Reply With Quote
It is still destined to explode. Even if they take care of Greece, Italy is next.
Pretty severe write-down, but probably about what is needed. As the article notes though, nothing is really set in stone yet, and the final haircut is, as one might expect, hotly debated/contested.
If you think our Congress is a bunch of do-nothing windbags, at least we don't have the clash of country interests within the EU. Yikes.
--------------------------------------------------------
A Greek bond writedown of 50 percent is practically assured, sources close to the situation told CNBC on Wednesday.
Negotiators remain divided, however, on the issue of what will happen to the remaining 50 percent of the current outstanding 205 billion euros ($284.9 billion) of debt load.
Indications are that the remainder will be divided into a cash sweetener, Greek Sovereign paper and paper from the European Financial Stability Facility (EFSF), the name of the currency zone's bailout fund. The exact mix remains to be determined and remains a key point of debate.
Indications are that the deal on a writedown-or "haircut" in current parlance-bears no resemblance to the original 21 percent PSI haircut, but will remain voluntary, though this word's meaning is becoming increasingly fuzzy, sources said.
Improved Chance of a Deal?
Prospects for a comprehensive deal to resolve the euro zone debt crisis at a summit on Wednesday had begun to look dim, with deep disagreement remaining on critical aspects of the potential agreement, including how to give the region's bailout fund greater firepower.
While there appears to be broad consensus on the need for around 110 billion euros ($150 billion) to be injected into the European banking system to help it withstand a potential Greek debt default and wider financial contagion, there is little clarity on either of the other two critical parts of the plan.
Aside from the Greek writedown, any agreement would hopefully involve scaling up the region's 440 billion euro EFSF.
European Union leaders will consider two methods for scaling up the EFSF, one by using it to offer guarantees to purchasers of new euro zone debt, and the other using part of its capacity to set up a special purpose investment vehicle that would attract money from sovereign wealth funds and other investors to buy debt.
They might also agree to combine both options.
No Concrete Numbers Expected
Whereas financial markets have been hoping for weeks that Wednesday's summit, scheduled to start at 1500 GMT with a gathering of all 27 EU leaders, followed at 1730 GMT by the meeting of the euro zone heads of state, will produce detailed figures on how to combat the debt crisis, there is now little likelihood of concrete numbers, sources say.
"The numbers are not yet finalized - you have to have all parameters in place and see what is needed and what the leverage factor would be.
It needs a lot of technical work to come up with a number," one EU official said, adding that discussions would continue on Wednesday to forge a pre-summit consensus.
"The leaders will agree on the options tomorrow, but whether it will be an agreement with all details remains to be seen.
I think it will be challenging - it will be very difficult to agree on everything." Instead, it looks likely that it won't be until Nov 7-8, when EU and euro zone finance ministers are next scheduled to meet, that the details of whatever euro zone leaders agree on during Wednesday's summit will be completely finalized.
- Reuters contributed to this report.
http://beta.finance.yahoo.com/news/g...125447673.html
It is still destined to explode. Even if they take care of Greece, Italy is next.
..........and Spain, and Portugal, and Ireland...............
And one day, probably even us.............
Yep, the developed countries have no choice but to inflate their way out of the mess and stick it to the creditor nations (China, Saudi Arabia, etc.)
I see the bears are out in full force.
I don't think it will get quite so out of control. Ugly, to be sure, but I think the economic system will muddle on.
Oh the system will defintely muddle on. There's just going to be a lot of banks, investors, taxpayers and beneficiaries of government spending taking pretty big haircuts along the way.
http://www.bloomberg.com/news/2011-1...llies-say.html“If the Greek people don’t see the necessity of backing Papandreou we have a whole different ballgame,” Otto Fricke, the budget spokesman in parliament for Merkel’s Free Democratic Party coalition partner, said by phone. “If he doesn’t get a majority, then there’s no second aid package, no voluntary haircut. We’d have a potentially explosive situation, one that leaves us today baffled as to what we could possibly do next.”
Just read that, WH.
Very interesting. Since it is going to a popular vote, I dont think its too big of an assumption to say the Greeks are going to vote against the austerity measures en masse, this would trigger Greece's withdrawal from the EU and its partners.
Unless they stop the vote (dont see that happening), Greece will be isolated from the rest of Europe.
Will this trigger more withdrawals? Spain? Italy? Portugal?
Interesting times, interesting times.
"Greece will be isolated from the rest of Europe"
Letting Greece in, with its corruption and lax tax collection among many other major issues, was a mistake, and many knew it back then.
If Greece withdraws from the EU it would give them a tool they don't have now: devaluing the currency (i.e., a new Drachma)
Won't work since the bonds are in Euros.
Pretty sure Greece isn't going to give a about that if they withdraw from the EU.
I should paraphrase the above remark to Drachen that I pretty much don't know about whats going here.I read the articles and I knew of the deal and somewhat of the troubles and I get whats happening but I really have no insight or understanding of the ramifications.
WH, help a man out with some commentary here.
I found this especially funny:
1520:
The banks which agreed to write down some 100bn euros worth of Greek bonds say they will proceed as planned despite Mr Papandreou's announcement, AFP reports out of Washington.
I mean devaluing their currency does nothing if the bonds are valued in another currency
Let's say that 1 Euro = 1000 drachma
Lets say that their monthly interest payment is 10 Euro (10,000 drachma).
Now, they devalue their currency by a factor of 10 so 1 Euro = 10,000 drachma
Now their payment is still 10 Euro, but now 100,000 drachma.
Devaluing does nothing unless the debt is in your currency.
http://www.bbc.co.uk/news/business-15537557
But without the approval of the Greek people, without an end to crippling pervasive strikes, how on earth could this austerity be followed by economic recovery?
So although Mr Papandreou's decision to hold a referendum has shocked investors and eurozone leaders, to criticise him would be to argue both that democracy is a bad thing and (many would say naively) that a Greek revival could be possible in the teeth of opposition from Greek people.
Lets say I owe you one Euro. Lets say you demand repayment and I say sure, I'll pay you back, but in Drachma. Then you're like oh no just give me .50 Euro. I then promptly tell you to GFY and offer you 400 Drachma instead. What are you going to do? Invade me?
I have to take a similar position to MiG here and say out loud that I am not privy to the ramifications of this procedure, but...
If Greece withdraws from the EU, why would they give a about how much they owe? They are their own nation, they owe someone else money, who gives a ? They could just throw the middle finger to the bank/EU and say "What money? What debt?"
So long as they have a stable economy (they dont), good tax collection (according to BD, they dont) and willing trade partners (Russia again? Someone else?), whomever holds the debt has no recourse to actually collect.
What am I missing?
You put it much better than I did.
No, I won't loan you any more money and without natural resources, that is far more devastating than an invasion.
Who's going to loan them money anyway? They're about to default. Greece is already in a lot of pain so (and as I said above - I'm not very familiar with the situation) threatening them with economic pain isn't going to really do much, IMO. If the Greek people are willing to default then I'm not sure what course of action the EU has to scare them into doing what they want. It indeed may be harder for Greece along this path but that doesn't seem to matter to them.
The central banks of the stronger EU countries.
Why do they need to be loaned money to begin with? As a nation, a sovereign nation, an en y that can print its own money and value it independently, why would you borrow money from a quasi-governmental Bank?
Greece has an opportunity to opt out of the system completely. Not just its debt, not just the EU or Europe in general, but the whooooole banking system of the world.
Will it work? Way above my head...like way above. I never understood national debt as a concept, how a nation can owe itself money because it borrowed against its potential future-growth from quasi-private en ies (who got their wealth by...?).
It will never make sense to me.
There are currently 1 users browsing this thread. (0 members and 1 guests)
Posting Permissions
