George Papandreou

Moody's Warns Of Greek Default Spillover As Greece Opposition Leader Rejects New Austerity Package

The Greek bankruptcy, pardon, sovereign liability management exercise, pardon reprofiling, is once again front and center in the news this morning, after Moody's had some words of caution about a broad spillover effect in Europe should Greece file. From Reuters: "A Greek debt default would hurt other peripheral euro zone states and could push Portugal and Ireland into junk territory, Moody's said on Tuesday, warning it would classify most forms of restructuring as a default.  "A Greek default would be highly destabilising and would have implications for the creditworthiness of issuers across Europe," Moody's Investors Service's chief credit officer in the region, Alastair Wilson, told Reuters in a telephone interview. "This would result in more highly polarised credit worthiness and ratings among euro zone sovereigns, with the stronger countries retaining very high ratings and the weaker countries struggling to remain in investment grade." And yet a Greek bankruptcy seems increasingly more inevitable after a brand new fissure has now appeared in the government, after the chief opposition, New Democracy, party leader Antonis Samaras said he would oppose the latest round of austerity which, nonetheless, must pass in order for Greece to not run out of funds in 2 months, as we previously reported, and finally set off the dominoes. While the political bickering will likely hit fever pitch, and result in new and increasingly more violent protests in Athens, it is likely that austerity will pass as western banks are licking their chops at acquiring Greek "privatized" assets, at least when it comes to infrastructure and real estate, banks not so much, at below cost prices.

Greek CDS-Buying Villain Hellenic Postbank To Be First Casuality Of Hellenic "No Bid" Privatization Reality

A little over a year ago, when the Greek CDS scapegoating campaign was in full swing (you see, the reason why the first $1 trillion Greek bailout failed is because of those evil, evil CDS traders: it had nothing to do with Greece being, well, bankrupt), one of the most hilarious discoveries was that among the chief speculative villains was none other than the state-owned Hellenic Postbank. That's right: the government of Greece was profiting by betting on its own demise even as it was making a stink about others doing the same. Well, justice for the insolvent is short, swift and quite poetic. According to Reuters, the first entity to fall to Greece's privatization ambitions will be the very same bank. (Granted, this is not really news: Greek Reporter noted this some time ago, see below). What will be funny is when Greece puts up its insolvent banks on the block and discovers that nobody wants to come within 10 feet of them, unless, of course, it is JP Morgan buying it up with the assistance of Maiden Lane IV, also known as My Big Fat Greek Bailout Taxpayer Funded Conduit, for 2 drachmas per share.

EU To Greece: "We Want To Help You Help Yourself"... And We Want To Own You After You File For Bankruptcy

Well, nobody is leaving the eurozone (as expected), but EU is merely ratcheting up the rhetoric one notch seeing full well what happens to countries that continue to endorse unlimited banker bail outs. And it is likely that the war of words will simply continue escalating until such time as the Greek restructuring becomes inevitable, which will likely happen not sooner than a year from now due to Greek bailout liquidity availability and nobody will push the country to do the inevitable until there is even one spare euro in the coffers for fears of what will happen to Deutsche Bank and the European financial domino. So for those wondering what happened at last night's secret finance minister meeting, one one hand, as Dow Jones reports, Greece "asked its euro-zone partners to ease the country's deficit targets as it struggles to comply with strict austerity terms set under last year's financial bailout agreement, a senior euro-zone government official said Saturday. The senior official said Greece acknowledged that it is unlikely to be able to return to the bond market next year and might need to tap the European Financial Stability Facility, the EU's new bailout fund, for funding. A German proposal to possibly extend the maturities of Greek debt falling due in 2012 also was discussed, this person said. Athens has a long-term borrowing requirement of EUR27 billion in 2012. "Greece has asked for the deficit targets to be eased, specifically to push the budget deficit target of 3% of GDP in 2014 forward by at least two years."" Alas, as expected the latest panhandling attempt by Greece was met with abject failure: "No decisions were taken, according to the Commission's statement. Greece's request for easier terms didn't win the assent of Germany and other participants in Friday's meeting, according to a senior European official." In other words, the country is on autopilot, and possibly worse. Per Bloomberg: "European Union officials may require Greece to provide collateral for aid as policy makers struggle to prevent the euro area’s first sovereign debt restructuring, said a person with direct knowledge of the situation."In other words, for the first time since Weimar, a country may soon be forced to collateralize superpriority debt issuance to foreign creditors: an exercise not really seen in international politics since the Weimar war reparations... and at least Germany had its own currency back then. Summary: the EU just told Greece to prepare for Debtor in Possession loan issuance. Basically should Greece default, and it will, the Parthenon will go to Germany, Santorini will go to Luxembourg, Piraeos will likely end up in IMF hands, and the Chinese will own the rest. Welcome to sovereign debt restructurings for the 21st century.

Breaking: Greece Threatens To Leave Eurozone, Reintroduce Own Currency

    • And cue panic and furious denials:
  • French finance ministry official cannot neither confirm or deny Spiegel report of emergency Eurozone meeting
  • Austrian Finance Minister spokesman says Eurozone breakup "absolutely unthinkable"
  • German government source says theres no plan for Greece to leave the Eurozone
  • Senior Greek government official denies report that Greece raises possibility of leaving Eurozone

Market Recap: 12.3.2010

Technically it a joke to call what we are seeing day in and day out, at least in equities, a market, but for old time's sake, here is a recap of what happened today in stocks, rates, corporates, FX, and a focus on the two key events from late in the day: the bombs from Bernanke and Merkel.

Morgan Stanley On How Only A "Deux Ex Machina" Can Save The European Periphery, And Why The Fed May Have To Do God's Work Out Of The Machine

Morgan Stanley's Arnaud Mares, who a few months ago made the jarring claim that a European default is all but inevitable (and the only question is what shape it will take), has followed up with the next piece in his Sovereign Subjects series, in which he attempts to quantify the practical inputs that would lead to sovereign default, and, more importantly, to government overthrow. Obviously the two are linked, and as Mares notes "out of 19 cases surveyed, on 18 occasions default was followed by the incumbent government losing elections." Which means that Europe is certainly interested in resolving its unresolvable issues in a way that affords fiscal adjustment in a way that does not almost inevitably lead to some form of government overhaul. The problem is that as the following chart demonstrates, the "fiscal adjustment" option which is the only one that at least gives the possibility of preserving incumbency, and unfortunately, this option is that one that not only impairs only taxpayers and not creditors, but is also prolonged over time and not instantaneous. This is also the option that guarantees a build up of resentment not only toward the ruling politicians, but toward the banking oligarchy, has the potential to result in a far greater, and more violent outburst of "social discontent", and just happens to be the state in which America will be trapped for a long time. Yet back to the core topic at hand: in looking at the only feasible way in which a "fiscal adjustment" could work, Mares approaches the issue from a game theory angle, and finds that only a "Deux Ex Machina" can prevent a systemic collapse. While he refers to the IMF, we believe the Federal Reserve, and its various systemic backup facilities (such as the FX swap line), are a much more appropriate subject to fill these shoes. We believe that since to every quid there is a quo, the Fed will not give Europe an infinite handout for free: the leverage the Fed will use, will be to force the ECB to keep the Euro artificially high, threatening with pulling all support if Europe defects in a world in which its consistency is predicated upon the Fed's ongoing generosity. Which is why in the race to the bottom, an eventual EURUSD parity thesis may have to be revised.

Leo Kolivakis's picture

Greece's exit from the eurozone would be the "worst possible option", Europe's central bank chief said at the weekend amid concerns over the debt-stricken country's ability to pull itself out of crisis. Will Greece default and will this cause yet another global crisis?

When Jail Threats Don't Work: Greek Government Punctuates Case Against Strikers By Firing Tear Gas At Them

As we wrote earlier, Greece is currently paralyzed, literally, due to a wholesale shortage of fuel at gas stations, as drivers of trucks carrying the precious commodity have been striking for several days. As noted previously, the government invoked a war-time mobilization measure forcing the strikers to stop striking or face civil penalties and jail time. Shockingly, this had absolutely no impact ont he angry mob. In order to make its point even more clear, the government accentuated its overturn of labor rights by firing tear gas at protesters, according to the Guardian. And, in an amusing turn of events, the IMF delegation which was rumored to be passing by at just this time to conclude the backroom deal in which US taxpayers would fund a few hundred more billion of failed Greek programs, was subjected to a Greek parliamentary guard wearing the traditional skirty attire, screaming in a bullhorn that the truckers were merely engaged in a modern remixed version of sirtaki and there was absolutely nothing to see there (obviously the guy had just graduated from the CNBC School for People who Want to Fabricate the Truth Good).