Posted on 01/14/2012 10:42:02 PM PST by bruinbirdman
Fears are mounting that Greece could be the first European country to default on its debt in 60 years, as the country gears up to salvage collapsed talks over bond repayments on Wednesday.
Three months of negotiations ground to a halt on Friday night, amid a wave of downgrades by ratings agency Standard & Poor’s aimed at a clutch of European countries, including France.
The unexpected breakdown in talks between Greece and its private-sector creditors has taken the country a step closer to bankruptcy after a failure to sign up lenders to a voluntary and “orderly” 50pc haircut to their holdings.
Greece’s finance minister Evangelos Venizelos said talks would resume on Wednesday to “bridge differences” but insiders remained sceptical that a deal could be stitched at such a late stage.
The clock is ticking for Greece, as a deal must be reached before March 20, when the country is due to receive a further €130bn (£107bn) bail-out tranche from the International Monetary Fund and must make a key €14.5bn bond payment.
The problem centres on the difference between lenders agreeing to a “voluntary” and orderly default – which would mean swapping into bonds with a lower value – and lenders refusing terms, which would cause a default.
This type of “credit event” would trigger billions of insurance claims through credit default swaps (CDS), insurance policies taken out to protect investors in the event of a default.
The problem is that, of the €315bn of Greek debt outstanding, only €7.8bn is covered by Greek CDS. The vast majority of Greek debt is held by European banks, which have little insurance on their exposure. Most Greek CDS are held by hedge fund managers – accused by Germany and France of financially benefiting from sovereign woes. Some claim that
(Excerpt) Read more at telegraph.co.uk ...
Bankrupt means that you owe more than you can repay. Insolvent means that you no longer have enough cash to pay your bills.
Greece has been bankrupt for years. Greece will become insolvent in a matter of weeks. Taken off the euro life support, the Greeks will have to print their own currency. This will quickly lead to hyperinflation combined with all the economic and sociological disaster that accompanies it.
The United States and most of the euro zone are exactly the same position with respect to everything but timing. We have been bankrupt for years. We will become insolvent in due course.
This is a farce, they should just get this done ... they will never repay this debt, they are broke
Greece is neither. The nation certainly has enough money to pay it's bills, and can repay it's debt. They are choosing to continue to loot the empty pubic treasury and embezzle those funds to private companies and public employees, rather than simply face the truth that Greece can no longer pay the salaries of all the priests, provide 1.7 months a year in vacation and days off for public servants, etc, etc, etc.
Greece has been bankrupt for years. Greece will become insolvent in a matter of weeks. Taken off the euro life support, the Greeks will have to print their own currency. This will quickly lead to hyperinflation combined with all the economic and sociological disaster that accompanies it.
For Greece, the hyper inflation happened before the Euro conversion, and those public employees and retirees were used to large yearly adjustments to their income. Even after they converted to the Euro, public employees and retirees got two more upgrades in their payments as if they were still suffering inflation, even though the Euro was increasing in value, rather than dropping, at the time.
The United States and most of the euro zone are exactly the same position with respect to everything but timing. We have been bankrupt for years. We will become insolvent in due course.
Every single Eurozone nation that is at risk and the United States has within their power the ability to reduce these huge pensions and benefits packages to public employees and retirees. End the looting and embezzlement of the public treasury, and these financial woes will go away.
But by all means, give money you don’t have to making sure pedophiles, pyromaniacs and kleptomaniacs have welfare money, grouping the with wounded veterans in an attempt to make sure they feel okie dokie about themselves.
“the United States has within their power the ability to reduce these huge pensions and benefits packages to public employees and retirees..”
Not before they can attempt to STEAL everything they can, in the name of “health.”
Germany will refuse to permit EU monetization and Greece will default in some form over the next few months. The U.S., for the above reasons, has a very long rope with which to hang itself, and will use every inch of it to drive itself to the brink over the next decade.
Responsible political leadership in the U.S. would push out the day of reckoning. Given the love of the populace for their entitlements and low taxes, however, the patient will remain terminal.
If Greece defaults, its creditors should sue for repayment with art treasures from the National Museum. If Spain—treasures from the Prado. If Italy—well—you get the idea.
“its creditors should sue for repayment with art treasures”
It might surprise you to know that in the US, if the government defaults, you’re out of luck. Congress decides if you get paid. If they don’t allocate the funds, you don’t get paid.
A reality check.
A “haircut” is something to get a regular intervals to make you look good. It is a regular, survivable event. There isn't a banking or brokerage firm anywhere in the world that calls losing 50% of their investment portfolio a “haircut”.
That level of economic loss is a trip to the guillotine not a barbershop!
For the private investor a 50% “haircut” means he goes bankrupt and his family is on the streets beside him.
For the businesses investors, banks and brokerage firms, a 50% “haircut” also means bankruptcy. Who would give a bank or brokerage firm private money to invest after they voluntarily lost 50% of their portfolio?
What the media has said, and continues to say, is they like the liberal-progressive-socialist politicians have no clue when it comes to finances.
Why else would they trumpet a 50% loss of capital as a “haircut” instead of its more correct term - "DECAPITATION"?
Also means their products/exports become cheap.
Production should increase while their purchasing power decreases and import pricing increase.
Tourists will enjoy greater purchasing power.
In time, the Greeks will be better off being their own masters once again, as long as they throw off the shackles of socialism. If they don`t , they`re doomed to repeat the whole cycle yet again.
If Greece defaults the credits should be repaid according to the terms of their contract, period. They knew the risk.
Unexpected!
(Now someone hire me as an economist with a $150K salary already!! :-) )
Okay. You got me there.
You're right.
Euro Declines For Second Day as S&P Cuts Ratings, Greek Debt Talks Resume
The ECB bought Italian and Spanish government bonds today, according to four people with knowledge of the transactions, who declined to be identified because the deals are confidential.
Where's the ECB getting the money to make the loans to the entities buying up all those bonds....?
Wait a minute. The ECB is making the bond purchases directly now? Okaaaaay. Still wanna know where the ECB is getting the money to do it.
Wary banks boost ECB deposits; reserve change due
=8-0
BTTT.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.
