This page has been archived and commenting is disabled.
Greek Bond Yields Surge Over 10% As Germany Flip-Flops On Grexit Fears (Again)
Greek 10Y bond prices (and stocks) are tumbling, pushing the yield well north of 10% once again - the highest in 15 months - as Bild reports Germany warning of bank runs and systemic financial system collapse. Having noticed the weakness in financial assets that this caused, several European talking heads are out now trying to calm the waters with Germany's Michael Fuchs confirming "systemically [Greece] is not relevant anymore," but as one trader noted, for now, "investors seem wary of catching the falling knife."
Greek bonds are tumbling after Germany's reported comments...
As Bloomberg reports, they are starting to talk back some of last night's rhetoric...
Any political turmoil in Greece following this month’s election is no longer a threat to the wider stability of the euro area, Michael Fuchs, a senior lawmaker from Chancellor Angela Merkel’s party, said today.
“The situation in Europe has changed very much” since the height of the region’s debt crisis, Fuchs said today in an interview with Bloomberg Television. “Systemically they are not relevant anymore, the Greek people, so I’m not afraid for any other country.”
The French are also calming the waters...
Pierre Moscovici, the European Commissioner for the Economy and Taxation, said in an interview in the World , that "we must let the Greeks make their choice " in the early parliamentary elections of January 25, and that " whatever their choice, it will be respected. It's not up to us to choose , to ostracize, the leader of a country of the European Union."
Mr. Moscovici, "we must make this election for what they are: an appointment you very meaningful democratic but not the possible trigger of a crisis " . It ensures that "the situation of uncertainty created by the elections causes movements very limited in scope and volume as regards the markets. Even more, in the case of capital."
In quantifying the problems, KeepTalkingGreece reports Germany's FAZ notes German economists estimate that...
A debt write off will cost Germany 40 billion, but a Grexit will cost 76 billion euros.
...
Economist Jens Boysen-Hogrefe is member of the Kiel Institute for the World Economy (IfW), an economics research center and think tank located in Northern Germany.
By a Greek haircut the German state budget would suffer greatly. Financial expert, Jens Boysen-Hogrefe estimates the potential losses for Germany, one of the main creditors of Athens, will be up to 40 billion euros, should Athens insists on a haircut, that would sink its debt ratio from current 175% to 90%.
“If Greece does not serves its debt anymore, the cost would be even higher, notes the FAZ, adding that another Institute for Economic Research, the Ifo Institute calculates the cost of a Grexit as much higher.
The Ifo Institute has added further costs that would be incurred if Greece not only goes for a haircut, but it exists the euro (“Grexit”).
“If Greece becomes insolvent and leaves the euro, the Federal Republic would expect a loss of up to 76 billion euros,” said economics professor Timo Wollmershäuser from the Ifo Institute for Economic Research.
* * *
The 'negotiation' continues... or rather the game of chicken.
»
- 5291 reads
- Printer-friendly version
- Send to friend
- advertisements -
I'll be extremely surprised if Greece ends up leaving. I see the news now.
"In a surprise turnout, New Democracy got 51% of the vote. On related news the election was made easier with new Diebold voting machines."
Oh Herr Boysen-Hogrefe, pray tell how much would a "hair cut" on Spanish debt cost the Bund? Italian? Irish?
Oh yes, and after reading the essay -- it fails to consider the Bund's recap costs for the ECB, which it would have to contribute 22%.
I am sure zeee Germans would have happy to part with another 100 billion or so in a show of "European Unity" -- right Ghordo?
I'd be extremely surpised if Greece is allowed to leave. IMO, this is just providing the "OMG, Do something!!!" mandate to force the fiscal union they couldn't achieve at the ballot box when the EU was formed.
In other words, this event has been on their radar from the beginning, as it was beyond obvious that a monetary union could never work within the framework agreed upon.
I don't think Greece is leaving, either. Syriza will quickly start to enjoy the "perks" of being in power- perks provided by the rest of Europe. Leave the Euro and those perks go away. It won't take long for them to become like those they replaced. It'll boil down to political leverage used for another round of renegotiating their debt.
An old European tradition. The old ways still work.
I think Grexit is a bit more complicated than the media will have you believe. The present rhetoric is that there will be not Grexit because the costs are huge and the implications may be unpredictable. But consider what it would take to prevent it. Greece definitely needs a haircut, no doubt about that BUT, the debt is no longer in the hands of private banks, it is mostly in the hands of other governments. It is hard enough to get out of privately held debt, but getting out of intergovernmental debt, as in debt held essentially by the taxpayers of another country is surely a bitch, if at all possible. Politically this will be messy either way you look at it.
Second, if Greece is granted some (substantial) leeway or a haircut, aren't Spain, Italy, Portugal, Ireland (deficit problem again, not fixed after all) and possibly France entitled to demand the same? Would this cost more or less than Grexit in the long run? My guess is it will cost more. It could also mean an effective end to austerity, and any attempt to cut down on deficit spending across Europe. This is just as destabilizing for the Euro and the Eurozone as Grexit. If not more.
I really don't see any way out of this except either 1) Greece defaults and exits with the EU making the conscious decision of dealing with the consequences as best they can, incuding recapitalizing the ECB, or 2) This is something we had articles on ZH a few years back, Germany and a core of stronger economies decide to exit, letting the Euro become a weak currency. The gold repatriation requests should give an indication as to which these countries could be.
There is of course another possibility, whoever gets elected in Greece finds an excuse to do a 180 the day after the election, and the farce continues for another couple of years until the next premature election. Rinse, repeat.
I find your last paragraph persuasive, but I would much prefer option 2 in the third paragraph.
How do you say it's deja vu all over again in Greek?
What's that graph say if you run it through Audacity? I know I know it says: Is Greece going to default?
... and how much would an Italian and Spanish write off cost, since they obviously would demand the same deal?
Sorry to say my friend -- I beat you to it.
Actually, you edited your post after I posted that. Your post time is beyond mine. And when my screen refreshed, your update didn't display.
Bummer. Well, touche then.
Last greek bailout was 200bn - so you can divide 200bn between Europe.
Since a Syriza win can only be a planned win then it is safe to say that it will be a toothless dog.
still can't believe iceland had such big ballz
Change the channel. I've already seen this show a few times.
Greece has some more BSing mileage to go. The Euro isn't ready to implode quite yet.
The EU and ECB hasn't got the guts to do what's right and kick out the club med countries.
They'll be leeches until the host dies.
You don't have to kick them out if you can walk out yourself.
I dont think its catching a falling knife...its more like playing hot potato....if you own those bonds..you are trying to get rid of them real fast....and if you cant...they make nice wallpaper....
And how much are off balance sheet derivitive losses?
This is like viewing old reruns.
Greece, keep taking as much as you can from these fools. The same for the rest of the club-med countries.
Something of imortance that is overlooked is that any bailout is not a bailout of Greece, it's a bailout of german etc. banks who hold the Greek debt. Germany/EU has total incentive to "rescue" Greece. But it's not out of compassion for the slothful Greeks, oh no, it's all about the banking elite and keeping the game going, for now.
I agree that it was a bailout of Europe's TBTF banks but in the long run the results of postponing the moment of reconing will be even worse. Kick the can has run its across Europe and the US and the time has been wasted on meaningless nonsense instead of true reform and slashing of both taxes and government and doing away with a whole lot of bureaucracy. This crisis has not been used to move to a more free more open economy, instead it has been used as an excuse to further control and government mingling in the private economy. Well the moment of truth is about to arrive for all of us.
Grexit looms large, U.S. bond yields should start to rise shortly.
http://www.globaldeflationnews.com/grexit-looms-possible-as-snap-electio...
http://www.globaldeflationnews.com/10-year-u-s-treasury-index-yieldellio...
TICKER:
GREK
OPTION SYMBOL:
GREK141220P00015000DATE:
11/17/2014
LAST:
16.53
COMPANY:
GLOBAL X FTSE GREECE 20 ETFOPTION:
DEC 14 15 PUT
CLOSE:
.2
CHG:
0
VOLUME:
9989
VOLUME CHANGE:
9919
OPEN INTEREST:
10,325