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HenryTo
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HenryTo
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HenryTo
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diesel
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HenryTo
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 Posted: Wed Jun 29, 2011 11:57 pm Post subject: |
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Bridgewater's latest:
| Quote: | Are the Greek Banks Out of ECB Eligible Collateral?
The crises are coming at European policymakers at an accelerating rate. On Wednesday, the Greek parliament agreed to the austerity bill that is necessary to push the drama along, but policymakers are still no closer to answering the basic question of where the capital and liquidity will come from to ultimately resolve the crisis. If there is a bank run how will it be controlled? Where will the capital come from to deal with the insolvency of the peripheral countries? The lack of answers to these questions despite all the time and effort and despite the need for such answers leads us to believe that the answers cannot come. The interests of the different parties (i.e., the creditors, the debtors, the IMF, the ECB) are most likely irreconcilable, so instead more and more unsustainable band-aids (like asking the Greeks to suffer even further austerity) are applied from day to day. |
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HenryTo
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| Posted: Fri Jun 24, 2011 2:15 pm Post subject: |
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Bridgewater's latest on the Greek sovereign debt crisis:
| Quote: | As we have described, there are five steps necessary for Greece to secure the July installment of bailout money and ultimately the agreement on a second bailout package; a critical condition if the EU is going to buy itself time to put in place the institutions and mechanisms necessary to deal with an orderly sovereign default. These include:
1.) The Greek government's survival of a no-confidence vote;
2.) EU-IMF acceptance of the details of the Greek government's final five-year austerity plan;
3.) EU policymakers' approval and finalization of the means of payment going forward (bilateral, EFSF, ESM, etc) for the new bailout scheme, with an agreement in principle expected to be reached at Friday's EU heads of state meeting;
4.) Participation by at least a limited number of private institutions in voluntary extensions/restructuring of Greek debt (for political reasons);
5.) Actual passage by the Greek parliament of the agreed-on austerity measures on June 30.
The first item has been met and it now appears the second item on the list has also been achieved. Coinciding with the big reversal in both the euro and US equities around 3:00pm Thursday, the WSJ reported that the EU and IMF had agreed to the terms of Greece's proposed five-year austerity plan. Earlier in the day, some doubts had been cast as the details released by the Greek finance minister seemed to leave the EU-IMF several billion euro short of their spending cut goals. While this progress is significant, there is still a long way to go just to get this one tranche of lending to cover near-term shortfalls (conditions 3, 4, and 5 above have not been fulfilled yet), and we are still nowhere near actually fixing the underlying problems.
While market tensions eased late in the day, the sensitivity of periphery spreads to these deliberations (spreads for Irish, Portuguese and Spanish debt were out by 50, 40 and 20 basis points prior to the WSJ report) and the knock-on effects to other markets (stocks and the euro down 1%, bonds up 1%, gold down 2%) give a little taste of the potential contagion of an unraveling of the Greek debt situation. |
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nodoodahs
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| Posted: Thu Jun 23, 2011 11:58 am Post subject: |
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| rffrydr wrote: | | Talking $E150B, 80 cash, 40 asset pledges, and voluntary roll. Interesting that the roll will all be shorter-term denominations and leave German bank holdings (and way exaggerated US) untouched by Mr Moody. |
Rolling the short makes sense from the POV that economic recovery will paper over many problems and allow austerity time to work.
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diesel
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| Posted: Tue Jun 21, 2011 6:55 pm Post subject: |
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| Quote: | The best quote on the Greek parliament’s vote of confidence for Prime Minister George Papandreou – and thus his austerity plan:
“This is not a program to salvage the economy, it’s a program for pillage before bankruptcy,” said Alexis Tsipras, head of the small opposition Left Coalition. |
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rffrydr
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| Posted: Fri Jun 17, 2011 5:53 pm Post subject: |
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Talking $E150B, 80 cash, 40 asset pledges, and voluntary roll. Interesting that the roll will all be shorter-term denominations and leave German bank holdings (and way exaggerated US) untouched by Mr Moody.
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nodoodahs
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| Posted: Fri Jun 17, 2011 1:48 pm Post subject: |
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| nodoodahs wrote: | The most likely scenario is IMF+EU funding for the 2012 shortfall, through additional support and/or an extension of the maturity of the current support.
Then look for a voluntary restructuring - one that won't trigger CDS events - prior to the ESM in Jul 2013. They could coerce a lot of agreement to accept restructuring with various measures, such as accounting-treatment sweeteners for holders of the restructured debt to maturity.
Two-to-three years of economic recovery will do a lot to paper over the long-term structural and competitive problems.
The idea that Greece would leave the EU (either voluntarily, or not) is and has always been ridiculous. Nobody in the EU is better off under those conditions. |
http://www.bloomberg.com/news/2011-06-17/merkel-says-she-s-prepared-to-work-with-ecb-on-investor-role-in-greece.html
| Quote: | “We would like to have a participation of private creditors on a voluntary basis,” Merkel told reporters in Berlin today at a joint press conference with French President Nicolas Sarkozy. This “should be worked out jointly with the ECB and there shouldn’t be any dispute with the ECB on this.”
The euro, stocks and Greek bonds rallied as Merkel and Sarkozy signaled a reconciliation between German calls for investors to help rescue Greece with warnings from the ECB and France that a compulsory move risked triggering the euro area’s first sovereign default.
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“The aim is involvement of the private sector on a voluntary basis, and for that the Vienna Initiative, as it’s called, is a good basis,” Merkel said. “I think we can achieve something on this basis.”
Echoing the Vienna plan, used during the financial crisis of 2009 for eastern European units of banks to maintain their exposure, would involve encouraging creditors to roll over expiring bonds, buying time for Greece until its austerity program shows results or until a permanent rescue fund kicks in from mid-2013. A rollover involves reinvesting the proceeds from maturing bonds in new securities.
“This is a breakthrough,” Sarkozy said. “Finally we have found a solution for an involvement of the private sector on a voluntary basis,” he said. “What we decided just now is precisely in the spirit of what was decided in Vienna.”
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Merkel’s government is now “open” to discussing ways to achieve “voluntary, substantial, reliable and quantifiable” private-sector involvement, Deputy Finance Minister Asmussen said, adding that Merkel and Schaeuble are “on the same page” on this and working with the ECB to make it happen. |
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HenryTo
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HenryTo
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| Posted: Tue Jun 07, 2011 3:02 pm Post subject: |
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FYI
Moody's: Greek rollover would likely be credit event
PARIS (Reuters) - The head of Moody's sovereign ratings group said on Tuesday it was hard to see how a private sector rollover of Greek debt would be truly voluntary and it would therefore likely constitute a default.
European officials are striving to arrange a private sector rollover as a key part of a new rescue plan for Greece, to help justify to their taxpayers the burden of fresh financial aid for the struggling euro zone member.
Bart Oosterveld, head of the sovereign risk group at Moody's Investors Service, said the ratings agency could classify a debt rollover as a default if it believed that bondholders had only taken part because they feared the consequences of not participating.
"It's hard to imagine in the current circumstances that people would voluntarily do this," he told reporters in Paris.
"Our default definition contemplates that for something to be voluntary it has to be truly voluntary ... More likely than not this would be a credit event in our view."
Oosterveld, who is based in New York, said there was a big difference between Greece's current situation and 2009's Vienna Initiative for eastern Europe, when international banks agreed to keep credit lines open to subsidiaries in Romania, Latvia, Hungary and Serbia.
"The thing about Greece is that it is so late in the game," Oosterveld said, noting there was now a clear risk of a Greek default looming over investors, unlike when the Vienna Initiative was agreed. "It's hard to imagine anyone doing anything voluntarily right now."
Moody's assigns a Caa1 rating to Greece's sovereign debt, which implies a 50 percent chance of a default within three to five years.
Oosterveld said Moody's saw the default risk increasing among troubled euro zone periphery countries, "sometimes from a very low base, sometimes from a high base."
However, he noted that the combined debt of these economies made up only 13.5 percent of the region's economy.
"The euro zone governments and the European Central Bank have the resources and the incentives to contain (this), especially short-term financial pressures," he said.
MARKETS TO STAY STRESSED
While the market was hoping for a bold resolution of the Greek crisis, policy constraints in euro zone member states including Greece itself were forcing incremental steps.
"It is more likely than not that markets are going to remain volatile and stressed for some time," Oosterveld said, adding that it was impossible to foresee a Greek restructuring that would alleviate the situation and at the same time be orderly.
To have any impact on Greece's debt, which totals around 340 billion euros or 150 percent of the country's GDP, any restructuring would have to be large and therefore disorderly, with an impact on Greek banks and the European Central Bank's balance sheet, Oosterveld said.
Cyprus' banking system and its sovereign rating would also be hit because of its intimate ties to Greece, although the impact of a haircut of 50 percent on Greek debt would be "manageable" for banks in Germany and France, he said.
A 50 percent haircut had been roughly the average in recent sovereign defaults, Oosterveld noted.
In this sense, he said, the introduction of collective action clauses on euro zone debt from 2013 would not represent a watershed, because to have an impact any restructuring would have to include debt issued before that date. |
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rffrydr
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| Posted: Sat Jun 04, 2011 11:52 am Post subject: |
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Speaking of Vienna, which is now the model for the Greek project, almost everything in the this article is misunderstood and misapplied:
http://www.businessweek.com/magazine/content/11_18/b4226012481756.htm
That should be a good sign. That it comes from an historian shows....self-promotion. Far from a backwater in finance Vienna was the seat of the Austo-Hungarian empire--the europe before europe and the "tinder" has already been set afire. And, aside from that, right here in the same mag:
http://www.businessweek.com/globalbiz/content/may2010/gb20100526_993227.htm
And the seat of OPEC, Vienna isn't doing too badly for itself these days.
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rffrydr
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| Posted: Fri Jun 03, 2011 7:05 am Post subject: |
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Trying to square the CDS circle a "vienna initiative" incorporating markets is outlined here by SocGEN via alphaville:
| Quote: | “If press reports are to be believed it looks very much as if we have the makings of deal on Greece. Meeting late into the night (appropriately enough in Vienna) the European Economic and Financial Committee of deputy ministers and senior officials is reported to have agreed in principle a new three programme that will effectively fund Greece until mid 2014, covering a total financing gap of around €85bn. Over the next three years the EU and the IMF are expected to provide a further €30-40bn on top if the existing €110bn of bilateral loans. At this stage it is not obvious whether the additional funds would be provided by the EFSF or by bilateral loans, although the French Finance Minister Christian Legarde has previously indicated that additional lending to Greece would come in the form of further bilateral loans. An accelerated programme of privatisation is expected to raise €25bn leaving around €20bn to be raised from the private sector, presumably through some sort of Vienna style initiative with private investors expected accept swapping their existing Greek bonds for new 10-15 year notes. The suggestion that private sector involvement will be limited to just €20bn suggests a fairly limited programme is envisaged that may simply be limited to those Greek bonds held by Greek banks. Again this rather patchwork solution simply succeeds is again kicking the can down the road and still does nothing to address Greece’s long term solvency. However a deal of this nature would materially reduce the uncertainty surround Greece’s immediate funding needs and therefore clear the way for the ECB to hike rates in July.”
ertainly the ECB was concerned that a strong element of compulsion in any Vienna style debt swap could potentially have a contagion effect on Portugal and Ireland if creditors feared the same treatment. Yesterday ECB Vice President Victor Constancio effectively signalled the ECB’s willingness to accept a limited debt swap saying that “some forms of private sector involvement that are voluntary we admitted as a possibility” but the key condition is “avoiding a legal credit event.” According to previous press reports investors in the new bonds may be given preferred status, higher coupon payments or collateral as incentives to roll their exposures of Greek debt maturing between 2012 and 2014. Negative incentives are also under consideration, such as cutting off old Greek bonds from eligibility for use as collateral with the ECB while granting that privilege to new bonds.”
TA
“In return for the additional funding, Greek Prime Minister George Papandreou is expected to present the government’s Medium Term Fiscal Strategy to Jean-Claude Juncker in Luxembourg later today. This basically represents the additional austerity measures that the EU/ECB/IMF Troika identified as being required in March’s third programme review in order to bring the programme back on track. The MTFS budget plan will include €6.4bn of new savings this year with new tax increases for employees, the self employed and pensioners as well as a further €22bn of savings to be made over the years 2012-15. At this stage it doesn’t look as if Greece will be required to undertake additional austerity measures, aside from the accelerated privatization programme, beyond those envisaged in the MTFS. According to sources quoted in the press, the new plan would involve detailed commitments by Greece on the management of a new national wealth agency and on the timing of specific privatisations, but would stop short of intrusive international supervision of the agency. At home Mr Papandreos faces opposition even within his own party over the new budget plan with a number MPs demanding that parliament be given time to properly debate the new set of austerity measures. But Greek sources told Kathimerini on Thursday that Mr Papandreou will only let Parliament vote on the entire fiscal plan rather than on specific measures.”
TA
“Although the final details of the bailout package have still to be hammered out and it looks as if the exact size of the bailout and how much each international donor will contributed will be decided at the June 20 Eurogroup meeting. However, it looks as of once again, faced with their backs to the wall, euro area policymakers have again opted for the least risky and painful solution; i.e. more support for Greece. A year after the first bailout package for Greece was first put in place, Europe’s sovereign debt crisis therefore continues to ebb and flow with each new bailout package. This reflects the fact that the solutions that have been put in place continue to treat this crisis problems as one of liquidity rather one of fundamental solvency. This latest agreement for Greece is no different although one could also argue that the initial rescue package for Greece was simply too small and the target of returning Greece to the market as early as next year was hopelessly optimistic. Greece will still be left with a huge mountain of debt at the end of programme – we estimate that the Greek debt to GDP ratio will peak at around 170% – which will do nothing to allay the market’s concerns that a restructuring of Greek debt cannot be postponed indefinitely. However for now European officials appear content to kick the can down the road.” |
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rffrydr
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