The "EURECA" Moment

Tyler Durden's picture

Via Peter Tchir of TF Market Advisors

As realization settles in that levered EFSF may not be the best solution since it is circular and puts the ratings of every country in Europe at risk, along comes another proposal to save Europe.  The "Eureca" plan which can be found at has made its way around the market the past couple of days.

The premise of the plan is that speculators are to blame and that Greece should sell its state assets "such as ports, airports, highways, and real estate".

The asset sales would generate 125 Billion from Europe, to whom, Greece, naturally would sell.  Those proceeds would then be used to fix Greece.  How about Greece defaults.  Refuses to pay on existing bonds.  Wipes out all debt, and then sells these same assets to China for 200 Billion Euro?  Greece could then buy Italian debt trading at 7% and wait for Germany and France to bail out Italy and make a huge profit, further increasing their reserves?  Seriously, if Greece is willing to strip itself of its sovereign assets, they might as well do it right.

Then once again there is talk about how this would put an end to speculators and crush the CDS buyers in particular.  How many hedge funds are short Greece through CDS?  Greece is trading at 62 points up front.  There is daily noise that Greece may receive some miracle bailout.  There is the risk that Greece, in an attempt to get future debt would negotiate a decent recovery for existing holders.  A recovery of anything above 37 means the CDS would LOSE money in event of default.  Squeezing Greek CDS tighter, in conjunction with the bonds, will do nothing to hurt speculators.  The morbid fascination people have with the CDS market and its impact gets out of control sometimes, and this is one of those times.  It was dumb banks willing to lend a country 145% of GDP based on figures that everyone knew "wink/wink" were fudged.

My favourite part was the suggestion that 20 billion EUR could be used to restructure the state assets increasing their value by 50 billion EUR.  Only a management consultant firm could create a 150% return so easily.

The market seems to be grasping at straws. Plan after plan seems to catch a brief following, but falls apart under any scrutiny.  Why are any plans on how to manage a Greek default completely ignored?  I remain convinced that a Greek default could be dealt with.  I don't think stocks would go below 1000 on SPX, and afterwards the financial system would be less complex and easier to manage going forward.  Instead we leap from plan to plan, fixing nothing, and risking a much much steeper decline.

The market is drowning.  Germany and France are trying to save the market.  Germany is growing concerned that the thrashing drowning man may actually drag them down.  France swims on, oblivious to the risk of being dragged under by the market they are trying to save.  Somewhere on the beach is a crowd of people, yelling at the drowning man to stand the heck up!  It's only 3 feet of water, just stand up!  Just to be clear, it is the market they are trying to save, not Greece, and the market may not be in as desperate shape as some believe.


Roland Berger EURECA Project 20110927

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Habspurg's picture

Last, dyslexic bitchez!

sqz's picture

Silly plan. No matter what, Greece is going to get a huge amount of cash whether they default or not, as long as they remain within the EU, so there is no incentive to them to agree to a plan as politically risky as this one. The longer the establishment take the more default becomes the path of least resistance.

With this plan, seems like a Germany-associated consultant is clutching at straws for some "middle" way ...

DormRoom's picture

Greece wont' get a huge amount of cash.   There is a structural problem in the monetary union between the North & the South, due to the Ricardian specialization, and inconsistent NAIRU for the composite nations, pre-union.


Germany knows that any influx of cash to stave off default does not address the structural problem, but pospones it, but when it is address again in a couple of years, Germany's is at a far greater risk of sovereign default, and has fewer fiscal & monetary options.


She may be cutting off her hand now, only to go into cardiac arrest later.


Greece will default on half it's debt.  That's is the best of the worse-case scenarios.  But Europe must find away to resolve the internal economic contradictions of the monetary union, or else the worse-worse scenario occurs.

sqz's picture

You're kind of missing the point. No matter what happens, either Greece is bailed out or Greece is allowed to default and then has to be recapitalized and stimulated so as to prevent the risk of contagion.

Do you honestly think that Greece will be allowed to default, then receive nothing or at most what they would receive if they had unilaterally defaulted, left the Eurozone/EU and switched back to the Drachma? They would instantly revert back (in fact worse) to their original effectively developing/Third-World economy status instead of being a rather immature EU state.

There is a high premium associated with being part of the Eurozone and Greece knows that regardless of what happens this has to be maintained in order to prevent the risk of contagion and the large economic fallout affecting the larger somewhat similarly structurally unsound southern countries, i.e. Italy and Spain, which cannot be bailed out.

oogs66's picture

donald trump should advise greece - seriously, he knows that no matter what is said before you default, they will come back to the table to lend to you after the default

DormRoom's picture

you assume bailing out Greece, and a leverage EFSF will stop the contagion.  But there's a structural problem.  The contagion will spread to Ireland, Portugal, Spain, then Italy.  Then after this bailout, there's a higher probability of contagion to France.  Then Germany.


You must resolve the structural problem of the monetary union to stop the contagion.

Mountainview's picture

Greece has found the perpetum mobile: Lie and cash in, lie and cash in..etc.

baten's picture

NO NO! That place is take by the good ol' US of A..

TruthInSunshine's picture

Bailing out Greece is step one of hundreds of steps, including bailing out many other sovereigns, that sends the credit ratings and national savings of the only solvent EU member states right up in flames.

And Greece probably represents 7% of the sovereign debt at risk in the EU. Once past Greece is "saved" (for a year or so), onward and upwards to PII[G}S+France+UK + European Banks in trouble + recapitalizing the ECB about 80 times (and notice I didn't even talk about derivative risk on this side of the pond or other risks on both sides of the pond and in Asia).

Nearly everyone is completely underestimating the massive gravity that will turn into a black hole that is the EU crisis.

disabledvet's picture

Excellent! I give you an A+! Now let's head over to the astrophysics department for a discussion on the space/time continuum! (and a Dunkin Donuts coffee too!)

Zero Govt's picture

Can you get Dunkin Donuts in Greece? i'm not sure you'd want to set-up in Greece after decades of Marxist-Socialist State intervention in every facet of business!

You need dozens of 'permissions' (Licenses) from peanut brained totally ignorant pen pushers and self-appointed little Hitlers behind Govt desks to run anything in Greece. Like the Greek Govt knows how to conduct business right? Licenses for business, opening hours, staff, health and safety, display your insurance,only set-up in such and such an area, property permissions, yabba dabba doo

I know, i know it sounds like Sovietic Britain and America. Govt looks pretty much the same Communist Blockheds wherever you go nowadays. Ho Hum!

Maybe the Govts should just provide all the food rather than bossing the prvate sector around in a million different ways and they show us how its done? Like their massively expensive, massively bankrupt healthcare systems that kills patients in days (faster than a lifetimes smoking) and slap the warning signs and grotesque photos on the ciggy packs, not the 1,000 times more dangerous to your health Marxist-public-Fascist-private State-managed killer hostpitals

We've all got sooo much to learn from the most ignorant institution the world has ever known, democratic Govt So much to learn from State morons behind desks. C'mon Statists, run the world, you do such a fine fuking job with your own shambolic bankrupt flushing down a toilet everywhere on the globe operations

Govt : the Biggest Social & Economic Mistake for Centuries very fitting that the birthplace of Govt, Greece, be the first Govt-led country down the sewer all Govt-led countries inevitably head

Robslob's picture



The concern should be all the "floating plans" as if to see which one the "managed market" will buy...just one problem...thus far the "market" has bought them all!

oogs66's picture

bought them, bought them again, doubled down, and still wonders why nothing is actually fixed

Robert Neville's picture

Stand up you are in three feet of water, but a shark has eaten off your legs.

Arroneous's picture

just one comment:  'i remained convinced that a Greek default can be dealt with'.  that right there is the epitome of the problem we are dealing with.  people are still talking about whether or not Greece could default.  time to grasp reality ladies and gentlemen.  Greek default will be dealt with one way or another.  there is no way around it.  the pain must be taken for the past.  the sooner politicians analysts media economists get that thru their heads the better off we will all be.  

Ghordius's picture

well put

now try to explain this to the TBTF banks who issued CDS on Greece

and all the politician analyst media economist bankers who think that the default of several banks in the EuroZone is the fabled "breaking up of the EUR"

oogs66's picture

yeah, how do they get away with the conclusion that a greek default, coupled with a few bank failures is the end of the eur?  that is a massive leap that doesn't make sense

eigenvalue's picture

Consulting firms=snake oil charlatans. 

CrimsonAvenger's picture

Guilty as charged - but damn the money's good.

Zero Govt's picture

the money's good until (other peoples) money runs out

the British Govt spends over £1bn per annum on management consultancy from the likes of the big crony accountancy firms and look what a shithole Westminster has made of everything

Being paid to underline the Ministers policies may be good money for large international accountancy firms and milking the public purse for all it's worth but like their cooking of the books for the banks past 4 years it'll add just another nail in the coffin to the whole worthless corrupt crony industry 

Accountancy Profession RIP (Dead by continuous shots in their own foot, Enron onwards)

buzzsaw99's picture

they can't very well put the banks into receivership. banks are like utilities. Very, very, highly compensated, nation wrecking, utilities. Without them we are lost. [/sarcasm]

disabledvet's picture

Which is why the real name is Plan BOHICA not EURICA. History does indeed rhyme--especially if it repeats badly.

The Alarmist's picture

I especially like Step 8: "Drive growth swing from -5% to +5%, producing additional tax revenue equivalent to 4% of GDP."

This is reminiscent of the old cartoon where two scientists at a chalk-board have mapped out a huge schematic of some process, but in the very middle is a black box captioned "Then a Miracle Occurs."  Maybe Roland Berger has a detailed plan of how to drive a growth swing, or maybe this is all just one giant fantasy premised on a miracle occuring.

BTW, what happens when Greek politicians decide somewhere down the road to "recapture" much needed revenues by nationalising the previously bundled assets to fund new spending?

guiriduro's picture

That probably depends on whether you see the Greeks as feckless, workshy, corrupt, tax-avoiding parasites; or whether you think they are (in the main) a hardy sort looking to work but unable to do so because of 'ex-machina' issues like enforced austerity, lack of confidence in the banking system and inability to get credit.  The truth is probably a bit of both - I'm still doubtful whether Greece can avoid a default, or very significant writedowns on existing debt, but I do think the capability of ordinary Greeks to get on and work (and pay tax) once the external issues are fixed and the incentives to do so are returned to their economy are quite good.  (Although I accept the likelihood that we'll need to go through a europe-wide bout of capital destruction and bank failure on a large scale first - those being the forces most opposed to eventually reinstating a socio-economic contract that ordinary Greeks would be happy to work under.)

Seems to me then, that this EURECA is a not-quite sound proposal but a step in the right direction, don't you think?

Ghordius's picture

this could work if the Greeks had any confidence in their gov

since they lack this ingredient they will have some ink missing at the right moment

Zero Govt's picture

the "ink" all runs red in Greece don't ya know! Not only red with deficit and debt spending but red as in Marxist-Socialism State direction on every area of the economy ..if you're looking for public 'confidence' in the Greek Govt you won't find it in the screwed by Marxists for decades private sector who are key to any and every recovery... Govt cannot do it, all they do is suck get rid of the whole corrupt Govt system and confidence will return in Govt (not being there)

Govt : the Biggest Social & Economic Mistake for Centuries very fitting that the birthplace of Govt, Greece, be the first Govt-led country down the sewer

mvsjcl's picture

The middle road you paint, arguments that appear to be balanced and truthy, embrace a false diachotomy. You base it on a given that the Greek government is legitmate, and represents the will of the people and works toward their benefit. Nothing could be further from the truth. The awakening has occurred there, and it greatly alarms the dispensers of pills.

Schmuck Raker's picture

"Somewhere on the beach is a crowd of people, yelling at the drowning man to stand the heck up!  It's only 3 feet of water, just stand up!"

I like that - so true.

Unfortunately, governments don't want their citizens to know that they can stand on their own two feet.

BurningFuld's picture

The problem with Greece is it is most likely past the point of no return. In that I would imagine a good deal of people have thrown in the towel. "I am not going to pay my taxes" "What are they going to do about it? Put everyone in jail?"  The fact that the people printing tax return forms have run out of ink is all you need to know. There is an underground revolt brewing against paying ANY taxes. That is the point of no return. I would suspect tax revenue coming in to the Government has fallen off a cliff despite the Government "increasing" taxes.  Just speculation on my part but I would love to see those numbers.

walküre's picture

What does it take Americans to do same and STOP feeding the beast?

Scisco's picture

'i remained convinced that a Greek default can be dealt with'

Yes a Greek default could probably be dealt with. What happens when the remaining PIIS realize they are chumps and decide to default as well. Ring fence that.

Hansel's picture

+1, The biggest problem with "resolving" Greece is what to do with the next 4+ countries waiting in line, which is why nothing is happening.

mjk0259's picture

My favorite part is " Drive growth swing from -5% to +5%, producing additional tax revenue equivalent to 4% of GDP" - assumes at least 40% of taxes will be paid when it's already clear that probably  less than 10% are.

TradingJoe's picture

yeah, roland berger, used to intern for this guy back in early 80's, what a douche, the biggest shark in german/european waters, he would sell his momma for a profit! i've seen quite a few "doubtful personalities" passing through his office in munich!

just another 'profiteer' "greece should sell its state assets" me please at extremly distressed prices, eh?!?! Sucker!

riptide's picture

 US Banks 5y cds widening out

sudzee's picture

Euro markets droppping like a rock. Whats up doc!

Hansel's picture

I'd just like to say Peter Tchir does a nice job with these market notes.

ramblinon's picture

Not to mention the complete politically untenable nature of this.  The Greek people are freaking the hell out that their pensions and other entitlements are taking a somewhat mild haircut.  How do you think they will react when they realize what privatization will mean to their entitlements?  Who will they string up over the Parthenon first?

Everyone is grasping at straws...

warchopper's picture

If speculators are defined as "politicians who gamble with tax payer's money", then I say let the speculators get wiped out!

dasein211's picture

I think the reason that nobody wants to try a default is that the banks and central banks are hiding more bodies than they are admiting to. It only makes sense. There have been lots of plans that should have been done already were it not that things are far worse than everybody is admitting... Im thinking dark pools here. It works on everything that has been exposed to the light but the shadow banking system is where all the rot is. Exposing the shadow system does more than collapse the market. This is the place that governments, drug lords and the like do all their transactions away from the public eye. A lot more than the financial markets will be lost when this goes down.

Caviar Emptor's picture

It's simple, really. The Haves of the world will grab the resources and the Have Nots will go all in to the sex trade. It will become valuable to families to have attractive young girls or boys. Exotic dancing will be very in again. So will traveling minstrel shows. Great palaces will be built to house the orgies, the fortune tellers, and the booming domestic servant class. Slavery could make a come back, but there's an upside: giant mausoleums will spring up like the pyramids once again. 

ElvisDog's picture

Ooh, I like your Borgia-like vision of the future. In the words of Mel Brooks "It's good to be the King".

Zero Govt's picture

"Speculators" are at fault for the Greek Govts decade of Marxist-Socialist-Unionists spending orgy and to blame for them now drowning in un-serviceable mountains of debt... we can all see the 'clear logic' in that 

nothing to do with every loony left socialist Govt in history bankrupting their countries straight into the sewer i suppose! C'mon Germany, you simply cannot back these Euro-zombie morons with anymore of your countrymens money can you?!!

Oh forgot, Merkel is a born and bred Eastern German socialist too ...well let nobody, including Western German voters, stop you in your loony left suicide socialist belief system then


Vincent Vega's picture

When none of the proposed solutions can be agreed upon they will revert to their default (no pun intended) solution: Print, print, and print some more.

Got gold?

jm's picture

The United States of Europe.  The EU is going to have to pool credit risks...  AAAs issue in combination with C grade issuers. 

AAAs are going to get downgraded either way.  The longer they put this off, the worse the bid on the blended bonds will be.


BandGap's picture

How does Greece default and stay in the EU?  Isn't inclusion contingent upon be economically viable?

Another question - Greece defaults, gets bitch slapped but survives.  Doesn't this then signal to other nations on the brink that it's "come on in, the water's fine"?

Maybe the magnitude of the finances can be dealt with, but the entanglements presented by a default will take years to sort out.  Much wailing and gnashing of teeth.

Reptil's picture

You can bet the suckers will issue another "kick the can" statement tomorrow. That's their modus operandi, to remain explicitly vague on important issues that were not included in their plans: Anything that is diverging from their "we're not going to let the banks fall, we're not going to let the euro fall", is by them considered a defeat.

Trichet did a fine job of convincing the europeans of the statemanship and calculated preserving strategies of the ECB, however, this is now an old "one trick pony". The issue is the market is a bunch of VERY hungry hyenas, tthat want to see some kind of settlement (either way).

Fools they are, they could've defaulted when no one was watching, all managed, all prepared with some construct to make it all palatable. Boom! Accept this! That would be statemanship and leadership. Not this fumbling around beneath the sheets. They were foolish to run up the debt, and even more foolish to not act. If they let Greece default, and anything else crappy enough to drown inmediately, there's a reasonable chance of the eurozone surviving. But that's not the bankers' idea. To them this european TARP is just another way to have money change from one pocket to another. Because that's their job.

aleph0's picture

I'm surprised this ZH article / idea ... didn't get more attention from the Politicians ... & Banksters of course :

European Sovereign Debt - Can't We All Just 'Net' Along?

gnomon's picture

The Greeks have been debilitated by decades of entitlements and now they have thrown in the towel except for the effort to elicit more bribes for playing along with this farce.  

Pull the Plug!!

Caviar Emptor's picture

Other options besides giving away ports, airports, and real estate: 

Greece has several major "national dishes" to give away to other, richer countries that find themselves challenged in the culinary Dept. These dishes could be renamed to give the attribution to another country. For instance: Moussaka could be renamed 'Dusseldorfer Hash', Gyros could be renamed Berliner Fleish and Souvlaki could easily become Prussian Pie