Greece...

Graham_Devon

Am I reading this right? It seems basic enough, but surely it can't be this simple...

Key talks between Athens and its private creditors are set to resume later to try to agree a debt write-off that would dramatically reduce Greece's debt levels.

The two parties have so far failed to agree an interest rate on new bonds that would replace existing debts.

If agreement can be reached, Greece should be in line for additional bailout funds.

Athens has said it hopes to reach a deal by the end of this week.

That reads to me that the plan is to hopefully write off some of the existing debts as Greece simply can't pay them.

Which is great etc.

But the plan is to then simply replace the debt that's been written off with new debt, and that solves the current issues?

I can't be reading this right?

Anyway, it's another month where Greece wil go bankrupt next month if they don't get their next tranche of funds. So of course, they will get their funds regardless, but is this honestly how they are "fixing" things?

http://www.bbc.co.uk/news/business-16736978

CRASH_BANG_WALLOP

its disgusting dude. greeks dont pay their taxes and then go asking for bail outs :mad:

The_White_Horse

why should private investors write off their debt. Let the IMF and the EUROZONE write off their debt!

In any event, Greece should have to pay back every last penny it borrowed and if her people starve and riot in the process, so be it. They took it, now pay it back.

Typical country run by lefties. Borrow borrow borrow. Don't worry about collecting tax, paying the debt back - just borrow more.

About time these morons learnt a lesson.

And with our debt at £1trn and growing, the lefties are stitching us up nicely here. But never fear, the lefty still wants more benefits, a bigger public sector, higher public sector wages and more generous pensions. and what is more, the fact they don't generate a single penny to pay for it is irrelevant. they are ENTITLED.

Rochdale_Pioneers

As I understand it there is sandbagging going on with two parties. First the creditors are for some reason refusing the haircut which is even larger than the one they were told they had accepted late last year (they hadn't). And the Germans who are desperately trying to manage the deal so it doesn't leave them paying out cash support to someone.

Lets assume that the creditors get persuaded and a deal goes through. Greece gets its cash injection but has to redirect large chunks of it to prop up a banking system just bankrupted by the levels of written off debt owed to it. Greece still has enormous unpayable debts even at the rates of interest being discussed as its economy continues its austerity death spiral downwards.

gailey_2

From what I gather last year the deal in place might have been upto 60%haircut but think even then that wasent eneough for them to get back on their feet as they need growth and reform and austerity in greeks case is making things worse.

What annoys me is we heard so very little about greece since gpap was forced out and national unity government put in place. technocrat government not solved italy either.

Also im confused whos funding the bailout?

I did think was eu as last bailout money was given end of november.
But then im sure I read somewhere that the imf was withhoilding last bailout money

thourght imf was independant of eu!

If IMF funding their bailouts then germans are laughing as yes they comtributing

but so are uk and usa who said they resented bailing out the eurozone.

Think this issue could blow up next week at davos?

On random note why do they always meet at davos?is it because its neutral?

ILW

Have the Greeks actually DONE anything to address their overspending?
Or is it all just talk and asking for more bailouts?

gailey_2

Just been doing some light reading however struggling to get key facts.

They have a debt deadline of march and cant see how they can pay up.

Its like they borrowing off payday loan company and cant see how they get out of cycle.

The row over haircut is about %rates of new bond coupons they cant agree but even at 4% wouldent solve their issues and imf saying 3.5%.

The euro bailout fund just not big enough.
They reckon portuagl and spain may need bailout and italy not out of woods yet and unsure whats happening in ireland?

guess french worried as they hold lot of greek debt

unsure if not sorting greece out wil mean like letting layman brothers go down?

ecb will lose money.

At end of day you could keep chucking money at it and it still fail.
might be better cut lifesupport now and might be cheaper in the long run.

Think greece should default
leave euro reintroduce drachma as lets face it

their bonds junk status
their credut rating rubbish
no one wants to lend.

Cant see what they have to lose.

reconsolidating their debts to new 30year bonds in hope they recover by then and pay it all back.

unless they reform and create growth cant see how they can recover.

the bailout is stipulating conditions that stifle growth and causing extre poverty and civil unrest .

Mrs_Bones

I've never understood how this haircut with the creditors was going to work anyway. It was decided that they would all accept this haircut as a way of solving the problem by a bunch of politicians. There seemed to be no discussion with the creditors beforehand, it was offered to them as a fait accompli. Now there is surprise that they are not happy about it?

While at the time of that summit it was heralded as a great accomplishment in solving the problem of Greece it was only a matter of days before the bods on the markets had worked the numbers and declared that even with the haircut, Greece would still be up that certain creek without a paddle.

So what exactly is being accomplished here?

I know a couple of people in Greece and some sections of society are really struggling, the austerity measures are not even being fully implemented yet. The Greek government has let it's people down badly and it is still doing it by trying to cling on to the EU's coat tails. If they get some deal sorted and if they get the next lot of bailout money, it's just another can kicked down the road, nothing is being actually solved. The solutions now seem to be more about soothing the EU's ego rather than what is best for the country and it's people.

Generali

Investment banks sell a sort of insurance called a Credit Default Swap or CDS. This is a derivative product that pays out in the event that a company or country defaults on its debt.

Now unlike normal insurance, you don't have to suffer a loss in order to claim so it's a bit like being able to buy contents insurance which pays out if your next door neighbour is burgled.

The point of all this is that if Greece defaults on her debt, banks have to pay out on CDSs. As many banks in Europe are probably skirting around the limits of solvency if not outright insolvent, the fear is that banks will go bust which will trigger more CDS which means more banks will go bust. The fact is that most countries can't afford another round of bailouts so they'll have to let the banks go bust one way or another. So what to do? Well obviously you impose a voluntary default which means that you don't have to pay out on CDSs. This, I believe, has been ruled as ok by an organization called ISDA who regulate some parts of the derivatives market.

This is all well and good unless of course you bought a CDS on the reasonable assumption that it'll pay out if Greece defaults. This has left you rather shafted and to make matters worse, Governments and Central Banks aren't facing any loss on their bonds at all. You bought bonds thinking that all were equal (as they were in law) and you bought insurance against losses and still you being done for 2/3rds of your investment or whatever ends up being 'agreed'.

The trouble with bailing out the insolvent is that it makes the previously solvent insolvent as well.

I am led to believe that there is one bank that is on the hook for a huge amount of CDS. I can't name names as it is irresponsible at times like this. You will have heard of them but will be unlikely to have any money with them, directly at least.

FTBFun

Generali wrote: »

I am led to believe that there is one bank that is on the hook for a huge amount of CDS. I can't name names as it is irresponsible at times like this. You will have heard of them but will be unlikely to have any money with them, directly at least.

Liverpool's sponsors?

kabayiri

Generali wrote: »

Investment banks sell a sort of insurance called a Credit Default Swap or CDS. This is a derivative product that pays out in the event that a company or country defaults on its debt.

Now unlike normal insurance, you don't have to suffer a loss in order to claim so it's a bit like being able to buy contents insurance which pays out if your next door neighbour is burgled.

The point of all this is that if Greece defaults on her debt, banks have to pay out on CDSs. As many banks in Europe are probably skirting around the limits of solvency if not outright insolvent, the fear is that banks will go bust which will trigger more CDS which means more banks will go bust. The fact is that most countries can't afford another round of bailouts so they'll have to let the banks go bust one way or another. So what to do? Well obviously you impose a voluntary default which means that you don't have to pay out on CDSs. This, I believe, has been ruled as ok by an organization called ISDA who regulate some parts of the derivatives market.

This is all well and good unless of course you bought a CDS on the reasonable assumption that it'll pay out if Greece defaults. This has left you rather shafted and to make matters worse, Governments and Central Banks aren't facing any loss on their bonds at all. You bought bonds thinking that all were equal (as they were in law) and you bought insurance against losses and still you being done for 2/3rds of your investment or whatever ends up being 'agreed'.

The trouble with bailing out the insolvent is that it makes the previously solvent insolvent as well.

I am led to believe that there is one bank that is on the hook for a huge amount of CDS. I can't name names as it is irresponsible at times like this. You will have heard of them but will be unlikely to have any money with them, directly at least.

Now I understand why these CDS products and other financial exotica were developed by so called 'rocket scientists' and whizz kids.

The thing about a rocket is that it sounds great when you design it, but when you come to use it, very little of the original rocket returns.

Perhaps financial products should be designed by Intensive Care nursing staff. They have longstanding experience of keeping a patient alive but on life support.