An interesting (if unsourced) piece at Zero Hedge regarding market rumours of a voluntary Greek debt exchange :
The Greek 10 Year (well technically 9.5 Year) just passed 8%, 8.003% to be precise.
The reason: increasing market rumors that the country is contemplating a voluntary debt exchange in which a portion of the debt will be cut, in essence an out of court bankruptcy but for a sovereign. How this will be accomplished and whether it is at legal per the EU charter is uncertain. What is rumored is that since the transaction would be voluntary between debtor and creditors, it would not trigger CDS thus an event of default will not have occurred. On the other hand total Greek debt exposure may end up being cut by about 25% or more, which would trim the country’s interest outlays. As Greece is currently caught in a debt spiral in which its cost of debt is orders of magnitude over its growth rate, this would actually be the right thing to do. The question is if 25% of the total Greek debt of €305 billion is eliminated (there is $375 billion in debt and future interest for Greece alone), what will happen to the creditors, primarily European banks, and whether they have provisioned for over $100 billion in losses on the country. Furthermore, will this send a signal to the rest of the EU that out of court transactions are ok: how much debt will be eliminated in such a manner next time around when Portugal, Spain, Hungary, and everyone else that is comparably insolvent decides to “cut” some debt?
One to watch in the coming days I think.
Greece and Spain won’t pay back. This was a calculated Risk, and a Lesson for the Banking System. The only thing Germans can do is:
REPOSSESS 170 Leopard 2AEX Battle Tanks from Greece, and 190 Leopard 2A6E Battle Tanks from Spain.
U.S.A must REPOSSESS 170 F-16 Jet Fighters from Greece, … the rest is gone with the wind …forever …
Greece must stop paying lucrative pensions with borrowed money, reform the free health care system, and cut down, 4 times the military budged.
Greece’s problem is too much debt. Greece has a budget deficit of 12.7% of GDP – meaning that the country is spending 12.7% more than the value of one year’s economic output.
Greece is no different to a serial credit card borrower who can’t pay back his loans. But just like a serial credit card borrower, as long as Greece keeps relying on borrowed money to fund itself, the problem won’t go away. It will just get worse.
http://www.defenseindustrydaily.com/Greece-in-Default-on-U-214-Submarine-Order-05801/
Don’t worry; the ECB, the Fed or both will print the money.
And all of us will share the pain, with our hard-earned money.
Bad is never good until worse happens.