Greece...

Generali

Graham_Devon wrote: »

Well thats a surprise.

Now they just got to figure out who owes who what, as apparently no one knows.

Apparently though, they have figured these CAC's will only cost £2-3bn? So makes you wonder what on earth all the fuss was about in the first place!??

It is a bit of a surprise as the point of structuring the bailout and partial default in this way was to avoid it being defined as a default.

Credit Default Swaps are what are known as OTC products. That stands for 'over the counter' as opposed to exchange traded. The thing is, OTC products aren't traded on an exchange so nobody knows who owns what. It's why the ISDA committee met on a Friday because a bank or 10 could have just been made insolvent by this decision although it's unlikely. One French bank won't be happy about this (can't name names).

michaels

Well just like holding the bonds was a gamble so was holding the CDSs....

Mr_Mumble

The net exposure narrative - that there is nowt to worry about, only ~3bn euros of net exposure on Greek CDS and everybody will have hedged their holdings and nobody would be dumb enough to do an AIG with regard Lehman - is probably correct but there are already signs that not everything is hunky dory:

In a statement before ISDA’s decision, KA Finanz said it may have risk provisions of about 1 billion euros if credit- default swaps on Greece it has written are activated. That includes charges of 423.6 million euros on an assumed loss quota of 80 percent, it said.

via Bloomberg

An Austrian state-owned bad-bank, whoops. Given The German bad bank is the largest 'private' foreign creditor to the Greek government the taxpayers in continental Europe should be questioning how much of the private sector involvement in Greece was a sneeky grant from Northern Europe to Southern.

setmefree2

We still don't know yet how well the system is going to handle the actual exchange of money when default-insurance payments start happening. And that won't start until an auction scheduled for March 19.
If you remove all hedges and offsetting swaps, there's about $70 billion in default-insurance exposure to Greece out there, which is a little bit bigger pill for the banking system to swallow. Is it possible that some banks won't be able to pay on their default policies? We'll find out.

Another worry is whether Greek and other European officials will work harder next time to avoid triggering these default policies,
Neutering the default-insurance policies could help keep banks that write insurance policies from having to pay up the next time Greece defaults -- which seems inevitable. But it could also weaken investor faith in the default-insurance system. If investors stop believing they can buy default insurance that actually works, then they might just stop buying risky sovereign debt.

http://www.huffingtonpost.com/2012/03/09/greece-clinches-debt-deal_n_1333922.html?ref=business

pqrdef

michaels wrote: »

Well just like holding the bonds was a gamble so was holding the CDSs....

But insurers don't expect their clients to volunteer to take losses. They get a bit annoyed if you roll your Ferrari over a cliff on the grounds that it doesn't matter, you're covered.

The haircut victims have been rather spineless. Bluffs could have been called.

setmefree2

Far from being the end of this eurozone debt crisis, or even the beginning of the end, Friday's debt-swap was probably just the end of the beginning.

http://www.telegraph.co.uk/finance/comment/liamhalligan/9135984/Forget-economic-spring-Greek-outlook-is-stormy.html

setmefree2

Is it true that there is even more Greek debt that we don't even know about?

The Greek €107 Billion Contingent Liability Gorilla Exposed

http://www.zerohedge.com/news/greek-%E2%82%AC107-billion-contingent-liability-gorilla-exposed

Degenerate

Degenerate wrote: »

There's a good chance this will ultimately end in military dictatorship for Greece.

The country is becoming difficult to govern already and the economic situation is about to get a whole lot worse. The upcoming elections are likely to result in decimation of the the mainstream parties and surges in support for the far left and right. There will be no clear mandate for any party, and the differing factions will be too ideologically disparate to work together, leaving no-one effectively at the helm right at the moment when strong leadership is most needed. That when the generals will step in.

I wonder how the Merkel and the rest of the Euro-zone leadership will spin that one if it happens?

I hate it when I'm right about these things.

Graham_Devon

Greece can't seem to form a coalition government now, with the Democratic Left Party refusing the bailout conditions.

This could lead to new elections, of which there is a fear the Democratic Left party will gain more votes, damaging the relationship further between the EU and Greece and putting further bailouts at risk.

Commentator, from Greece this morning stated that the reality is it's now a waiting game for Greece to pull out of the Euro. Greece wants, and needs to stay part of the EU, without the currency, and it's up to others in power to decide whether this will conclude in a bitter end. Afterall, the UK is in the EU, without the currency, but they appear to be making it nigh on impossible for Greece to do the same, creating further problems for Greece.

Generali

If the polls are right, Syrizia has got the most to gain by getting fresh elections. They are leading opinion polls with 25% of the vote As the winner of the poll gets a bonus 50 seats, they'd be looking at having slightly under 120 votes: not too far away from a 151 majority.

If Syrizia can get that they could probably form an anti-austerity majority along with the Independent Greeks who, while a notionally right-wing party, already came to an election agreement with a left wing party.