Greece downgraded to CCC by S&P, Greek MPs plan their getaway!

Mr_Mumble

Thought I'd post yet another inevitable Greek downgrade for posterity. from the FT (paywall)..

Greece rating now worst in world

Greece was downgraded close to default on Monday, sending 10-year bond yields near to fresh euro-era highs and prompting more worries over the health of the eurozone.

Standard & Poor’s cut Greece’s long-term sovereign credit rating three notches to triple C in a sign the rating agency thinks it will be forced to downgrade Athens to default as private creditors are likely to be involved in the country’s next bail-out.

Greece is now the lowest-rated sovereign in the world, having fallen below Ecuador, Jamaica, Pakistan and Grenada.

S&P said: “In our view Greece is increasingly likely to restructure its debt in a manner that, under the conditions of any package of additional funding provided by Greece’s official creditors, would result in one or more defaults under our criteria.”

Greek 10-year bonds jumped over 17 per cent for the second time this year before closing at 16.97 per cent in response to the S&P move, which puts Athens only four notches above default.

Irish and Portuguese bond yields also came under pressure. Portuguese and Irish 10-year yields closed at euro-era highs of 10.66 per cent and 11.34 per cent respectively.

Sign of the times, Greek MP evacuation edition

Apparently, a tunnel that leads from Lykavitos to the Greek parliament, and from there to the sea port of Piraeus, is being cleaned out by foreign workers in preparation for the possible evacuation of Greek MP’s in the event of a storming of parliament ahead of wednesday’s vote on the new memorandum.

:eek:

Generali

What Greece has left to look forward to in ratings terms (from S&P):

‘CCC’—Currently vulnerable and dependent on favourable business, financial and economic conditions to meet financial commitments.
‘CC’—Currently highly vulnerable.
‘C’—Currently highly vulnerable obligations and other defined circumstances.
‘D’—Payment default on financial commitments.

The only way Greece won't default is if someone else pays off their debts. It's funny to think that just 4 years ago Greek debt used to yield about the same rate of interest as Germany's!

Mr_Mumble

(hopefully the above WSJ graphic shows up!)

Quite a collection of ragtag countries. The only other negative outlook however is Belarus, not good company:

Belarus devaluation spreads panic

Wednesday May 25, 2011, 12:44 pm EDT
MINSK, Belarus (AP) -- A sharp devaluation of the Belarusian ruble has spread panic across the country, with people rushing on Wednesday to buy dollars, euros, toasters and canned goods -- anything that will not lose its value as quickly as the national currency.

Belarusians swept store shelves and queued for entire days at currency exchange offices in a desperate attempt to protect their savings from the country's sinking fortunes.

President Alexander Lukashenko promised that the national currency will remain stable following the devaluation ordered a day earlier, but experts warned it will continue its nosedive if Russia doesn't provide a quick bailout.
Confidence in the ruble, whose value is fixed in Belarus, has dropped for weeks amid fears over the country's finances and the country's lack of support from its neighbors, both the EU and Russia.

Belarusian officials on Tuesday cut the ruble's official value against the dollar almost in half Tuesday -- to 4,930 rubles per dollar from the previous 3,155. The perceived value of the local currency is much lower, however -- on the black market it takes 6,000 rubles to buy a dollar.

The current protection given to the Greeks, of an implicit guarantee the Germans will pay their bills in the short-term, is perhaps too much comfort? Yep, Greeks will whine that they're feeling pain but they've not been impacted like Belarusians, yet. If the IMF don't pay up or the German government and ECB can't resolve their differences in the next couple of weeks we could have chaos in the EU. Of course the likelyhood is a hodge-podge can-kicking exercise but that just makes the problem - ever increasing debt - worse when default happens.

Generali

Mr_Mumble wrote: »

The current protection given to the Greeks, of an implicit guarantee the Germans will pay their bills in the short-term, is perhaps too much comfort? Yep, Greeks will whine that they're feeling pain but they've not been impacted like Belarusians, yet. If the IMF don't pay up or the German government and ECB can't resolve their differences in the next couple of weeks we could have chaos in the EU. Of course the likelyhood is a hodge-podge can-kicking exercise but that just makes the problem - ever increasing debt - worse when default happens.

Ultimately there are 2 choices for Greece: default or get someone else to pay the debts. They seem incapable of taxing their citizens and corporations so can't get the money. People that haven't been paying taxes for decades are hardly going to start now just to pay off foreign creditors!

worldtraveller

Until it actually happens (inevitable IMHO!) a default by Greece could have several outcomes of course. My concern is that many people seem to only be looking at a default by Greece currently. It's been dragged out so much, and has been pretty inevitable for so long now, that financial institutions an Governments have at least had an opportunity to plan accordingly. Whether or not that will prevent panic in the market, is an unknown of course. Investors may well panic and sell off bonds in the likes of Portugal, Spain, Ireland & Italy, but also unload equities & higher grade bonds. It is the domino effect that is the main concern. It will also, again, expose the spiders web of Governments (taxpayers) & financial institutions exposure to Greece & other countries debt. If there is a panic it is also highly likely to cause (further?) stagnation in the global economy. We have already discussed many times on this forum "Who is next for a downgrade/bailout"? Surely, after a default by Greece, we will be doing exactly the same, but inserting "default", for several other countries, particularly if stagnation sets in?

worldtraveller

EU commissioners have a "profound sense of foreboding" about Greece and the future of the eurozone, a leaked account of a meeting has suggested.

The account, seen by BBC News, said this was in reaction to the "damning failure" of eurozone ministers to agree a new bail-out for Greece last night.

The author warned that the markets would now "smell blood".

The European Commission said it would not comment "on anonymous interpretations of meetings".


BBC News


:rotfl::rotfl:

vivatifosi

Can anyone please explain why, in spite of Greece and potential warnings re other PIIGS, the euro remains so resilient against the £?

STing

vivatifosi wrote: »

Can anyone please explain why, in spite of Greece and potential warnings re other PIIGS, the euro remains so resilient against the £?

My guess is the prosperity of Germany, France, Finland and others act to balance the PIIGS?
The UK's economy is precarious, and runs a huge trade deficit.

vivatifosi

STing wrote: »

My guess is Germany, France, Finland and others act to balance the PIIGS?
The UK's economy is precarious, and runs a huge trade deficit.

That was my thought initially, but although politically the will may be there to help out one, can that be supported for more than one?

In other words, if you were a prudent German, how long would it be before you threatened to change government because you were fed up with bailing out a profligate debt-laden neighbour, then another; when you're not the one who made the mistakes and your loyalty to that group isn't that strong?

This must tell in the Euro sooner or later, surely?

Really2

STing wrote: »

The UK's economy is precarious, and runs a huge trade deficit.

But has narrowed a fair wack, I think the same as viva, it is hard to see why the euro is so strong when in general it looks very unstable.

Is it not down to the ECB buying up bonds?

STing

vivatifosi wrote: »

That was my thought initially, but although politically the will may be there to help out one, can that be supported for more than one?

In other words, if you were a prudent German, how long would it be before you threatened to change government because you were fed up with bailing out a profligate debt-laden neighbour, then another; when you're not the one who made the mistakes and your loyalty to that group isn't that strong?

This must tell in the Euro sooner or later, surely?

I take your point. And feel the German government are under enormous pressure from voters not bail out countries unable and/or unwilling to carry out the required reforms.

Markets don't like uncertainty, and PIIGS troubles weigh on the currency. I could be wrong but I think this risk is already factored in, and the currency would be far higher were it not for PIIGS troubles.

Probably not the answer your looking for. I'll bail out wait for a forex trader to explain to us all.