Wednesday, January 18, 2012

Suspended Animation as we wait for the Greece fire !

Good morning ! Welcome to the Greece fire ! Another day -  more austerity , more greek families abandoning their children because they simply can't afford to care for them any longer and more greek suicides. Greece has been on a slow walk to hell over the past two years but the end appears to be coming into view - that being the March 20th cliff for the big bond redemptions. It appears clear that as things presently stand , the country can't make the 14.5 billion euros payment due on that date. It doesn't appear that the can to be kicked further ( as the can has been kicked to date. ) It seems unlikely as things stand now that Greece has any further possibilities for movement past a resolution of the bond redemption ( payment ) or default by March 20th. So , where do things stands today ? Let's go around the horn briefly .....

  • From The Telegraph: Greece prepares to give way to banks to secure debt deal
  • From The NYT: Greek Premier Says Creditors May Be Forced to Take Losses
  • From Fredw : Do you believe any of the spin , lies and jibber jabber ? 
  • Taking direct aim at hedge funds and other private holders of Greece’s debt, Prime Minister Lucas Papademos says he will consider legislationforcing the creditors to take losses on their holdings if no agreement can be reached in critical negotiations scheduled to resume Wednesday.

    Now , pay attention to the last point , this is critical to understanding the extent of the problem. PM L-Pap is threatening to seek passage of a law which in essence of a Collective Action Clause which would cram down what could amount to an approximately 70 percent loss on private investors if they don't "eat their peas " by Wednesday.  While the private investors are told to eat their peas , the IMF and ECB want to take nary a loss at all ! And since hedge funds have replaced european ( one exception being  Greek ) banks to a meaningful degree - as far as holding greek debt  ,  there is a serious question as to whether the hedgies will bite on such a deal. 

    Meanwhile , time rolls on , this Friday will be the 20th and it would probably take a good six weeks to complete the debt swap. That assumes a deal can be reached , the hedgies and banks play ball , litigation doesn't ensue and everything else lines up perfectly. In other words , don't hold your  breath ! 

    However , the sad fact remains as long as the ECB and IMF refuse to take losses on the holdings , the private investors would need to take a 100 percent loss to give Greece meaningful relief - have we heard any noises from the ECB or IMF that they will truly help Greece ? Of course not - so , while the focus remains on the private debt swap , just consider that without ECB and IMF participation at the same level as the private investors , Greece will still take it in the pants .