Despite Debt Deal, Greece Set to Default

Merkel and Sarkozy’s window dressing appearances were only that. No aid package will save Greece from defaulting. Lining up now Portugal, Spain and the U.S.

Reuters
July 25, 2011

Moody’s cut Greece’s credit rating further into junk territory on Monday and said it was almost certain to slap a default tag on its debt as a result of a new EU rescue package.

It was the second rating agency to warn of a default after euro zone leaders and banks agreed last week that the private sector would shoulder part of the burden of a rescue deal that offers Greece more cash and easier loan terms to keep it afloat and avoid further contagion.

“The announced EU program along with the Institute of International Finance’s statement implies that the probability of a distressed exchange, and hence a default, on Greek government bonds is virtually 100 percent,” Moody’s said in a statement.

Bank lobby IIF, which led private sector negotiations, aims to attract 90 percent investor participation in the bond exchange plan which comes on top of the EU’s new 109 billion euro bailout.

Moody’s cut Greece’s rating by three notches to Ca, just one notch above default, to reflect the expected loss implied by the proposed debt exchanges.

Greece now has the lowest rating of any country in the world covered by Moody’s, which, like Fitch last week, said it would review Greece’s rating after the debt swap is completed.

“Once the distressed exchange has been completed, Moody’s will reassess Greece’s rating to ensure that it reflects the risk associated with the country’s new credit profile, including the potential for further debt restructurings,” it said.

However, whereas Fitch pledged to quickly give Greece a higher, “low speculative grade” after its bonds had been exchanged, Moody’s said it could not forecast when the rating would change or how.

“It all depends how quickly the debt exchange takes place,” said Alastair Wilson, Moody’s Managing Director for EMEA Credit Policy. “Once we have greater visibility over that, we will reassess the credit profile quite quickly. Whether the rating will change, that’s a different question,” he told Reuters.

A senior EU official said on Saturday that the aim was to start a voluntary swap of privately-held Greek bonds in late August and conclude it in early September [ID:nLDE76M02I]

Greek bank shares and the broader stock market were unfazed by Moody’s action. Analysts said the downgrade and the default warning were priced in and less worrying following assurances provided by the EU deal.

“The EU Council last week effectively secured Greek banks’ continued access to ECB liquidity, even in the case that PSI (private sector involvement) triggers a selective default,” said Platon Monokroussos, an economist at EFG Eurobank.

The government has repeatedly criticized ratings firms for their downgrades and its spokesman threatened on Monday to end its subscriptions to these agencies as the new rescue package means Greece will not issue new bonds for years.

“All governments pay a subscription to these agencies. We, I think, do not need the reviews anymore. They have no practical value,” Elias Mosialos told Radio 9. “Perhaps the finance ministry should end its subscription.”

CONTAGION CONTAINED … FOR NOW

Moody’s said it would take into account the possibility of a second default while reassessing Greece’s rating.

“Our experience is that relatively small restructurings have often been followed by deeper defaults,” Wilson said, adding that he could not say if this would be the case for Greece.

The rescue package for Greece benefits other euro zone countries by containing near-term contagion risks but it was not necessarily positive in the longer run as it set a precedent for private sector involvement in rescue deals, Moody’s said.

“The support package sets a precedent for future restructurings should the finances of another euro area sovereign become as problematic as those of Greece. The impact of Thursday’s announcement for creditors of Ireland and Portugal is therefore likely to be credit-neutral,” it said.

The cost of insuring most peripheral euro zone government debt against default rose on Monday on market doubts that the fresh aid package for Greece agreed last week will protect bigger economies from contagion.

Standard & Poor’s and Fitch rate Greece CCC, broadly in line with Moody’s rating. S&P has not yet said how the EU summit deal will affect Greece’s rating.

Bankers Order the Looting of Greece

According to Max Keiser, people of the kinds of Forbes are already in Greece to get its assets for pennies on the Euro. It is now clear the rest of the countries will come next. That is the plan.

Reuters
June 18, 2011

A restructuring of Greece’s 340 billion euro ($481.5 billion) debt is not on the agenda and would damage the country’s credibility on bond markets, the European Union’s internal markets commissioner said on Saturday.

Forcing Greece’s private creditors to take part in an upcoming aid package would count as a restructuring and is not being considered either, Michel Barnier told Europe 1 radio.

“This question of a restructuring … is not on the table,” he said. “It would only postpone the problem and in the wake of a restructuring Greece would face exactly the same difficulties and would no longer have any credibility to borrow.”

Greece’s embattled prime minister on Friday sacrificed his finance minister to force through an unpopular austerity plan and avert bankruptcy, while EU powers Germany and France promised to go on funding Athens.

Citing German and French backing for a plan to involve private bondholders such as banks on a purely voluntary basis, Barnier said: “To impose an effort would be to acknowledge a restructuring and that is not on the agenda.”

Describing Greece as a country that had been badly run and had lived above its means, Barnier said the solution was a “collective” effort to successfully thrash out the details of a new rescue plan in the coming weeks.

“We don’t have the right to draw blank cheques on the back of future generations,” he said. “The work is to continue over the coming weeks.”

Bond markets remain spooked by fears of a Greek default and most economists are overwhelmingly sceptical that Greece can ever repay its debts in full.

Massive Austerity causes Wave of Protests in Europe

Is this the beginning of a mass wake up against the tyranny and irresponsibility of the bankers and elites of the planet?

AP

Anti-austerity protests erupted across Europe on Wednesday – Greek doctors and railway employees walked out, Spanish workers shut down trains and buses, and one man even blocked the Irish parliament with a cement truck to decry the country’s enormous bank bailouts.

Brussels International Airport stop to a halt on September 26. (AP)

Tens of thousands of demonstrators poured into Brussels, hoping to swell into a 100,000-strong march on European Union institutions later in the day and reinforce the impact of Spain’s first nationwide strike in eight years.

All the actions sought to protest the budget-slashing, tax-hiking, pension-cutting austerity plans of European governments seeking to control their debt.

In an ironic twist, the march in Brussels comes just as the EU Commission is proposing to punish member states that have run up deficits to fund social programs in a time of high unemployment across the continent. The proposal, backed by Germany, is expected to run into strong opposition from France.

“It is a bizarre time for the European Commission to be proposing a regime of punishment,” said John Monks, general secretary of the European Trade Union Confederation, which is organizing the Brussels march.

“How is that going to make the situation better? It is going to make it worse,” Monks said in an interview with Associated Press Television News.

Unions fear that workers will become the biggest victims of an economic crisis set off by bankers and traders, many of whom were rescued by massive government intervention.

Several governments, already living dangerously with high debt, were pushed to the brink of financial collapse and have been forced to impose punishing cuts in wages, pensions and employment – measures that have brought workers out by the tens of thousands over the past months.

Transportation has been affected in Spain, where workers decided to protest against cuts. (AP)

“There is a great danger that the workers are going to be paying the price for the reckless speculation that took place in financial markets,” Monks said. “You really got to reschedule these debts so that they are not a huge burden on the next few years and cause Europe to plunge down into recession.”

In Spain, Prime Minister Jose Luis Rodriguez Zapatero’s Socialist government is under severe pressure because of the hugely unpopular measures put in place to save Europe’s fourth-largest economy from a bailout like one that saved Greece from bankruptcy.

The cuts have helped Spain trim its central government deficit by half through July but the unemployment rate stands at 20 percent, and many businesses are struggling to survive.

The strike Wednesday was Spain’s first general strike since 2002 and marked a break in the once-close relationship between unions and the Socialist government.

Whistle-blowing picketers blocked trucks from delivering produce at the main wholesale markets in Madrid and Barcelona. Strikers hurled eggs and screamed “scabs” at drivers trying to leave a city bus garage in Madrid.

The salary cuts for civil servants, pension reforms and new laws that make it easier for companies to fire workers were rushed into law quickly in Spain, without traditional negotiations between management and workers.

Greece, which had to be rescued by the euro-nations this spring to stave off bankruptcy, has also been forced to cut deep into workers’ allowances, with weeks of bitter strikes and actions as a result.

Bus and trolley drivers walked off the job for several hours while Athens’ metro system and tram were to shut down at noon. National railway workers were also walking off the job at noon, disrupting rail connections across the country, while doctors at state hospitals were on a 24-hour strike.

Greece has already been suffering from two weeks of protests by truck drivers who have made it difficult for businesses to get supplies. Many supermarkets are seeing shortages, while producers complaining they are unable to export their goods.

Truck drivers’ unions voted late Tuesday to continue their protests against plans to liberalize their tightly regulated profession, despite a government threat to force them back to work or cancel their licenses.

Greece’s government has imposed stringent austerity measures, including cutting civil servants’ salaries, trimming pensions and hiking consumer and income taxes. Several other EU nations are also planning actions.

In Dublin, a man blocked the gates of the Irish parliament with a cement truck to protest the country’s expensive bank bailout. Written across the truck’s barrel in red letters were the words: “Toxic Bank” Anglo and “All politicians should be sacked.”

Police arrested a 41-year-old man but gave few other details.

The Anglo Irish Bank, which was nationalized last year to save it from collapse, owes some euro72 billion ($97 billion) to depositors worldwide, leaving Irish taxpayers with a mammoth bill at a time when people are suffering through high unemployment, tax hikes and heavy budget cuts.

Many experts say, no matter what unions try, the towering government debt across the continent will force drastic changes in Europe’s labor situation.

“The party is over,” said former EU Commissioner Frits Bolkestein at the financial Eurofi conference in Brussels. “We shall all have to work longer and harder, more hours in the week, more weeks in the year, and no state pension before the age of 67.”

The unions say, however, the party was only there for society’s upper crust, and workers are being forced to pay the bills. The crisis has left 23 million people unemployed in Europe, Monks said.