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Greece: Out Of Cash, Out Of Time, Out Of Options
Greece: Out Of Cash, Out Of Time, Out Of Options
On Friday Greece is due to pay at least a quarter of the €1.5bn due to the IMF in June.
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The creditors say they will only disburse the money if the Greek government enacts various key economic reforms and does not roll back reforms the last government agreed with the lenders and if the Greek government undertakes to run large enough budget surpluses every year in the future that Greece might have a chance of paying back the money the creditors have lent it.The Greek government says there is no possibility of it ever paying back all the money it has been lent and the creditors need to accept that, write off some of the debt, and not insist that Greece runs large surpluses (predicated on the fantasy of paying back the debt) or cuts back on pensions or enacts other similar measures that run contrary to the Greek voters’ will (as expressed in the last election).
Most commentary still appears predicated on the idea that there will be some last-minute deal – either because the creditors will back down and give Greece some more money without requiring it to be paid back or because the Greek government will back down if it understands that not doing so would ultimately mean leaving the euro.
I, on the other hand, don’t believe either side is particularly interested in achieving a deal.
The Eurozone does not want to make any compromise with the current Greek government because:
(a) they don’t believe they need to because Greek threats to leave the euro are empty both because internal polling suggests Greeks don’t want to leave and because if they did leave that doesn’t really constitute any threat to the euro;
…click on the above link to read the rest of the article…
This Could Sink Banks in Greece, Portugal, Spain, and Italy
This Could Sink Banks in Greece, Portugal, Spain, and Italy
Not that much has changed in Spain since the climax of the debt crisis during which its collapsing banks were bailed out. Some of them were recombined into a bank with a new name – Bankia – and sold to the public via an IPO that immediately sank into red ink and scandal. Spanish government debt sported yields that reflected the risks of owning it. At this time in 2012, six-month T-bills yielded over 3.2%.
But that part has changed. In this absurd era when risks no longer exist in a quantifiable manner, the Spanish government today joined a growing club: it issued its first debt – 6-month T-bills – with a negative yield. Spain!
But the European Commission is now contemplating pulling the rug out from under the banking miracles in Spain, Portugal, Greece, and Italy.
Turns out, these four countries have been smart in how they propped up their rickety banks. They and their banks have declared something a “high quality” asset even though it has a dubious value, no market price, and can’t be sold. And they have included this totally illiquid asset of dubious value in the “core capital” of the banks. This asset significantly increases the “capital buffers” and makes the bank more resistant to shock and collapse, on paper. That’s how they solved their banking crisis.
…click on the above link to read the rest of the article…
