Europe and develop solar farms to export energy to the all of Europe. I am long China, Chinese solars, Greek bonds and all you drama queens over here will be proven wrong!!!

Spalding_Smailes's picture

Leo, did they not just go belly up? They needed a huge bailout a few months ago & the banks are still insolvent ? They need outside financing to service this debt ?

But the media is wrong? <scratching my head>

Leo Kolivakis's picture

And they got the bailout, implemented austerity measures, and they will eventually come back stronger. My point is that the current market yields on Greek bonds are an abomination. No US or Canadian pension fund has the guts to invest in Greek debt, so China is making the right move. They will profit from this and other projects they're financing in Greece.

lizzy36's picture

Leo, i will bet you, that in a maximum of 3 years, Greece will in some form or another default on their sovereign debt. There will be a restructring.

And come back stronger, how?


Leo Kolivakis's picture


Greeks always come back stronger when the rest of the world counts them's in our DNA to persevere and come back stronger. ;)

Spalding_Smailes's picture


And they got the bailout, implemented austerity measures, and they will eventually come back stronger.


How can they come back when the gdp will drop with austerity and tax issues persist the austerity will not help this issue. They have the largest black market going next to turkey, will the rest of europe keep giving hard earned saving while the greek people run from taxation? Europe does not have a long history of *one big happy family*.

i-dog's picture

"will the rest of europe keep giving hard earned saving while the greek people run from taxation?"

Pick me ... I know this one! ... ummmm, yes!

Mark Noonan's picture


It is physically impossible for the Greeks to pay back their debts - there aren't enough Greeks to do it.  Greece's population is set for a steep decline unless Greek women suddenly decide to have a lot of children...and even then it would take a generation for things to turn around in demographics.

Now, if your plan is to just buy some Greek bonds now and hope to unload them on an even greater fool a year or so down the road, then great...but Greece will default.  There is no way out.

Mark Noonan's picture


It is physically impossible for the Greeks to pay back their debts - there aren't enough Greeks to do it.  Greece's population is set for a steep decline unless Greek women suddenly decide to have a lot of children...and even then it would take a generation for things to turn around in demographics.

Now, if your plan is to just buy some Greek bonds now and hope to unload them on an even greater fool a year or so down the road, then great...but Greece will default.  There is no way out.

Imminent Crucible's picture

Leo: "We Greeks--especially we Canadian Greeks--are just genetically superior to the rest of you mongrels."

Suddenly I realize that Leo Papadopolous is an obnoxious jerk with a victim complex.

The "bailout" is hardly a bailout, Leo.  It just sank Greece deeper in debt and kicked the grenade down the road.  And Papandreou just shot the Greek shipbuilders to make room for COSCO.  China will end up holding Greece's leash.

JMcLeod's picture

Leo is absolutely right, the Greeks will bounce back... so it will at least appear... Michael Lewis' article in Vanity Fair has a few pointers of how it would be done...