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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.
The new rescue plan for Greece will not solve the long-term problems in the euro zone, analysts and investors told CNBC Friday.
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.
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)
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.
Originally posted by freetree64
Not sure if this has been linked yet, but, has a lot of details on this story....