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Greece Debt - Wouldn't this be a form of default?
Old 09-28-2011, 01:11 PM   #1
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Greece Debt - Wouldn't this be a form of default?

They are doing all they can to try to call it something else.

But.... default, bailout, or some sort of negotiated bankruptcy... seems to me somebody isn't going to get paid.

UPDATE 4-Greece to face inspectors, Merkel hints at bailout change | Reuters


Quote:
The second bailout aims to ease Greece's debt burden by imposing a 21 percent loss on private Greek bondholders.
After intensifying debate among economists and policymakers that only a 50 percent loss would make the country's debt viable, more investors have signed up to the bond exchange plan, Greek financial daily Naftemporiki reported.
Citing an unidentified finance ministry official, it said Greece's weeks-long struggle to lure private bondholders into the rescue plan had ended with it reaching the 90 percent participation target.
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Old 09-28-2011, 02:18 PM   #2
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My understanding is that there is no "default" option written into the Euro legalities. Not that any government would actually speak that clearly, but there may also be a legal need to call it something else. At least they are getting a bit more serious this time.
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Old 09-28-2011, 02:42 PM   #3
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I think governments and the EU get to call these things anything they choose.

The market will decide if it is a "default."

IMO, Germany would be better off if they stopped pumping euros into the black hole that is Greece. Bump Greece out of the Eurozone, let them revert to the drachma and inflate it as much as they choose. Germany could use their euros to prop up their own banks (big losers in the Greek debacle).
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Old 09-28-2011, 03:06 PM   #4
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In the bond business a 'default' is technically not paying interest or principal when due...

If you can get the person to agree to take 80 cents on the dollar and pay them that 80 cents prior to when it was due.... it is not a 'default'....

Sure, the bondholder got shafted, but it was his choice...

Most companies (and it looks like gvmts also) will do a lot of things to prevent a default... because it creates a lot of unwanted covenants to be broken in almost every loan they have....
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Old 09-28-2011, 03:12 PM   #5
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Originally Posted by samclem View Post
I think governments and the EU get to call these things anything they choose.

The market will decide if it is a "default."

...


It looks like some market participants already have.

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It costs $6.1 million upfront and $100,000 annually to insure $10 million of Greek debt for five years. An increase signals worsening perceptions of credit quality; a decline, the opposite.
Sovereign Credit Swap Index Falls in Europe, Reversing Increase - Businessweek
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Old 09-28-2011, 04:40 PM   #6
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That's the key -- what the language is in the CDS agreements.
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Old 09-28-2011, 04:55 PM   #7
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I really am curious how the CDS are worded. Is in any change to the term and interest rated considered a default? of is as Texas Proud suggest if the bond holder agrees it isn't a default.
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Old 09-28-2011, 06:25 PM   #8
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Didn't they raise the property tax also to pay debt? I hope Greece does NOT default. This effects the Stock market.

I have shares in Bank of Ireland.
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Old 09-29-2011, 04:45 AM   #9
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I have read that certain events may not trigger CDS payouts.


If all of the PIIGs do not get their austerity acts together.... it appears that there is not enough money in the bailout fund.

I have been seeing some people say it will take them a decade to get it all settled because of the complications of different governments, lack of cooperation and gaps in their monetary system.

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But there is now widespread agreement among economists and investors that the €440 billion fund is not big enough to be effective if some of the larger euro area economies fail.
Some economists have estimated that the fund would need up to €2 trillion to bail out Spain or Italy. Both nations are struggling with unsustainable levels of debt and dim economic prospects.

Euro stability fund is a mirage - Sep. 28, 2011
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Old 09-29-2011, 07:17 AM   #10
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I have been seeing some people say it will take them a decade to get it all settled because of the complications of different governments, lack of cooperation and gaps in their monetary system.
They may never get it settled. Monetary union can't work unless the nations either have political union or at least a common monetary policy/approach to govt spending, etc. This was supposed to be provided for in the earlier EU framework, but the details never got sorted out and the existing rules/good practice weren't enforced. Now the market is enforcing them. The market will also enforce discipline in the US, at our great expense, if we can't muster the political will to do it ourselves.
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Old 09-29-2011, 07:51 AM   #11
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Originally Posted by samclem View Post
They may never get it settled. Monetary union can't work unless the nations either have political union or at least a common monetary policy/approach to govt spending, etc. This was supposed to be provided for in the earlier EU framework, but the details never got sorted out and the existing rules/good practice weren't enforced. Now the market is enforcing them. The market will also enforce discipline in the US, at our great expense, if we can't muster the political will to do it ourselves.
It will get settled one way or the other. Default, EU departures, EU breakup, bailout, etc.

I have been reading that some think Greece is either in a depression or will be declared that way soon.
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Old 09-29-2011, 12:27 PM   #12
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Here in Spain I am constantly hearing politicians say -with a stern and authoritative tone- that we have -collectively as a nation- been spending vastly above our means and productivity, and they explain it away with the metaphor of a family that spends more than it earns.
Well, in this national family, who has been in charge for the last few years, if not the politicians themselves?
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Old 09-29-2011, 08:50 PM   #13
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Originally Posted by vicente solano View Post
Here in Spain I am constantly hearing politicians say -with a stern and authoritative tone- that we have -collectively as a nation- been spending vastly above our means and productivity, and they explain it away with the metaphor of a family that spends more than it earns.
Well, in this national family, who has been in charge for the last few years, if not the politicians themselves?
Yeah. What is this "we" nonsense?
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Old 09-29-2011, 09:04 PM   #14
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Anyone holding any financial stocks from Europe?
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Old 09-30-2011, 12:33 AM   #15
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Anyone holding any financial stocks from Europe?
How about you? Holding any brewers from Benin?
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Old 09-30-2011, 01:56 PM   #16
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How about you? Holding any brewers from Benin?
Just IRE.
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