Socio-Economics History Blog

Socio-Economics & History Commentary

Greece is in Trouble Again!

Supposedly Greece was Saved on that blue circle when yet another bailout was approved! Chart source:

  • Greece will default. It is a foregone conclusion. The market is already driving Greek government bond yields to 44+% for 2 year bond and 60% for 1 year bond. No one has confidence in Greece. Can anyone or country survive with such high interest rates (even higher than loan shark rates)? I doubt so! Whatever, they do, the Eurozone leaders will fail because the whole thing is intentionally setup to fail ! The Illuminists are about to pull the plug on the whole debt house of cards. See also: September 23: The Beginning Of The End For Merkel… And The Eurozone?

    Greece Matters Again and It Could Be In Trouble
    By: Patrick Allen,
    On July 21, EU leaders, the European Central Bank and the International Monetary Fund agreed on a second rescue package for Greece, one they hoped would put the country in a position to come to grips with its debts. As they agreed, fears were already growing over Spain and Italy, which a few weeks later required the ECB to step into the market and start buying the bonds of both countries.

    While the ECB intervention pushed borrowing costs lower for Italy and Spain, the euro zone’s third- and fourth-largest economies, that deal for Greece is now looking like it could fall apart.

    Yields on 2- and 10-year Greek debt stand at 47 and 18 percent, respectively, and the debt swap agreed to on July 21, which required private investors to agree to accept longer-dated bonds than they had purchased, is not going well. On Friday, the Greek government indicated it would walk away from the debt swap unless it got 90 percent sign-up from private investors. So far, less than 60 percent are thought to have done so.

    If the deal collapses, then a new support mechanism will be needed. “The financing gap in this case will have to be covered by official financing, probably by the European Financial Stability Fund,” Athanasios Vamvakidis, the head of G10 FX Strategy at Bank of America Merrill Lynch, said on Friday.

    So borrowing costs are soaring and the debt swap deal is looking shaky at best, but the problems do not end there. Next up are the terms under which other euro zone members will lend money to Greece. Finland has demanded collateral from Greece before it lends money, and others, like the Netherlands, Slovenia, Slovakia and Austria, say they will want the same deal if Finland gets its way.

    Germany, which would have to lend the most money to Greece, has said Greece can’t be forced to offer up collateral. Finland is thought to want collateral worth 20 percent of any loan. “If all five economies gained the same deal that Finland has reportedly agreed, Greece might have to set aside up to 13 billion euros of its new 109 billion euro loan package as collateral,” Ben May, a European economist at Capital Economics said in a research note.

    … for the full article click here!


August 29, 2011 - Posted by | Economics | , , , , , , ,

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