Greece Has Defaulted: Here Is Where We Stand

Tyler Durden's picture

After reading this, everyone should have a fairly good grasp of what happened not only today, but ever since the great (and quite endless) European financial crisis took center stage, and what to look forward to next...

From Chindit13

In a nutshell---okay, a coconut shell---this seems to be where we are:

1)  Greece was able to write off 100 billion euros worth of debt in exchange for a 130 billion rescue package of new debt, of which Greece itself will receive 19%, or about 25 billion, so that it can continue to operate as an ongoing concern.  Somehow Greece is in a better position than before, with more debt and less sovereignty and still---by virtue of sharing a common currency---trying to compete toe-to-toe with the likes of Germany and the Netherlands, kind of like being the Yemeni National Basketball team in an Olympic bracket that includes the US, Spain and Germany.  At least a "within the euro" default prevented bank runs in Portugal, Spain, Italy et al.

2)  As a result of the bond haircuts, Greece has many pension plans that can no longer even pretend to be viable, at least according to the original contracted scheme, but pensionholders still working can take heart in the fact that their current wages will be cut, too.

3)  CDS buyers will have to sweat bullets, jump through hoops, and be forced to endure every cliche known to man, but they might end up getting something for all their trouble, provided their counterparty is solvent and that counterparty itself is not heavily exposed to an insolvent party or a NTBTF institution, otherwise known as a Lehman Brothers.  Expect the legal profession to be the prime beneficiary of this "event", as any new CDS contract will be at least a hundred pages of boilerplate longer in the future.

4)  Good luck to any less than AAA rated sovereign who wants to issue debt from now on out.  That contracts can now be unilaterally abrogated, as Greece' bonds were with the retro-CACs, bodes ill for attractive pricing from here on out.  Peripherals in the EU will suffer most, as they face the added indignity of being subordinated to the ECB at any point the ECB chooses to exercise its divine right of seniority.  The thing that used to be called the risk free rate no longer exists.  Bill Sharpe take note.

5)  One hundred billion euros worth of perceived wealth evaporated.  That can not be a good thing for a Eurobanking system already capital short, as it raises leverage (quick back of the envelop calculation) by about 6% across the board.  It also will not make the interbank market any more trusting, thus increasing the likelihood of perpetual LTRO.  LTRO lll looks to arrive sooner than QE lll.

6)  With the drawn-out Greek event and the LTRO, Europe might believe it has firewalled the system for at least three years and limited damage to Greece and Portugal (who will likely undergo a similar default by the 3rd quarter).  LTRO-provided liquidity, it is hoped, will lower market rates enough in Spain and Italy so that those countries can meet sovereign bond obligations and both service existing debt and issue new debt.  When the LTRO expires in 2015, "hopefully" something called organic growth will have taken over in countries imposing severe austerity measures on their public sectors, so that debt servicing becomes easier.  Organic growth obviously is something that comes in a can, a can which has been kicked out to 2015.

7)  As Europe now speaks increasingly of greater EU financial integration, Sarkozy's poll numbers will be the victim and a less EU friendly individual will likely win the upcoming election.  Since France and Germany fortunately have a long and storied history of being the best of friends, and no one in either country would ever pander to nationalist sentiments, this shouldn't present a problem.

8)  Given how much angst was caused by the drawn out Greek affair, the Spanish leader knows he has enormous leverage with EU leadership and he can continue to do what he has been doing with regard to ignoring the deficit targets demanded/suggested by the EU.  The EU might well bark at him, but they cannot afford to bite at this time.  Muchos gracias, Greece.

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Squid Vicious's picture

when they bring maria cabruso carrero back from Greece to "Headquarters" we'll know shit is about to go down over there

Tsar Pointless's picture

Seems to me the most immediate problem for Pan-Eurocratic supremacy is the seventh point made in the post.

This whole Grecian nightmare will do nothing but light the fires of nationalism even brighter and hotter than they currently are, even in the most Pan-European nations - whatever those might be after all of this madness had played out.

If TPTB wanted to destroy the European Union and all of its trimmings, they couldn't have picked a better strategy for so doing.

Makes me wonder it that wasn't the whole purpose all along.

Oh, BTW - is this bullish for equities, or uber-bullish?

Manthong's picture

EU organic growth: green sprouts from warm wet steaming piles of debt.

SillySalesmanQuestion's picture

CDS = Constipated Dogshit Smells...really bad and just as worthless.

Silver Dreamer's picture

Am I wrong for enjoying this?  It's the first domino of many too.

Esso's picture

Yeah, let's get this show on the road already.

The Shawshank Gambit: Get busy livin' or get busy dyin'.

Miles Kendig's picture

Nice read Chindit13.

It's good to remember that the only nationalist sentiment that matters in Europe at present is Eurmany's.

rocker's picture

I never heard anybody say they are kicking the can down the road again.

I guess they are driving a garbage truck. followed by Ben's Brinks truck. 

knukles's picture

After this, in Athens a woman who is  uncomfortable watching you masturbate:
A. Probably needs a little more time  before she can cope with that sort of intimacy.
B. Is uptight and a waste of time.
C. Shouldn't have sat next to you on the bus in the first  place.


kaiserhoff's picture

You're in rare form tonight, Knucks,

And cheers to you Mrs. Robinson...

Angus McHugepenis's picture

If she's that uptight, she should have put her clothes back on and got off the bus!

nmewn's picture

Chindit, a treasure at the hedge.

SheepDog-One's picture

OH so now we're good till 2015...yea whatever.

Silver Dreamer's picture

That's what I love about you.  You're such an optimist.  ;-)

MrSteve's picture

My Athenian silver tetradrachmas, circa 500 BC, are still holding their value.

Default what you want, the old PMs and the new PMs are still rock solid. Might be time to buy more!
do it yesterday and thank yourself tomorrow.

disabledvet's picture

I'm really not that into this Friday eve. How 'bout this instead:

unrulian's picture

oiling my H&K M770 tonight. Schmidt & Bender short dot on top....god germans make great shit

mess nonster's picture

Hk Standard Issue for Mexican Marines.

Just a fact, not a swipe. Its the best

the 300000000th percent's picture

Got an HK93, best rifle I own.

Tsunami Effect's picture

The e100B was the roll risk.  That's gone.   Now Greece has a socialist model that has a burn rate of e25B per year.  

What a joke.  Without a growing, real economy, OR a huge govt. bond leveraged recap, the socialist european system is a complete fail.


MinnesotaMD's picture

"why can't we just be like Europe?", Bill Maher 2008. He is getting his wish.

Elvis is Alive's picture

Maybe someone in Athens can help me. What currency are Greek hookers taking these days? Euros? Gold? Cans of spam? We need help with this really important stuff.

Normalcy Bias's picture

Astroglide. Everybody should stockpile that shit in preparation for what their Central Govt has in store...

Waffen's picture

They don't need astroglide in europ because the zionists haven't convinced the goyim there to chop off the working part of their dicks.

Yes I am bitter.

Angus McHugepenis's picture

There are no hookers left in Greece. They followed the money offshore.

BliptoP3's picture

Is that why they call it a depression?

adr's picture

So now we get a repeat of all this again in two years. Then do we get the can kicked to 2016? After that it looks like the can can't get kicked any further. What happens in 2016? Another US presidential election, maybe the last one ever. Unless Barry the dictator decides to cancel it and declare himself emporer. I think he already has.

Anything to keep the ponzi going as long as possible. Looks like it has four years left. Better make good use of your last few years!

Temporalist's picture

It seemed like a good idea at the time.

Goldman Secret Greece Loan Shows Two Sinners as Client Unravels 


In related news:

Iceland wants the loonie, Canada is not saying no


China to offer renminbi loans to BRICs nations

nmewn's picture

Read the Bloomberg article...and highly recommend it.

Clay Hill's picture


Institutionalized debt-slavery featuring the banksters as plantation owners, and the pols as slave catchers and auctioneers...

...wait, maybe that's backwards.

I sure am glad that can't happen in 'merika.

DaveyJones's picture

"Bloomberg News filed a lawsuit at the EU’s General Court seeking disclosure of European Central Bank documents on Greece’s use of derivatives to hide loans. Releasing such information could damage the commercial interests of the ECB’s counterparties, hurt banks and markets, and undermine the economic policy of Greece and the EU, the central bank said last May in a response to the suit."

that's why non disclosure has had such a healthy effect.


pufferfish's picture

It illistrates very nicely how, as a perspective debtor, you should:

a) Pay attention when taking out loans.

b) Look at the maths behind charts.

c) Not borrow from GS.

T-roll's picture

Greece will be holding elections soon. What are the ipmlictions if anti-EU parties gain control of the gov't and decide to go along with "the program"?

UP Forester's picture

About the same as trying to hold a referendum.  All previous decisions will be declared null and void by the latest, greatest, banktator-in-chief (appointed).

jomama's picture

seriously debating dumping a decent amount of fiat on on Ag this weekend.  only thing is the USD might be artificially strong for a week or at least a couple days.

that or the metals go to the moon come sunday 3pm.

Reese Bobby's picture

File under: "Late to the Party"

jomama's picture

i've got plenty already -.-

srs question.  

anyone forsee temporary dollar strength on these news?

Reese Bobby's picture

"It's the tallest midget" -Kyle Bass

tekhneek's picture

Lemme whip out my crystal ball: got it.

I doubt you have "plenty" if you had plenty you wouldn't be buying more, put 25/33/50% in this weekend and leave the remainder for the week and see how it plays out.

If the dollar tanks you at least bought below the ramp and can wait for the next dip, if the dollar gets a big unicorn boner then at least you didn't dump all your cash and you can cash in on that dip.

Buy the dips though man, buy those MF'n dips. Anything above $35 right now is.. iffy territory. I'm personally holding out for sub 30s to buy again, but, who knows I could be wrong.

But then again I have plenty too. I just wish mine didn't get lost in my last camping/boating trip. It's all gone now. I don't have any at all, anywhere.

mess nonster's picture

Gawd I know... got home from a weekend in Vegas... all pms gone, vanished- theives didn't break anything or leave any fingerprints either. Very mysterious.

HoofHearted's picture

Do it in the middle of last week....or back when it was in the single digits like the rest of us did...

MsCreant's picture

I read this on the other thread (three times) and thought it deserved to be published as it's own article in it's own right. My respect for Tyler just went up and it was pretty high anyway.

Reese Bobby's picture

The 138th week is often the charm.

MsCreant's picture

I've been in love for a while. Wouldn't want to sour it by being a creepy stalker type, and, you know, hanging around the blog too much or anything...

Reese Bobby's picture

You're probably right.  But since I went on the feeding tube things have gotten kind of dark for me.  Sorry.