Wait... Wasn't the Greek Issue Solved Already?

Phoenix Capital Research's picture

Greece is in big trouble.

 

I realize that 99% of commentators have completely missed this fact. After all throughout 2011 the mainstream financial media published stories claiming that the Greek Crisis was solved.

 

However, the reality is that Greece remains in Crisis mode. The country has only 37 billion Euros left from its first bailout package. And the second bailout package is anything but guaranteed.

 

Indeed, as the below story reveals, the two financial backstops for Greece (the IMF and Germany) are in no place to pony up more cash.

 

Analysis: IMF funds for Greece not assured

 

IMF chief Christine Lagarde is warning Europe that Greece's economic prospects are deteriorating and the European Union will either have to pony up more money to rescue Athens or debt holders will have to stomach steeper losses.

 

Unless the private sector or the EU contribute more to Greece's rescue, the International Monetary Fund will view the nation's debt load as unsustainable and may be unwilling to deliver more funds, IMF sources told Reuters as Lagarde met with Germany's and France's leaders in Europe...

 

But talks aimed at getting private-sector creditors to shoulder a bigger part of a new Greek bailout are going badly, senior European bankers said on Wednesday, raising the prospect that euro-zone governments will have to increase their contribution.

 

If bondholders refuse to take larger losses and the EU does not agree to provide more aid, it is unlikely the IMF would come in to save the day, a senior diplomatic source said.

 

Already, concern is rising among IMF member countries about the Fund's growing exposure to Greece, with lending already at 2,400 percent of the nation's IMF quota -- by far the largest on record since 2003.

 

U.S. Republican lawmakers are already taking aim at Washington's support for the IMF, threatening to snatch back a loan approved for an IMF crisis fund in 2009. With a presidential election looming in November, the Obama administration has made clear it has no plans to provide further resources through the IMF to help Europe.

 

http://www.reuters.com/article/2012/01/11/us-greece-imf-idUSTRE80A2AL20120111

 

Let’s consider the IMF first. The IMF has already given Greece 2,400% more funds than its quota allows. Moreover, the IMF is essentially a US-backed organization. And what are the odds that Congress and Obama are going to “OK” hundreds of billions in funds to bailout Europe during an election year?

 

Next to none.

 

So the idea that the IMF will somehow save the day here is completely delusional. Indeed, you can even see this in the following paragraph:

 

Unless the private sector or the EU contribute more to Greece's rescue, the International Monetary Fund will view the nation's debt load as unsustainable and may be unwilling to deliver more funds, IMF sources told Reuters as Lagarde met with Germany's and France's leaders in Europe...

 

This is nothing more than a cop-out: the IMF knows private bondholders don’t want to eat more losses on their Greek debt holdings, so it’s using that as the reason why it cannot provide more funds. It’s actually pretty brilliant as it portrays the IMF as wanting to help, but blames others for the reason why it can’t.

 

Germany is pulling a similar stunt, promising to pony up more cash only if Greece meets certain conditions (conditions that Germany knows Greece won’t agree to).

 

Merkel warns Greece on second bailout

 

German Chancellor Angela Merkel has warned Greece it will not be able to receive further aid unless it makes rapid progress on its second rescue package, including reaching agreement with private bondholders over a voluntary write-down on Greek debt, Reuters has reported.

 

Speaking at a joint news conference in Berlin with French President Nicolas Sarkozy, Merkel told reporters,“The second Greek aid package including this restructuring, must be in place quickly. Otherwise it won’t be possible to pay out the next tranche for Greece.”

 

The scheme aims to cut Greece’s debt-to-GDP ratio from around 160 percent to 120 percent. However, last week European Central Bank (ECB) policymaker Athanasios Orphanides said the private sector deal should be scrapped, while on Saturday an adviser to Germany’s finance minister said a 50 percent “haircut” was insufficient to tackle Greece’s huge debt, Reuters reported.           

 

http://www.globalpost.com/dispatch/news/business-tech/debt-crisis/120109/merkel-warns-greece-second-bailout

 

In plain terms, both the IMF and Germany have stated they will help Greece if and only if Greece agrees to various measures… which they KNOW Greece cannot agree to.

 

And so the Greek issue has become a kind of “hot potato” that no one wants to keep holding. Meanwhile, every day that this issues doesn’t get solved, the EU as a whole moves closer to systemic failure.

 

After all, the very same issues that are plaguing Greece (namely the inability to find additional bailout funds) are going to take down Spain, Italy, and the other PIIGS. And once they do, the EU in its current form will be broken up.

 

You can already see investors preparing for this as they flock to German bunds pushing yields negative there. On top of this, EU corporations and banks are so worried about the system that they are parking record amounts of cash with the ECB.

 

So if you’ve not already taken steps to prepare your portfolio for a Euro collapse, NOW is the time to do so. Because once the real fireworks start, it will be too late.

 

If you’re looking for specific ideas to profit from this mess, my Surviving a Crisis Four Times Worse Than 2008 report can show you how to turn the unfolding disaster into a time of gains and profits for any investor.

 

Within its nine pages I explain precisely how the Second Round of the Crisis will unfold, where it will hit hardest, and the best means of profiting from it (the very investments my clients used to make triple digit returns in 2008).

 

Best of all, this report is 100% FREE. To pick up your copy today simply go to: http://www.gainspainscapital.com and click on the OUR FREE REPORTS tab.

 

Good Investing!

 

Graham Summers

 

PS. We also feature four other reports ALL devoted to helping you protect yourself, your portfolio, and your loved ones from the Second Round of the Great Crisis. Whether it’s my proprietary Crash Indicator which has caught every crash in the last 25 years, or how to stockpile food (where to get it, what to buy, and how to store it) our reports cover this information in great detail.

 

And ALL of this is available for FREE under the OUR FREE REPORTS tab at: http://www.gainspainscapital.com

 

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steve from virginia's picture

 

Why would the Fed do anything? If it sits on its hands the dollar swaps will allow Wall Street scavengers to pick up Greek assets at swap meet prices (in dollars).

For them to add dollars now would raise the question 'why?' when adding dollars later (or never) makes more 'bidness sense'.

If you know you can buy a car next week for $100, why pay $10,000 for it now?

Gold Dog's picture

With a crow-bar!

Ancona's picture

Ahhhh.....blood in the water. I wonder how long before Goldman puts a "buy" on Greece, then shorts the shit out of them?

falak pema's picture

this scam is the shame of western civilization; the second invasion of Europe by the lousy financial HF/PD generation of scum bags and banks, too deep in debt, too reaking of crime and blood already spilt in financial mayhem, to care for the common man. Raise high the gallows carpenter for the bankstas and their corrupt politicial friends.

NEOSERF's picture

You haven't been paying attention...#1. NOBODY will let Greece default in case it is the first dominoe.  #2. Money will be quitely funneled via the Fed or other if necessary to keep this going...

agent default's picture

In the end it will be the US taxpayer that bails out the world.  We have to save the world economy, even if it kills us, because otherwise we are doomed.  I just love these bullshit dilemmas they hit us with every six months or so.

cdskiller's picture

Doomed, my ass. We don't have to save anything or anybody, let alone Greece, bondholders or european banks. That's the big lie. What limits our choices is not reality but our own ignorance and the greed of powerful interests.

DollarMenu's picture

This mess is dragging out as long as Fukishima.

Our new reality, perpetual meltdown.

omniversling's picture

Olive oil = good lube..prepare for super-shafting. Birthplace and deathbed of western 'democracy'.