Greece – Page 45 – Infinite Unknown

Marc Faber: It’s Dead Simple, The Supply Of Dollars Will Grow Way Faster Than The Supply Of Gold

March 6, 2010 by Infinite

The Fed, creating the US dollar out of thin air, is the real Ponzi scheme here and not gold.

Marc Faber’s recommendation to continue buying gold every month, forever, received a full broadside on CNBC.

[At 3:45 in the video]:

“You see sir, I am a huge fan of yours, but I have a real difficulty here that I’d like you to help me out with. If I’m looking to invest in my retirement, I have a choice of investing in the American stock market, which is basically a play on change, bright people, working internationally in teams, around the world, and chasing the margin every day of their lives… OR… I can do what you’re suggesting and buy an inanimate object that sits in a dark, damp cellar somewhere, that may or may not be in short supply, may or may not glitter in the correct light, but really has no productive power. Isn’t gold the ultimate Ponzi scheme?”

Faber’s response:

“No, I don’t think it’s a Ponzi scheme, and it’s not a liability of someone else… it’s quantity cannot be increased at the same rate as you can print money… I’m not saying that the dollar will go straight away down because other currencies like the euro are even worse at the present time. But eventually if you print money, the purchasing power will lose.”

Germany Snubs Greek Aid Plea As Protesters Seize Finance Ministry in Athens

March 4, 2010 by Infinite

See also:
– Greece passes new deficit cuts to avert ‘catastrophe’ (Telegraph)

George Papandreou, Greece’s prime minister, pauses during a conference organized by The Economist in Athens, on Feb. 2, 2010. (Bloomberg)

March 4 (Bloomberg) — Greece’s pledge to deepen planned budget-deficit cuts failed to yield an offer of assistance from Germany, Europe’s biggest economy, as protesters in Athens seized the finance ministry building and blocked roads in the city center.

German Chancellor Angela Merkel said a meeting tomorrow with Greek Prime Minister George Papandreou won’t be “about aid commitments.” Her finance minister, Wolfgang Schaeuble, said the third round of deficit-reduction measures this year were probably enough to convince investors to buy Greek debt.

While Papandreou is risking a backlash at home to meet European Union demands for more deficit cuts before allies even consider providing aid, Merkel is facing domestic opposition to tapping taxpayers to extend a financial lifeline to Greece.

“There would be no understanding in Germany for bailing out Greece,” Henrik Enderlein, a political economist at the Hertie School of Governance in Berlin, said by phone. “It’s a bit of catch-22 situation: if you give in to Greece and you put 5 billion or perhaps even 10 billion into some kind of rescue package or into some guarantees, then the German government would look irresponsible. However, if it doesn’t, then European Union leaders might put a lot of pressure on Merkel and say, look, we have to bail out Greece.”

Germany moves to out Greek debt speculators-source

March 1, 2010March 1, 2010 by Infinite

* Financial watchdog BaFin attempts to identify debt bettors

* Probe sharpens German debate about helping Greece

* Berlin fears a rescue could give windfalls to speculators

BRUSSELS, March 1 (Reuters) – Germany has moved to identify speculators in Greek debt to try to prevent them from profiting from any bailout of the euro zone country’s ailing economy, a source with direct knowledge of the matter told Reuters.

The initiative by the country’s financial watchdog is part of delicate deliberations in Germany as to whether it should help bail out Greece, which is grappling with mounting debts. [ID:nLDE6200TF]

“It would be bad if it were to emerge after a rescue that the money had gone into the pockets of speculators,” the source told Reuters.

“The result of the ‘Greek tragedy’ is that the political environment has become such that the Credit Default Swap (debt insurance) problem has come to the fore.”

The investigation by financial watchdog BaFin comes against a backdrop of worries over Greece’s future. It sends a warning to those trading insurance for Greek debt which, while legal, has been blamed for fuelling volatility – though it has so far failed to identify to what extent speculators are behind Greek debt price swings.

JP Morgan Chairman: California Is A Greater Risk Than Greece

February 28, 2010 by Infinite

Jamie Dimon, chairman of JP Morgan Chase, has warned American investors should be more worried about the risk of default of the state of California than of Greece’s current debt woes.

Governor Arnold Schwarzenegger is desperately trying to reduce California’s $20bn deficit Photo: BLOOMBERG

Mr Dimon told investors at the Wall Street bank’s annual meeting that “there could be contagion” if a state the size of California, the biggest of the United States, had problems making debt repayments. “Greece itself would not be an issue for this company, nor would any other country,” said Mr Dimon. “We don’t really foresee the European Union coming apart.” The senior banker said that JP Morgan Chase and other US rivals are largely immune from the European debt crisis, as the risks have largely been hedged.

California however poses more of a risk, given the state’s $20bn (£13.1bn) budget deficit, which Governor Arnold Schwarzenegger is desperately trying to reduce.

Earlier this week, the state’s legislature passed bills that will cut the deficit by $2.8bn through budget cuts and other measures. However the former Hollywood film star turned politician is looking for $8.9bn of cuts over the next 16 months, and is also hoping for as much as $7bn of handouts from the federal government.

Earlier this week, John Chiang, the state’s controller, said that if a workable plan to reduce the deficit and increase cash levels is not reached soon, he will have to return to issuing IOU’s, forcing state workers to take additional unpaid leave and potentially freezing spending.

Europe: Quantifying The Donors And Moochers – Without Germany, The EU Would Not Exist

February 27, 2010 by Infinite

With the dramatic emergence of intra-EU bickering between various “banana-eating countries” and “tax cheats”, it is easy to lose sight of the forest for the banana trees. While it is subjective to say who owes whom what, one thing that is very objective, is whose money is critical to sustaining the European Union.

And here there is no doubt: without Germany, the EU would not exist. The country, which receives €78 billion from the EU annually, pays out more than double that, or €164 billion, for a net impact of (€1,045) per capita.

Surely the Germans would be just as happy to see this money retained by their economy instead of going to assorted hangers-on. And speaking of the latter, one of the biggest recipients, with a net benefit of €2,284 per person, is Greece, which pays just €15 billion a year to the EU but receives nearly triple, or €40 billion.

We wonder just how Greece will plug that particular hole should the EU dissolve after the recent escalation in rhetoric threatens to royally piss off the Germans.

(Click on image to enlarge.)

Graphic via FSTeurope.com

Banksters Bet Greece Defaults on Debt They Helped Hide

February 25, 2010 by Infinite

The police in Greece pushed back against demonstrators on Wednesday as unions staged a one-day general strike to protest austerity measures by the government to reduce its deficit. (AFP)

Bets by some of the same banks that helped Greece shroud its mounting debts may actually now be pushing the nation closer to the brink of financial ruin.

Echoing the kind of trades that nearly toppled the American International Group, the increasingly popular insurance against the risk of a Greek default is making it harder for Athens to raise the money it needs to pay its bills, according to traders and money managers.

These contracts, known as credit-default swaps, effectively let banks and hedge funds wager on the financial equivalent of a four-alarm fire: a default by a company or, in the case of Greece, an entire country. If Greece reneges on its debts, traders who own these swaps stand to profit.

“It’s like buying fire insurance on your neighbor’s house – you create an incentive to burn down the house,” said Philip Gisdakis, head of credit strategy at UniCredit in Munich.

As Greece’s financial condition has worsened, undermining the euro, the role of Goldman Sachs and other major banks in masking the true extent of the country’s problems has drawn criticism from European leaders. But even before that issue became apparent, a little-known company backed by Goldman, JP Morgan Chase and about a dozen other banks had created an index that enabled market players to bet on whether Greece and other European nations would go bust.

Last September, the company, the Markit Group of London, introduced the iTraxx SovX Western Europe index, which is based on such swaps and let traders gamble on Greece shortly before the crisis. Such derivatives have assumed an outsize role in Europe’s debt crisis, as traders focus on their daily gyrations.

A result, some traders say, is a vicious circle. As banks and others rush into these swaps, the cost of insuring Greece’s debt rises. Alarmed by that bearish signal, bond investors then shun Greek bonds, making it harder for the country to borrow. That, in turn, adds to the anxiety – and the whole thing starts over again.

Greece: Police Clash With Protesters During Strike Against Austerity Plan

February 24, 2010February 24, 2010 by Infinite

– Nationwide Strike Paralyzes Greece (Wall Street Journal)

– Germany parries Greek broadside over Nazi occupation (Reuters)

Clashes broke out between police and protesters on the streets of Greece

Police in Greece have clashed with protesters striking over austerity measures designed to save the economy.

Greek police fired tear gas at a group of some 50 protesters on the edges of the rally, reports said.

It is the second general strike in two weeks and coincides with growing anger at the EU’s response to the crisis.

The action is set to be the biggest since Greece’s socialist government introduced cuts to bring the country’s debt and deficit under control.

Greece has closed airspace to all flights, trains and ferries are standing idle, and archaeological sites have been shut.

The country currently has a spiralling public deficit of 12.7%, more than four times higher than eurozone rules allow.

The government has pledged to cut this to 8.7% this year, and also reduce the 300bn-euro ($419bn; £259bn) national debt, by freezing public sector salaries, raising the average retirement age to 63 by 2015, and increasing taxes on petrol, alcohol and tobacco.

It also wants to crack down on tax avoidance. Greece’s black economy is estimated at 30% of official gross domestic product.

In The Worst Possible Moment, Fitch Downgrades Greece’s Largest Banks To BBB

February 23, 2010 by Infinite

Bund Spread Jumps 10 Bps To 325

And just as Greece was about to launch its 10 year bond offering… Where is Papandreou to claim that Fitch was bought by all the accounts (who may or may not invest in the €5 billion issue) to make the price even better.

Because the spread to Bunds just jumped by about 10 bps to 325 following the news. Fitch notes: “The rating actions reflect Fitch’s view that the banks’ already weakening asset quality and profitability will come under further pressure due to anticipated considerable fiscal adjustments in Greece.

In particular, Fitch believes the required fiscal tightening that needs to be made by the Greek government will have a significant effect on the real economy, affecting loan demand and putting additional pressure on asset quality.

The latter could result in higher credit costs, ultimately weakening underlying profitability.” In the US, where any news is good news, equities jump following the headline.

From Fitch:

Fitch Ratings-Barcelona/London-23 February 2010: Fitch Ratings has today downgraded the Long-term and Short-term Issuer Default Ratings (IDR) of Greece’s four largest banks, National Bank of Greece (NBG), Alpha Bank (Alpha), Efg Eurobank Ergasias (Eurobank) and Piraeus Bank (Piraeus) to ‘BBB’ from ‘BBB+’ and ‘F3’ from ‘F2′ respectively. The Outlook on the Long-term IDRs is Negative.

At the same time, the agency has downgraded the banks’ Individual Ratings to ‘C’ from ‘B/C’, whilst the ratings of the banks’ senior, subordinated and hybrid capital instruments have all been downgraded by one notch. The Support Ratings and Support Rating Floors (SRF) of all four banks have been affirmed.

A full rating breakdown is provided at the end of this comment. Separately, Fitch has also affirmed Agricultural Bank of Greece’s (ATEbank) Long-term IDR at ‘BBB-‘, which is on its SRF, and Short-term IDR at ‘F3’. The Outlook on the Long-term IDR is Negative. ATEbank’s IDRs, Support Rating and SRF are based on sovereign support as the bank is majority-owned by the Greek state (rated ‘BBB+’/Negative Outlook).

Britain At Risk Of Worse Government Debt Crisis Than Greece

February 20, 2010 by Infinite

Britain is at risk of a Government deficit crisis worse than that of Greece, sparking serious fears over the economic stability of the country.

Economists said that the scale of the shortfall in the budget could this year mount to above £180 billion Photo: PA

In surprise news which sent the pound sliding on Thursday, official figures showed that the Government borrowed £4.3 billion last month.

It was the first time since 1993 that the public finances had gone into the red in January – a month in which tax revenues usually push the Exchequer into the black.

Economists said that the scale of the shortfall in the budget could this year mount to above £180 billion – higher than even the Chancellor’s forecast of a record £178 billion.

Such a deficit would, at 12.8 per cent of British gross domestic product, be even greater than the deficit faced in Greece, which is facing a full-scale fiscal crisis and may need to be bailed out by fellow euro nations or the International Monetary Fund.

The public borrowing figures coincided with further bad news from the housing market, as the Council of Mortgage Lenders reported that mortgage lending dropped last month by 32 per cent, hitting the lowest monthly total in a decade.

The Bank of England also reported a decline in lending to businesses, indicating that the economic slowdown is far from over.

The poor economic figures came as a major blow for the Chancellor, Alistair Darling, coming a month ahead of the Budget, which he had hoped would provide proof that the economy was finally on the mend.

The news also came ahead of Gordon Brown’s unofficial launch to the Labour election campaign, which the Prime Minister hopes to base on his party’s economic record and policies. (ROFL!)

Has Goldman Sachs helped the UK to hide its debts too?

February 16, 2010February 16, 2010 by Infinite

The UK is broke and the pound is soon to be worthless paper, thanks to the BoE and the government.

Much noise this morning surrounding the news that Goldman Sachs (and a number of other banks) allegedly helped Greece to hide the full scale of its ballooning government debts through financial jiggery-pokery over the past decade or so. Eurostat has now demanded an explanation from the Greeks for $1bn of currency swaps it says it was unaware of (though Greece seems to be insisting the authorities did know).

The original story about Goldman’s involvement appeared in Der Spiegel last week (though the theme has been the subject of investigation by the excellent euro blog A Fistful of Euros for some time), and over the weekend the New York Times produced an excellent feature filling in the gaps. One of the more intriguing lines from that latter piece says: “Instruments developed by Goldman Sachs, JPMorgan Chase and a wide range of other banks enabled politicians to mask additional borrowing in Greece, Italy and possibly elsewhere.”

So, the obvious question goes, what about the UK? Did Britain hide its debts? Was Goldman Sachs involved? Should we panic?

To which the answers, respectively, are: yes, yes and no. Britain has been finding various ways to hide its debt off its balance sheet for years; Goldman Sachs was one of the prime movers in this industry, through its infrastructure arm; but the fact is we (and by extension, one presumes, investors) have known about this for quite some time. The chief modus operandi here was the private finance initiative, something which helped the Government remove just south of £50bn from the official balance sheet. Goldman was a big player in the industry. But let’s not get carried away by vampire squid criticism here – it was one of many players in a well-established industry. *

Greece Outlaws Cash Transactions Worth More Than 1500 Euros

February 14, 2010 by Infinite

The cashless society is another major stepping stone towards the New World Order. The elite wants to establish a cashless society, where all your transactions can be monitored. Total control of every aspect of your life is the goal.

– Societe Generale chief strategist Albert Edwards: Greek bailout only delays ‘inevitable’ Eurozone breakup

HIGHLIGHTS-Greek FinMin unveils tax reform, wage policy

ATHENS, Feb 9 (Reuters) – Greece outlined on Tuesday its public sector incomes policy and a tax reform bill, as part of an EU-endorsed plan to increase state revenues and reduce its huge deficit.

The following are comments by Greek Finance Minister George Papaconstantinou at a press conference:

IMPACT OF REFORMS

“The total benefit of our incomes policy will be around 800 million euros.

“EU partners and markets will closely monitor the implementation of our fiscal plan, I believe that the response will be positive. The measures that we have announced are becoming action”

TIME FOR CHANGE

“The time has come for major changes, the country can’t afford to wait any longer”

TAXATION

“From 1. Jan. 2011, every transaction above 1,500 euros between natural persons and businesses, or between businesses, will not be considered legal if it is done in cash. Transactions will have to be done through debit or credit cards”

Societe Generale chief strategist Albert Edwards: Greek bailout only delays ‘inevitable’ Eurozone breakup

February 13, 2010February 13, 2010 by Infinite

‘The inevitable break-up of the eurozone.’

SAN FRANCISCO (MarketWatch) — A bailout of Greece will only delay the inevitable breakup of the Eurozone because the one-size-fits-all interest rate policy imposed by the euro has left several countries in the region uncompetitive, Societe Generale strategist Albert Edwards said Friday.

Edwards, a noted bear, warned about the Asian currency crisis of the late 1990s before it happened. That turmoil led to Russia’s debt default and the collapse of hedge fund Long-Term Capital Management.

“The situation in Greece following hard on the heels of similar solvency issues in Dubai feels to me very much like the Russian default and LTCM blow-up in 1998,” SocGen’s /quotes/comstock/24s!e:gle (FR:GLE 39.00, -1.26, -3.13%) Edwards wrote in a note to investors Friday.

European leaders vowed this week to save Greece from a fiscal crisis that’s pushed the country’s relative borrowing costs to the highest level since the country joined the Eurozone more than a decade ago.

“Any ‘help’ given to Greece merely delays the inevitable break-up of the eurozone,” Edwards wrote.

Such concerns have triggered a slump in the euro in recent weeks. It’s also fueled a jump in relative borrowing costs for other countries in Europe with big fiscal deficits, such as Portugal, Ireland and Spain. With Greece included, this group has become known as the PIGS.

“The problem for the PIGS is that years of inappropriately low interest rates resulted in overheating and rapid inflation, even though interest rates might well have been appropriate for the eurozone as a whole,” Edwards explained.

Greek Debt Crisis: How Goldman Sachs Helped Greece to Mask its True Debt

February 11, 2010February 11, 2010 by Infinite

Greek Finance Minister George Papaconstantinou speaking at a conference in January.

Goldman Sachs helped the Greek government to mask the true extent of its deficit with the help of a derivatives deal that legally circumvented the EU Maastricht deficit rules. At some point the so-called cross currency swaps will mature, and swell the country’s already bloated deficit.

Greeks aren’t very welcome in the Rue Alphones Weicker in Luxembourg. It’s home to Eurostat, the European Union’s statistical office. The number crunchers there are deeply annoyed with Athens. Investigative reports state that important data “cannot be confirmed” or has been requested but “not received.”

Creative accounting (Legal FRAUD!) took priority when it came to totting up government debt. Since 1999, the Maastricht rules threaten to slap hefty fines on euro member countries that exceed the budget deficit limit of three percent of gross domestic product. Total government debt mustn’t exceed 60 percent.

Greece: 2009 Budget Deficit Was Just Revised From 12.2% To 16% Of GDP!

February 10, 2010 by Infinite

– German Official: No EU, Bilateral Aid For Greece On EU Agenda (Wall Street Journal)

Goldman’s Erik Nielsen lands the bombshell that the Greek deficit mysteriously increased from €29.4 billion to a shopping €37.9 (keep in mind, this is not Bernanke notation where only quad- prefixes impress people at this point).

This increases the (running) 2009 budget deficit from 12.2% to 16%!

While certainly not the last time we hear of “prior revisions”, the question of just how patient Germany will be, should this number approach, oh say, 50% once the artificial support of various Goldman swaps expires (and at 50% the BSDs like Goldman will surely round up to 100%), is very much open.

From Goldman’s Erik Nielsen

Big revision up in their 2009 fiscal deficit: Late yesterday, the Greek finance ministry amended its website for its 2009 fiscal cash execution, adding close to EUR 6bn to expenditures in December for a total of EUR 11.8bn, which takes the full-year deficit to EUR 37.9bn – up from EUR 29.4bn reported previously. This implies an increase in their 2009 central government budget deficit from about 12.2% of GDP to about 16% of GDP. There has been made no explanation for this revision, but we think it may be associated with payment of arrears to hospitals, which means that the general government deficit may have increased by less. Regardless, given the uncertainties, it is a stunning revision to make to the December payments without an explanation. Hopefully, it’s a good use of money, like clearance of arrears, but it would be good to know.

Read moreGreece: 2009 Budget Deficit Was Just Revised From 12.2% To 16% Of GDP!

German Official: No EU, Bilateral Aid For Greece On EU Agenda

February 10, 2010 by Infinite

– Storm over bailout of Greece, EU’s most ailing economy

– Greece: ‘Ouzo crisis’ escalates into global margin call as confidence ebbs

– The CDS Puppetmaster Behind It All And The Ever Increasing Parallels Between AIG And Greece

BERLIN (Dow Jones)–Euro-zone finance ministers scheduled to talk about Greece this afternoon are unlikely to make any decision and there is no aid for Greece on the agenda of Thursday’s summit of European Union leaders, a senior German government official said Wednesday.

The official added that Germany will stick to the European Union bailout clause and at present no EU or bilateral aid for Greece is on the meeting’s agenda or is planned.

The comments come before an informal summit held by the EU in Brussels, where leaders will focus on Greece’s debt crisis as part of a broader assessment of post-recession government debt levels.

“There doesn’t exist any decision on such aid and it also isn’t pending at present,” said the senior government official at a press conference on Thursday’s meeting. The official added that for Germany, Greece has the responsibility to deal with its budget woes.

The euro and peripheral euro-zone government bonds, such as those from Greece, Spain and Portugal, have been under pressure due to fears that Greece may default on its debt.

The EU summit is widely expected to work on further steps to help Greece shore up public finances and restore calm to financial markets.

Storm over bailout of Greece, EU’s most ailing economy

February 10, 2010 by Infinite

– German Official: No EU, Bilateral Aid For Greece On EU Agenda (Wall Street Journal)

Athens will be paralysed today by a 24-hour strike against a government trying to stave off bankruptcy ? as fellow members of the eurozone squabble over how best to solve Greece?s debt crisis

Angela Merkel tried to calm fevered speculation in financial markets yesterday that Germany was preparing to lead a bail-out of Greece amid a split in the EU on how to handle its most ailing member.

The German Chancellor denied reports that her Finance Minister was conducting secret talks with Jean-Claude Trichet, head of the European Central Bank, and with other capitals on an EU rescue fund for Athens.

Mrs Merkel has staunchly resisted suggestions that the EU must swallow its pride and turn to the Washington-based IMF for a solution to the growing economic turmoil in Greece, with fears that its troubles in international finance markets will trigger a domino effect, toppling other weak members of the eurozone such as Ireland, Portugal, Spain and Italy.

But last night there were signs of a developing European split over calling in the International Monetary Fund, a move also strongly opposed by Brussels, with suggestions from Sweden’s Finance Minister and other officials that this might be better than the EU programme outlined last week.

Mrs Merkel has repeatedly rejected the idea that the 16-nation eurozone would need to look to the IMF, which is already overseeing recovery efforts in Latvia and Hungary – both EU members outside the single currency. Her insistence that the eurozone can keep its own house in order led to market speculation yesterday that an EU bail-out was imminent.

There were also reports yesterday that Wolfgang Schäuble, the German Finance Minister, was working bilaterally and at the European level on putting together a package to help Athens.

Germany Backs Greek Bailout as EU Creates ‘Economic Government’

February 10, 2010 by Infinite

Update: German Official: No EU, Bilateral Aid For Greece On EU Agenda (Wall Street Journal)

—-

The last word is not spoken yet!

The winner in case of a bailout is:

– The CDS Puppetmaster Behind It All And The Ever Increasing Parallels Between AIG And Greece

Germany is preparing to drop its vehement opposition to a rescue package for Greece, fearing that a rapid escalation of the debt crisis in Southern Europe could endanger German banks and damage the euro.

Protesting farmers shout slogans while marching in central Athens Photo: AFP/Getty Images

Wolfgang Schäuble, Germany’s finance minister, has asked officials to prepare a plan in time for a summit of EU leaders on Thursday, according to reports in the German media. The options include either a loan from EU states or some sort of institutional EU response.

The news pushed the euro to $1.38 against the dollar, the strongest one-day rally since the single currency began its nose-dive late last year. Yields on Greek 10-year bonds plummeted 36 basis points to 6.39pc in a matter of hours as speculators scrambled to exit overstretched positions, with synchronised moves for Portuguese, Spanish, and Italian bonds.

Michael Meister, parliamentary chief for Germany’s Christian Democrats, said the crisis could not be allowed to drag on. “Our top priority is the stability of the euro,” he told FT Deutschland. “Should Greece receive help, it will only be under tough conditions and if the Greek government undertakes root-and-branch reforms.”

Germany’s apparent backing for a bail-out comes despite worries that it will lead to the breakdown of fiscal discipline across the Club Med region. It also raises troubling questions of fairness. Ireland has tackled its own crisis by slashing wages and going far beyond any measure so far offered by Greece, yet Dublin has not received help.

Germany’s dramatic shift in policy changes the character of the euro project. It follows weeks of soul-searching in Berlin, and after increasingly loud pleas from Brussels, Paris and southern capitals. The deciding factor was concern that letting Greece fail risked a “Lehman-style” run on Club Med debt, with systemic spill-over across Europe.

The CDS Puppetmaster Behind It All And The Ever Increasing Parallels Between AIG And Greece

February 9, 2010 by Infinite

Goldman Sachs

David Fiderer’s below piece, originally published on the Huffington Post, continues probing the topic of Goldman and AIG. For all intents and purposes the debate has been pretty much exhausted and if there was a functioning legal system, Goldman would have been forced long ago to pay back the cash it received from ML-3 (which in itself should have been long unwound now that plans to liquidate AIG have been scrapped) and to have the original arrangement reestablished (including the profitless unwind of AIG CDS the firm made improper billions on, by trading on non-public, pre-March 2009, information), and now that AIG is solvent courtesy of the government, so too its counterparties can continue experiencing some, albeit marginal, risk, instead of enjoying the possession of cold hard cash. Oh, and Tim Geithner would be facing civil and criminal charges.

Yet as we look forward, we ask, who now determines the variation margin on Greek CDS (and Portugal, and Dubai, and Spain, and, pretty soon, Japan and the US), the associated recovery rate, and how much collateral should be posted by sellers of Greek protection? If Greek banks, as the rumors goes, indeed sold Greek protection, and, as the rumor also goes, Goldman was the bulk buyer, either in prop or flow capacity, it is precisely Goldman, just like in the AIG case, that can now dictate what the collateral margin that Greek counterparties, and by extension the very nation of Greece, have to post on billions of dollars of Greek insurance. Let’s say Goldman thinks Greece’s debt recovery is 75 cents and the CDS should be trading at 700 bps, instead of the “prevailing” consensus of a 90 recovery and 450 spread, then it will very likely get its way when demanding extra capital to cover potential shortfalls, since Goldman itself has been instrumental in covering up Greece’s catastrophic financial state and continues to be a critical factor in any future refinancing efforts on behalf of Greece. Obviously this incremental margin, which only Goldman will ever see, even if the CDS was purchased on a flow basis, will never be downstreamed on behalf of its clients, and instead will be used to [buy futures|buy steepeners|prepay 2011 bonuses|buy more treasuries for the BONY $60 billion Treasury rainy day fund].

In essence, through its conflict of interest, its unshakable negotiating position, and its facility to determine collateral requirements and variation margin, Goldman can expand its previous position of strength from dictating merely AIG and Federal Reserve decision making, to one which determines sovereign policy! This is unmitigated lunacy and a recipe for financial collapse at the global level.

This is yet another AIG in the making, with Goldman this time likely threatening to accelerate the collapse not merely of the US financial system, but of the global one, in order to attain virtually infinite negotiating leverage. Of course, the world will not allow a Greece-initiated domino, allowing Goldman to call everyone’s bluff once again.

Greece: ‘Ouzo crisis’ escalates into global margin call as confidence ebbs

February 9, 2010 by Infinite

For the third time in 18 months the global financial system risks spinning out of control unless political leaders take immediate and radical action.

A driver stands near parked trucks on the road leading to the Kulata border crossing between Bulgaria and Greece. The roadblock was set up by farmes protesting higher taxes.

Flow data shows an abrupt withdrawal of German and Asian capital from Club Med debt markets. The EU’s refusal to offer Greece anything beyond stern words and a one-month deadline for harsher austerity – while admirable in one sense – is to misjudge how fast confidence is ebbing. Greece’s drama has already metastasised into a wider systemic crisis. The world risks a replay of the Lehman collapse if this runs unchecked, this time involving sovereign dominoes.

Barclays Capital says the net external liabilities of Greece are 87pc of GDP, or €208bn (£182bn). Spain is worse at 91pc (€950bn), and Portugal worse yet at 108pc (€177bn); Ireland is 68pc (€123bn), Italy is 23pc, (€347bn). Add East Europe’s bubble and foreign debts top €2 trillion.

The scale matches America’s sub-prime/Alt-A adventure and assorted CDOs and SIVS of the Greenspan fling. The parallels are closer than Europe cares to admit. Just as Benelux funds and German Landesbanken bought subprime debt for high yield with AAA gloss, they bought Spanish Cedulas because these too had a safe gloss – even though Spain’s property boom broke world records. They thought EMU had eliminated risk: it merely switched exchange risk into credit risk.

A fat chunk of Club Med debt has to be rolled over soon. Capital Economics said the share of state debt maturing this year is even higher in Spain (17pc) than in Greece (12pc), though Spain’s Achilles’ Heel is mortgage debt.

The risk is the EMU version of Mexico’s Tequila crisis or Asia’s crisis in 1998. This Ouzo crisis is coming to a head just as tougher bank rules cause German lenders to restrict loans, and it touches on the most neuralgic issue of our day: that governments themselves are running low. Britain, France, Japan, and the US are all vulnerable. All must retrench. The great “reflation trade” of 2009 is over.

Fears Rise of Euro Government Default, Euro And Stock Markets Slump

February 5, 2010 by Infinite

– Germany Warns of ‘Fatal’ Eurozone Crisis, Funds Flee Greece (Telegraph):

Germany has triggered a near-panic flight from southern European debt markets by warning that there will be no EU bail-outs, even though it fears the region’s economic crisis has turned dangerous and could prove “fatal” for the entire eurozone.

Financial markets swooned Thursday amid rising fears of a government debt default in Europe, highlighting the seriousness of the challenges facing the euro currency as fiscally challenged countries like Greece, Portugal and Spain dig themselves out of debt.

After a brief respite early this week, the cost of insuring against default the debt of euro-zone members with large budget deficits jumped late Wednesday and rattled investors more broadly on Thursday.

While Greece and Portugal have felt investors’ fire in recent days, now even larger economies like Spain are starting to come under pressure from worries about their weakened public finances.

Blue-chip stock indexes in Spain and Portugal slumped nearly 6% and 5%, respectively, while an index of Europe’s 600 biggest companies dropped 2.7%. The euro sank more than 1% against the U.S. dollar to an eight-month low of $1.3727 and lost 3% of its value against the Japanese yen.

The global economic downturn, and extensive government spending to fight it, have led to major fiscal problems in Europe, especially for less-dynamic economies like Greece, Portugal, Ireland and Spain. Such countries took advantage of their membership in the 16-nation euro bloc during the boom by borrowing at unusually low interest rates. But now, investors are worried about how they will reduce yawning budget deficits that exceed 12% of their economic output in the case of Greece and Ireland.

Germany Warns of ‘Fatal’ Eurozone Crisis, Funds Flee Greece

January 29, 2010 by Infinite

Germany has triggered a near-panic flight from southern European debt markets by warning that there will be no EU bail-outs, even though it fears the region’s economic crisis has turned dangerous and could prove “fatal” for the entire eurozone.

Wonders of the World: Parthenon, Greece
Funds flee Greece as Germany warns of “fatal” eurozone crisis

The yield on 10-year Greek bonds blasted upwards by over 40 basis points to 7.15pc in a day of wild trading. Spreads over German Bunds reached almost four percentage points, by far the highest since Greece joined the euro, and close to levels that risk a self-feeding spiral. Contagion hit Portuguese, Spanish, Irish, and Italian bonds.

George Papandreou, the Greek premier, said in Davos that his country had been singled out as the weak link in a “attack on the eurozone” by speculators and political foes. “We are being targeted, particularly by those with an ulterior motive.”

Marc Ostwald, from Monument Securities, said the botched bond issue of €8bn (£6.9bn) of Greek debt earlier this week has made matters worse. Many of the investors were “hot money” funds that bought on rumours that China was emerging as a buyer, offering them a chance for quick profit. When the China story was denied by Beijing and Athens, these funds rushed for the exit.

However, a key trigger yesterday was testimony in Germany’s parliament by economy minister Rainer Brüderle, who said there would be “no bail-outs” for struggling debtors and no move to a “European economic government”.

“A few European nations are exhibiting dangerous weaknesses. That could have fatal consequences for all countries in the eurozone,” he said. Despite the warning, he said each country must solve its own problems.

Greece’s debt crisis: Chinese whispers drive up Greek yields

January 28, 2010 by Infinite

– Greece, Portugal Debt Concerns Start to Infect Companies, Banks (Bloomberg):

Jan. 28 (Bloomberg) — Investor concern about the ability of Greece and Portugal to lower their budget deficits is starting to hurt the debt of national utility companies and banks.

The cost to insure Greek sovereign debt against default surged to a record today, spurring a rise in credit-default swaps on Hellenic Telecommunications Organization SA and National Bank of Greece SA. Swaps on Portugal Telecom SA and Energias de Portugal SA jumped as the perceived risk of holding their government debt rose.

“If you fear a Greek crisis then you should not only avoid government bonds but corporates as well,” said Philip Gisdakis, head of credit strategy at UniCredit SpA in Munich. “And if you fear Greece you should also fear Portugal and Spain.”

Chinese whispers drive up Greek yields

Greek Prime Minister George Papandreou speaks during an economic policy speech aimed to soothe international markets increasingly worried by the country’s ballooning public debt and budget deficit, in Athens. (AP)

(Financial Times) — Greece’s debt crisis returned to financial markets with a vengeance as agitated investors demanded the highest premiums to buy its government bonds since the launch of European monetary union over a decade ago.

The yield spread between 10-year Greek bonds and benchmark German Bunds widened dramatically on Wednesday, by almost 0.7 percentage points at one point, in what one trader called a “capitulation” to sellers worried about Greece’s ability to refinance its debt.

The mayhem unfolded after Greece denied it had given a mandate to Goldman Sachs, the US investment bank, to sell government debt to China. Greek 10-year bond yields closed at 6.70 per cent, 0.48 percentage points up on the day.

The Financial Times reported on Wednesday that Athens was wooing Beijing to buy up to €25bn of government bonds in a deal promoted by Goldman. China had not yet agreed to such a purchase, the FT said.

The government’s comments unsettled markets because of their implication that China, with $2,400bn in foreign exchange reserves, was not interested in increasing its exposure to sovereign Greek debt.

Experts, though, said that heavier Chinese purchases of Greek debt would be no less disturbing. For the eurozone, “a member country implicitly rescued by China would be an even worse signal than an IMF programme,” said Marco Annunziata, chief economist at Unicredit.

The Greek finance ministry said Athens wanted to diversify its sources of funds, and meetings with institutional investors would continue in Athens as well as the US and Asia.

Shares in Greek banks tumbled after Greece’s denial that it had mandated Goldman. The yield spread on Portuguese and Italian government bonds widened as traders fretted about other peripheral eurozone countries with high public debt and rising budget deficits.

Marc Faber on Coming Sovereign Debt Crisis: Next Countries to Default are the US, Japan and the ‘PIIGS’

January 14, 2010January 14, 2010 by Infinite

Listen to what Marc Faber exactly says in the beginning of the video.

Greece condemned by the European Commission for falsifying data

January 13, 2010 by Infinite

See also FT Alphaville on a “Greek tragedy“:

It’s the last thing you need when you’re trying to convince the market that you’re fiscally sound and responsible — a European Commission report condemning you for deliberately falsifying data.

But that’s just what happened to Greece on Tuesday afternoon. From the report:

On 2 and 21 October 2009, the Greek authorities transmitted two different sets of complete Excessive Deficit Procedure (EDP) notification tables to Eurostat, covering the government deficit and debt data for 2005-2008, and a forecast for 2009. In the 21 October notification, the Greek government deficit for 2008 was revised from 5.0% of GDP (the ratio reported by Greece, and published and validated by Eurostat in April 2009) to 7.7% of GDP. At the same time, the Greek authorities also revised the planned deficit ratio for 2009 from 3.7% of GDP (the figure reported in spring) to 12.5% of GDP, reflecting a number of factors (the impact of the economic crisis, budgetary slippages in an electoral year and accounting decisions). According to the appropriate regulations and practices, this report deals with estimates of past data only.1

Revisions of this magnitude in the estimated past government deficit ratios have been extremely rare in other EU Member States, but have taken place for Greece on several occasions. These most recent revisions are an illustration of the lack of quality of the Greek fiscal statistics (and of macroeconomic statistics in general) and show that the progress in the compilation of fiscal statistics in Greece, and the intense scrutiny of the Greek fiscal data by Eurostat since 2004 (including 10 EDP visits and 5 reservations on the notified data), have not sufficed to bring the quality of Greek fiscal data to the level reached by other EU Member States.

Ouch.

The above report deals with the past data only, the subtext being that the 2009 forecasts could well be off too. And that seems to be what’s worrying bond markets.

The yield on the Greek 10-year jumped about 15bps to 5.68 per cent earlier on Tuesday, and is currently hovering around 5.65 per cent:

The full EC report is available here.

(Financial Times) — Greece was condemned by the European Commission on Tuesday for falsifying data about its public finances and allowing political pressures to obstruct the collection of accurate statistics.

In a damning report published as the eurozone grapples with its worst financial crisis since the euro’s launch in 1999, the Commission said figures from Greece’s were so unreliable that its budget deficit and public debt might be even higher than government had claimed last October.

At that time Greece estimated its 2009 deficit would be 12.5 per cent of gross domestic product, far above 3.7 per cent predicted in April. It revised its 2008 deficit up to 7.7 per cent from 5 per cent.

The data shocked and angered Greece’s 15 eurozone partners and prompted swift downgrades of Greek debt as well as an increase in the premium demanded by financial markets to buy Greek bonds.

The socialist government is promising to slash its deficit to 3 per cent or less by 2012, but financial markets question whether it can introduce the drastic austerity measures implied by such a target without sparking labour unrest and social disorder.

ECB: No Bailout For Greece

January 6, 2010 by Infinite

Greece’s Prime Minister George Papandreou holds a news conference at the end of a European Union heads of state and government summit in Brussels October 30, 2009 file photo. (REUTERS)

ATHENS/MILAN (Reuters) – EU officials arrived in Greece on Wednesday for an inspection visit, hours after ECB Executive Board member Juergen Stark was quoted as saying the bloc would not bail out Greece if its debt problem worsened.

The government’s broad outline of how it will get out of its fiscal mess has not impressed markets, making the talks with Brussels on the details of a long-term budgetary plan Greece must submit by end January a sensitive point for investors.

“The EU officials are here (at the finance ministry), they are looking at the draft of the plan,” a senior finance ministry official said. “They will meet in the coming days officials from the health, labour, defence, and economy ministries.”

In a sign of increasing pressure on Greece to get its finances back in order, Stark told Italian newspaper Il Sole 24 Ore that EU states would not help out.

“The markets are deluding themselves when they think at a certain point the other member states will put their hands on their wallets to save Greece,” Stark said in the newspaper.