Archives of “austerity measures” tag

rss

Greece won’t last beyond November without aid, says PM

  
Analysis, Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #

Greek Prime Minister Antonis Samaras has signalled that his country could not survive beyond November if it isn’t granted the next tranche of bailout aid. 
Samaras highlighted that the most important thing for Greece is liquidity and underlined the necessity of the international financing. 
When questioned in the Handelsblatt interview how long Athens could survive without additional help he answered: “Until the end of November, then the cash box will be empty.” 
Samaras also felt that the European Central Bank (ECB) could help out by accepting lower interest rates on Greek bonds and rolling over the debt at maturity. However, ECB President Mario Draghi ruled out the idea, because he considers it to be “monetary financing”. 
In an International Herald Tribune conference held in Paris, Samaras also warned that a Greek exit from the euro would be “disastrous” for the Eurozone and could slash the Greek standard of living by up to 70%. 
German Finance Minister Wolfgang Schäuble gave some show of support stating that countries with problems should be allowed more time to reform but he did lash out at Greece by stating that all the other Eurozone states had made good progress on their austerity measures. He did however admit that Athens is in a “difficult situation”.

Nine Reasons Why Greece, PIIGS Approaching Irreversible Slide to Default

  
Analysis, Economy, Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #
  • Like other emerging market nations, it has entered a vicious cycle in which market skepticism creates higher borrowing costs and actually pushes the country closer to the abyss, its demise becoming a self fulfilling prophecy. Once that momentum begins, it is very hard to stop the decline in confidence.
  • Fitch downgrade means no more room to fall before junk bond status: Fitch’s downgrade of 2 notches from BBB+ to BBB- means the next level down is junk bond status, leaving Greece with no collateral to use for borrowing from the ECB. This after the ECB yielded and agreed to accept the BBB+ rating after 2010.
  • Yield on Greek debt is now above many countries with lower, junk-rated bonds: What does that tell you about where Greece’s ratings, and thus yields, are going?
  • A quickening death spiral has started.
  • Extreme austerity measures cut GDP and tax receipts, spur capital flight from banks.
  • EU’s March 25th rescue accord failed, eroding EU credibility: The EU needed a big, timely, decisive rescue package with an announcement shock effect similar to Washington’s guarantee of the too big to fail banks back in September of 2008. It needed to show that no matter what, the EU would not let Greece default, even if it meant effective EU stewardship and economic occupation, and Greece had to agree to it. Instead, neither Greece nor its rescuers have approached the issue with this level of life-or-death seriousness. Both sides have chosen to bicker, bargain, and attempt to hold out for better deals in a deadly game of chicken. The result, the EU’s credibility is damaged, and the EU was the last hope for the markets, as Greece has long ago lost credibility.
  • Greece selling short term bills into a steeply inverted Greek yield curve: The Greek Yield Curve is inverted from 3 months to 5 years. Yet Greece will attempt to sell 26 week and 52 week paper, after having failed to sell long term bonds. Looks like the rates will be too high once again, even if there is demand.
  • Greece needs to find €10 bln by May. The EU and/or IMF will probably give them that one way or another. However this is just delaying the inevitable. Greece needs another estimated €30 bln to make it through the year.

  • EU failure on Greece endangering other PIIGS block members. Spain alone needs to sell €30 bln of bonds in July. It is in better shape than Greece. However, as noted in Contagion Spreads: PIIGS Credit Default Spreads Rising On Greece Default Fears, Spain and its fellow PIIGS colleagues are watching in horror as their own borrowing costs are rising to new highs on fear generated by Greece’s woes. Should Spain need help, there will be little or no cash left in the EU accord. Markets know this, which in turn sparks more fear and higher rates, pushing Spain and the others closer to the edge themselves. Note that Spain and Italy have debt loads many times larger than Greece’s, and that fact alone may doom them unless the EU can inspire confidence and get borrowing rates down.

    • About the author: Cliff Wachtel


    IMF/EU Bails Out Greece (€110 billion), Papandreou Text, Greek Finance Minister, Riots (Videos)

      
    Analysis, Economy, Education
    #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #

    Greece got a bailout Sunday from the IMF (International Monetary Fund) and EU (European Union).  There will be harsh austerity measures (increase in taxes, lower public sector wages, pension reform), read this Reuters article: Greek cabinet to discuss tough new austerity steps and listen to the Greek Financia Minister speak below.  Specifically on the bailout, WSJ reported that,”Greece reached a historic deal with other euro-zone countries and the International
    Monetary Fund for a three-year, €110 billion ($146.5 billion) bailout”. [full WSJ article] The bailout also includes a €10 Billion support fund for banks (Bloomberg).  Find the full text of Papandreou addressing his Cabinet on the bailout here. Below are videos from RussiaToday, Reuters and EUX.tv featuring Greek Finance Minister Giorgos papaconstantinou outlining the austerity package, riot videos and more.


     

    Will this be a short financial capitulation event transferred to main street in Greece?
    Go to top