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Greece Aid Plan Is Not Working


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Greece May Be Heading to ‘Square One’ as Bonds Fall

April 1 (Bloomberg) -- Europe’s week-old rescue plan for Greece has so far failed to do what its leaders predicted: reduce borrowing costs for the region’s most indebted country.

The yield on 10-year Greek government bonds has increased 25 basis points since EU leaders agreed to the aid blueprint on March 25, reaching a one-month high of 6.529 percent yesterday. The yield eased to 6.525 percent today, still more than double the rate on comparable German debt. Seven-year bonds sold by Greece on March 29 fell for a third day today.

“What they were hoping for was to set up some sort of arrangement that never has to be used,” said Phyllis Reed, head of bond research in London at Kleinwort Benson, which manages about $32 billion. “The markets have sniffed that out and it seems like we’re heading back to square one.”

As borrowing costs increase, the risk is that EU leaders will have to deploy a rescue mechanism that still needs to be fleshed out. That would push them to decide the role of the Washington-based International Monetary Fund in any rescue and force the head of Europe’s biggest economy, German Chancellor Angela Merkel, to counter public opinion by funding a bailout with taxpayers’ money.

So far, EU officials say they expect Greek yields to decline as the government in Athens carries out a plan to reduce its deficit to 8.7 percent of gross domestic product from 12.7 percent last year. European Central Bank President Jean-Claude Trichet said yesterday investors will “progressively recognize” the steps taken by Greece. EU spokesman Amadeu Altafaj said that Greece’s deficit-cutting plan is “on track.”

Last Resort

The aid facility, a combination of IMF and EU bilateral loans, will only be triggered if Greece runs out of fund-raising options. Greek Prime Minister George Papandreou, who has to raise as much as 11.6 billion euros by the end of May, welcomed the plan last week as “very satisfying.”

Since then, the extra yield investors demand to hold Greek 10-year bonds instead of German equivalent has risen to 342 basis points, compared with 305 points on March 26. The yield on Greek two-year bonds rose to 5.17 percent today from 5.119 yesterday.

“Markets don’t believe that Greece will be able to see things through,” said Razeen Sally, senior lecturer in international political economy at the London School of Economics, in a telephone interview.

Give the market a target, and the market will go for it.

This is going to be fun, the hedgies are loving it :D

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Greece is so old hat now. It will collapse but it might take a decade... or it may happen tomorrow... but it is tedious, dull and unexciting now... and the markets and the meeja bore easily.

No one cares about Iceland anymore. Irish banks losing 11 billion - have they looked under the mat - does not even raise an eyebrow.

Move along, nothing to see here.

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So everytime the interest rate goes up, it wipes out any savings from the austerity cut. Is this simply a debt spiral?

I hope this is a wakeup call for the UK leaders.

VMR.

no. If they need new borrowing then the savings are wiped out.

the secret is....shhhhhhh!...stop borrowing

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Buyers of the 10 year bond in the recent private placement have been given a bloody nose less than 1 week after the EU/IMF "solution":

- analysts and media commentary are overwhelmingly negative about the EU/IMF plan, believing it solves nothing and in any case is insufficient

- investors are offside by 50bps on the credit (maybe 4% loss on the bond) in just one week, which is emerging markets level of volatility

Meanwhile, if Greece is paying 5%- 6.5% on each rollover of existing debt (regardless of maturity), the compound debt trap gets worse and worse.

Isn't this amazing?

What are they going to do to make the next issuance attractive ? Talk of a US$ bond is a last throw of the dice in my opinion. IMF definitely to come in within 1-2 months and order a rescheduling of bond payments (a technical default).... and this is the least radical solution!

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Dumpling Merkel FAIL!

Who knew.

I think Merkel is getting what she wants. Merkel does not want to bailot any of Portugal, Greece and especially Spain. She is sending a message to them all no German money and if Greece has to fail and suffer the pain so the others get thier finances in order she views this as a price worth paying.

On a broader view the days if Germany funding the EU and letting France make the political decisions is over as well. Merkels new stance is we pay we tell you what to do. Interesting times ahead.

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If you are German or run a Hedge Fund, Greece is not going to be a good holiday destination for a few years. :)

"Holidaymakers not welcome here unless they pay twice"

-- once via tax-funded bailout, once for the hotel B)

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Buyers of the 10 year bond in the recent private placement have been given a bloody nose less than 1 week after the EU/IMF "solution":

- analysts and media commentary are overwhelmingly negative about the EU/IMF plan, believing it solves nothing and in any case is insufficient

- investors are offside by 50bps on the credit (maybe 4% loss on the bond) in just one week, which is emerging markets level of volatility

Meanwhile, if Greece is paying 5%- 6.5% on each rollover of existing debt (regardless of maturity), the compound debt trap gets worse and worse.

Isn't this amazing?

What are they going to do to make the next issuance attractive ? Talk of a US$ bond is a last throw of the dice in my opinion. IMF definitely to come in within 1-2 months and order a rescheduling of bond payments (a technical default).... and this is the least radical solution!

search me....nothing is going down that is getting Greece to SOLVE its problem.

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I don't know if the Greeks have reformed their pension system as part of their austerity plan but if I were a German taxpayer I certainly would get very violent if any German money is handed over before every Greek is made to wait until at least 65 for their state pension. Check this out:

http://www.nytimes.com/2010/03/12/business/global/12pension.html

"Vasia Veremi may be only 28, but as a hairdresser in Athens, she is keenly aware that, under a current law that treats her job as hazardous to her health, she has the right to retire with a full pension at age 50.“I use a hundred different chemicals every day — dyes, ammonia, you name it,” she said. “You think there’s no risk in that?”

“People should be able to retire at a decent age,” Ms. Veremi added. “We are not made to live 150 years.”

Perhaps not, but it is still difficult to explain to outsiders why the Greek government has identified at least 580 job categories deemed to be hazardous enough to merit retiring early — at age 50 for women and 55 for men.

Greece’s patchwork system of early retirement has contributed to the out-of-control state spending that has led to Europe’s sovereign debt crisis. Its pension promises will grow sharply in coming years, and investors can see the country has not set aside enough to cover those costs, making it harder for Greece to borrow at a reasonable rate.

As a consequence of decades of bargains struck between strong unions and weak governments, Greece has promised early retirement to about 700,000 employees, or 14 percent of its work force, giving it an average retirement age of 61, one of the lowest in Europe."

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Greek Bonds Slide on Speculation EU-IMF Aid Plan May Falter

April 6 (Bloomberg) -- Greek government bonds fell amid speculation that a plan for European Union and International Monetary Fund assistance in reducing the nation’s budget deficit may falter.

The declines pushed the yield on the 10-year Greek bond higher after Market News International reported that Greece wants to bypass IMF involvement should it require assistance, because the conditions would be too stringent. An IMF delegation will arrive in Athens, Greece’s capital, tomorrow to provide technical assistance and review the country’s finances, Ta Nea newspaper said, without citing anyone.

...

Greece has been receiving information from the IMF about the conditions it would impose in return for aid, Market News said. Government officials found them to be “tough,” and are concerned that they could result in civil unrest, Market News said, citing officials it didn’t identify.

So, what exactly is G-Pap asking for?

Money for nothing, with no belt-tightening attached?

Dream on, muppet :rolleyes:

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I don't know if the Greeks have reformed their pension system as part of their austerity plan but if I were a German taxpayer I certainly would get very violent if any German money is handed over before every Greek is made to wait until at least 65 for their state pension. Check this out:

http://www.nytimes.com/2010/03/12/business/global/12pension.html

"Vasia Veremi may be only 28, but as a hairdresser in Athens, she is keenly aware that, under a current law that treats her job as hazardous to her health, she has the right to retire with a full pension at age 50.“I use a hundred different chemicals every day — dyes, ammonia, you name it,” she said. “You think there’s no risk in that?”

“People should be able to retire at a decent age,” Ms. Veremi added. “We are not made to live 150 years.”

Perhaps not, but it is still difficult to explain to outsiders why the Greek government has identified at least 580 job categories deemed to be hazardous enough to merit retiring early — at age 50 for women and 55 for men.

Greece’s patchwork system of early retirement has contributed to the out-of-control state spending that has led to Europe’s sovereign debt crisis. Its pension promises will grow sharply in coming years, and investors can see the country has not set aside enough to cover those costs, making it harder for Greece to borrow at a reasonable rate.

As a consequence of decades of bargains struck between strong unions and weak governments, Greece has promised early retirement to about 700,000 employees, or 14 percent of its work force, giving it an average retirement age of 61, one of the lowest in Europe."

Exactly. The EURO is, and always has been, f*cked from the start.

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Exactly. The EURO is, and always has been, f*cked from the start.

The European Work Ethic league table:

1) Anglo-Saxon

2) Scandinavian

3) Slav

4) Frank

5) Latino- Mediterranean

If you don't have a common culture how on earth can you have a common currency ?

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Greece Denies Attempt to Rework EU-Aid Agreement to Exclude IMF

April 6 (Bloomberg) -- The Greek government is not pushing to renegotiate the terms of a potential rescue package to exclude International Monetary Fund involvement, a Finance Ministry official said.

The Greek government still backed the agreement announced last month after a summit of EU leaders who called for the IMF to play a central role in any aid package for Greece, said the official, who declined to be identified.

The denial was prompted by a report today by Market News quoting an unidentified government official saying Greece now opposed an IMF role because the lender would set conditions on the loan that could cause social and political unrest.

Not true until officially denied? :D

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I hope this is a wakeup call for the UK leaders.

They only have one thing on their minds at the moment, dashing around from one marginal to another hoping to con people into voting for their particular brand of complete uselessness.

Debt, what debt? Forgot about the debt in all the excitement.

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The European Work Ethic league table:

1) Anglo-Saxon

2) Scandinavian

3) Slav

4) Frank

5) Latino- Mediterranean

If you don't have a common culture how on earth can you have a common currency ?

6) Trades Unionists

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The European Work Ethic league table:

1) Anglo-Saxon

2) Scandinavian

3) Slav

4) Frank

5) Latino- Mediterranean

If you don't have a common culture how on earth can you have a common currency ?

I wonder how many foreigners you actually work with. Lots of Portuguese and a couple of Greeks at my last place, they were some of the hardest working people there (and definitely above the average Brit). Maybe you should try calibrating your racist-o-meter against reality.

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Exactly. The EURO is, and always has been, f*cked from the start.

Exactly...just like every other fiat currency in history...including those in circulation today!

"You can't print phantom money out of thin air-backed by nothing, and producing practically nothing, without destroying the economy." -Gerald Celente

The water is finally getting through the cracks in the bond market. It's now just a question of when the stupids realise their fiat should have been put into Gold and Silver and not the ponzi paper markets.

The clock is ticking...

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  • 441 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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