Even more on Greece

Courtesy of Eurointelligence, here is a French take on what is happening.

Update: Tony Barber has a blog entry on Thursday’s summit here.

23 replies on “Even more on Greece”

“les attaques contre la Grèce, le Portugal et l’Espagne.”

There is always good mileage in looking for modern day gnomes of Zurich!

Given the number of infringements that are opened against member states, it is difficult to get compliance with rules.

Ireland for example is among the laggards with Bulgaria and Greece in failing to make progress in implementing the EU services directive.

The Eurogroup should develop a countercyclical fiscal rule with some serious sanctions.

Remember 2001 when McCreevy told the ECB and Commission where to get off; there was wide support for his stance and FF support jumped in an Irish Times poll.

Last week, the business lobby BusinessEurope said the difference between a European economy growing at 2% instead of 1% amounts to 6.5 million additional jobs and a public debt consolidation effort of €450bn or 7% of GDP by 2014.

Competitiveness of Eurozone economies: Long tradition of tensions:


On the subject of European countries finding themselves in difficulty….

“In conclusion, the establishment of the National Asset Management Agency is a prerequisite for economic recovery and the maintenance and creation of jobs. It will remove risky loans from the balance sheets of the Irish banks, which in turn will enable them to resume their essential role in the economy – the extension of credit.”

Can anyone recall who said that in a speech to the Dail last year?

I’m racking my brains to try and remember. Who was it now?


“Thomas Stolper at Goldman Sachs said the drop in sentiment towards the euro reflected not merely worries over Greece, but were symptomatic of broader concerns over European sovereign debt sustainability and European monetary union.

He said the small size of the Greek economy, which represents about 3 per cent of eurozone gross domestic product, meant that its direct significance was not the real issue.”

Not the real issue.

Well exactly. The real issue is whether Greece will be let hang out to dry by Germany. Is so, then the markets are correct to penalise Greek debt.

The real issue is solidarity and with it the future of the Euro itself.

“Traders make $8bn bet against euro”


“Amid growing nervousness in financial markets over whether countries including Spain and Portugal can repair their public finances, Madrid on Monday launched a PR offensive to try to assuage investors’ fears.

Elena Salgado, Spanish finance minister, and José Manuel Campa, her deputy, flew to London to meet bondholders.”

Psalms 23:4 “Yea, though I walk through the valley of the shadow of death, I will fear no evil …”

Should the Euro fall asunder, whither the auld sod?
Will we get a “Punt 2.0”, which would then tumble precipitously against oil(!!!)/gold/dollar/sterling/schadenmark ?
That would be a laugh. Oh but wait, what would happen to the value of all those UK/NL/DE pension investments into irish land banks and other opportunities?
Looks like they’re damned if they dont, to me.



“The real issue is solidarity and with it the future of the Euro itself.”

Apologies if we’re heading into semantics and or philosophy here, but I do think the word solidarity is not the proper one here.

Germany has been a net contributor to the EU for how long?
Greece has been a net beneficiary for how long?
Did Germany show solidarity to Greece by helping out with EU funds?

If Greece is falling it is not due to lack of solidarity from Germany, it is due to the decisions taken by the Greek government and by extension by the Greek people who elected them.

Predictions are risky, still I think that Greece will have to sort out it’s own crisis. Ireland will have to do so as well. Low tax countries are will have to help themselves before high tax countries will bother.

Tax for an average earner in Ireland is about 10-15%, in Germany someone on the same salary is paying 35-40%. It would take a very skilled, very motivated politician to convince the one taxed at 35-40% that part of his taxes should be going to pay for the benefits of someone with similar earnings but taxed at 10%.


No apology necessary. Perhaps I used the word too quickly and without sufficient explanation.

I don’t mean some “fuzzy feel-good” solidarity where Germany (the school prefect) protects Greece (the slow pupil) from the bullying bad boys (speculators).

I don’t mean solidarity in the Lech Walesa sense.

I mean that either Germany, France and the Benelux make it clear that they will protect each and every Euro member or the speculators (traders) will continue the attack.

The use of naked leveraged CDS as a method is clear. It is a cheap method of naked short selling Greek debt and pushing up yields to a level where they enter a debt spiral.

“Greek crisis intensifies as Joe Stiglitz calls for Europe to ‘teach the speculators a lesson’”


This has gone beyond an analysis of deficits and tax policy. It is an outright attack on the Euro by speculators. None of the PIGS can repair their reputations in the short run. Greece has been targeted because theirs is the most difficult to repair. They admit they cooked the books.

Either the speculators are sent packing with large losses or they will continue the attack. There’s nothing Greece can do about it, short of announcing a 20% cut in expenditure. They don’t have the luxury of waiting three or four years.

Talk of reducing the deficit from 12% to 3% in three years without a plan merely feeds the speculative position.


it seems we’re in agreement about most things then. I wouldn’t say the euro is under attack though.

Greece is being targeted as someone with a lot of borrowing needs & with a perceived lack of ability to pay back. They’ve had the luxury of more than 3-4 years to use the cheaper borrowing the euro gaven them to sort out their problems.

It is unlikely they can do it now in the time the markets seems willing to allow, especially (like you say) since they’ve not yet announced a believable plan.

If Greece can’t borrow, it shouldn’t affect the rest. I believe it will even make it cheaper for other euro countries to borrow as the other euro countries would not have the perceived risk of having to bail out weaker countries.

Greece should face this without running for help simply because it is the right thing to do. Not sure if it is politically correct to quote this but the old saying of “Spare the rod, spoil the child” seems appropriate for this situation.

Btw, I don’t think the speculators will be taught a lesson by Greece facing up to reality. There will always be risk takers willing to speculate. Casinos are full of risk takers, some will also find their way into international finance.


“If Greece can’t borrow, it shouldn’t affect the rest.”

Here I disagree.

If Greece can’t borrow it will not be in a position, let alone to finance its deficit but, to refinance existing debt. It will be in default. CDS rates will bypass the Moon on their way out of the Solar system.

Greece will collapse. The speculators will hit the mother lode, destroying those on the wrong side of the trade (creating another banking crisis), and move on with their gains to target Portugal.

If Greece defaults the Euro is dead.

“Spare the rod, spoil the child”

Problem is Greece (when a Euro child) was spoiled. It is now a stroppy teenager. Too late for the rod now. Daddy’s going to have to solve the problem AND THEN explain the facts of life.
The speculators certainly will be taught a lesson if Greece is allowed default. And that lesson will be that the Euro is easy pickings.

Someone sold the CDS, apparently that someone didn’t pay attention to what happened to AIG…….

If nothing else, the CDS should be made illegal for bondmarkets. If the insurer is so sure of his/her ability to price the risk why settle for part of the profit but all or at least the biggest part of the risk?

Greece defaulting is a problem for the seller of CDS. Hopefully some lessons have been learned from AIG, leading to negotiations and the CDS are not to be honoured in full as the original seller might also end up in default.

Political solutions to economical problems are by definition unlikely to be good. I suppose that the solution to the current crisis depends on how big the political element is.

I’m guessing that if AIG sold some of the CDS then suddenly the political repercussions of allowing Greece to fall and the buyers of CDS to cash in will be quite large.

Let Greece go into default but first let the debate continue 🙂

Over to you Greg (maybe Eoin could weigh in as well?)

“Hopefully some lessons have been learned from AIG”

Nothing has been learned. Obama’s efforts to curtail the use of derivatives will be buried in Congress without ceremony.

“Political solutions to economical problems are by definition unlikely to be good.”

The Euro from inception was a political construct. That’s why fudged accounting was ignored.

“I’m guessing that if AIG sold some of the CDS”

I doubt that AIG Financial Products could sell a hot dog.

Something wicked this way comes.

“The carnival’s leader is the mysterious “Mr. Dark” who bears a tattoo for each person who, lured by the offer to live out his secret fantasies, has become bound in service to the carnival.”

Breaking…(unconfirmed but being taken seriously)





At the moment there are investigations into the bailout of AIG and the payout that were made. The discussions are about why the full amount was paid out on the CDS, the question is being asked: Why weren’t negotiations taking place before paying out the full amount?

The amount could possibly have been reduced as AIG did not have the funds to pay it out and was “rescued” by the american government.

Was AIG rescued or were the buyers of CDS rescued?

As this is happening now, I believe that even the short memory of the public and politicians will suffice to remember that. If Greece were to default I wouldn’t bet on that the CDS will be honoured in full unless the sellers of the CDS can actually do it without other governments support.

Anyone know who is selling the CDS for Greece?

Eoin Says:

Breaking…(unconfirmed but being taken seriously)

So Daddy came home.

Greece is going to be taken to the woodshed for a sound beating.

I wonder how the Greek people will feel about some German telling them to cut their pensions and welfare.

Don’t mention the war.

Who would buy credit insurance from the guy who is being insured against?

If they could pay back the debt in the first place then the credit insurance wouldn’t be used. If they couldn’t pay then they still wouldn’t be able to pay.

Free money for Greece & paying money for nothing for whoever the buyer is.

If the rumour about the bailout is true, I wonder how they’ll finance it. Will it come from the magic money tree or will someone actually have to pay?

I suppose well find out tomorrow.


“Who would buy credit insurance from the guy who is being insured against?”

You’d hide the fact that it is you (the insured) selling it.

Easy peasy.

“I wonder how they’ll finance it”

The tooth fairy will be busy tonight and tomorrow Article 122 will be “interpreted”.

Wonder how the Brits will feel about that.

If the bailout is true there ought to be some serious margin calls tomorrow. Assuming those who bought the CDS didn’t pay up front. In any event there are going to be some big write offs.

@ Jesper

“Anyone know who is selling the CDS for Greece?”

All the major investment banks would market make it.

@ Greg

“If the bailout is true there ought to be some serious margin calls tomorrow.”

Yes and no. Bailout loan to Greece will probably be short-to-medium term in duration, ie 2yrs. The idea is that it’ll buy them time to get their house in order and give the markets confidence that their is a solution there for them, but its not going to be so big or long-term as to cover all their prblems. And its not like Greek debt and CDS is going to suddenly converge with Germany. It’ll still be way further out than the rest of the Eurozone.

The CDS went from around 385bps pre-announcement to 335 afterwards, but 335 would still count as a horrible level only a few weeks ago.


A 13% drop in one hour is not to be sneezed at.

Somebody lost a packet.

I wonder will it shot back up if the Germans start bickering amongst themselves.


Greece hit by nationwide strike over austerity measures

“Public sector workers will not be hit as hard as they have been in the Irish Republic, but they complain that some of the lowest paid will suffer while the rich dodge tax with impunity, says BBC Europe correspondent Jonny Dymond.”

@ Zhou

Greece, with a population of around 11mio people, had a sum total of 65 people declare an income over €900k last year. Clearly there is rampant tax evasion going on. However, that said, they also have a public sector pension scheme that pays out 96% of finishing salary, so it would seem that everyone is on the mooch over there to at least some degree.

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