Assuming that the Greeks have already made up their minds about defaulting, with 50pc haircuts, Papandreou's latest statement could be a shrewdly calculated insult to galvanise the Germans into action. "Greece will make the same surprising transformation that Germany made in the 1990s," he said. "What we want is nothing less than the rebirth of our nation." I wonder what Bild magazine will make of that.
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http://www.telegraph.co.uk/finance/financialcrisis/8784243/Greece-sees-default-with-50pc-haircut-on-debt-reports.html
http://www.telegraph.co.uk/finance/financialcrisis/8791473/Greek-PM-urges-Europe-to-stop-the-cac
Behind closed doors, officials in Berlin and elsewhere in the euro zone have been making contingency plans for a Greek default. But leaders have been playing for time, aware that a default now would lead to market turmoil and engulf other high-debt nations such as Ireland, Portugal, Spain and Italy. The aims is to wait until Europe has the mechanisms in place to handle the impact of a Greek bankruptcy on other nations and on the European banking sector. http://www.spiegel.de/international/europe/0,1518,788603,00.html
Commentary: Europe’s leaders have done nothing to prepare for the end By Matthew Lynn LONDON (MarketWatch) — The imminent Greek default is now the only issue that matters to the financial markets. The country is running out of money to pay its bills. It can no longer borrow on the markets. It has missed the deficit-reduction targets in the bailout package, and unless the euro area’s political leaders can come up with a fresh rescue package it will soon have no choice but to renege on it debts. The real question is what happens next. Will Portugal, Spain and then Italy face a run on their banks as people rush to get their money out? Will a series of European banks fail, starting a fresh credit crunch? No one really knows, but the signs are hardly encouraging. The pressure on other high-indebted nations once Greece goes down will be intense. So will the pressure on the banking system. The only force that can avert catastrophe is that strange double-headed beast known to bond traders as Markozy — the French President Nicolas Sarkozy and the German Chancellor Angela Merkel. Neither shows any signs of getting to grips with the scale of the challenge they face, nor have they done so at any point since this drama started 18 months ago. Anyone staying in the markets now is taking a massive gamble that they suddenly get their act together over the next few weeks. They are almost certainly going to be disappointed. http://www.marketwatch.com/story/dont-count-on-markozy-to-save-you-as-greece-falls-2011-09-28?link=home_carousel
The Financial Times newspaper reported that a split had opened in the euro zone over the deal. Quoting senior European officials, it said as many as seven of its 17 countries argued that the private bondholders should swallow bigger writedowns. Hardliners in Germany and the Netherlands were leading the calls for bigger writedowns but meeting fierce resistance from France and the ECB, which feared more selling of shares in European banks with big Greek bond holdings http://www.reuters.com/article/2011/09/28/us-greece-idUSTRE78Q1G220110928
Germany and America were on a collision course on Tuesday night over the handling of Europe's debt crisis after Berlin savaged plans to boost the EU rescue fund as a "stupid idea" and told the White House to sort out its own mess before giving gratuitous advice to others. snip Greece has a trump card in rescue talks with the IMF-EU "Troika". If it opts for a "hard default", it could set off a chain reaction. Lorenzo Bini-Smaghi, an ECB board member, said those arguing that Europe's banks could withstand a Greek default are misguided. "Similar views were held before Lehman. Those who say this have no idea how contagion works," he said. http://www.telegraph.co.uk/finance/financialcrisis/8793010/Germany-slams-stupid-US-plans-to-boost-EU-rescue-fund.html Euro States Need Bank Backstops, German Minister Schaeuble Says http://www.bloomberg.com/news/2011-09-27/euro-states-need-bank-backstops-german-minister-schaeuble-says.html
Mr. Sprott, long a critic of leverage as a destabilizing factor for banks, sided firmly with Mr. Carney. We have long maintained that all banks should make stronger efforts to bolster their capital reserves. It should not be the responsibility of government to rescue these corporations if they continue to make the same mistakes, and engage in the same risks, year after year. In that vein, we must also question why banks were allowed to reinstate their dividends so quickly after the 2008 crisis. In France, for example, where French banks are currently experiencing deposit withdrawals, one wonders how much stronger they would be today had they initiated a more prudent recapitalization policy. In our opinion, the current economic crisis is still, at its heart, a banking crisis. Mr. Dimon’s alleged criticism reflects his inability to acknowledge this. Banking regulation is a wholly crucial issue and we stand behind Mr. Carney’s attempts to address it. http://www.theglobeandmail.com/globe-investor/investment-ideas/streetwise/eric-sprott-backs-carney-in-dimon-spat/article2182036/ http://www.ctv.ca/generic/generated/static/business/article2180982.html
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