Greece - Is it saveable?

[Uncle Festivus]

There goes $60B down the drain. How are they going to pay it back?

April 24 (Bloomberg) -- Greece’s request for a $60 billion bailout led by the European Union may fail to ease investor concerns about the nation’s ability to end its fiscal crisis.

A rebound in Greek bonds after the government’s request for a rescue yesterday, fizzled out as investors kept their focus on a budget deficit that will still be around 10 percent of gross domestic product this year even after austerity measures. The yield on the Greek two-year note rose to 10.23 percent, after falling to 9.63 percent.

“We are not buying Greek debt while so many problems remain unsolved,” said Ralf Ahrens, who holds Greek bonds as part of the about $20 billion he manages as head of fixed-income at Frankfurt Trust. “Asking for the package will not calm down the market.”

European policy makers have only spelled out the aid that Greece would receive over the next year, sparking concerns about how the country will finance itself beyond 2011. While Greece has pledged to lower its budget deficit below the EU’s 3 percent limit by 2012, Goldman Sachs Group Inc. says the country’s challenge is so great the nation may cut or delay payments to bond investors.

Maybe they can start making barge poles and sell them to bond buyers - about the only way they are going to make any foreign income?

Greece is stuffed, who's next?

 

[explod]

There goes $60B down the drain. How are they going to pay it back?

Maybe they can start making barge poles and sell them to bond buyers - about the only way they are going to make any foreign income?

Greece is stuffed, who's next?

Well the great thing Uncle is that the general investment community is learning to understand that countries in this day and age can go broke. It will make for astute observers when a few more start to go broke and they may even begin to look for other ways in which to safeguard their hard won dosh.

However on a Saturdy after a few schooners I find it hard to say more less I get into bother again. Does anyone out there have a clue?

 

[Calliope]

However on a Saturdy after a few schooners I find it hard to say more less I get into bother again. Does anyone out there have a clue?

I think you mean Saturday and lest. That's what a few schooners will do. I hope you didn't drive home.

 

[TheBigSponge]

And pigs fly Greece is the last on the agenda. Go the Euro!!

 

[Macquack]

I did not realise Greece had scrapped the "drachma" in 2002.

Big, big mistake relinquishing control of their currency to the "money masters" in the European Central Bank headquartered in Frankfurt, Germany.

 

[explod]

I think you mean Saturday and lest. That's what a few schooners will do. I hope you didn't drive home.

Not at all ole pal, off topic but if ya not good at spellin you dish out with the sounds. Of course in the 1950's the accent was very much Saturdy or Saterdy, and it was Pub day for the returned diggers, Dad always at the front to hide the back (the past)

 

[basilio]

It's a big question isn't it? Perhaps the real question is

"What would be the consequences for large bank solvency, investor confidence and international financial transactions if Greece fell over? "

And of course the follow up question

"How much capacity do other countries have to bankroll a restoration of confidence?"

in 2010 we are not talking about a single or small country taking a dive in a largely robust international world. There is no country that is not in substantial if not dangerous debt. And the financial links that tie countries, banks and economies together suggest that if one country goes "down" it will be a real challenge to keep the rest above water.

The inevitable conclusion of this metaphor is almost all countries will be pulled into the water with their debt millstones locked securely around their throats.

Bit like the collapse of the Austrian banks in 1931 which turned the stock market collapse of 1929 into a true depression.

http://www.globaleconomiccrisis.com/blog/archives/199

Cheers....

 

[TheBigSponge]

Look on the bright side guys! Its dirt cheap to holiday in Europe now!!

 

[basilio]

It's not getting any prettier in Greece and Europe is it?

And it's also clear that the potential loss of multi-billions in bonds could "destabilize" some of the biggest institutions in Europe. From our perspective what investments do we hold and what do we exit from?

Or do we see this as another fantastic buying opportunity within a couple of weeks?

One thing for absolute certainty. Goldman Sux and co will be milking the roiling markets senseless in the next couple of weeks. That means we are going to well and truly shorn if not slaughtered.

 

[Calliope]

Of course it is not salvageable. They say God helps those who help themselves but I don't think he meant helping yourself to stuff you can't afford. They are not prepared to put in the hard yards to dig themselves out of their hole.

The EU made the big mistake of taking all these basket cases on board in the first place.

The EU is a failure. By the way, how's Rudd's Asian Union going?

 

[Absolutely]

I don't get what the consequences are of not being able to pay back debt.

I mean what does it mean for the average Greek?

What would Greece be saved from actually, if it were "saveable"?

 

[Temjin]

It doesn't matter if an agreement was made in 3 weeks time or not. Greece will have to face a complete or partial default sooner or later. It's not a matter of if, but when.

In fact, the amount of hurdles that the EU has to go through to get a "bailout" package is simply impossible to go pass given how "political" this has become.

I remember the RBA gave a public comment suggesting the "problem" with EU/Greece is "behind us now". HAH, am I not surprised to know they didn't see this coming? (and while other blogs, ZeroHedge, etc, are jumping up and down about it is getting worse and worse by the day, until today, which was not a surprise at all)

This article is a very good read.

http://www.investorsinsight.com/blo...2010/04/26/the-making-of-a-greek-tragedy.aspx

John Mauldin's on "The Making of a Greek Tragedy".

 

[MRC & Co]

Germany just won't move before the 9th May elections.

EZ will be punished by then and contagion is spreading right now.

 

[GumbyLearner]

Greek bonds 2 year-yield over 20% corn:

http://www.marketwatch.com/story/greek-bonds-in-free-fall-two-year-yield-over-20-2010-04-28

 

[maffu]

Greek bonds 2 year-yield over 20% corn:

http://www.marketwatch.com/story/greek-bonds-in-free-fall-two-year-yield-over-20-2010-04-28

Most junkies and homeless people can access a credit card at rates cheaper than that...

I am too young to remember the Russian default, and am really interested in how this will all play out, as I have not see a nation of prominence go bankrupt since I have studied Finance.

What I find strange is that the Greek public are protesting so hard against changes to cut government spending...

 

[kwallace]

It's all very, sadly, interesting I agree.

What I would like to know is how they are going to get investors to come (back?) to Greece?

There is almost nothing at all a company would want to be there for, small internal market, they cannot devalue their currency to make exports attractive, they cannot offer bonus tax terms due to agreements within the EU and a generally high wage system with immense social payments to boot (Also not to mention stupidly high real estate values, though that may change soon)

Can anyone tell me if I'm wrong about this?

 

[Calliope]

What I find strange is that the Greek public are protesting so hard against changes to cut government spending...

Greece has 10 million people. One fifth of the workforce is in the Public Sector, they have jobs for life, they have an early retirement age, and they get a pension of 80% of their income. The Public Sector is also riddled with corruption.

Any realistic cutback in Government spending would involve cutting wages, raising the retirement age and reducing pensions. They are protesting, often violently, over loss of privilege.

ATHENS (Dow Jones)--Greece's public sector umbrella union, ADEDY, said it would extend a planned 24-hour strike to a second day to protest the government's austerity measures.

In a statement issued late Sunday, ADEDY called on public workers to walk off the job from Tuesday for 48 hours. The union had previously announced a strike, along with its private sector counterpart, GSEE, for Wednesday.

"The executive committee of ADEDY calls on the workers to strongly react against the unprecedentedly harsh and savage measures taken by the government," the union said in a statement.

The statement followed an announcement Sunday that the Greek government has signed off on a EUR110 billion, three year joint European Union-International Monetary Fund aid program.

The program, which will help Greece cover its financing needs for the next two years, requires Greece to implement tough spending cuts and raise taxes, including steep cuts in civil service pay and pensions and higher sales and sin taxes.

On Monday, local government workers also staged a 24-hour strike, both to protest plans to radically pare back the number of local governments, and over the recent austerity measures.

http://online.wsj.com/article/BT-CO-20100503-701264.html?mod=rss_Bonds

 

[Calliope]

It becomes more and more unlikely. The civil servants are reluctant to give up there their privileges to help Greece out of bankruptcy.

Three dead as Athens burns

ATHENS: Three people were killed last night when an Athens bank went up in flames as tens of thousands of Greeks took to the streets to protest against harsh spending cuts aimed at saving the country from bankruptcy

.

http://www.theaustralian.com.au/news/world/three-dead-as-athens-burns/story-e6frg6so-1225862813392

 

[Temjin]

Here are some interesting facts that almost everyone is unaware of and has not been reported in the media.

http://online.wsj.com/article/SB10001424052748704866204575224421086866944.html

U.S. participation in the €110 billion ($145 billion) loan to Greece is relatively modest. The 15 nation euro-zone governments are ponying up $106 billion, divided according to their stake in the European Central Bank. Germany, for example kicks in $29 billion, with France good for $22 billion.

Of the $39 billion the IMF is participating in, the US is likely to kick in somewhere in the neighborhood of $3 billion dollars. Considering the US role in the global collapse, that is a relative bargain.

Each member has a "quota"—that is, a financial stake in the IMF, expressed as a percentage—and contributes accordingly. The U.S. quota is 17.09%, followed by Japan at 6.12%, Germany at 5.98% and France and Britain at 4.94% each.

Australia's share of IMF = 1.49%, $3236.4 of SDR quota.

Does that mean that the U.S. is responsible for 17% of the IMF's portion of the Greek package? Not exactly.

First, though all countries are theoretically responsible for investing in the IMF's lending pool, not all of them have currencies that potential borrowers can use. (Think of Zimbabwean dollars or Venezuelan pesos.)

The IMF doesn't say that outright. Instead, it uses the concept of "usable resources," meaning it uses money from countries that are considered financially sound. About 21% of the quota contributions to the IMF were "non-usable," according to the IMF, as of January 2010.

Because the U.S., Japan and big European countries are in the "usable" camp, they finance a larger percentage of IMF funding than their quota would suggest.

It isn't possible now to pinpoint those percentages, for several reasons.

We can assume Australia's money is considered "financially sound" and is a "usable resources".

It is of course, impossible to know for sure how much of Australia's money is involved in this bailout. But let's assume it is equally share among all shareholders of IMF.

$3 billion from US of $39 billion = 7.7% share.

Australia has a quota share of 8.77% equivalent to the US's quota.

Therefore, it MAY be possible that we are funding approximately $263,100,000 for the total bailout in Greece.

That's $11.78 for every man, woman and children in Australia to satisfy the greedy unionsed citizen of Greek and their incompetence.

Yes, this does not sound a lot. But $263 million dollar is still a lot of money and could have been better spent elsewhere.

And you can be sure that once the precedent has been set for bailing out Greece, Spain and Portugal will start asking for help as well. The bill will only get more expensive.

So why is Australians have to pay for this ridiculous bailout for someone who is several thousand kilometers away?

 

[Ageo]

So why is Australians have to pay for this ridiculous bailout for someone who is several thousand kilometers away?

Hehe i agree totally, protectionism i reckon!