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Wow, Greece Gets a Deal!


Parsad
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The other PIGS must be fuming. Greece have been given a massive debt-writedown despite the fact that many of the structural reforms that were supposed to have been in place years ago have still not been implemented. How long will it be until the debts of Portugal and Ireland become so great that they too will start asking where are is their writedown?

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The other PIGS must be fuming. Greece have been given a massive debt-writedown despite the fact that many of the structural reforms that were supposed to have been in place years ago have still not been implemented. How long will it be until the debts of Portugal and Ireland become so great that they too will start asking where are is their writedown?

 

Do they have a credible threat?

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This is politically a nightmare.  You can bet this is Greece's final chance.  Another bailout in the next ten years for Greece would be political suicide for a German Chancellor or French Pres.  You can bet the EU is resturctured to turf rogue sates after this. 

 

I think Ireland is okay and Italy seems to be muddling along, as is Spain.  Domt know about Portugal. 

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This is politically a nightmare.  You can bet this is Greece's final chance.  Another bailout in the next ten years for Greece would be political suicide for a German Chancellor or French Pres.  You can bet the EU is resturctured to turf rogue sates after this. 

 

I think Ireland is okay and Italy seems to be muddling along, as is Spain.  Domt know about Portugal.

 

It will be forgotten. Mexico needed help in 1976, 1982, 1988, and still got the Clinton/Greenspan/Summers/Rubin help in 1994.

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Looks like bondholders are close to taking a 70% haircut!  Higher than I expected...50% is what I thought was fair.  EU should legislate strong measures now against Greece and hold them up to strict fiscal measures for the next ten years!  Cheers!

 

http://www.cnbc.com/id/46064939

 

I would feel bad if I am from Greece. Sad to see your country to be on this kind of news!

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I would feel bad if I am from Greece. Sad to see your country to be on this kind of news!

 

Sorry for being harsh but I have lived through this a couple of times. The German and French banks and governments are as guilty as the Greeks. It is the responsibility of the lender to make sure that the borrower has capacity to pay.

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I think Greece has a way better bargaining power than most people realize:

 

“by far the greatest advantage that Greece would enjoy in a restructuring of its debt derives from the fact that so much of the debt stock is expressly governed by Greek law (90 percent or more).”

- Lee C. Buchheit & Gulati, Greek Debt - The Endgame Scenarios

 

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1807011

 

http://www.athensnews.gr/issue/13478/52264

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I am sure they will reach a deal, and the market will probably rally. But the markets are only going to start focusing their crosshairs on Portugal, which is in need of debt forgiveness. After that, it will be Ireland, and then probably back to Greece again. In the meanwhile, you have the massive Italian and Spanish economies, are are teetering on the brink, anymore bad economic data could push them over the edge very quickly.

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Keep in mind that Greece is not allowed to get a haircut on the IMF/ECB loans that were given to keep them afloat. 

 

Even after a 70% haircut on the public debt holdings, Greece is still over 100% GDP to debt with negative cashflow and a contracting economy.  This is step #1, but doesnt really help yet.

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  • 2 weeks later...

http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100014697/for-greece-a-tear-for-brussels-a-blush/

Very quickly: some of you will have seen that Greece’s tax revenue from VAT collapsed by 18.7pc in January from a year earlier.

 

Nobody can seriously blame tax evasion for this. It has happened because 60,000 small firms and family businesses have gone bankrupt since the summer.

 

The VAT rate for food and drink rose from 13pc to 23pc in September to comply with EU-IMF Troika demands. The revenue effect has been overwhelmed by the contraction of the economy.

 

Overall tax receipts fell 7pc year-on-year.

 

This is a damning indictment of the EU-imposed strategy. Greece is chasing its tail. The budget deficit is stuck near 8pc to 9pc of GDP because the economic base is shrinking so fast.

 

Let me just add that it makes little difference whether or not Lucas Papademos secures triparty agreement today – or soon – for a debt deal.

 

The Greek parliament still has to vote and there is a sauve qui peut mood among MPs who don’t want to be stoned to death (metaphorically) by the polloi – hoi or otherwise.

 

Prof Yannis Varoufakis told me this morning that PASOK suupport has dropped to 8pc in the polls from 47pc when elected. New Democracy is down to 18pc.

 

Where are voters going? To parties that are not very friendly to Angela Merkel. The hard Left in various forms is running at around 35pc.

 

So what happens in the April elections? Does anybody think that the new government will comply with the Merkel-Troika Diktat, and continue complying until 2020 when the country will still be prostrate with a public debt of 120pc of GDP – if all goes perfectly?

 

April is the inflexion point.

 

http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100014720/greek-death-spiral-accelerates/

Another normal day at the Hellenic Statistical Authority.

 

We learn that:

 

    Greece's manufacturing output contracted by 15.5pc in December from a year earlier.

 

    Industrial output fell 11.3pc, compared to minus 7.8pc in November.

 

    Unemployment jumped to 20.9pc in November, up from 18.2pc a month earlier.

 

I have little further to add. This is what a death spiral looks like.

 

It is what can happen if you join a fixed exchange system, then take out very large debts in what amounts to a foreign currency, and then have simultaneous monetary and fiscal contraction imposed upon you.

 

Germany discovered this on the Gold Standard when it racked up external debt from 1925 to 1929 (owed to American bankers) in much the same way as Greece has done.

 

When the music stopped – ie, when the Fed raised rates from 1928 onwards – Germany blew apart in much the same way as Greece is blowing apart. This is not a cultural or anthropological issue. It is the mechanical consequence of capital flows into a country that cannot handle it, as Germany could not handle it in the late 1920s.

 

By the way, Greeks work an average 42 hours a week, one of the highest in Europe. Just want to put the record straight on that.

As Greece reaches a deal, the situation continues to deteriorate rapidly.

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The Greek parliament passes the Troika bailout conditions! - http://www.telegraph.co.uk/finance/financialcrisis/9078221/Greece-passes-crucial-bailout-vote-as-country-burns.html

Lucas Papademos, the embattled Prime Minister, told Parliament: "Vandalism and destruction have no place in a democracy and will not be tolerated. I call on the public to show calm. At these crucial times, we do not have the luxury of this type of protest. I think everyone is aware of how serious the situation is."
I have to say, I thought the bolded statement from Papademos was cute considering he is an un-elected, ECB lackey.
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The Greek parliament passes the Troika bailout conditions! - http://www.telegraph.co.uk/finance/financialcrisis/9078221/Greece-passes-crucial-bailout-vote-as-country-burns.html

Lucas Papademos, the embattled Prime Minister, told Parliament: "Vandalism and destruction have no place in a democracy and will not be tolerated. I call on the public to show calm. At these crucial times, we do not have the luxury of this type of protest. I think everyone is aware of how serious the situation is."
I have to say, I thought the bolded statement from Papademos was cute considering he is an un-elected, ECB lackey.

 

Unemployment 20.9% and going up after this. This is just the start.

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The next couple of weeks will be interesting to watch. The Germans could be the big losers as it looks like they are being made out to be the bad guys in the Greek press. With all the WWII references (and Nazi Germany) one has to wonder just how bad relations could get. And as austerity spreads to more countries I can see historic scabs getting picked. Perhaps the Euro will survive a financial crisis and get brought down in the end by a social crisis.

 

Greek elections in April will make the current US situation look like childs play.

 

Makes one thankful for our boring Parliamentary system (Canada). I am also thankful to Paul Martin when he was finance minster under Jean Cretien for having the brass to get our finances in reasonable shape when the opportunity presented itself (and yes, the CAN$ dropping to $0.66US helped as did a commodity boom). 

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  • 2 years later...

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