Greece Bailout

[icm63]

REF: http://www.dailymail.co.uk/news/arti...-hit-26bn.html

Greece Bailout, but with conditions ..

So Gold and Euro could reverse upwards...

NOTE: Greece annual deficit is equal the to USAs deficit of a couple of months..

The word is if Greece defaults, big banks in Germany could explode, and thats why Greece is getting the bailout ...

[goadam1]

Re: Greece Bailout

REF: http://www.dailymail.co.uk/news/arti...-hit-26bn.html

Greece Bailout, but with conditions ..

So Gold and Euro could reverse upwards...

NOTE: Greece annual deficit is equal the to USAs deficit of a couple of months..

The word is if Greece defaults, big banks in Germany could explode, and thats why Greece is getting the bailout ...

I'm shocked.


You have been flip flopping on your dollar stance lately. It's hard to keep up with politics instead of facts. I would keep assuming that everything will be done at a price that favors the strong (see aig vs. gs). And then someone will screw up.

[c1ue]

Re: Greece Bailout

ICM,

I don't see a smoking gun: that the EU will unconditionally bail out Greece.

The language I see is that the EU will see to it that Greece meets its budget cutting requirements, at which time the EU will bail Greece out.

Given the protests scheduled, it is still not clear to me that the Greek people will accept the EU's conditions.

Another possible outcome is that the EU bails out Greece despite Greece failing to meet the EU's conditions, but without the EU explicitly doing so (unconditionally). But this is worthless - the EU's member nations which contribute to the bailout will have to justify their spending to their own constituents who will not understand why Greece is to be bailed out even as their own internal economies don't enjoy such luxuries.

A third outcome is that the EU allows Greece's own borrowing straitjacket to force that nation to reduce its deficits via the simple mechanism of being unable to get more money. But this too has its problems - why bother being in the EU at all then?

The EU Commission's 'unofficial' statement is worthless - it doesn't actually have any money.

[big67]

Re: Greece Bailout

I do not see any proof either... I do not think EU is going to announce this in the middle of a trading week.
The whole article is contraddictory.

[Kadriana]

Re: Greece Bailout

What are the chances of all the European countries getting through the next year with out facing some sort of collapse? Isn't it almost a given at this point that at least one will end up going under soon? Can the other countries really survive one going under since their interest rates will probably sky rocket then causing the ones on the edge to fall over?

[Mega]

Re: Greece Bailout

I think a deal will be hammered out, "They" try Spain next but soon see that sheilds are up cap't. However......there is one place they could go......Massive debt, crashing "FIRE" econermy....Northsea oil/gas running dry..............
Mike

[ViC78]

Re: Greece Bailout

From John Mauldin's letter today -

Before we get to this week's Outside the Box, a quick note about my writing on Greece in last Saturday's letter. I made the point that if Greece defaults it does not necessarily mean they have to leave the EU, any more than if Illinois defaulted they would have to leave the United States. Greece could still use the euro and life could go on. EXCEPT. The markets would no longer lend the Greek government money at anything close to a livable rate. Greece would be forced to balance its budget. Since they are part of the euro, devaluing the currency is not an option. The results of controlling their fiscal deficit would not initially be pretty and would almost insure a serious prolonged recession or depression in the Greek area, with fall out in the region. It would be a sad decade for Greece. But in the long run, it is a better option than default.
Further, and more important to the rest of Europe and the world, the results of a Greek default would be financial turmoil. 250 billion euros (and maybe 300!) of Greek debt is in international bond funds, pension and insurance companies, and above all at banks. Think German banks. Already undercapitalized banks. Also, think of all the investment banks who have been selling relatively cheap (given the apparent risk) credit default swaps on Greece, in an unregulated market, exposing their balance sheets. What should be a simple, if sad, matter for the Greeks, becomes a problem for the world, just as subprime debt in the US caused a world credit crisis. And the risk of contagion from Portugal, Spain, et al is serious. 2 trillion euros of debt could get downgraded by the bond market in very short order. It could be a replay of the last credit crisis, just with new actors as the prime problem.
Bailing out Greece without serious and credible deficit reductions by their government over the next few years would simply delay the problem, and it is not altogether clear the bond markets would go along for very long. At the end of the day, it may be the bond market which forces the Greek government and its people to take some very bitter medicine. Stay tuned. This is just the beginning of what will be a series of sovereign debt crises over the coming decade. It is important for the world that we get this one solved right, or the consequences will be quite severe.

[GRG55]

Re: Greece Bailout

From John Mauldin's letter today -

Before we get to this week's Outside the Box, a quick note about my writing on Greece in last Saturday's letter. I made the point that if Greece defaults it does not necessarily mean they have to leave the EU, any more than if Illinois defaulted they would have to leave the United States. Greece could still use the euro and life could go on. EXCEPT. The markets would no longer lend the Greek government money at anything close to a livable rate. Greece would be forced to balance its budget. Since they are part of the euro, devaluing the currency is not an option. The results of controlling their fiscal deficit would not initially be pretty and would almost insure a serious prolonged recession or depression in the Greek area, with fall out in the region. It would be a sad decade for Greece. But in the long run, it is a better option than default.
Further, and more important to the rest of Europe and the world, the results of a Greek default would be financial turmoil. 250 billion euros (and maybe 300!) of Greek debt is in international bond funds, pension and insurance companies, and above all at banks. Think German banks. Already undercapitalized banks. Also, think of all the investment banks who have been selling relatively cheap (given the apparent risk) credit default swaps on Greece, in an unregulated market, exposing their balance sheets. What should be a simple, if sad, matter for the Greeks, becomes a problem for the world, just as subprime debt in the US caused a world credit crisis. And the risk of contagion from Portugal, Spain, et al is serious. 2 trillion euros of debt could get downgraded by the bond market in very short order. It could be a replay of the last credit crisis, just with new actors as the prime problem.
Bailing out Greece without serious and credible deficit reductions by their government over the next few years would simply delay the problem, and it is not altogether clear the bond markets would go along for very long. At the end of the day, it may be the bond market which forces the Greek government and its people to take some very bitter medicine. Stay tuned. This is just the beginning of what will be a series of sovereign debt crises over the coming decade. It is important for the world that we get this one solved right, or the consequences will be quite severe.

"Muddle Through" Mauldin is probably going to be wrong again. I don't see how there is any way "for the world...get this one solved right". I don't think there is a "solution" that is both financially and politically feasible.

As he points out, the global financial sector has recently been feasting on sovereign CDSs, including those written by the large European banks and numerous hedge funds [with the contrarian deflationistas like Hugh Hendry taking the other side of that trade].

As apparently "safe" sovereign debt proves anything but, the spreads on these CDSs are blowing out, and the speculators smell blood once again. So where is the collateral going to come from to make good on these CDSs?

I fear the ECB and the governments of Europe, including Germany, are now facing the choice between having to bail out the PIIGS [in an effort to avert another potential cascading derivatives crisis] or once again bailing out at least the selected TBTF banks that wrote [or financed the hedge funds that wrote] this sovereign credit insurance in the first place.

Fun, eh...:rolleyes: