Incredible AP report about Greek Debt and the bailout

[Swan Noir]

Every news outlet in the world -- including AP -- told us that the banks had agreed to the haircut. Trumpets were blown and champagne corks were popped. We know they are all lying SOB's but this one goes right over the top!

AP -- 12/16/11

GREECE:

European officials told The Associated Press that private holders of Greek bonds were resisting EU efforts to persuade them to take a voluntary 50 percent cut in the value of their holdings. The talks in Paris between EU and Greek leaders against representatives of global banks and hedge funds have been very difficult, they said.

The proposed €100 billion ($130.6 billion) write-off of privately held Greek bonds is supposed to be agreed upon by early next year — and it's central to Greece's second bailout deal. Without it, Greece's debt is forecast to escalate to nearly 200 percent of GDP.

http://www.google.com/hostednews/ap...q9L9mQ?docId=9962595b05a846ed993b2e4415d7e75e

 

[Random.Capital]

I wouldn't take it, either.

Let Greece go down, take the 100% haircut secure in the knowledge Greece will *immediately* turn around and borrow from you again at higher rates.

 

[Swan Noir]

Historically bankrupts (of all stripes) end up returning to the debt markets at much lower rates. Counter-intuitive? Not really ... shedding the debt pisses people off but it dramatically improves the balance sheet. Particularly in the case of sovereigns as they rarely give up a substantial part of their asset base.

My point though was not about the logic of the decision to take the haircut or not but that the "done deal" was never actually done.

Quote from Random.Capital:

I wouldn't take it, either.

Let Greece go down, take the 100% haircut secure in the knowledge Greece will *immediately* turn around and borrow from you again at higher rates.

 

[Martinghoul]

Quote from Swan Noir:
Every news outlet in the world -- including AP -- told us that the banks had agreed to the haircut. Trumpets were blown and champagne corks were popped. We know they are all lying SOB's but this one goes right over the top!

I have no idea where you've been getting your news. The Greek PSI saga has been ongoing for a good long time and it's been common knowledge throughout that they just can't agree. So, contrary to what you say above, the endless headlines about these negotiations going nowhere have been so numerous, they've really gotten on my nerves. To the point where I, frankly, just don't give a damn. So I personally don't recall any media saying it was a done deal.

 

[Swan Noir]

Martin I have followed your posts for years so when you commented of course I took the comment seriously. After reading articles like this in October i took my eye off Greece (more completely than I thought) and thought Italy, Spain etc. were where the game was centered. Clearly the negotiations continue unabated.

Thanks for the correction.

http://www.guardian.co.uk/world/2011/oct/27/eurozone-crisis-banks-50-greece

Quote from Martinghoul:

I have no idea where you've been getting your news. The Greek PSI saga has been ongoing for a good long time and it's been common knowledge throughout that they just can't agree. So, contrary to what you say above, the endless headlines about these negotiations going nowhere have been so numerous, they've really gotten on my nerves. To the point where I, frankly, just don't give a damn. So I personally don't recall any media saying it was a done deal.

 

[m22au]

Quote from Martinghoul:

I have no idea where you've been getting your news. The Greek PSI saga has been ongoing for a good long time and it's been common knowledge throughout that they just can't agree. So, contrary to what you say above, the endless headlines about these negotiations going nowhere have been so numerous, they've really gotten on my nerves. To the point where I, frankly, just don't give a damn. So I personally don't recall any media saying it was a done deal.

I'm with you there. It's just ridiculous how frequent these "crisis summits" are taking place. There was one in late October, where the world was supposedly saved. Amazing short squeeze in the various insolvent European banks for two days, then they came crashing down the next week.

Then another "must take decisive steps" summit last weekend, again with nothing of note determined.

Eventually, (maybe, hopefully) financial markets will just realise that nothing has been achieved and then the crisis will be finalised, either with defaults, or emergency money printing.

 

[Martinghoul]

This is actually happening in parallel to the crisis summits. So there's two distinct sets of headlines. Like I said (and to quote a famous song), I, for one, have become comfortably numb.

 

[intradaybill]

Quote from Martinghoul:

This is actually happening in parallel to the crisis summits. So there's two distinct sets of headlines. Like I said (and to quote a famous song), I, for one, have become comfortably numb.

Greece has no option but to default and go back to own currency otherwise it will have to put up sovereign rights as collateral for issuing bonds with arbitration in London rather than in Greece. Accepting this for a Greek politician may lead to treason charges in the future. Lenders will not accept bonds with Greek arbitration because that will mean they will take a 50% haircut but they still run the risk of a future default.

In other words, Merkel used Greece as an experiment to see how the private sector will react to similar situations. Greek politicians were stupid enough to enter into a Merkozi game with odds against them. Then Merkel announced no more private sector involvement (haircuts) but Greeks were stuck with a huge stick against their behind.

I say cul de sac for Greece. They are in a game where others set the rules and change them all the time. No Nash equilibrium can be achieved.

 

[Cdntrader]

Quote from intradaybill:

Greece has no option but to default and go back to own currency otherwise it will have to put up sovereign rights as collateral for issuing bonds with arbitration in London rather than in Greece. Accepting this for a Greek politician may lead to treason charges in the future. Lenders will not accept bonds with Greek arbitration because that will mean they will take a 50% haircut but they still run the risk of a future default.

In other words, Merkel used Greece as an experiment to see how the private sector will react to similar situations. Greek politicians were stupid enough to enter into a Merkozi game with odds against them. Then Merkel announced no more private sector involvement (haircuts) but Greeks were stuck with a huge stick against their behind.

I say cul de sac for Greece. They are in a game where others set the rules and change them all the time. No Nash equilibrium can be achieved.

the first to leave the euro will probably benefit the most imo.

 

[intradaybill]

Quote from Cdntrader:

the first to leave the euro will probably benefit the most imo.

I guess you mean they will be in a competitive position with exchange rates for exports to the rest.

What about if they decide to put import taxes to punish the runaway state?