Thursday, September 02, 2010

Greek Debt Crisis – Apocalypse Later

Almost "shocking" to see a rationale market response.... ;-)

Fast "unheimlich" mal eine rationale Marktreaktion zu sehen... ;-)

Greek Debt Crisis – Apocalypse Later CFR

The difference between Greek and German government bond yields can be used to estimate the market’s view of the likelihood of a Greek default. The chart above shows these probabilities over different time frames on three different dates. On April 30th, no European plan was yet in place to address the ballooning Greek debt, and default was considered a real possibility in the short term. On May 11th, just after the European Stabilization Mechanism (ESM) was announced, markets sharply cut their view on the odds of default across all time horizons. However, the market’s analysis of the ESM has become much more nuanced since then. On September 1st, the market’s view of the probability of default within two years was lower than before the ESM was announced, but higher over longer time frames.

Greece will happily borrow from the ESM to avoid having to close its primary deficit (that is, excluding interest payments) too rapidly. Yet if Greece is successful in eliminating its primary deficit, its temptation to default will actually grow, as it can wipe out huge amounts of accumulated debt without any longer needing the financial markets to fund current expenditures. If faced with the choice between paying Greek debts and letting Greece default, its northern neighbors may, once their banks are on more solid footing, find it more attractive simply to let Greece default. This is the story line that the markets are now pricing into government bond spreads

Greece Default Risk Is ‘Substantial,’ Pimco’s Bosomworth Says

“Greece is insolvent,” Bosomworth, Munich-based head of portfolio management at Pimco, which oversees the world’s largest bond fund, said in a telephone interview today. “I see it as being quite a substantial risk that Greece eventually defaults or restructures.”

In a best-case scenario, Greece’s government debt will swell to 150 percent of gross domestic product, Bosomworth said.

“Debt servicing as a share of government revenue will increase substantially, particularly if current yield levels do not decline,” Bosomworth said.
Greece Sees €4 Billion (2%) In Deposit Outflows In July ZH

Outflow troubles continue for the time bomb in Europe's periphery, Greece, whose second default is approaching. The central bank has just reported that in July household and business deposits declined from €216.5 billion to €212.3 billion: so much for the ECB's presence inspiring confidence. So €4 billion a month in deposits taken out, and applying a fractional reserve multiplier, means Greek banks lost another €40 billion in monetary supply in July alone. Deflation + Austerity = Kaboom.
National Bank of Greece Greek debt warning FT Alphaville

The most denied cash call of recent times has finally happened. Late on Tuesday night National Bank of Greece announced a €2.8bn ‘Comprehensive Capital Strengthening Plan

NBG says the equity issue and disposal will ‘create an additional, sizeable capital buffer to face the macro-economic situation in Greece in the short-to-medium term’.

But what does that mean? Could it be that NBG is raising the money to cover a Greek government bond haircut? Very possibly.

If you recall the early stages of the financial crisis there was one glaring trend from the various bank CEO’s and CFO’s – they just couldn’t wait to get on TV with their slogan:

“We are well capitalized.”

Of course, that turned out to be a lie as it’s now clear that most banks in the USA were woefully undercapitalized. Today, Greece’s finance minister is out with similar comments:

“Restructuring is not going to happen. There are much broader implications for the eurozone should Greece have to restructure its debt. People fail to see the costs to both Greece and the eurozone of a restructuring: the cost to its citizens, the cost to its access to markets. If Greece restructures, why on earth would people invest in other peripheral economies? It would be a fundamental break to the unity of the eurozone.”

In other words, “we are well capitalized”.

As i have said from the beginning, the entire bailout stunt wasn´t to help the Greek..... Combine this with the latest "Unlimited & Extended" action from the EU, ECB & the Joke Of The Day From ECB´s Smaghi "€ More Stable Than Deutsche Mark" is getting even more "funny".... ;-) Judging from recent IMF attempts to desperately broaden their "safety net" it´s almost certain that Greece won´t be alone......In this context headlines like IMF Sees G7 Net Debt At 200% Of GDP By 2030; 441% By 2050 should further boost confidence...."Pray & Delay" seems to be the top priority around the globe... The long term bull case for GOLD isn´t getting weaker on a daily basis....

Wie bereits seit Anfang der Krise gesagt ging es weniger um das Wohlergehen der betroffenen Griechen..... Wenn man zudem noch die letzten unlimitierten und zeitlich unbegrenzten weiteren Rettungsmaßnahmen der EU & ECB mitberücksichtigt wird der Witz des Tages von Smaghi das der "€ stabiler als die DM ist" nur noch witziger... ;-) Die neuesten Verrenkungen des IMF um das "Sicherheitsnetz" fast um jeden Preis zu erweitern können nur dahingehed gedeutet werden das wir in naher Zukunft etliche "Griechenländer" sehen werden...In diesem Zusammenhang sollte nachfolgende Meldung IMF Sees G7 Net Debt At 200% Of GDP By 2030; 441% By 2050 eine Erklärung geben warum sich die langfristigen Perspektive für GOLD tagtäglich trotz stark gestiegenem Kurs nicht gerade verschlechtern....

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