Europe has a deal!

[Ballinvarosig Investors]

1. The only concrete thing that has been achieved is to take a disorderly greek default off the table.

Not really, the Greek debt to GDP ratio is only being brought down to 120%. Meanwhile, the Greek economy is still imploding, so that figure is likely to increase as each year passes.  It may very well come to pass that Greece will be forced into another default in two years time.

 

Also, this does nothing to address the debt of the other pigs. I know that here in Ireland, people are asking why are we being asked to endure austerity and to repay all our debts (plus banking sector debt) in full?

[Santayana]

I guess I don't see all the pessimism.  They've managed a 50% default without any CDS payouts.

 

They've managed to say that is what will happen, they haven't managed to do it yet.

[maxthetrade]

"All other euro area Member States solemnly reaffirm their inflexible determination to honour

fully their own individual sovereign signature and all their commitments to sustainable fiscal

conditions and structural reforms."

 

Vinod

 

Yeah, you can wipe your a$$ with such statements. In March G Pap said that Greece would pay every cent of its debt...

[enoch01]

"All other euro area Member States solemnly reaffirm their inflexible determination to honour

fully their own individual sovereign signature and all their commitments to sustainable fiscal

conditions and structural reforms."

 

Vinod

 

Yeah, you can wipe your a$$ with such statements. In March G Pap said that Greece would pay every cent of its debt...

 

But they said "solemnly"!  They're really really serious!  Really!  Now go buy their debt before they have to use the word "solemnly" in all caps.

[Ballinvarosig Investors]

Another thing, the Greek government look likely to nationalise the banking system. What sort of bodies will be found hidden in the Greek banking system?

 

http://www.bloomberg.com/news/2011-10-27/greek-bank-investors-facing-wipeout-as-nationalization-looms.html

[ERICOPOLY]

It may very well come to pass that Greece will be forced into another default in two years time.

 

I guess I'll try to find something positive to say about kicking it down the road two more years:

 

1)  banks will have time to gather a lot more capital yet they will hold the same amount of Greek debt.  Sort of like the argument around BofA -- as long as the losses don't come in all at once it is manageable.  Swallow your steak in one bite and you choke -- cut it up and chew it slowly and you are fine.

2)  there will be less CDS exposure in two years due to expiring contracts (not just on Greece but on all the PIGS)  Unless some idiot bank keeps rolling it over, but surely they can be told not to if they want to live.

 

So there might be some advantages of scale to letting it go on a while longer.  I'm only listing advantages though (pretty sure there is no shortage of people discussing the disadvantages).

 

I think they figure they can't put Greece in a better position than the others because it would create a lot of jealousy.  Unless they want to take haircuts on them all at once, which they probably don't believe the banks can manage.

 

 

 

[vinod1]

Anyone find it ironic that the European agreement tries to do two things

 

1. Ensure that a 50% haircut on the Greek bonds is not a "default" and thus render CDS from being paid.

2. Provide an insurance cover on sovereign debt that pays if there is a "default".

 

I am hoping a Mel Brooks movie comes out on this Euro drama.

 

Vinod