Greek coalition talks fail -- prime minister to seek vote of confidence

[jk]

Re: Greek coalition talks fail -- prime minister to seek vote of confidence

it's not just european banks on the hook. according to john mauldin's latest letter [look there for the reference since i don't recall it] AMERICAN banks have written cds's on about half the value of piigs bonds held by european banks. the trade appears to be that european banks think there will be a credit event SOONER, while the american banks think there will be a credit event LATER. of course the american banks don't have the capital to cover their potential losses, which means that if the eurozone crumps start looking for TARP 2, no doubt funded by QE3.

[mmr]

Re: Greek coalition talks fail -- prime minister to seek vote of confidence

The Irish statistics are also skewed by the foreign banks that set up subsidiaries in Ireland to benefit from favorable local tax laws, but really didn't lend much in the local market. Basically, they would borrow money from their overseas parent and lend primarily to borrowers in other countries, allowing the parent to shift income to a low-tax jurisdiction. While these banks show up in the Irish statistics, they were largely just passing money through Ireland.

The most notorious example is a bank called Depfa that moved much of its operations to Ireland about 10 years ago. This bank basically invested in "public finance" projects worldwide, which unfortunately included billions of dollars of sketchy securities, and borrowed from their German parent company. From what I recall, this one "Irish" bank alone was borrowing nearly 100 billion euros from its German parent at one point (the German parent was subsequently nationalized by the German government).

Similarly, a significant portion of the other "international" debt in Europe may also really just be intercompany debt (not to say that debt levels in general aren't ridiculously high). These international debt statistics are very difficult to interpret accurately; probably the only way to find out the true level of international exposure would be through default.

[touchring]

Re: Greek coalition talks fail -- prime minister to seek vote of confidence

The Irish statistics are also skewed by the foreign banks that set up subsidiaries in Ireland to benefit from favorable local tax laws, but really didn't lend much in the local market. Basically, they would borrow money from their overseas parent and lend primarily to borrowers in other countries, allowing the parent to shift income to a low-tax jurisdiction. While these banks show up in the Irish statistics, they were largely just passing money through Ireland

I see what you meant. Ireland is a financial center.

[c1ue]

Re: Greek coalition talks fail -- prime minister to seek vote of confidence

The Irish statistics are also skewed by the foreign banks that set up subsidiaries in Ireland to benefit from favorable local tax laws, but really didn't lend much in the local market.

It isn't just banks.

When I was still working for a salary, the Japanese comptroller of the Japanese subsidiary I worked in (in Japan, US parent) was heavily involved coordinating global sales attribution (i.e. sales anywhere in the world, but mostly Europe) to Ireland.

At one point over 80% of all sales to Europe and 40% of all ex-US sales were being routed through Ireland - along with assorted other tax dodge type tactics.

I'm quite sure my former company wasn't the only one.

[unlucky]

Re: Greek coalition talks fail -- prime minister to seek vote of confidence

According to the Irish govt, their total government debt at the end of 2010 was 148.1 Bn euro. Projected to rise to 172 Bn euro by the end of 2011.

This includes promissory notes already issued to recapialize banks, but does not include bank debt guaranteed by the Irish state. And it doesn't include any other private sector debt.

There are so many way of reckoning debt, especially with everyone guaranteeing everyone else's debt, that it becomes the proverbial how long is a piece of string.

I take it though that if the Irish state were to default, in the first instance there would be 148.1 bn worth of bonds that would be instantly impaired, and then there would be multiple secondary impairments in a sort of spreading mushroom cloud effect.

[don]

Re: Greek coalition talks fail -- prime minister to seek vote of confidence

a consideration . . .

Under pressure from France, Chancellor Angela Merkel of Germany agreed not to force private investors to shoulder some of the burden in any new bailout.

The German government’s previous insistence on what the finance minister called “fair burden sharing” had renewed market jitters by threatening to derail negotiations on the second rescue, which will be needed to avert another financing crisis next year.

Chancellor Angela Merkel and the French President Nicolas Sarkozy announced the agreement after a two-hour meeting in Berlin.

“We would like to have a participation of private creditors on a voluntary basis,” Mrs. Merkel said at joint news conference with Mr. Sarkozy.

“This should be worked out jointly with the E.C.B.,” she added. “There shouldn't be any dispute with the E.C.B. on this.”

“This is a breakthrough,” Mr. Sarkozy said, referring to the softening of the German position.

European stock markets turned positive on the news and the euro strengthened against the dollar, reversing its earlier decline. Risk premiums on Greek and other peripheral-country bonds declined after a week-long rout, according to Reuters.

after 2 hours alone . . .

http://www.nytimes.com/2011/06/18/bu...ef=global-home

[GRG55]

Re: Greek coalition talks fail -- prime minister to seek vote of confidence

...Chancellor Angela Merkel and the French President Nicolas Sarkozy announced the agreement after a two-hour meeting in Berlin.

“We would like to have a participation of private creditors on a voluntary basis,” Mrs. Merkel said at joint news conference with Mr. Sarkozy...

...

Ya, right. Listen, when anyone volunteers to take a haircut it's usually because they are raising money for cancer or something like that...