For Greece, Bailout Two Is Just The Beginning

Tyler Durden's picture

If one is wondering why Greece Finance Minister Venizelos is scrambling to pass the proposed bill which enacts Greek Bailout #2, without any debate or details, very much like the US Attorneys General passed the robosigning settlement without a robosigning settlement even having been inked, the following excerpt from Section E of the MoU between Greece and the Troika should explain it. Because heaven forbid someone actually ask for details as to just what '€[xxx]' of future funding needs over and above the €320 billion in committed funding means in practical terms, i.e., just how lower the minimum wage is going, how many million more jobs will be lost (in a population of just 11 million), and how soon until pension and retirement benefits go negative. Also, our German friends may be interested to know that funding 136% of Greek GDP in the form of endless "bailouts" (of which 81% goes to shore up bank balance sheets), is just the beginning. We are confident our German PM friend is more than aware of this exit clause which gives her the loophole to opt out of everything all over again.

Full MOU:

 

h/t George and Athens News

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lolmao500's picture

The government needs to hang if they pass that deal.

Future Tense's picture

Marc Faber was on Fox News this week saying Greece is only the beginning.  He also has turned bullish on US housing saying that he recommends purchasing a $120,000 5 bedroom home and renting the other 4 bedrooms out to concubines.  Apparently he has not seen the shadow inventory graph that Tyler posted earlier this week.  Video here:

http://www.ftense.com/2012/02/marc-faber-greece-is-just-preview.html

lolmao500's picture

he recommends purchasing a $120,000 5 bedroom home

Sorry but that doesn't exist. Maybe in Detroit in the worst neighboorhood, but anywhere else? Forget it.

Global Hunter's picture

We did it last summer, look around take your time and look in places neighbourhoods that people aren't considering moving to.  Small towns and rural communities is the place to start. Hint if you see a lot of European cars and trendy looking stores and antique shops move on to another village to look.  IF there a lot of people on a saturday or sunday morning jogging or walking purebread dogs (often a labrador) its probably very over priced.

dcb's picture

if there are cars on the lawn, people are all overweight, or thin and rotten teeth that's a good place to look. Plus confederate flags are a plus as well.

TruthInSunshine's picture

You can buy a 5 bedroom house in many parts of the country, in decent neighborhoods, for around that price.

Of course, you can't do that in dense, urban, affluent areas, nor coastal cities.

And of course, the prices on all housing would drop far lower if (when) the Fed & government GSEs quit providing an artificial floor by locking up so much of the excess inventory, much in the forms of vacant, REO properties.

As for Greece, €350 to €450 billion is going to be required just to keep it functioning for the next couple of years. That money will be funded only if there's a net benefit to creditor banks (holding Greek sovereign bonds) that outweighs (redundant: net benefit) the money to be made on derivatives and other hedges from a Greek default.

And then, in a couple/few years, because Greece won't be able to grow its way out of hat-in-hand status, another bailout package will have to be forthcoming.

If those estimates are even roughly correct, and if an inevitable second round of bailouts is inevitable for Greece in a couple/few years, accretive to that initial sum, just imagine how much the rescue of PIIS(+potentially France, or at least France's undercapitalized nationalized banking sector) is going to cost over time.

Greece represents about 1.9% of Eurozone GDP (granted, it has outsized debt vs GDP of 4%, even by PIIGS standards, but stay with me here).

So just imagine what this same process will look like, using far larger numbers, when Spain has to inevitably be rescued, with Spain representing 8.7% of Eurozone GDP, and then Italy (yes, it is inevitable - and will be the make or break moment for the EU, with the question of too-big-to-fail or too-big-to-save as the pertinent one), which represents roughly 13% of Eurozone GDP.

Throw in Ireland & Portugal to the mix, and PIIGS represents a full 26% of Eurozone GDP, and that assumes France isn't teetering on the edge.

So Greece, which represents less than 2% of Eurozone GDP, is already attracting credible estimates of a life support bailout for a few years costing anywhere from €330 to €450, with more of the same in a few years from now.

The numbers get staggering in contemplating anything that actually represents a bailout, of even a few years, of PIIGS.

The only solution to bailing out this block for several years, with no prospect of curing the fundamental defects that brought these nations to this point of utter indebtedness, meaning the process will continually be repeated, is to literally print a sum of € that ensures debasement of European living standards by such a large margin that one couldn't possibly be accused of sensationalism to claim that inflation over the short term (3 to 5 years) will necessarily exceed 40%, as a conservative estimate (i'd argue that it would easily run well past that, but I'm either a pessimist or a realist).

How does the loss of 40% to [I'd argue 50% 60%] of your purchasing power over 3 to 5 years sound, Europeans? Petrol at €2.90 or €3.20 per liter, anyone?

I'm sure that before the EU politicians and technocrats force this through, they'll engage in some incredible claims denying that what I just spoke of will take place, because....well...they have special powers that allow them to defy basic math and economic fundamentals.

trav7777's picture

growth growth growth...it's not coming back anytime soon.

trebuchet's picture

move to nebraska, you get paid to go - 100 acres, or something

Louie the Dog's picture

Plus confederate flags are a plus as well.

and a Ron Paul sign in the yard

Manthong's picture

They have to pass stuff to know what's in it.

Sound familiar?

fonzannoon's picture

Faber was referring to Arizona. I too think he has gone bats. He is still touting the big "reset" that is coming yet still recommends a basket of stocks, bonds, real estate etc.

XitSam's picture

My friends bought a 4 BR city home built in '67 in the AZ recently for $250K. Outside the larger cities it may be possible. Would require some looking. Concubines not included.

hack3434's picture

Henderson NV and Palmdale CA have a few homes that meet the criteria if you look around. Thing is, now there's a glut of rent properties bought by all that "smart money" that tried to to catch the falling knife in the name of yield.  

 

 

http://www.zillow.com/homedetails/35th-St-W-Palmdale-CA-93551/2121646853_zpid/

http://www.zillow.com/homedetails/1518-Plain-Sight-Ave-Henderson-NV-89014/7073977_zpid/

 

TruthInSunshine's picture

If you are tied in with those who are locking up REOs, keeping them off the market generally (government GSEs and too-big-to-fail banks, some of whom are primary dealers), you can buy new (never lived in, maybe 2 to 4 years old) or semi-new (barely lived in) homes in Phoenix, Glendale, Vegas, Henderson, Topeka, Cleveland, Wichita, Portland, Denver, Wisconsin, Tampa Bay, Jacksonville, Orlando, Alpharetta, Charlotte, etc. etc.) homes, from 1,800 all the way to 3,000 square feet (and up), for $90,000 to $220,000.

Some of these are urban setting, one car garage, vertical units, with little land, while others are nice big ranches on 3/4 acre lots, with all the amenities (granite counters, city water/sewer, full basements, 3 car garages, AC) in proper neighborhoods.

How do I know this? Because banks and GSEs have lists of these properties that they are literally sitting on, available only to particular people in the industry (attorneys, some specialized realtors, and a few mortgage brokers and title shops), that have all the details.

Many of these properties are held by GSEs like Fannie & Freddie, and are of the type that the government is considering renting out en masse, rather than selling, so as to not flood the market with REOs, thus depressing prices further.

Many of these houses are vacant, in nice neighborhoods, with no 'for sale' sign anywhere to be found, with well manicured lawns or weeds growing everywhere. Many of the houses are being lived in by people who haven't made a mortgage payment in years.

All I can say is that I am privy to the database.

The shadow inventory of unlisted, new and relatively new, vacant and occupied homes, that are for all practical purposes REOs is vastly larger than any bank, politician, regulator or realtor will admit.

DarkestPhoenix's picture

Yeah, no kidding.  Rural communities are the bomb.  I bought a beautiful 5 bedroom Victorian in a town of about 9,000 for $58,000.  Cost less than $2,000 to fix it up and move in.

q99x2's picture

Mechanicville Pennsylvania is a good spot. It's about 4 hours outside of NYC and right next to Palo Alto. NA has a big presence there.

GeneMarchbanks's picture

Faber has gone bats. I know most here enjoy perspectives of the economic clergy but he's officially out of ideas. He should just Socratically stick to saying the same things about the same things: get yourself some gold and step aside instead of trying to wow with nonsense headlines...

Future Tense's picture

The inflationists (like Faber) are starting to turn bullish on real estate because they think all assets will move higher nominally.  I don't think they're factoring in the inventory...

http://www.zerohedge.com/news/biggest-obstacle-record-shadow-housing-inventory-and-how-obama-may-have-just-popped-consumer-sp?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+zerohedge%2Ffeed+%28zero+hedge+-+on+a+long+enough+timeline%2C+the+survival+rate+for+everyone+drops+to+zero%29

or the cost to finance homes when rates rise.  But even Kyle Bass says he only sees about 10% more in price declines, which means we're probably a lot closer to the bottom than the top. 

fonzannoon's picture

Assets will only move higher in the "inflationist" scenario if wages move higher as well. That does not seem to be the case. For now anyway. This seems like some kind of runaway stagflation starting.

Awakened Sheeple's picture

Housing has probably or is close to hitting bottom in terms of price declines but we're not going to see an explosion to the upside either. Any price appreciation in housing won't keep up with increase in prices for other "real goods" like commodities, PMs etc.

Mr Lennon Hendrix's picture

20 million homes in shadow inventory and you think we are close to a bottom?  20% unemployment and you think people will buy houses?  Even Bernanke knows the housing market is about to take another leg down.

Think about it.  Bernanke has already bought Fannie and Freddie and now he is going to buy all the toxic MBS from the Major Banking Houses as they flip it right before the next epic banking failure.  Touting recovery on one hand and continuing the monitization of the finacial system with the other. 

Isn't one hand suppossed to be free? 

Gotta love the Fiat Ponzi!

Awakened Sheeple's picture

Depends how long they can keep the charade going... If the past year has taught us anything, the PPT is not going to let the economy collapse without a fight. They will prop this fucker up for as long as it takes to achieve price STa-BeeeL-eeTY. I would not buy housing as an investment. I am looking at farmland, undeveloped land, lake front property but not housing. Central planning is destroying our economy from the core. If you are renting, I say buy a foreclosure (it beats renting). If you can afford property farther away from urban areas, I say do it now. The truth is the collapse could happen tomorrow or it could happen 10 years from now but it will happen.

earleflorida's picture

perhaps a 15 year @ 2.75 / 30 year @ 3.67% is a great innovator - ponzi or not - cycles are just that,... cyclicals in perpetual motion

just sayin

q99x2's picture

My take two. He hasn't a clue as to where to hide his money during the meltdown.

Mr Lennon Hendrix's picture

Which one?  Because when I see "funding from the IMF" I sort of feel like writing my congressmen.

Global Hunter's picture

Christine Lagarde for a being a horse faced ugly bitch...oh the stealing from hundreds of millions of people?  Yes that too

earleflorida's picture

once she bed's ya - your neutered

greek goat's haven't a chance

GeneMarchbanks's picture

Then you realized your congressman doesn't know what an IMF is and breathes with his mouth?

Mr Lennon Hendrix's picture

Makes me want to....

I haven't written my reps for over a year now because I realized it didn't help. 

There is no changing dumb.

Eclipse89's picture

If it passes then Germany will block it saying "Wtf €[xxx] means? Are you kidding me? No way!"

stocktivity's picture

It's all about saving the banks...the bailout has nothing to do with the people....rally on!

disabledvet's picture

they're funding the banks...not the Greek government. This is just horrendous press coverage...here and elsewhere i might add. Greece get's nothing--though certain Greeks i'm sure are very happy with the details--as with a few Irish "blokes"--"they've skipped town." And country i imagine. So does the government need to hang? "They're idiots"...i agree. Tough question to answer..."how does one explain the no win scenario to the people?" We all like to think of ourselves as "problem solvers"--in reality we aren't however.

BennyBoy's picture

This too shall pass (in the dead of night)

Global Hunter's picture

They will attempt to turn Greece into the political and economic equivalent of an Arab state and if they pull that off then they can try with other European countries and finally towards the USSA. 

The problem with Westerners is the short term thinking, people in poor countries with no futures riot and turn to organized violence more than suburbanites in comfy homes in leafy neighbourhoods.  

Prep your physical and more importantly prep your heart.  Hearts of lionz bitchez

Olympia's picture

Loan sharks knew that if they took the dollars printing machines under their control they could suffocate the world ...they could initially suffocate USA and after taking the USA from the Americans, they could move and suffocate the whole world and take the countries from their people.

FED printed cheap money and loansharking multiplied this money in an unnatural way within the American economy boarders and they discarded them abroad so that they did not threaten USA. USA became the first state in the world with artificial “breathing”...

It cannot be possible but just in the USA for only the last year, more than one million houses were seized. It cannot be impossible but the New World has returned to tents and shelters ..has returned to the ages of Columbus. It cannot be possible that we allow to a few loan sharks looting the toils and the assets of people...

http://eamb-ydrohoos.blogspot.com/2012/01/global-debt-crisis.html

------------------------

Global Debt Crisis

Authored by PANAGIOTIS TRAIANOU

Everybodys All American's picture

Gr(EU)ece can pass any law they want to but the Greek people will never follow the law they pass. Your take away from this is that a Greek default will be a calamity on the EU and ECB and that TPTB are not quite ready for a Greek default.

Bansters-in-my- feces's picture

FUCK the bankers.....!!!! Time to take our planet back from these fucking Parasites of the earth...... Get off your knees people and turn off your T.V's.

Band together.

Forget the Liberal, Conservative,Democrat ,Republican thing,it's all to sidetrack the sheep,they ALL have the same BOSS......

WAKE THE FUCK UP.....

Who creates the so called "money" with interst attched....?

NOT Your Goverment.....

These fucking number punchers live off of our work and labour.

Get a fucking REAL JOB ,Parasite bankers........

Olympia's picture

Loan sharks knew that if they took the dollars printing machines under their control they could suffocate the world ...they could initially suffocate USA and after taking the USA from the Americans, they could move and suffocate the whole world and take the countries from their people.

FED printed cheap money and loansharking multiplied this money in an unnatural way within the American economy boarders and they discarded them abroad so that they did not threaten USA. USA became the first state in the world with artificial “breathing”...

It cannot be possible but just in the USA for only the last year, more than one million houses were seized. It cannot be impossible but the New World has returned to tents and shelters ..has returned to the ages of Columbus. It cannot be possible that we allow to a few loan sharks looting the toils and the assets of people...

http://eamb-ydrohoos.blogspot.com/2012/01/global-debt-crisis.html

------------------------

Global Debt Crisis

Authored by PANAGIOTIS TRAIANOU

dead hobo's picture

I just read the 30 pages, more or less. Funny stuff.

To paraphrase ... "We, the Greeks, plan to form task forces real soon to think and talk about making some big changes at some time in the future. Please give us our money now. Thank you."

And this memo is now the basis for the law being agonized over in Greece's Parliament? Thus, Greeks will be required BY LAW to plan to form task forces to think about making big changes for Greece later this year?

Europeans must be stupid.

 

TeresaE's picture

deadhobo, can you explain to me how our own "deficit talks" are any different?

Thousands of man hours, hundreds of tv hours and tens of thousands of new laws later and all we have managed to do is to "pledge" to not spend quite as much as we were planning on.  Two-ten years from now.

Watching systematic collapse is amusing.  At least it amuses me now, soon very few will have the strength to be amused.

ISEEIT's picture

Would not be even mildly suprised if some 'pandemic' hits Greece. Might shave 30-40% off the population.

No, I'm not kidding.

Randall Cabot's picture

They're cutting off much of the medicine, many will die as a result of that:

"The measures, which will be voted on in parliament Sunday, include sweeping reforms such as €1.1 billion worth of cuts in pharmaceutical costs, abolishing restrictive rules on tourist guides and opening up Greece's energy market to foreign investment."

 

 

 

 

http://www.zerohedge.com/news/cost-combined-greek-bailout-just-rose-%E2%82%AC320-billion-secured-debt-or-136-greek-gdp#comments   

trebuchet's picture

CCGT power station in greece with interconnected SE European market + interconnectors into europe is a possible good investment, look at italy, burning oil coz it doesnt have gas.

Mind you neither does greece atm but those pipelines are coming.......

Better still, build a nuclear power station in Greece.  

Did i hear someone say EON just bought some land in Greece?

 

 

 

 

dwdollar's picture

I can see it happening. The degraded living conditions will be perfect cover for a controlled release.

smb12321's picture

You have obviously never traveled outside the ZH world.   Even now, Greece is 100 times better off than most nations in Africa, Latin America or Asia.  They have food, communications, homes and a tourist industry.  Greece has survived for millenia without medicine, free education or 13th and 14th "extra" payments.   This is what happens when you elect politicians who promise you can live on someone else's dime foreer.  Visit Egypt or Honduras or Bangladesh if you want to see "degraded living conditions".

dwdollar's picture

You completely misunderstood what I said. The Greeks would be perfectly fine on their own, but they aren't on their own. The chaos of a financial collapse instigated by the bankers will cause homelessness. Release a genetically engineered super-bug, kill a few million Greeks and blame it on the squaller they live in (thanks to the bankers). A perfect cover story to reduce the population.

smb12321's picture

Sorry.  Agree 10000% on being on their own.  Disagree about the bug.  Actually, Greece's brith rate is so low the nation is losing population on its own. I've been to Greece (several times) and while they do not live in McMansions the dwellings are safe & moidern.  If Russia (a 4th world country) can survive, so can Greece.  I repeat, the bankers are only the final nail on the coffin.  The hammer and wood were the Greek people, politicians and the EU.  Anyone with an atom of sense knew that the PIIGS could not compete with the Protestants on their terms.  Ideology triumphs over common sense yet again.