On October 26th , the members of the Euro Zone agreed to three major structures to reduce credit stress within the union. First, there was an agreement to increase the losses to private sector Greek bondholders from 21% to 50%. Second, there was an agreement on the need for bank recapitalizations of 108 billion EUR. Third, there was agreement to expand the size of the bailout facility to enhance its ability to cover larger nations. All are important and all are related. Let’s review the structures to gauge if they will be successful and to gauge what additional measures need … …READ MORE
Tag Archives: Greece
Why market is selling Italian bonds
For the markets, the most troubling aspect is the problem of rising Italian bond yields. According to Bloomberg:
“The recent increase in yields puts Italy’s finances on an unsustainable path. The debt-to-GDP ratio is set to rise to 126.2 percent by 2014 from its present level of 118.4 percent with the seven-year sovereign yield at 7.54 percent, according to Bloomberg Brief estimates based on GDP forecasts from the IMF. That compares with a decline to 117.7 percent by 2014 after peaking at 119.7 percent next year, when that interest rate was at 5.2 percent a month ago. The seven year … …READ MORE
Greek Vote Scenarios and Outcomes
Now the smoke has cleared a tad on the new Greek vote on accepting the new bailout plan, I think we can provide a bit more clarity to the hyperbolic reporting and analysis from yesterday. Let’s review the possible outcomes.
1. Friday, there is a likely Greek parliament confidence vote.
a. If this confidence vote passes, then there will be another vote to take it to the voters.
1. Greek parliament votes for a plebiscite.
2. Greek parliament votes against a plebiscite.
b. If this confidence vote fails, then:
1. PM can call for a new confidence vote.
2. Government … …READ MORE
Greek Democracy=End of Euro Zone?
Today in a surprise move, Greek Prime Minister Papandreou announced that he would hold not one, but two referendums on the latest bailout plan for the country. The first vote would be in the Greek parliament and the second would be to the Greek voters. “We trust citizens, we believe in their judgment, we believe in their decision,” he told Socialist party deputies. “In a few weeks the (EU) agreement will be a new loan contract… we must spell out if we are accepting it or if we are rejecting it.”
Papandreou said the referendum would take place in a … …READ MORE
Icarus expectations for Europe
Coming out of the G-20 finance ministers meeting this past weekend, here were some of the comments by European leaders.
European financial policymakers promised a “decisive” solution to the two-year-old Eurozone debt crisis.
“The results of October 23 will be decisive,” French Fin in Francois Baroin
Europe would “bring a comprehensive package of measures” to the meeting said German FinMin Wolfgang Schaeuble
Obviously, Europe’s hyperbole is only matched by their inability to deliver in a timely matter. The European debt crisis has now dragged on for 2 years. The pressure is building to have not only a plan in place … …READ MORE
The World Prepares for Greek Default
Over the last 48 hours, financial authorities are speeding proposals to shore up shaky global banks ahead of what appears to be a looming Greek default.
Over the weekend, French PM Sarkozy and German PM Merkel met to discuss bank recapitalization plans. They announced on Sunday that they had an agreement on how to proceed, but didn’t release details on the agreement. Sarkozy stated, “We will recapitalize the banks…We’ll do it in complete agreement with our German friends because the economy needs it, to assure growth and financing.” Sarkozy and Merkel stated the plan would be ready in time for … …READ MORE
The Greek Endgame is Now
For weeks, Greece has been saying that they will run out of euros by mid-October. On October 14th, Greece has a 2 billion-euro interest/note redemption due. While it is a major assumption to believe Greece on their finances, we have to take seriously that they won’t have the funds to make the payment. This is why they approved a series of austerity measures to try to meet the criteria set by the Troika of the IMF/EU/ECB to get the next tranche of bailout money.
On Monday and Tuesday of this week, EU finance ministers met and discussed what options were … …READ MORE
Greek default date
Late Friday, the markets pursued Risk-Off trading strategies as equities dropped, bonds rallied and the US dollar rallied. To me, I expect this type of activity to occur every Friday until we get some type of certainty/resolution to Greece. Why? On the last day of the week, we should get fears over a Greek default announcement taking place over the weekend. While this didn’t occur this past weekend, we did get a negative Greek development/announcement.
The Greek government announced that they will miss the Troika budget targets for 2011 and 2012. The IMF/ECB/EU had set a budget deficit target of … …READ MORE
Latest on Greece:
By now, most have heard or seen the CNBC reports of a TALF-like structure for the EFSF and how it would work. Also, ECB member Smaghi stated that EFSF securities would be allowed for collateral use at the ECB. This news contributed to a big Risk-On rally in the US which continued overnight. Today, the Greek parliament is expected to approve a new real estate tax today despite Greek union leaders telling their members not to assist in collecting the tax. Greece must increase tax collection or it will not get the next 8 billion euro loan tranche and avoid … …READ MORE
Euro turmoil to get white-hot
Today, the markets are selling risk as we enter into the NYC trading day. This started on Friday with the lack of action from the European EcoFin meetings that US Treasury Secretary Geithner attended, speechified and was summarily criticized for both. The ministerial meetings failed to generate positive newsflow for quick action to resolve the critical issues before Europe: Greece default, EFSF expansion and fiscal integration.
Clearly, European (Troika as well) strategy for Greece is to apply as much pressure on the country to enact the strongest possible austerity measures and public/private restructuring as possible before they receive the E8 … …READ MORE
