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Greece Threatens To Unwind Second Bailout By Agreeing To Finland Collateral Demands
One of the biggest stories this morning is that European cohesion and solidarity is about to crumble after it was disclosed that Greece was pursuing a private deal with Finland in which Greece promised to collateralize Finnish contributions, in essence eliminating Finland's contribution to the Greek Bailout round 2. As Kathimerini reported, "Greece and Finland agreed on Tuesday to virtually cancel the latter’s participation in the former’s second bailout package, following three days of negotiations between Finance Minister Evangelos Venizelos and his Finnish counterpart Jutta Urpilainen. Finland’s share in the 109-billion-euro package amounts to about 1 billion, which Helsinki will pay to Greece but Athens will repay it through a new loan contract to be signed for this purpose and which will be valid for the next 25 years (likely to be the maturing period of the new loans, too). This means in practice that Finland’s contribution to the new package will be returned in full and deposited in a special account to be created by the Finnish government." End result is that everyone else has immediately come demanding the same treatment: first the Austrians, next the Dutch, and last the Slovenians. And what happens if Finland backtracks on its collateral demand: will it back out of the Greek bailout as well? Or, if Finland digs in, and all the non-German countries follow suit, will Germany say Enough and tell Europe (and China) to fix its own problems?
From Kathimerini:
Austria opposes Finland's deal with Greece on collateral for loans and will demand collateral as well if eurozone countries approve Finland's deal, a spokesman from Austrian finance ministry was quoted in a newspaper report as saying.
"The collateral model has to be open to all the euro zone countries. We will figure out if that's the case,» Harald Waiglein from the finance ministry told Finland's biggest newspaper Helsingin Sanomat in a phone interview.
Earlier this week Finland reached a deal with Greece on collateral, its key condition for joining to help the debt-burdened country.
The agreement between Finland and Greece will allow the southern European nation to deposit cash in a state account that Finland will invest in AAA rated bonds. The interest generated will raise the amount to match the required collateral. Finland will return the money, plus interest, once the bailout loan is repaid, Finance Minister Jutta Urpilainen said.
If Greece is unable to pay back its loans to the temporary stability mechanism, Finland would take possession of the capital put up by Greece following a procedure agreed upon in advance.
And from Reuters:
Austria, the Netherlands and Slovakia said Thursday they want collateral on loans to Greece after Finland secured a commitment, raising question marks over a second bailout agreed for Athens last month.
The three countries said their positions were not new and echoed the view of some other euro zone states.
They and the Finns account for only something like 11 percent of the new Greek bailout which totals 109 billion euros ($153.5 billion).
But new signs of discord will do nothing to encourage markets that euro zone politicians are getting on top of the debt crisis, after a blueprint from the leaders of Germany and France underwhelmed investors earlier this week.
"With more of Greece's euro zone partners asking for collateral for their contribution to the second rescue package, the available pool of money becomes smaller, rendering the success of the second package more difficult," said Theodore Krintas, head of wealth management at Attica Bank in Greece.
And why this could mean game over for the bailout plan:
Francois Cabau, economist at Barclays Capital, said Finland's insistence on collateral could threaten the process."
By agreeing to (collateral) ... you actually do the opposite of what you originally set out to do, withdrawing cash from ... somewhere that doesn't have any," he said. "This is likely to provoke some annoying political noise in the market."
It seems that Greece has realized just how precarious its rescue is courtesy of the following just released Venizelos headlines:
- GREECE'S VENIZELOS SAYS COLLATERAL IS PENDING EURO APPROVAL
- VENIZELOS SAYS HAS SHOWN GOOD FAITH, FLEXIBILITY ON PROGRAM
- VENIZELOS SAYS COLLATERAL ACCORD IS PENDING EURO AREA APPROVAL
- VENIZELOS SAYS GREECE COMPLETELY RESPECTS JULY 21 DECISION
The biggest problem is that Greece simply does not have enough collateral to backstop the entire €100+ billion second bailout tranche.
Look for this to be the source of the next "emergency" Merkozy meeting as Europe once again realizes that when you have 20 or so insolvent countries in the same union, things simply don't get done according to plan.
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Throwing bricks in a house of Glass! Burn baby burn!
Ausschlus is the new Anschluss
Our Risk On/OFF Model has been sniffing recession triggering a risk-off trade 6/30 so we've missed the entire move down in SPY and are now +8% YTD vs negative SPY. We are opening up our weekly commentary to those on ZH emailing me at eclark@breakaway-partners.com. Just send me your email and I'll add you to our weekly market update with risk-on/off signals. Got gold?
It's cold in Findland...free vacation rentals for life for all Finns..... WEEEEEEEEEEEEEEEEEEEEEEEEE
I will gladly pay you Tuesday for a hamburger today...
Those Finns are dumber than I thought
until you know the collateral terms, I would not call the Finns dumb. Remember they have one of the strongest currencies, etc.
By definition, anyone who negotiates with the Greeks about anything is dumb.
What? Are you Finnish?
Not hardly! But do not discount the Finns as they were smart enough to duck some of the EU bailouts.
Never forget the Icelandic Put. When you have no credit to lose; you are free to make your own ride, rough as it may be.
Now the Finnish, next!
They have the Euro - they gave up there strong currency. As to dumb, I think not. They got paid for their vote. It would shock me if the deal proceeds now.
As someone said on Mike Shedlock's site, "Looks like the Finns need another election." No surprise there, though.
Gold would be good collateral.
That means it's time for another gold margin hike, to punish the prudent.
Capital preservation is contrary to public policy.
All your FRNs are belong to us!
I'd rather have an endless supply of olives, feta cheese, yogurt and ouzo.
Back to nation states fending for themselves after realizing supranational entities leading them down the road to ruin are their biggest security threat.
BTW, is this not the equivalent of a bank run on sovereign debt?
First one to the window gets their money back closest to par....
Needs get filled away; the next wave of the Lehman black hole TBTF Jubilee time!
Hmm... so Finland lends Greece money which Greece then deposits in a special account for Finland? Sounds good. Surely all the other Euro bailout participants will expect the same deal as Finalnd, Austria, Netherlands etc?
Should make interesting viewing. I must get a bigger bucket of popcorn.
the problem with too much debt, and being bankrupt, is that one has to constantly dance the jig to pay bills etc ... total disgrace and national embarrassment.
Somebody should teach them about the money multiplier!
Yes - I'm with you. It should be entertaining to see how this news goes over. Does everyone sans Germany get a clawback? That should make the election interesting.
Head scratching time!
YOU CAN'T SOLVE A DEBT PROBLEM WITH MORE DEBT...PERIOD!!!! All this back and forth is just ridiculous!!! </rant>
Miss Lagarde, 55, the head of the IMF, faces investigation for complicity in embezzlement of public funds for approving a 403-million-euro (£350 million) settlement to Bernard Tapie in 2008.
Christine Lagarde facing fresh controversyGerard Depardieu 'sorry' to have urinated on plane
What else can u expect from a nwo-frenchie who supports the tyranny of banks?
Next week's headline:
Christine Lagarde sorry to have urinated on von Rompuy
Gerard was merely shaking hands with the unemployed.
take that strangelovian ride on that the greek way missile!
What?
I've read and re read this and for the life of me cannot figure out any purpose whatsofuckingever for the creative accounting.
Kinda like sterilizing open market operations.
Why bother to spend all the time and effort to get nowhere so fast?
It's Finland covering their Euroass. This way they don't have to vote against a bail-out of Greece (which would kill it). Instead they say "kyllä - we vote for our Greek brothers to get a bailout" In Brussels they remain in the in-crowd, and can still drink in the nice bars. Meanwhile they take the title on some assets to make sure they get their money back.
I wonder what China's terms were?
OK, yeah, sure.... politics of it all.
I play but don't pay sorta.
Optics, as always.
Long on forum, short on substance. (Is that a paired trade?)
Kinda defeats the whole purpose of the deal for Greece.
Once there's a real bankruptcy/insolvency/default, whatever they'll call it "death by contagion" it's gonna be real strange to sort out who have what claims on anything that's left over anyhow at the end of nowhere.
Finland’s share in the 109-billion-euro package amounts to about 1 billion, which Helsinki will pay to Greece but Athens will repay it through a new loan contract to be signed for this purpose and which will be valid for the next 25 years (likely to be the maturing period of the new loans, too).
$1B is all it takes for a seat at this table? Why doesn't Buffett put his money where his mouth is and become an EU bailout syndicate member? What fun!
BTW - see what kind of a tune congressman Howard Buffett (Warren's father) was singing about ever-expanding government in 1956 (firewall)
http://online.wsj.com/article/SB10001424053111903480904576511893253902226.html?mod=WSJ_topics_obama
No paywall here:
http://www.thefreemanonline.org/featured/the-economic-foundation-of-free...
...Finland’s share in the 109-billion-euro package amounts to about 1 billion, which Helsinki will pay to Greece but Athens will repay it through a new loan contract to be signed for this purpose and which will be valid for the next 25 years (likely to be the maturing period of the new loans, too)...
No mention of collateral here.
2000$ an ounce before Sep. 1? YEAH!!!!!
Hey wait a minute this guys says no : http://seekingalpha.com/article/228879-forget-2000-an-ounce-gold-set-to-...
The larger the lower jaw the smaller the brain?
That article was written in October 2010, i.e. when Gold was around $1,400. It has since CRASHED all the way to $1,820.
I think we can safely consign it to the "Total fucking bullshit" folder, and never read a word written by this dumbass ever again.
The best is the last line/discloser : Disclosure: Author is short GLD
I wonder WHEN he covered, if he has.....LOL
What is the Plan B to deal with a 10% excise tax on physical PM transfers. It will guarantee, verify, protect the public, of course until it doesn't.
This dude seems to Pre-write his articles weeks,mos in advance......................WTF, every day, or 12 hrs brings a new global issue.(any problems being solved that anyone here knows of?.)
"Before the financial crisis, gold was priced at $650/ounce in January 2007. The average price of gold had fluctuated between $300 and $500 during the ten years prior. As the financial crisis unfolded, gold served as the ultimate investment vehicle to profit from fear because of its unique characteristics. It isn’t valued on fundamentals, it generates no earnings, it pays no interest, it is essentially a perpetual zero coupon bond that is easy to manipulate into a snowball effect. This ambiguity made the asset a prime profit generating allocation during times of uncertainty."
First,the USA was for the 10yrs prior, enjoying a period of prosperity, and huge growth, and very good paying jobs,professions.(this is why no one wanted Gold,why own a static metal, when you could earn 4-5% on a plain CD?,for conservative investors, and tons more in the markets?.
Secondly,What IS the USD now, and Treasuries, and Bonds, of just about ANY Muni,etc you can name?.(same old crap as this,
"It isn’t valued on fundamentals, it generates no earnings, it pays no interest, it is essentially a perpetual zero coupon bond that is easy to manipulate into a snowball effect."
Same crap, except far more speculative..............we know the four I typed are losers,and will just get worse from here.
While I respect SA,this article is SO far off where we really are,compared to his argument for why the GO TO investment / insurance choice of CB's and Soverign nations, of the globe is almost passe'.And headed into the shitter, it's laughable.
Riddle me this, if not Gold, WHAT else?.NO more paper pls, and No land/ property, that you can lose by taxation, and /or eminent domain?.
no solution to the massive debts but for worldwide govts to PRINTPRINTPRINT.
Deflationary depression or runaway hyperinflation, take your pick.
in fact, there is a solution..... MORE DEBTS!
LOL
Dont look now but NATO wrapping up the Libya campaign - allegedly - and turning the guns east. Hariri inquiry release timing, Israel deploying drones offshore and iron dome in past few weeks, US awaiting (angling for) Iraq troop extensions, Saleh refuses to quit in Yemen, Mubarak trial restart in Sept, Iranians say Bushehr coming online "soon" and the Palestineans set to declare in Sept despite fierce opposition by US/Israel. New moon coming and Obama just laid down the mark calling for Assad to resign (and the toothless UN calling for war crimes).
Damn -- so Kurgman was onto something, with his war speculation!
What happens when hundreds of thousands of servicemen and women realize they/their spouses/children are dying from radiation? Mass desertion to return home for final [insert time period].
There isn't a war planner on the planet that isn't taking this into consideration. And how many terrorist organizations will care about blowing up the Great Satan when they realize their Allah has committed jihad on us and we're all dying anyway? No fun/Islamic honor blowing up a cancer patient.
"...and the Palestineans set to declare in Sept despite fierce opposition by US/Israel."
Isn't that really a backward "slash /" ?
These R "brown" domestic politic messages from Finland.
This all works well for Finland until someobody in Greece eventually goes all Hugo Chavez on them.
Do you know where the USA keeps its gold? Fort Knox and West Point. Yes, people often leave out West Point. The Army has your gold. And Chavez? He's going to get cash trash at the comex spot price.
Prove it.
"And just when was the last assay of the gold in the vault?", says dude diligence.
"Hello, Staples? Get some lazer printers and toner cartridges to Greece, stat!" - Bernak
Greece Finance Minister Evangelos Venizelos on phone with his Finnish counterpart had agreed to deposit collateral of “less than half” – between half and one bln euros.
This was in Welt today, any leaks from todays Euro Working Group out yet?
European disintegration bitchez!
Looks like some people are realizing that "there will be bagholders".
And positioning themselves accordingly.
Want to hold my "bag"? The sulpher is making it itch.
I wonder how the Acropolis will look on the shores of Helsinki?
cod for anchovies...
mmmm...
Toldja them Finns were crafty. When I saw the election news I just about dropped my coffee and posted to ZH right away.
True Finns can vote 'NO' or they can get....something. Looks like something.
So any idea on what the “Jump the Shark” episode for the Euro looks like?
shame to be greek now..
shame to be greek now..
One thing for sure since Finland did this, there will be very little cooperation from hence forth to resolve these "sovereign debt" problems until it can be assured that no seperate nation to nation parley can be done after people sign the line. This will slow actions and aggrevate agrievements in the EURO-zone financial caldron. Play this as more volatility.
divide and create dissension...True Finlandia is a trojan horse of populist dissension. And the Greeks bought into it. Just goes to show Club Med is not good for anything else but vacationing...
Message to anyone holding Euros: get out. Just get out of the currency. Buy Francs. Buy silver. Buy gold.
Do not trust the ECB or the EFSF. Nations and their central bankers are playing for keeps, and this proves it. They do not care about you. If the 'Zone collapses, your currency will vaporize. Please, please, do not let this happen to you. Do not put your faith in bankers and their bought-and-paid for representatives.
Get out of the Euro.
Thx. I'll take the other side of your trade, since I like you. The EU countries have almost as far to fall as Texas upon exit. The oil they banked since the 1971 Oil Embargo won't save them from two devils instead of one.
When you talk about Greece here, you mean the Greek government. The Greek government threatens no one but its own people. It does what the EU wants. Finland had certain demands, so Greece of course agrees to give away some more of its country. Anything to avoid the scary (for the bankers and the EU) default. It was recently disclosed by a Russian government official that Putin had been willing to lend (as a first installment) billions of Euros to Greece before its deal with the IMF, that G-Pap had been told this, but G-Pap chose to talk about the environment (or ecology) instead in his private meeting in Moscow with Putin. The Russians were like "WTF did this guy come here for?"
Please don't expect the current Greek government to do anything smart, anything that would be in the interests of its people. They are the incompetent servants of the EU. Greece needs a new government, that will actually look out for the people.
"Greece needs a new government, that will actually look out for the people."
How many Billions funneled to Corporations are spent to directly influence the election for PM of Greece? How many Billions necessary to perfect the message to the US citizenry for the election of the leader of the Republic for which the USA Pledge of Allegiance pertains.
Oh to the contrary, they do have collateral for the 100 billion. They have 1400 islands and only 227 of them are inhabited, so that leaves over 1100 islands that could be used for collateral (I've said for months that this was the game plan from the start). They could say we will give you 10 islands as collateral until we pay whatever countries amount and on it goes. This game is about to come apart and how.
If Iran attacked Turkey from the rear, do you think Greece would help?