2 Trillion (2,000,000,000,000) bailout fund and 50% Greek Haircut - will it work?

Going4TheDream

RJP33 wrote: »

I think they still would have, it's a cultural thing. Over there people are given jobs for life no matter how useful they actually are to the state, and they have an extreme problem collecting tax.

So they would have gone bang eventually whether in the Eurozone or not... Why tie in millions of people into further debt through even more lending when we all know they just cannot (and probably will not) pay it. Surely there comes a time to count your losses and move away graciously. Or are those who are running the whole Euro show really only worried about saving face o9n their hideous experiment and to hell with the cost.

StevieJ

RJP33 wrote: »

I think they still would have, it's a cultural thing. Over there people are given jobs for life no matter how useful they actually are to the state, and they have an extreme problem collecting tax.

So why haven't they hit the buffers in the period before joining the EC and gaining access to the cheap, easy credit? I guess I answered my own question there

RJP33

StevieJ wrote: »

So why haven't they hit the buffers in the period before joining the EC and gaining access to the cheap, easy credit? I guess I answered my own question there

Once the recession started they were doomed no matter what their currency, Greece has historically had issues with it's finances.

The only difference now is they have the Eurozone to bail them out and give them time, rather than having to devalue their own currency and put half the population into poverty quickly.

worldtraveller

A 50 percent write-down on Greek debt holdings, part of Greece's debt swap deal, is not enough to put the country's huge debt on a viable footing, an adviser to Germany's finance minister Wolfgang Schaeuble told a Greek newspaper.

In an interview with To Vima's Sunday edition, Clemens Fuest, who is also an academic, said the Greek debt haircut should be higher than the agreed 50 percent to help Greece repay its debt.

Reuters

Not really a surprise! The FT are reporting that people involved in the discussions said that bondholders were likely to face a haircut of 55-60%.

sabretoothtigger

pqrdef wrote: »

Always best to stock up on things when they're cheap, including money. Somebody offers you 3% fixed for 20 years, grab it. Borrow as much as you can.

People should learn that lesson with fixed rate mortgages, Instead its more tempting to hope rates stay lower then that for a decade which to me seems unlikely unless the Chinese are going to fund us that long

USA is financed short term, apparently Italy and Greece were also, because its cheaper till it isnt

Generali

sabretoothtigger wrote: »

People should learn that lesson with fixed rate mortgages, Instead its more tempting to hope rates stay lower then that for a decade which to me seems unlikely unless the Chinese are going to fund us that long

USA is financed short term, apparently Italy and Greece were also, because its cheaper till it isnt

It is cheaper but also it's what the debt market will buy.

Countries sell debt where the demand is. The UK gets to sell very 'long dated' bonds because it forces annuity providers to buy them. Now that's quite savvy from the POV of the Government but less good when you retire as it means that you are forced to receive a smaller pension than you would otherwise.

Effectively, the Government is taking a portion of retirees' income to subsidise their debt spending.

There is a lot of demand for short dated US Government debt, especially T-Bills (debt of between 1-52 weeks in duration) as it is seen as a very low risk and liquid place to keep your cash. As a result, the US Government issues a lot of short dated debt. If the US was to try to issue more long dated debt they would be unlikely to get many takers unless they too want to force people to buy it. Americans are a bit more savvy about that sort of thing and probably wouldn't have it.