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Official: Greece defaults!

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posted on Jul, 22 2011 @ 03:17 AM
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The latest Greek bailout is done — the official statement is here — and it involves Greece going into “selective default,” which is, yes, a kind of default.

I can’t remember a major financial story which has been covered so inadequately by the financial press. All the incomprehensible eurospeak seems to have worked, along with the fact that the deal was announced in Brussels, where the general level of journalistic financial literacy is substantially lower than it is in London or New York or Frankfurt. On top of that, statements are coming from so many different directions — Eurocrats, heads of state, the Institute of International Finance, Greek officials, Portuguese and Irish officials, you name it — that it’s extremely hard to put it all together into one coherent whole.

Oh, and to complicate things even further, most of the day’s discussion was based on various widely-disseminated draft documents which differed substantially from the final statement.

This is a bail-in as well as a bail-out: while Greece is getting the €109 billion it needs to cover its fiscal deficit, both the official sector and the private sector are going to take losses on their loans to the country.

As such, it sets at least two hugely important precedents. Firstly, eurozone countries will be allowed to default on their debt. Secondly, a whole new financing architecture is being built for Greece; French president Nicolas Sarkozy called it “the beginnings of a European Monetary Fund.”


The nature of massive precedent-setting international financing deals is that they never happen only once. There’s lots of talk today that this deal is for Greece and for Greece only, but some of the more explicit language to that effect was excised from the final statement. One thing is for sure: these tools will be used again, in future. They will be used again in Greece, since this deal is not enough on its own to bring Greece into solvency; and they will be used in other countries on Europe’s periphery too, with Portugal and/or Ireland probably coming next.


Greece Defaults

Okay, though "the official statement" doesn't use the word 'selective default' or 'default' anywhere, I understand that this is a restructure of the Greek sovereign debt, and this restructure means it comes at some loss on the original contracts for investors. This by definition is a default, and as the article points out. this sets a strong precedent that is certain to be used again with other countries, now that it has been used and endorsed here.

This could be the beginning of the end. We read elsewhere....


The new rescue plan for Greece will not solve the long-term problems in the euro zone, analysts and investors told CNBC Friday.


Euro Zone Deal Will Not Stem The Tide: Investors


Banks across Europe are braced to take as much as 17 billion euro ($24.5 billion) of writedowns on their holdings of Greek sovereign debt within a matter of days.

Even before politicians sat on Thursday to thrash out the terms of the second Greek bail-out, auditors had been warning bank finance directors that they would have to make provision for losses on their bonds with their second-quarter results, beginning next week.


Banks Brace For Hits On Greek Bonds

Private investors, banks and other Euro countries are already paying the price for bailing out Greece, and even this plan is not certain to deliver over the long term as many commentators are flagging. Imagine what happens when other Euro countries are seeking a similar bailout, which appears to be on the horizon, notably Portugal and Ireland from what I am reading.

I've been careful not to use this term before, but will here, how long will this Ponzi Scheme last for? Ponzi schemes always collapse on themselves as they rely on new investors to keep the scheme running.



posted on Jul, 22 2011 @ 03:30 AM
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I had heard that one or more of the rating agencies would consider it a default if they chose this path.. however I guess horse trading has come into play turning said threats by the rating agencies into hot air.. which I find deeply interesting... and I can not help but wonder what type of horse trading took place to allow that to happen...



posted on Jul, 22 2011 @ 03:39 AM
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reply to post by thoughtsfull
 


Hyper inflation in Europe?

Oh, leasing to the rest of the world.

EDIT: I thought more people would be posting about this. But it is 4:00 in the morning..

edit on 22-7-2011 by PubertySpider001 because: (no reason given)



posted on Jul, 22 2011 @ 04:04 AM
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hello people

i'm in france and seriously i don't get it ... our dear president is saying all is under controle, I think they are doing everything to keep things like that to still enjoy their benefits ... We should have been a long time into the abyss, but they continue to beat a dead horse ... until when? the fall will be fast, hard, and we will pay for them...



posted on Jul, 22 2011 @ 04:15 AM
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Not sure if this has been linked yet, but, has a lot of details on this story....





online.wsj.com...



posted on Jul, 22 2011 @ 04:20 AM
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Originally posted by PubertySpider001
reply to post by thoughtsfull
 


Hyper inflation in Europe?

Oh, leasing to the rest of the world.

EDIT: I thought more people would be posting about this. But it is 4:00 in the morning..

edit on 22-7-2011 by PubertySpider001 because: (no reason given)


I'm not sure what type of horse trading they are playing I suspect the noises (from the UKs Conservative Party of all places) that the "remorseless" logic of monetary union should be greater fiscal union changes the whole dynamics of the Eurozone into the Federal Europe that some seem to be craving.


www.ft.com...

He recognised that his enthusiasm for greater eurozone integration turned British policy on its head, since it ends the government’s long-standing desire to frustrate the creation of a two-speed Europe. He said “the remorseless logic” of monetary union was greater fiscal union.


So I would place fiscal union on the list of horse trading to keep the markets happy and further screws over the populations of the Eurozone.
edit on 22/7/11 by thoughtsfull because: (no reason given)



posted on Jul, 22 2011 @ 04:31 AM
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It's the lesser of 2 evils IMO.

Greek investors take a haircut.

This was always going to happen just depends to what degree.

France an Germany will have to pay the bulk, so more austerity measures heading their way (I can't imagine for one minute the French public being happy about this) but a full on default would have led to catastrophic collapse.

Has it stopped a full on default, has it stopped the contaigen spreading, has it installed confidence?

Some how I doubt it, it's merely postponed it to an even greater fall at a later stage.

IMO it's a case of who blinks first, you've got the FED openly warning of a possibility of US default (probably to pave the way for QE3) and the EU fumbling to fix the debt with more debt......

It's laughable, once one goes it will take the other with it and the respective politicians on either side can then blame the other side....."It started in America....."

MR



posted on Jul, 22 2011 @ 04:42 AM
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reply to post by Marlborough Red
 


It's become a case of hot potato, being tossed around, and soon the buzzer will go off, and last one holding the potato, get's to start 'splaining, how the mess got started, meanwhile behind the scene's, the players keep on playing, and the water's just fine, ask anybody who's dipped a toe in it lately.....



posted on Jul, 22 2011 @ 05:08 AM
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I don't know why these so called monetary experts are putting off the inevitable. The Euro is doomed. They'll try to save it by bailing out the likes of Greece, maybe Portugal and Ireland is looking dodgy again, but when Italy finally succumbs to it's debts the whole European Union may collapse. The Euro as a world currency will not survive Italy going bust.



posted on Jul, 22 2011 @ 05:15 AM
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reply to post by LemmyKautionu
 



I wouldn't be too concerned about Italy, that's small fry compared to Ireland.

If Irelend goes down it will take the UK with it and this will collapse everything faster than a burning steel framed building collapsing at freefall speed....!

Current UK banking exposure in Ireland is estimated at around £100bn......



MR



posted on Jul, 22 2011 @ 06:03 AM
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Originally posted by freetree64

Not sure if this has been linked yet, but, has a lot of details on this story....


online.wsj.com...


Good article.


I agree with the above re which one blinks first, the other falls so one side can just blame the one on the other side of the pond for the global collapse.



posted on Jul, 22 2011 @ 09:11 PM
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reply to post by Marlborough Red
 

What really grates my danglies is how we in Britain are suffering so we dont default on our debts while seemingly the rest of Europe, except Germany, are still enjoying a better quality of life than us and then are being bailed out by us!!! I thought we were skint yet we can still bail out other countries... And why are we giving money to these countries who have the Euro when we don't? Are we that dependent on the Euro surviving, and if we are, why don't we simply sign up and dump sterling?



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