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* G20 now preparing itself for Greek default after October - Sky sources. Will be on Sky News imminently with more
* G20 sources: all efforts behind the scenes (by G20 members) are now going into recapitalising banks, preparing economies for default.
* G20 sources: default not expected until after Cannes G20 early November. Emergency funding should still keep Greece afloat thru October
* G20 sources: No suggestion Greek default need imply country leaving the euro
* G20 sources: @ Washington summit marked difference in attitude. Confident euro members edging closer to recapitalising banks, expanding EFSF
Looks like the inevitable is coming in about a month.
Back on July 21, the same day as the Greek bailout redux hit the tape, we speculated that the biggest weakness in the Second Greek Bailout is that the EFSF would have to be expanded to well over the current E440 billion (which even at its current size has not been fully ratified in Europe, and based on recent events may not be implemented until 2012 thanks to Slovenia and Finland), or about E1.5 trillion (and possibly as much as E3.5 trillion). The reason this is a "problem" is that it would have to come exclusively at the expense of Germany which would have to pledge anywhere between 50% and 133% of its GDP (as France would have long since been downgraded and hence unable to participate in the EFSF at a AAA rating). We also assumed that the debt rollover with a 21% haircut would not be an issue as it should have been a formality: on this we were fataly wrong - the debt rollover plan has imploded and means that the entire Greek bailout has collapsed as some had expected. And now that it is clear that contagion is threatening to sweep through the core, it is back to Germany to prevent the gangrene, no longer contagion, from advancing beyond the PIIGS. However, in order to prevent a full out revolution, Germany's economic elite has said it would agree to an EFSF expansion and hence installation of European firewall, but at a price: a "controlled" default by Greece and 50% haircuts for private bondholders (as German banks have long since offloaded their Greek bonds).
This means that "Lehman" is indeed here: just like back in 2008 Paulson et al thought they coud contain the adverse effects of a Lehman bankruptcy, while the financial system ground to a halt 4 days later when money market funds broke the buck, so now Greece is somehow expected to remain in the eurozone even as it files bankruptcy.
Originally posted by loam
Now we see what is real and what is fear mongering.edit on 24-9-2011 by loam because: (no reason given)