It is when, not if. Financial markets merely aren't sure whether it'll be tomorrow, a month's time, a year's time, or two years' time (it won't be longer than that). Given that the ECB has played the "final card" it employed to force a bailout upon the Irish -- threatening to bankrupt the country's banking sector -- presumably we will now see either another Greek bailout or default within days.
What happens when Greece defaults. Here are a few things:
- Every bank in Greece will instantly go insolvent.
- The Greek government will nationalise every bank in Greece.
- The Greek government will forbid withdrawals from Greek banks.
- To prevent Greek depositors from rioting on the streets, Argentina-2002-style (when the Argentinian president had to flee by helicopter from the roof of the presidential palace to evade a mob of such depositors), the Greek government will declare a curfew, perhaps even general martial law.
- Greece will redenominate all its debts into "New Drachmas" or whatever it calls the new currency (this is a classic ploy of countries defaulting)
- The New Drachma will devalue by some 30-70 per cent (probably around 50 per cent, though perhaps more), effectively defaulting 0n 50 per cent or more of all Greek euro-denominated debts.
- The Irish will, within a few days, walk away from the debts of its banking system.
- The Portuguese government will wait to see whether there is chaos in Greece before deciding whether to default in turn.
- A number of French and German banks will make sufficient losses that they no longer meet regulatory capital adequacy requirements.
- The European Central Bank will become insolvent, given its very high exposure to Greek government debt, and to Greek banking sector and Irish banking sector debt.
- The French and German governments will meet to decide whether (a) to recapitalise the ECB, or (b) to allow the ECB to print money to restore its solvency. (Because the ECB has relatively little foreign currency-denominated exposure, it could in principle print its way out, but this is forbidden by its founding charter. On the other hand, the EU Treaty explicitly, and in terms, forbids the form of bailouts used for Greece, Portugal and Ireland, but a little thing like their being blatantly illegal hasn't prevented that from happening, so it's not intrinsically obvious that its being illegal for the ECB to print its way out will prove much of a hurdle.)
- They will recapitalise, and recapitalise their own banks, but declare an end to all bailouts.
- There will be carnage in the market for Spanish banking sector bonds, as bondholders anticipate imposed debt-equity swaps.
- This assumption will prove justified, as the Spaniards choose to over-ride the structure of current bond contracts in the Spanish banking sector, recapitalising a number of banks via debt-equity swaps.
- Bondholders will take the Spanish Banking Sector to the European Court of Human Rights (and probably other courts, also), claiming violations of property rights. These cases won't be heard for years. By the time they are finally heard, no-one will care.
- Attention will turn to the British banks. Then we shall see...
Continued on Page 47
#2
Or if Athens would retreat to its 490 BC borders.
Posted by: Matt ||
05/22/2011 13:04 Comments ||
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#3
- A number of French and German banks will make sufficient losses that they no longer meet regulatory capital adequacy requirements.
And guess who'll bail them out?
European banks took big slice of Fed aid
The Financial Times ^ | DECEMBER 1, 2010 | Robin Harding and Tom Braithwaite
Posted on Wednesday, December 01, 2010 4:31:06 PM by RobinMasters
Foreign banks were among the biggest beneficiaries of the $3,300bn in emergency credit provided by the Federal Reserve during the crisis, according to new data on the extraordinary efforts of the US authorities to save the global financial system.
The revelation of the scale of overseas lenders borrowing underlines the global nature of the turmoil and the crucial role of the Fed as the lender of last resort for the worlds banking sector.
However, news that banks such as Barclays of the UK, Switzerlands UBS and Dexia of Belgium borrowed billions of dollars at favourable terms from the US government may further anger critics already enraged about the Feds bail-out of Wall Street.
After being ordered by Congress to lift the secrecy on the crisis-time aid, the Fed published the details on Wednesday of more than 21,000 transactions with banks from 2007 to 2010.
Posted by: Deacon Blues ||
05/22/2011 16:28 Comments ||
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#5
@Procopius2k
Banks may nominally still be "German" or "French", but in fact banks have long ceased to be national entities.
They are interdependent global, organizations.
"Greece will redenominate all its debts into "New Drachmas" or whatever it calls the new currency (this is a classic ploy of countries defaulting)"
No, that's one thing they cannot do because their debts are in euros. That's the problem with reverting to drachma. Even if you "forgive" them 50% of their debts, the drachma will plunge, which means they will still face up to about the same debt burden as before.
The problems of Greece are structural ones. They won't be solved with a currency change.
Posted by: European Conservative ||
05/22/2011 18:51 Comments ||
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#6
"The problems of Greece are structural ones. They won't be solved with a currency change."
FTFY, EC.
Posted by: Barbara Skolaut ||
05/22/2011 19:04 Comments ||
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#7
Our problems have not "solved" by the borrowing and printing of more dollars either, but that is what is happening.
The finance chiefs of Germany and Britain on Saturday added to a chorus of calls for French Finance Minister Christine Lagarde to become the new leader of the International Monetary Fund. Lagarde has emerged as a front-runner to replace Dominique Strauss-Kahn, also of France, who resigned this week. This Christine is a woman. Thanks for making that clear...
"Europe would have the best chance to secure the post again with Christine Lagarde, if she decides to run," German Finance Minister Wolfgang Schaeuble told the German weekly Bild am Sonntag. He was quoted as saying that Lagarde was "outstandingly qualified" and "extremely respected and appreciated in the entire financial world." Besides, being of the female persuasion, it's unlikely she has the proclivities of a rutting chimpanzee.
Lagarde's chances for the job got a boost Friday when Kemal Dervis, a former finance minister for Turkey who had been considered the leading non-European candidate, said he did not want to be considered for the position because of his dark secrets. Schaeuble and German Chancellor Angela Merkel said that it is crucial that all Europeans now rally behind a candidate. Otherwise the Libyans or Iranians will want the slot. The guy who was going to be the Syrian representative to the UN Human Rights Commission is available...
Merkel on Saturday stopped short of formally endorsing Lagarde but said she was a "distinguished" and "very experienced" personality. Lagarde, 55, has a clean-cut image and has been praised for her acumen in helping steer Europe through the global financial crisis and its more recent debt woes. She speaks impeccable English and spent much of her career in the United States as a lawyer. Oh, well; nobody's perfect. Continued on Page 47
Posted by: Bobby ||
05/22/2011 08:53 ||
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President Obama and Europe were bound together during his first two years in office by the global economic downturn and the collective effort to resolve it. But then they all ran out of money, so they followed FDR's 1941 lesson, and started a war. Ooh, that sounds mean, doesn't it?
But the dominant themes of the president's European tour, set to begin Monday, highlight how much the world has changed over that time. World change, like climate change, happens all the time.
As he enters the second half of his term, security issues, in South Asia and the broader Middle East, have replaced the economy as the chief shared interests of the world's wealthiest and most powerful allies.
"Maybe this is an overstatement, but I see this as an opportunity for a reset of the European relationship," said Heather A. Conley, director of the Europe Program at the Center for Strategic and International Studies. "European leaders have really been struggling with where they fit. They had enormous expectations for this president, but they're now wondering, 'Is it that different after all?' " Same old change we always promise.
Obama's first vacation trip to Europe in the spring of 2009 was marked by his celebrity and the world's economic peril. Brought on by the unrelenting advance of socialism.
He was greeted at the Group of 20 meeting in London as a star, and fellow world leaders clamored to be seen with him. Eight years of the administration of George W. Bush, whose often unilateral approach to many policies, including the decision to invade Iraq with only 37 other countries lined up, had alienated many European leaders and publics. The meme continues. More celebrity news at the link. Continued on Page 47
Posted by: Bobby ||
05/22/2011 08:07 ||
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#1
Taking the RESET button to EUrope now? It worked so well in the Soviet Union Russia.
[Dawn] Hundreds of proponents and opponents held rallies in Sweden's second-largest city Goteborg on Saturday to voice their opinions over the building of a mosque there.
Heavy police presence kept the two groups appart and a front man for the force said only one person had been incarcerated for violent behavior toward an officer.
It was the biggest police effort in the city since the EU Summit in 2001, when several thousand people gathered to protest against US President George W. Bush, the EU and globalization.
Mosque opponents claim the construction will ruin a nearby park and that the area is not suitable, while supporters say the opposition is racist.
The mosque, which will be the city's second, is due to be completed in mid-June.
Continued on Page 47
Posted by: Fred ||
05/22/2011 00:00 ||
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#1
OK, I'll bite after half a year here.
1/. One picture of New Age .vikings, no pics of their opposiotion
2/. Race card used, however, (the ubiquitous however), mosques are (allegedly) not racial places, so the Race card doesn't work in this instance. Besides which, Islam is not a Race so suck that.
Whose side these sloppy hacks on? Some digging to be done.
[Iran Press TV] Thousands of demonstrators have taken to streets in the northwestern French city of Le Havre to protest the upcoming G-8 summit of world leaders.
Less than 10 days before the summit of the group of eight industrialized countries, several thousands of people marched peacefully in the streets of Le Havre on Saturday, carrying banners which read "Put People First, Not Finance. G-8 Out!"
The march, which would be followed by speeches and a concert, was organized by associations, unions and left wing political parties, AP reported.
La Belle France is hosting the annual summit of the group of eight industrialized countries in Normandy's town of Deauville from May 26 to 27, 2011.
A total of 18 presidents, 25 heads of delegations, 2,500 members of delegations and 3,500 journalists will attend the event in Deauville.
More than 12,000 coppers, gendarmes, and military officers will be mobilized to protect the participants attending the summit.
The Group of Eight, which was established by La Belle France in 1975, comprises of Germany, Italia, Japan, the UK, the US, Canada joined the group and Russia.
Continued on Page 47
Posted by: Fred ||
05/22/2011 00:00 ||
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[Iran Press TV] Tens of thousands of Czech workers including union leaders have taken to the streets of the capital city, Prague, to protest the government's planned austerity measures.
During the protests, the union leaders said their members would bear the brunt of the government's plans to cut pensions, healthcare and social benefits, and called for a new election, Rooters reported.
The austerity measures include increasing the retirement age, diverting part of pensions to private funds, and raising payments for healthcare, and etc.
"We are refusing your pension theft," a union leader said, addressing the government at Prague's central Wenceslas Square.
The unions have also threatened to call for a general strike if the government implements the planned reforms that are scheduled to be submitted to parliament in June.
The government says the reforms are necessary to compensate for the country's debt and to balance the budget by 2016.
The development came as similar demonstrations have been held in other European countries in protest at the austerity measures adopted by governments.
On Saturday, mass protests were held in Spain against unemployment and tight austerity measures for a seventh consecutive day.
Tens of thousands of Spaniards converged in squares in several cities across the country to express their fury at what they described as the Socialist government's ineptitude to tackle the growing financial crisis in the Eurozone's fourth-largest economy.
Earlier, protests were also held In Italia against the increasing number of government cuts on social services for the disabled, aimed at reducing. The Italian government says the cuts are needed to rid the country of its recession.
Continued on Page 47
Posted by: Fred ||
05/22/2011 00:00 ||
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A multi-volume chronology and reference guide set detailing three years of the Mexican Drug War between 2010 and 2012.
Rantburg.com and borderlandbeat.com correspondent and author Chris Covert presents his first non-fiction work detailing
the drug and gang related violence in Mexico.
Chris gives us Mexican press dispatches of drug and gang war violence
over three years, presented in a multi volume set intended to chronicle the death, violence and mayhem which has
dominated Mexico for six years.
Rantburg was assembled from recycled algorithms in the United States of America. No
trees were destroyed in the production of this weblog. We did hurt some, though. Sorry.
The finance chiefs of Germany and Britain on Saturday added to a chorus of calls for French Finance Minister Christine Lagarde to become the new leader of the International Monetary Fund. Lagarde has emerged as a front-runner to replace Dominique Strauss-Kahn, also of France, who resigned this week.
President Obama and Europe were bound together during his first two years in office by the global economic downturn and the collective effort to resolve it. 
