$139 billion to bail out Greece? I don’t think so
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That would be Euros, not greenbacks….the number grows by the minute
Strauss-Kahn refuses to quantify it anymore, so I’m going with open-ended. This is TARP for sovereign debt. Three pages of armegeddon scrawled on a napkin asking for a blank check. Thew beginning of the end of fiat.
Germany is only engine of sclerotic Euro economy
But Germany’s industries are export driven
And has own strategic issues of aging demographics, lack of innovative industries and weak engineering colleges: uncanny resemblances to dying Japan
If Peter Griffin can create Petoria (E Peterbus Unum), I’m going to incorporate my five acres into Flylandia. I’ll formally announce that I’m nearing bankruptcy, demand bailout funds (small bills only please), then sit back and watch all the little people squirm.
Half OT but my favorite Family Guy Stewie quote:
“Did you hear that Meg? Guys can marry other guys now. So…this is awkward, but I mean, if they can do that, that is pretty much it for you, isn’t it? I mean you as well pack it in. Game over. “
Ah, it will be at par by next week.
EU is doomed: caught between a rock and a hard place. Don’t bail out Greece and investors worry about Euro sovereign credit. Bail out Greece and other poorly run countries (Portugal, Italy, Spain, and Ireland or other reasons) will see no need to get their own houses in order. Result: more, and bigger, bailouts will be needed.
Either way the EU is screwed. The slippery slope was not enforcing the 3% deficit cap. Once breached the rest was inevitable. History will spill lots of ink over government policies that encourage “moral hazard”. Greek bailout is just one more chapter in the book. Eventually this silliness will be discarded. Unfortunately it appears we will have to all go broke before the current crop of financial policy makers understand.
Me, I think, there is a greater than 50% chance the Euro will disappear.
IB’er,
The bigger question is whether Germany pulls the plug on the Euro first.
PS: Just read these estimates, (which I assume are estimates for Spain, Italy, Ireland and Portugal). Just another example of opening Pandora’s box:
“European policy makers may need to stump up as much as 600 billion euros ($794 billion) in aid or buy government bonds if they are to stamp out the region’s spreading fiscal crisis, said economists at Goldman Sachs Group Inc., JPMorgan Chase & Co. and Royal Bank of Scotland Group Plc.”
when do they start selling the islands?
I suggest selling Crete to the Germans, rename it Kraut….(problem solved)
Next!
Great news…Spain just got downgraded by S&P.
I am surprised, IB’r, that the EU (the ECB countries, to be specific) do not prefer a restructuring of Greek debt at the cost of the bondholders (partial default). This would have the virtues of increasing confidence in the euro currency and result in smaller decline in consumer spending in Europe. Individual European governments and the ECB could backstop their banks to minimize the impact of Greek losses but could let private non-bank investors in Greek debt take the hit. At the same time, Greece would not be forced into pro-cyclical austerity measures, contributing to a double dip that could effect Europe as a whole. Moral hazard would be intact (second best option now that the 3% has not been enforced) with some exceptions due to backstopping the important banks.
Parasites killing the host
HG,
Banks own the majority of the paper, including Greek banks. Therein lies the rub:
http://www.zerohedge.com/sites/default/files/images/user5/imageroot/paulson/Greek%20Exposure.jpg
I dont think they will kill the euro. Its been too succesful for too much of europe.
Instead Greece and perhaps a few others will have to leave the currency.
In anyevent, HG is right, the bond holders need to take a haircut if there is a bailout. Otherwise, moral hazard would be wrongly punted on again.
Okay Chris- good news- u asked where to put your money? Buy FEZ (full disclosure- i did and Eurostoxx futures)…if you want to hedge, short IWM against it (70 cents worth for every dollar of FEZ)…to the extent this email is met with derisive comments- buy more
you can also buy NBG (adr for National Bank of Greece on NYSE)- but it had a huge bounce today (from 2.60 to 3.05)…yeehaw- maybe it was GOLDMAN///
I was thinking that by letting Greece default, you might be able–rather than sending an $80B+ check to Greece–to have national governments backstop their own banks. I.e., if a German bank is overexposed to Greek paper (whether Greek government or Greek banks), Merkel just bails out the German bank. I can see how this would be more risky than “containment” at the source.
HG,
Shoeless is correct. The FR have been the most vocal about a bailout, which surprise, surprise, benefits them disproportionally as the FR banks are the single biggest (25%) lender to Greece.
Shoeless,
For Germany it is a complicated decision. First, their banks are third in line behind the Swiss, but there is, IMHO, a more important stealth issue. Germany is a major exporter and the Euro has most likely helped them export. Put another way, if GER left the EU, the GER Mark would likely be higher, making exports less competitive. They have benefited to some degree by a stealth beggar-thy-neighbor currency devaluation.
IBer
That is correct- in fact, most of Germany’s exports are to the Eurozone…imagine Lira/Mark, Peseta/Mark and Drachma/Mark crosses today!!! I’m just bummed bcs me and Goldman could have cleaned up bigtime on that layup trade….instead, I have to worry about which big fund/bank wants to muscle Kiwi/$$ on any given day…
Which side of the deal is Goldman on? My money’s on them.
GW
so how is this story different than california/u.s. insolvency issue???
Well, being of Greek ancestry, this sucks. That said, my fellow Greeks deserve what they are getting.
Here’s the issue that makes it impossible for Germany and France to walk way from this. Based on estimates I have seen, German and French banks and pension funds own upwards of 70% of Greek sovereign debt (that figure may include Swiss banks as well). Thus, if Greece defaults, the pain will be felt disproportionately by Franco-German pensioneers. How politically palatable is that for Merckel or Sarkozy?
But here is the part that should really piss us off. The IMF is being dragged into this and may be on the hook for upwards of 20% or more of the bailout funds, though possibly in the form of guarantees. What you may not know is that the USA’s quota is 17% of the IMF! Japan is 6.1%. Germany 6.0%. China 3.7%. I do not even know if Greece rounds up to 1%.
So the USA will have a hand in bailing out Greece should that come to pass. But how will the Euros feel if the USA were to call upon the IMF to help bailout California, the sixth largest economy in the world?
Feeling better now?
Greece and Portugal contribute money to the IMF. I love the irony of it all! If only we weren’t the largest contributor, it would be so much funnier.
say it with me, “no bailout w/o no haircut!”
no more dollar for dollar bailouts. the bailout for greece is coming and it better involve “restructuring” which better be a kind way of saying here’s 90 cents for every dollar owed.
Shoeless:
You want to weep? Check out the actual quotas below. The PIIGS combined quota is 6.4% with Greece and Portugal at 0.46 and 0.43%, respectively. I may not fully understand the relationship between quotas and funding or guarantees but this seems to suck for US.
http://www.imf.org/external/np/fin/quotas/2009/data/091509.xls
Country Quota
United States 17.67%
Japan 6.56%
Germany 6.11%
France 4.51%
United Kingdom 4.51%
China 6/ 4.00%
Italy 3.31%
Saudi Arabia 2.93%
Canada 2.67%
Russia 2.49%
India 2.44%
Netherlands 2.17%
Belgium 1.93%
Brazil 1.78%
Spain 1.69%
Mexico 1.52%
Switzerland 1.45%
Korea 1.41%
Australia 1.36%
Venezuela 1.12%
Sweden 1.01%
Argentina 0.89%
Austria 0.89%
Indonesia 0.87%
Denmark 0.79%
Norway 0.79%
South Africa 0.78%
Malaysia 0.74%
Nigeria 0.74%
Poland 0.71%
Iran 0.63%
Turkey 0.61%
Thailand 0.60%
Singapore 0.59%
Kuwait 0.58%
Ukraine 0.58%
Finland 0.53%
Ireland 0.53%
Algeria 0.53%
Iraq 0.50%
Libya 0.47%
Greece 0.46%
Israel 0.45%
Hungary 0.44%
Pakistan 0.43%
Portugal 0.43%
Romania 0.43%
Philippines 0.43%
Czech Republic 0.42%
Egypt 0.40%
New Zealand 0.38%
Chile 0.36%
Colombia 0.33%
UAE 0.32%
Bulgaria 0.27%
Peru 0.27%
Morocco 0.25%
Bangladesh 0.22%
Congo, Dem. Rep. 0.22%
Zambia 0.21%
Serbia 0.20%
Vietnam 0.19%
Kazakhstan 0.18%
Slovak Republic 0.18%
Luxembourg 0.18%
Sri Lanka 0.17%
Belarus 0.16%
Ghana 0.16%
Croatia 0.15%
Zimbabwe 0.15%
did anyone ever see the Greek “hazardous occupation list”. well over 100 (it may be 500) jobs are listed…this provides for special perks like early retirement and higher pensions..among those jobs include BEAUTICIAN (i kid you not!!)
Well, FWIW a guaranty is cheaper
than actually having to put up cash.
I bet its fun calling on some of those countries to actually come out of pocket when needed.
Fly,
Better news still. IMF and EU loans will be junior to existing bonds. Moral Hazard has been perfected!
“Greece and Portugal contribute money to the IMF. I love the irony of it all! If only we weren’t the largest contributor, it would be so much funnier.”
ZeroHedge is reporting that this money – 120 billion Euro – will also be junior to the existing debt obligations out there. Just love my money being used to bail out Greek’s that don’t pay taxes and get 14 months worth of salary (not giving that up according to the gov’t) and then coming in at a JR level!! WTF is going on….this is RIDICULOUS.