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GREuphoria, Interrupted... Or Not

Tyler Durden's picture




 

UPDATE: *EURO FINANCE CHIEFS REACH DECISION ON GREECE, OFFICIAL SAYS

Can't wait to see what they came up with...

EURUSD is limping lower (-20 pips to 1.2800) as the early morning hours tick by in Europe and still Greece is not ceremoniously considered fixed. Reuters, citing official sources, got its hands on the 15-page report prepared for the meeting and it is grim reading indeed - summarized below (via Bloomberg): "The [extensive] package of options will not make it possible to arrive at a debt-to-GDP ratio of close to 120 percent in 2020 without taking recourse to measures that would entail capital losses or budgetary implications for euro area member states or envisage a more comprehensive Debt-buyback entailing the activation of collective action clauses." It would seem the GGB trade may well be the 'no brainer' trade of the year after these new haircuts.

 

Via Bloomberg:

Current Greek debt level about 170% of GDP

 

Without debt-reduction measures, Greek debt will fall to

  • 144% of GDP in 2020
  • 133% of GDP in 2022
  • 111% of GDP in 2030

Goal of debt-to-GDP ratio close to 120% in 2020 only possible with “measures that would entail capital losses or budgetary implications for euro area member states,” Reuters cited document

 

Target of reaching debt sustainability may be postponed to 2022

 

Reduction of interest rates on bilateral loans to Greece by 70 bp vs currently 150 bp above financing costs would cut debt by 1.4% by 2020; Cut to 25 bp would reduce debt by 5.1% of GDP by 2020

 

Deferring interest payments by 10Y to 2022 on loans made through EFSF would cut Greek debt by EU43.8b, or 16.9% of GDP

 

Return of profits made by ECB on Greek bond portfolio, would cut Greece’s debt by 4.6% in 2020

 

Buying back EU10b worth of Greek bonds from private investors at 50 cents/euro would result in debt falling by 2.4% of GDP by 2020

 

Combined elements would still fail to reduce the overall debt-to-GDP ratio to 120% by 2020, the level the IMF has deemed as “sustainable”

 

IMF may withdraw from Greek bailout programs if level can’t be reached

 

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Tue, 11/20/2012 - 23:35 | 3001016 CrashisOptimistic
CrashisOptimistic's picture

And who funds these delays?

Wed, 11/21/2012 - 06:56 | 3001405 Zero Govt
Zero Govt's picture

what funding?

the entire reason the alphabet soup of funding entities hasn't had 'lift off' is nearly every country supposed to add funding fuel is deep in a debt hole and broke themselves

this is alcaholics coming to the rescue of a comatose drunk. It doesn't get any prettier in pissed-stupid Europe

Tue, 11/20/2012 - 23:35 | 3001018 Conman
Conman's picture

Ooooo right out of the old play book. Plan to make a plan that will make a plan!

Tue, 11/20/2012 - 23:38 | 3001029 pleseus
pleseus's picture

Must kick can further.  Deal reached.  Smiles, back slapping all around.  Good for another 3 months before it starts all over again.

Tue, 11/20/2012 - 23:40 | 3001032 CrashisOptimistic
CrashisOptimistic's picture

Nope, it's showtime now.  The end of the road turns out to be when the cash is gone, as it is for Greece.  They have to put up or shut up now.

Tue, 11/20/2012 - 23:40 | 3001033 ArkansasAngie
ArkansasAngie's picture

These guys are all in. 

IMF isn't going to be the folks who stand on principal

 

 

Tue, 11/20/2012 - 23:43 | 3001042 CrashisOptimistic
CrashisOptimistic's picture

The Dutch just won an election with their platform being "no more money for Greece.".  The Fins will have to have collateral for any more.  And Germany has an election upcoming.

The issue is the delays require funding and funding is not consistent with "no more money for Greece".

The game may be over.

Tue, 11/20/2012 - 23:45 | 3001046 CrashisOptimistic
CrashisOptimistic's picture

I'm seeing -43 pips on the Euro in Asia this moment.  Still sinking.

Tue, 11/20/2012 - 23:56 | 3001070 Dr. Engali
Dr. Engali's picture

It won't be the first time a politician ran on a lie. Wait until the bankers hook em up with some hookers and blow then let's see what happens.

Wed, 11/21/2012 - 00:04 | 3001090 CrashisOptimistic
CrashisOptimistic's picture

Always possible, but you do realize there are no longer any private bankers significantly involved?  The PSI moved them all to 30 year paper.  This is all now Official Sector stuff and it's in smelling distance of 200 Billion Euros.

They can't pour more taxpayer money in that hole.  There is no bank intermediary now.  It's directly taxpayer Euros now.

Wed, 11/21/2012 - 01:20 | 3001229 three chord sloth
three chord sloth's picture

Greece is down to mainlining electronic money directly from central banks, and The One Central Bank That Matters over there (i.e. Germany) ain't fronting no mo' sunshine-in-a-bag to that Augean deadbeat.

Tue, 11/20/2012 - 23:43 | 3001037 edb5s
edb5s's picture

"Return of profits made by ECB on Greek bond portfolio, would cut Greece’s debt by 4.6% in 2020"

 

Profits on Greek bond portfolio?  That's a great plan.  Here's an idea to bring down debt to a "sustainable" level (forget, for a moment, the idea that being allowed to take on new debt should imply that your debt load is "sustainable" in the first place). STOP ISSUING MORE DEBT. 

Tue, 11/20/2012 - 23:43 | 3001041 Dr. Engali
Dr. Engali's picture

"The [extensive] package of options will not make it possible to arrive at a debt-to-GDP ratio of close to 120 percent in 2020 without taking recourse to measures that would entail capital losses or budgetary implications for euro area member states"

For crying out loud the greedy bastards need to take significant capital losses. Maybe they'll think twice about the loans they make next time. Maybe.... But I doubt it.

Tue, 11/20/2012 - 23:47 | 3001045 Caviar Emptor
Caviar Emptor's picture

EU to USA, circa 2008: You should not have let Lehman fail. 

USA to EU, circa 2012: You should not have let Greece go under.

 

The central bankers' nightmare is always the same: just when spring is about to start we get a blizzard and go back to the deep freeze. 

Wed, 11/21/2012 - 00:47 | 3001190 jeff montanye
jeff montanye's picture

the u.s. cabal of treasury/goldman people should not have let lehman fail in a disorderly fashion.  

a reorganization like that done routinely by the fdic of commercial banks would have been appropriate (arguably the fed already had the power; if not,emergency legislation could have been passed faster than the patriot act).  of course that wouldn't have eliminated a goldman competitor (in fact would have made it more competitive) nor would it have scared the shit out of the politicians and the sheeple and brought out the tarp pot o' gold (well paper/electrons).

even some one percenters are more equal than others.

Wed, 11/21/2012 - 00:05 | 3001095 q99x2
q99x2's picture

2020 I can't even see that well. I want a talk with their astrologer. 

Wed, 11/21/2012 - 01:31 | 3001247 TPTB_r_TBTF
TPTB_r_TBTF's picture

a mayan astrologer?

 

Wed, 11/21/2012 - 05:41 | 3001371 AmeliaV
AmeliaV's picture

Everything is extremely difficult for Greece. I think that it’s not worth to try to borrow more money than they can pay back. In case you are in deep and serious financial crisis, borrowing money can not always help you. Sometimes it only makes everything worse in case you are irresponsible and just can not control your budget. Planning is a good thing, but sometimes it’s not enough, there should be some actions also. Loans and payday advance loans to my opinion can not help Greece, they need to try to cut expenses as much as it possible and try to find a way of making money and bringing it to a country budget.

Wed, 11/21/2012 - 05:50 | 3001376 ZFiNX
ZFiNX's picture

Told you to go short EUR when DSK was getting another good thrashing in the NYT. All was not well, looks like France is bowing to U.S.-German pressure (what, France, surrender?), I am sure we will hear of France yielding its sovereignty to Germany after taking dual blows on its credit rating and whatever affront has caused them to accuse the US of hacking, likely revolving around power posturing in middle eastern negotiations.

Wed, 11/21/2012 - 06:14 | 3001386 Overflow-admin
Overflow-admin's picture

It's not 2020, it's 2022 (Juncker said).

"That is not a joke", Juncker said

Wed, 11/21/2012 - 07:00 | 3001408 Zero Govt
Zero Govt's picture

Yes about as real as Ronald McDonald landing on Mars in 2022 and selling burgers to drive-by aliens

Wed, 11/21/2012 - 06:53 | 3001402 Being Free
Being Free's picture

"Goal of debt-to-GDP ratio close to 120% in 2020 only possible with “measures that would entail capital losses or budgetary implications for euro area member states,” Reuters cited document"

If they'd just turn the data analysis over to the BLS I'm sure reaching that goal would be easy.

Wed, 11/21/2012 - 07:46 | 3001443 PaperBear
PaperBear's picture

And who says that Greek GDP will not have contracted 50% in the 8 years between 2012 and 2020 ? Which of course with the debt unchanged would mean 240 percent debt-to-GDP not 120 percent.

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