Socio-Economics History Blog

Socio-Economics & History Commentary

International Monetary Research Says “Eurozone Break-Up Certain”!

  • It is a question of when (and not whether) the Eurozone will collapse! September and October are usually the months when financial calamity strikes! Make sure you take cover and get out of harm’s way into gold.

    International Monetary Research says “Eurozone Break-Up Certain”; I say Embrace the Fact “Banks Cannot Be Saved” 
    by Mish Shedlock,
    …. Tim Congdon from International Monetary Research said it is folly to force Europe’s banks to raise money too quickly or crystallize losses abruptly. This will cause a monetary implosion and a repeat of the 2008 disaster.

    He said the ECB’s restrictive policies over the last 18 months and the lack of EMU fiscal union have doomed the euro to certain break-up. “It cannot be saved. Banks will suffer large losses,” he said.

    Embrace the Fact “Banks Cannot Be Saved”
    This mess cannot be saved. Tim Condgon bemoans the fact. I say, embrace the fact!  Tim Congdon wants to kick the can down the road. Christine Lagarde is clearly angling for more taxpayer bailouts.

    Just what the hell does it take for people to realize that throwing more money down the drain cannot solve a damn thing? Banks are going to take losses. That means bondholders are going to take losses. It is nonsensical to assume anything but that. It is equally nonsensical to suggest there is a way around it. The sooner we embrace the simple facts of the matter, the better off everyone but the bondholders will be.

    Attempts to shove more bailouts on the backs of already over-leveraged taxpayers will stunt the recovery for years more to come.


August 30, 2011 Posted by | Economics | , , , , , , , , | Comments Off on International Monetary Research Says “Eurozone Break-Up Certain”!

Finland’s Demands for Collateral Could Leave Greek Bailout in Ruins!

Demands for collateral could leave Greek bailout in ruins. Above, lightning over the Parthenon temple, on the Acropolis hill in Athens. Photograph: Petros Giannakouris/AP

  • Greece is in the news again. I am not sure how they can get out of defaulting on their debts. Greece by itself will not bring down the Eurozone. It is the contagion effect that will allow a Greek default to ignite the sovereign debt bomb fuse! It can happen any day now! (emphasis mine)

    Finland’s demands for collateral could leave Greek bailout in ruins
    by Heather Stewart, The Observer
    … as September rolls around and the beaches clear, Greece is once again the focus of financial markets’ fears. In July, Athens secured a second bailout package worth €109bn (£96bn), which involved “haircuts” for holders of Greek debt, and contributions from its eurozone neighbours.

    Both parts of that deal now look distinctly shaky. Finland, where the anti-European True Finns party scored well in recent elections, has demanded that Athens put up collateral against the Finnish share of the latest loan.

    Other small but angry nations, including Austria, Slovenia and Slovakia, responded by saying that if Finland was getting collateral, they wanted some too. Eurozone finance ministers were discussing the issue this weekend; but the Finns appear reluctant to back down.

    When questions emerged about what collateral Athens has left, given the €50bn privatisation plans it has already signed up to as a condition of the bailout, one Finnish minister reportedly said they would accept assets already earmarked for privatisation. Great swathes of Greek infrastructure are up for sale, from airports to casinos.

    Setting aside collateral will reduce Greece’s room for manoeuvre by tying up its assets; but, much more importantly, the row has laid bare the disarray in the eurozone. “At every step, we’re seeing the authorities pushed back further,” says Neil Mellor, of BNY Mellon. “It’s fire-fighting, pure and simple, and it’s not obvious what happens next.”

    The resulting alarm among investors sent the yield on Greek bonds – the interest rate the government would have to pay to borrow in the open markets – back to record highs last week. It’s as if the July rescue never happened – and it raises doubts about other elements of the emergency deal agreed at the time, including the new role of the European Financial Stability Facility (EFSF), which Sarkozy suggested was a fledgling European International Monetary Fund. Changes to the EFSF need to be agreed by all member governments, and the squabble about collateral underlines the wide political divergences across the single currency zone.

    The “voluntary” bond swap at the heart of the bailout also appeared to be in doubt this weekend, after Greece said it would pull out unless 90% of its creditors – mainly European banks – agreed to take part. Greek banks start reporting their results this week, and with government bonds making up much of their capital, they are expected to warn of losses of up to €5bn if the haircuts go ahead.

    Greek banks have also suffered rapid declines in deposits in recent months, as consumers withdraw savings to spend, and wealthy Greeks squirrel away their assets in safe havens abroad.

    This fresh outbreak of the jitters is happening against a sharp deterioration in the economic outlook right across the continent. Even in Germany, GDP growth has slowed to a crawl, and business confidence has plunged. The latest round of tax rises and spending cuts, with France, Spain and Italy all announcing new fiscal tightening since the beginning of August, are only likely to depress growth yet further.

    In Greece, weaker growth could mean the fiscal sums no longer add up. Analysts are beginning to speculate that even after passing a highly contentious package of austerity measures in June, the government could miss its deficit reduction targets.

    “There are signs that the Greek deficit is still not on track, despite the latest package that was agreed in July,” said Julian Callow, of Barclays Capital. Athens’ tax and spending plans are based on the assumption that the economy will contract by 4.5% this year. That is a catastrophic recession by any standard but it now looks too optimistic: Callow expects a contraction of 5.5%, perhaps even 6%.

    Europe’s sovereign debt crisis is far from over. It’s not clear exactly what will spark the next outbreak of panic in financial markets but, with the banks due to report, the Finns digging their heels in, and the IMF flying in to assess Athens’ compliance with its fiscal targets in the next few days, Greece looks like a pretty good bet.

    As Callow says, “Greece is really the epicentre right now, and has a lot of capacity to be a very negative force for financial markets in Europe in the weeks ahead, if things don’t go exactly according to plan.”


August 30, 2011 Posted by | Economics | , , , , , , | Comments Off on Finland’s Demands for Collateral Could Leave Greek Bailout in Ruins!

Eurozone Bank Deposits and “Black Mail” Point to More Crisis!

RIP: Rest In Pieces

  • All the indicators of an imminent banking/financial system meltdown are there. There are silent bank runs in the PIIGS, where money is flowing out of them into safe haven countries like Switzerland. Don’t be taken for a ride. Things are not improving but are getting worse at an accelerating pace. The Euro is about to collapse. The Eurozone experiment about to end! (emphasis mine)

    Bank Deposits and “Black Mail” Point to More Crisis
    by Justice Litle, Editor, Taipan Publishing Group
    As bank deposits flow from Greece to Switzerland, the odds of another crisis flare-up in Europe look assured. “Follow the money” is an old and wise adage. To understand what’s happening in Europe — and why there is more trouble ahead — we can follow the money literally. I’m talking specifically about depositor money in banks. As the WSJ reported last week:

    Greece’s worsening slump is threatening to compound another risk for the country: the steady withdrawal of money from Greek banks.

    In the last 20 months, the country’s banks have suffered an unprecedented withdrawal of customer deposits. Tens of thousands of Greeks — from the well-heeled to the less well-off — have moved their savings out of the country or stashed the cash in safe-deposit boxes or under a mattress, bankers say…

    As the Greek banks lose deposits, they also lose liquidity. This makes it even harder to lend, in an economy gripped by deep recession. According to the Greek central bank, a third of the funds withdrawn have gone abroad. One could safely consider that a low-end estimate, as the central bank has reason to be conservative. The higher the percentage of funds flowing across borders, the worse things look.

    Why are Greeks pulling cash from the banks? Because they don’t know what will happen to the banks… or to the country in general. Greece has lost control of its fiscal fate. The terms of a Greek bailout, previously thought settled, have been upended again by demands for collateral. Following the money further: While Greek banks can’t hold on to cash, Swiss banks are seeing too much cash. Via Marketwatch:

    [Swiss bank UBS] said it may shortly begin to levy a temporary charge on Swiss franc deposits as a way of encouraging its bank customers to keep their cash in the surging Swiss currency as low as possible.

    The bank said in a statement distributed by Swift earlier Friday that “in view of the prevailing market conditions which in particular affect the Swiss franc, we are closely monitoring the development of the CHF cash balances maintained in current accounts of our CHF cash clearing customers.”

    The Swiss have been here before. In the 1970s the Swiss National Bank (SNB) imposed “negative” interest rates, meaning holders of Swiss francs had to pay a charge to stay in the currency.

    Now the futures markets — where currency contracts trade on forward months — are predicting “negative” rate conditions until 2013! It is “Alice in Wonderland economics,” writes Gillian Tett of the Financial Times.

    The strength of the franc is a major burden for Switzerland as a country. When a currency shoots up in value for artificial reasons — because of buying pressure not related to exports — the export sector of the country suffers. Swiss goods and services become less competitive on the world market. Traveling to Switzerland becomes cartoonishly expensive (due to out-of-whack exchange rates). Over time, the result can be recession and deflation.

    Money keeps flowing out of places like Greece, and into places like Switzerland, because of uncertainty and ongoing crisis. European banks are dancing on the edge of a precipice. The eurozone experiment is headed for crack-up. And Europe’s leaders show no sign of averting disaster.

    Take German Chancellor Angela Merkel for example. In a political speech on Friday, Merkel accused the financial markets of “trying to blackmail states,” encouraging “countries that are highly indebted to really do their homework and get their debt down.” And as for euro bonds, Merkel adds: “That’s where we have to put up a clear stop sign and say we won’t do that.”

    In Germany’s terrible choice, we wrote of how Germany had to embrace a wide-scale solution like euro bonds, or risk letting the whole euro currency project break apart. With euro bonds so firmly off the table, the internal health of European banks unknown, and bailout agreements coming under new pressure, it is only a matter of time before a new crisis wave comes barreling out of Europe. Stay prepared.


August 30, 2011 Posted by | Economics | , , , , , , , , | Comments Off on Eurozone Bank Deposits and “Black Mail” Point to More Crisis!

Alex Jones: Secret Government UFOs, Massive Flying Triangle Troop Carriers, Holographic Projectors, Faked 2nd Coming & Alien Invasion, Star Trek Technology, Human Cloning ….

August 30, 2011 Posted by | Science & Technology | , , , , | 1 Comment

Mike Adams: Exposes Vaccine Industry Ties to Military Involvement with Institute of Medicine!

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  • NaturalNews exposes secret vaccine industry ties and military involvement with Institute of Medicine, reveals fatal conflicts of interest at IoM
    by Mike Adams, the Health Ranger, Editor of
    (NaturalNews) The Institute of Medicine is suddenly in the news following the release of its vaccine “adverse events” research which found that MMR vaccines actually cause measles, seizures and anaphylactic shock. The old media predictably distorted the story and used it to deceptively announce that “vaccines are not linked to autism!”

    In falsely reporting this study from the IoM, however, the old media reporters never bothered to even read the adverse reactions report. Nor did they ask a few simple questions such as “Who is funding the Institute of Medicine? And what is the agenda of the IoM?”

    Today, NaturalNews publishes a stunning story about the IoM which reveals this government-created non-profit to be a key player in the military medical complex involving a shady network of weapons manufacturers, the Department of Homeland Security, top pharmaceutical companies and population control globalists such as Bill Gates.

    Here, we expose who’s giving the IoM money and why the actual sources of funding behind the IoM destroy any credibility it once claimed to have on the subject of public health.

    We’ve already published the first honest assessment of the IoM’s report in a news item posted yesterday:…

    That story takes an honest investigative look at the IoM and what its report really says. The old “dinosaur” media, as usual, has predictably twisted this story around and falsely claimed that it gives vaccines a clean bill of health. Only NaturalNews (and other alternative media organizations) dares tell the truth while questioning the IoM’s financial ties and funding sources. The entire mainstream media blindly accepts the IoM’s “authority” as beyond reproach, neglecting to conduct basic journalism and follow the money as NaturalNews is doing.

    By the way, you can view the IoM’s full report for yourself at:…

    Why does the truth about the Institute of Medicine really matter?Because the IoM is positioned by the federal government as an independent, “prestigious” organization whose decisions are based on scientific facts. When the U.S. government rolls out its upcoming mandatory vaccination requirements, it will cite the Institute of Medicine as the source that said vaccines were safe (even though that’s a lie).

    The FDA, for example, cites the Institute of Medicine is setting its own vaccine policies (…). The USDA also turns to the IoM for its recommendations on things like school lunch programs…).

    Even more to the point, President Obama’s recent demand that health insurance companies pay for birth control medication was based on the Institute of Medicine’s recommendation (…). It was the IoM that put forth the guidelines to “require new health insurance plans to cover women’s preventive services” including “FDA-approved contraception methods and contraceptive counseling.”

    Even the CDC commissioned the IoM to study the control of viral hepatitis infections, after which the CDC quickly advised that all infants should be injected with multiple hepatitis vaccines “…as soon as they are stable and washed.” In this same set of recommendations, the IoM advised that students who are not vaccinated against hepatitis B should not be allowed to attend school. (…)

    The IoM, in other words, is the go-to organization for the setting of government health policy. Never mind the fact that the IoM is two-thirds funded by government itself and also takes money from the world’s top vaccine manufacturers. The conflicts of interest within the IoM are not merely notable, but severe conflicts of interest. They are so prominent, in fact, that no person in their right mind should believe a word the IoM says about vaccines, yet both the government and the mainstream media is positioning the IoM as (somehow) being a trustworthy independent non-profit that tells the truth about vaccines.

    Even the Washington Legal Foundation (, a group that advocates free choice in health care (and personal freedom in general), charged that the FDA could not legally accept recommendations from the Institute of Medicine because the committee members put forth by the IoM did not meet the lawful requirement of being “fairly balanced.”

    “Using advice from a committee that lacks fair balance encroaches upon Congress’ mandate that each Advisory Committee should be representative of a broad range of viewpoints and should include affected individuals,” said WLF Chief Counsel Richard Samp after filing WLF’s Citizen Petition. (…)

    This is where the danger really lies. Everybody else in government listens to the IoM and usually adopts its recommendations as public health policy. And yet the IoM is actually run and financed by a complex network of globalists and vaccine promoters, as you’ll see below.

    Because of the IoM’s unchallenged influence in setting public health policy, we are all being set up for a military-run mass vaccination campaign funded in part by the Department of Homeland Security and the Department of Defense, and relying on vaccine-tracking information technology from companies like Northrup Grumman, a weapons manufacturer with a history of illegal international arms trafficking. (More details below.)

    This is what vaccines have become in America today: A military agenda against the People. And the IoM sits at the hub of influence for this diabolical command center. This is all explained in more detail in the rest of this story, as well as in upcoming stories about the IoM slated for publication here on

    … for the full article click here!


August 30, 2011 Posted by | Economics, Medicine & Health | , , , , , | 1 Comment

DebtEnd: Euro Needs Surgery, Not Pills & Plasters!

August 30, 2011 Posted by | Economics | , , , , , , , | Comments Off on DebtEnd: Euro Needs Surgery, Not Pills & Plasters!

War for Africa: ‘Libya Key To New US Bases, Cheap Labor & Resources’!

August 30, 2011 Posted by | GeoPolitics | , , , , , , | Comments Off on War for Africa: ‘Libya Key To New US Bases, Cheap Labor & Resources’!

Will Al-CIAda get Libyan WMD? Yes!

August 30, 2011 Posted by | GeoPolitics | , , , , , , , | Comments Off on Will Al-CIAda get Libyan WMD? Yes!

INTENSE HAARP RING in Hurricane Irene = Weather Modification!


August 30, 2011 Posted by | Disaster, Science & Technology | , | Comments Off on INTENSE HAARP RING in Hurricane Irene = Weather Modification!

9/11: Total Proof That Bombs Were Planted In The Buildings!

August 29, 2011 Posted by | History | , , , , , | Comments Off on 9/11: Total Proof That Bombs Were Planted In The Buildings!

The Next Financial Panic Banking Sector Crash Could Start Tomorrow!

What is coming will make Black Monday 19 October 1987 look like a picnic!

  • European banks are already starting to distrust their fellow banks and lending amongst banks is freezing up. The interbank market is locking up and banks are already starting to goto the ECB for money. This tells you we are close to a meltdown! See: Capital Flight Proves Confidence in European Interbank System has Collapsed !
  • But keep in mind that it is not a liquidity problem as much as the financial MSM say so. The liquidity problem, as evidenced by the locking up of the interbank market, is a symptom. The true cause is bank solvency. Simply put: major western banks are bankrupt/insolvent!
  • When the Eurozone falls, the rest of the world will tank too. Export driven Asia will also collapse albeit (perhaps) it will not suffer as badly as western Europe and America. I seriously doubt when we are all in deep shit, we will be comparing who is in deeper shit!
  • This excellent article explains how easily the world financial system could collapse when the sovereign debt bomb explodes! (emphasis mine)

    The Next Financial Panic Banking Sector Crash Could Start Tomorrow
    By Shah Gilani, Capital Waves Strategist, Money Morning
    Fears of a banking crisis and rolling contagion are making global stock and bond markets extraordinarily volatile – and with good reason. Another financial meltdown, on par with what we saw in 2008, is looming large on the horizon. One of two potential triggers could ignite a new banking crisis, a rapid contagion, and a second financial meltdown:

    – One or more of the troubled European countries could default outright.
    – Or a major money center bank could be turned away from the interbank borrowing market by its peers.The panic resulting from either catalyst  could start at any time.

    And it would spread like wildfire. The threat of a banking crisis leading to a meltdown centers on Europe. European banks hold huge amounts of their home sovereign’s debt, as well as debt of their Eurozone neighbors. So when default risk rises for any sovereign in the euro area, every  one of the region’s banks feels the impact on their balance sheets.

    Of course,  it may not be immediately reflected in write-downs because many  banks hold sovereign bonds in their “held-to-maturity” books, as opposed to accounting for them in their “available-to-trade” books. Being held to maturity means bonds are accounted for at amortized cost as opposed to being marked-to-market, as they would have to be  in the trading book.

    This is a double-edged sword for banks. Banks don’t have to mark down bonds in the long-hold book unless they become “impaired.” But in an uncertain market, fearful investors may hammer a bank’s stock because its  true exposure to bad debt is unknown.

    A less obvious spillover of holding so much sovereign paper is that banks use those sovereign bonds as collateral to borrow from other banks in the short-term funding markets. As the value of sovereign collateral comes into question, it can be haircut (reduced in value as collateral) drastically, or not accepted at all.

    Banks right now want solid collateral from the counterparty banks to which  they are lending their funds. And since lenders already own huge amounts of sovereign debt, they are starting to turn away distressed sovereign paper as inadequate collateral.

    When that happens, banks in need of funding are forced to  turn to central banks. And that’s where it gets really scary. Central banks already hold large amounts of sovereign debt  on their balance sheets, and now they have to take on even more sovereign debt and  government-guaranteed securities as collateral  for the loans they’re making to distressed banks.

    And where do central banks get the money they lend out? They  get it from the same sovereign governments whose bonds are distressed in the first place. That leaves a twofold problem for central banks.

    First, if they borrow from distressed sovereigns to lend out to distressed banks holding the same debt, they are simply adding more suspect debt to their own balance sheets. That essentially makes them a leveraged extension of the sovereign country they’re supposed to backstop.

    The second problem for central banks is that if they print money, they end up devaluing the debt they are holding. Add to these scenarios the attendant stresses that would  accompany any downgrade of underlying sovereigns’ creditworthiness and  everything gets even more slippery. Not only are debt obligations directly affected, but the downgrades would flow through to other assets held by banks.

    Worse, downgrades reduce explicit and implicit government guarantees on all outstanding obligations carrying the backing of the  sovereign.

    Finally, by virtue of their overly leveraged holdings of bilateral contract derivatives and their unquantifiable exposure to attendant counterparty risk, banks have significant exposure to the already suspect derivatives market.

    All of the stresses on sovereigns and their debt obligations flow through to the banks that hold those debts as well as the banks indirectly exposed to rolling contagion effects.

    The primary danger we face is not a sovereign default. It’s that banks will stop trusting what’s really on the balance sheets of their peers and consequently stop lending to one another in the short-term funding market.

    If just one money-center bank with significant balance sheet exposure is turned away from the interbank funding market, other banks will clamor for liquidity by hoarding cash and seizing collateral. Consequently, the whole system could  falter, freeze and crack.

    Market volatility has many fathers, but the big daddy of them all is that worldwide contagion will follow a banking panic.

    So be  sure to watch volatility to determine if it is rising  because of increasing contagion fears. And, if you see a breakdown in any of the interconnected sovereign and bank funding mechanisms I just  identified, get out and get out quickly. Safeguard your investments and tread lightly.


August 29, 2011 Posted by | Economics | , , , , | Comments Off on The Next Financial Panic Banking Sector Crash Could Start Tomorrow!

Alex Jones: This is A Mafia Style Run Government!

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August 29, 2011 Posted by | Economics, GeoPolitics, Social Trends | , , , , , , , , , , , , , , , | Comments Off on Alex Jones: This is A Mafia Style Run Government!

Jewish Teenager Violently Arrested for Speaking Truth about Palestine!

Revelation 2:9 - .... and I know the blasphemy of those who say they are Jews and are not, but are a synagogue of Satan.


August 29, 2011 Posted by | GeoPolitics, Social Trends | , , , , , | Comments Off on Jewish Teenager Violently Arrested for Speaking Truth about Palestine!

Capital Flight Proves Confidence in European Interbank System has Collapsed !

Duration U.S. Japan Germany UK
3-Month -.01 0.10 0.97 0.51
6-Month 0.02 0.11 0.56 0.59
12-Month 0.08 0.12 0.59 0.53
2-Year 0.19 0.14 063 0.59
3-Year 0.32 0.17 0.67 0.75
5-Year 0.93 0.34 1.20 1.36
7-Year 1.52 0.59 1.63 1.84
10-Year 2.18 1.04 2.14 2.49
30-Year 3.55 2.01 2.98 3.75
  • The European banking system is in severe distress! This coming crisis will be far worse than the Lehman Brother collapse of 2008! Its effects will be felt around the world as dominoes keep falling throughout the entire global banking system! You cannot convince me that everything is A-OK. Those of us who understand what is really going on are getting out of harm’s way. Got physical gold yet? Or are you still hanging onto pieces of CONfidence Job, fiat currencies, electronic fiat digits? The global currency crisis is coming! (emphasis mine)

    Capital Flight Proves Confidence in European Interbank System has Collapsed
    by Mish Shedlock,
    Capital flight from European banks has now reached such a state that for one undisclosed bank needed emergency funding last week for a mere $5 million. Previously, the ECB stepped in to provide $500 million in emergency liquidity measures to non-disclosed banks. As money flees Europe, it lands in US banks that do not know what to do with it. Capital flight has led to negative interest rates in the US.

    Swelling US Deposits as Money Flees Europe
    For a look at European Bank funding needs please see 8 Trillion Euros in Borrow-Short Lend-Long Madness at European Banks; Circuit-Breaker Silliness; Dash for Cash Sends Short-Term Rates Negative Again

    “Lehman-Like” Credit Crunch Hits EU
    For discussion of the European credit crunch and $500 million in emergency liquidity measures to undisclosed banks, please see “Lehman-Like” Credit Crunch Hits EU; ECB Will Not Disclose Affected Banks; Euro-Style Anxiety Spreads to U.S.

    $5 Million in Emergency Funding
    $5 million is a trivial amount. That a bank would need it is not. Jean-Pierre Chevallier writing on Business économiste monétariste behavioriste discusses the setup in his latest post ECB: no more bets! More…

    The situation is out of control in the euro zone, as I have been writing it for a while… The interbank market does not work because euro-zone banks managers have lost confidence in other banks. So they keep their cash in US$ rather than lending it to other banks that need it as they would in normal times: ECB had loaned $5 million to a bank on August, 25.

    ECB had previously loaned $500 million (USD) on August 17. This caused a flash-crash in U.S. markets. The problem is serious.

    Chevallier notes that the paltry amount of money involved “shows that the interbank system is completely blocked”.

    Trust in European banks is shot, and by hiding the banks needing emergency liquidity funding, distrust spreads to all banks in the system. Then again, why shouldn’t distrust spread?

    The entire global financial system is bankrupt. Loans have been made that cannot and will not be paid back.


August 29, 2011 Posted by | Economics | , , , , , , , , | 1 Comment

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 | , , , , , , , | Comments Off on Greece is in Trouble Again!