Sunday, July 17, 2011

Greek PM knows game is up for Greece. Game is also up for the rest of EU. Time to change the game.

Greek PM says time for Europe to 'wake up'

Greece's Prime Minister said "...I've been continuously reiterating to our partners that we must collectively take brave decisions, not just for the future of Greece but of Europe as a whole. It is time for Europe to wake up." Papandreou said that several of the options that he had suggested and were rejected a year and a half ago, such as buying back debt, issuing common euro zone bonds and keeping credit rating agencies in check, were now on Europe's negotiating table." PM knows that it's not just Greece, but also the rest of the EU that is bankrupt. And if Europe can't keep those pesky ratings agencies in check, they'll ruin EVERYHTING. And we must 'buy back debt': what a great oxymoron - we are in debt therefore have no money, so we will 'buy back that debt' (with what exactly?)

Posted by doom&gloom @ 03:32 PM (2514 views)
Please complete the required fields.



18 thoughts on “Greek PM knows game is up for Greece. Game is also up for the rest of EU. Time to change the game.

  • I may be wrong, but I believe it was time for Greece to “wake up” years ago. Greece didn’t get to the top of the “most risky” countries overnight. Link:
    http://www.marketoracle.co.uk/Article29117.html

    They beat Ireland, Portugal, Venezuela and Pakistan to top spot. I can’t see why it should be everyone else’s financial problem.

    Reply
    Please complete the required fields.



  • mark wadsworth says:

    The way forward – however sneaky this may be – is for Greece to buy back its own debt at undervalue. Apparently some of it is trading at 52 cents in the Euro.

    Reply
    Please complete the required fields.



  • @MW. Interesting point. But Greece have no money to ‘buy back’ any debt. Their debt is trading at 52c in the Euro because in crude terms their current creditors believe that there is only a 50% chance that Greece will ever pay them back. To ‘buy back’ debt Greece would need rob Peter to pay Paul, and any commercial lender would demand at least the same risk premium as that currently priced int. Oh hang on, that’s where the EU steps in – lend them more money at preferential rates, which they then can then use to pay back their commercial creditors, even though there is a 50% chance the EU will never get their money back.

    We will see another smoke and mirrors solution which kicks the can a little further down the road, spreading the liability amongst the few remaining EU members still able to obtain credit in the commercial market (Germany anyone?) The end-game is anyone’s guess….

    Reply
    Please complete the required fields.



  • All this credit creation for bad loans (from credit-creators to complicit politicians who took the loans without the consent of the people they represent) leading to privatisation of public assets is happening outside Greece too. Lots of US cities and states are going through this process. Kicking the can down the road? This gives the creditors the time to turn their bad loans into real assets.

    Reply
    Please complete the required fields.



  • Via Reuters…(ECB Chief Trichet) said “it could not accept defaulted bonds as collateral and that governments would have to intervene and correct things were Greece government debt to be rated as a default”. speaking to FT Deutchland.

    “Trichet also said the euro currency was in no danger” – Reuters. (probably becuse Greece is only a small part of the Eurozone – my interpretation).

    Tommorow is a new day… oh yes, another EU finance officers mtg. IMHO, this problem has been bubbling along for such a long time it is a major embarrassment for the Euro. Why couldn’t someone have laid down a plan for what would inevitably happen to some luckless country? People on this site forecasted the problem 18 months ago. Nigel Farage (hat tip) was on the ball much quicker than us!

    Reply
    Please complete the required fields.



  • George P. is just going through the motions – saying what he thinks he has to say..

    ..there seems to be very little prospect of other eurozone countries stepping up to take a share of the Greek debt burden –

    a) Because they are victims of a misfortune that they brought upon themselves.

    b) Because it’s not just a Greek problem..

    ~~~

    – I had a look at Italy’s austerity package today..

    ..very little of the ‘austerity’ will actually cut in before their next election (after which, all promises are off the table..) and the numbers seem to fall way short of that required, – which implies a dependance on strong GDP growth from this moribund economy, the more so if their interest rates fail to fall back down again..

    Investors would be incredibly stupid to buy into the idea that Italy has things under control..

    Reply
    Please complete the required fields.



  • “Nigel Farage (hat tip) was on the ball much quicker than us!”

    – Us?

    Have you ever heard me express the view that the euro was anything other than doomed to failure?

    A vanity project, misconceived in concept and incompetantly executed – I’ve been consistant from the start..

    Reply
    Please complete the required fields.



  • @UT
    OK, I have accidentally slighted you. Sorry. You beat ME to recognising the Euro was a disaster.

    The point I was trying to make is that there isn’t a plan B prepared and George P (as a long term politician) should know very well what the problems are. Maybe he’s just being populist?

    Reply
    Please complete the required fields.



  • alan,

    No offence taken..

    ..the arrogance of the euro-federalists is well illustrated by the fact that they never do have a ‘plan B’ at the ready for anything..

    George P has to be populist – he comes from a Greek ruling family dynasty and clearly wants to emerge from the mess saying ‘but I did my best – now vote me or my relatives into back into office’

    Reply
    Please complete the required fields.



  • mark wadsworth says:

    D&G: “But Greece have no money to ‘buy back’ any debt. Their debt is trading at 52c in the Euro because in crude terms their current creditors believe that there is only a 50% chance that Greece will ever pay them back. To ‘buy back’ debt Greece would need rob Peter to pay Paul”

    Nope, that’s the clever bit. The 52c is only because they are overindebted.

    So imagine that Greece were a household which owned a £100k house and had £200k debt secured on it and no other assets or income. Clearly, whoever owns the debt can’t recover more than £100k. If Greece can persuade somebody to lend them another £100k, they can buy back the £200k nominal debt for £100k and then when the dust settles, Greece only owes the second lender £100k.

    Lots of banks have done this recently, and I’m quite sure that countries have done it as well. It’s quite common in the business world.

    Reply
    Please complete the required fields.



  • “If Greece can persuade somebody to lend them another £100k”

    But who, in their right mind, would want to do that?

    – Beware of Greeks bearing gifts!

    Reply
    Please complete the required fields.



  • Apart from any inherent weaknesses in the EU/euro project there’s the specific problem of Greece. The EU knew from the start that Greece had big problems and that its fiscal accounts were a joke and it did nothing to prevent German, French etc. banks from making bad loans to enable the Greek government to carry on shambolically. If the EU had leadership the solution now would be to invest in Greece – tidy up its tax collection and property registration systems, recapitalise its banks, retiring some of the debt, and invest in Greek ports, renewable energy and other income-generating projects. The alternative is pain for most of the population that is obviously politically unacceptable and insoluble as well as nonsense economically.

    Reply
    Please complete the required fields.



  • Icarus,

    Agree – but while they should never have let Greece join, because of their book fiddling; there is also a ‘pot and kettle’ problem in that the EU’s own accounts have not been signed off for the last sixteen years due to blatent fiddling and fraud…

    The ECB have also been very visibly asleep at the wheel – it was not rocket science to realise that most of the poorer countries within the eurozone were on a debt fuelled spending spree that could only end in tears.

    While the one-size-fits-all interest rates have been blamed for this, with the implication that there was nothing they could do about it; other forms of credit constraint could and should have been initiated.

    However, with an EU manned by greedy free-loaders, lacking any obvious altruistic principals; it is perhaps inevitable that short-term expediency will always prevail.

    Reply
    Please complete the required fields.



  • The press is a little behind the curve on this one. It’s widely known that the central banks of the main Eurozone countries will do a buy-back. There are already statutes in place to allow this. The ECB itself will not be a part of the buy backs. The buy backs will reduce the face value of the debt by about 40%. As the ensuing market conditions will not allow Greece to borrow and spend at anything approaching their old levels, the belief is that they will trickle back to some sort of manageable state in four or five years time. As far as I know, private buy-backs or Greek government buy-backs are not part of the plan.

    Reply
    Please complete the required fields.



  • Flashman,

    As the eurozone central banks have no power to create new money, where will the funds for these buy-backs come from?

    Reply
    Please complete the required fields.



  • Uncle [email protected]

    Quote “..very little of the ‘austerity’ will actually cut in before their next election (after which, all promises are off the table..) and the numbers seem to fall way short of that required, – which implies a dependance on strong GDP growth from this moribund economy, the more so if their interest rates fail to fall back down again..

    Investors would be incredibly stupid to buy into the idea that Italy has things under control..”

    You could be describing the UK there . A lot of hot air about cutting which will not even take us back to 2007 levels of public spending in real terms and very little in the way of actual cuts except to defence .

    Icarus @ 4

    Yep I think you are right , just an attempt to convert a load of worthless debt into something tangible before the games up .

    That is understandable , the question is however was that the intention all along – a massive territory grab ?

    Reply
    Please complete the required fields.



  • uc, the national central banks will transfer the (heavily discounted) Greek debt onto their balance sheets. They will issue their own bonds to raise money to buy the discounted Greek bonds. Once the transfer has taken place, new Greek bonds will be issued with much longer maturity dates and lower coupons. The longer maturities and lower coupons will be possible because Greek debt will have been almost halved and the new bonds will effectively be underwritten by the national banks of other countries. The national banks will not be at any more risk than they already are because the amount of debt they’d transfer onto their books is almost the same as the amount that they would transfer onto their books from their country’s own private banks in the event of the Greek default that would inevitably take place, if they didn’t do the buy-back. In return for this, the national banks of France and Germany will effectively take control of Greece’s spending.

    Reply
    Please complete the required fields.



  • Flashman,

    That sounds like a smoke and mirrors attempt at fiscal union…

    Reply
    Please complete the required fields.



Add a comment

  • Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
  • Please note that any viewpoints published here as comments are user´s views and not the views of HousePriceCrash.co.uk.
  • Please adhere to the Guidelines

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes:

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>