Well it would appear that all the talk of the European Union and the IMF standing at the ready did not calm the markets when it was being discussed over the past month. It was hoped that the markets would be calmed if they knew that Greece had support from its neighbors.
That was Plan A, now it is time for Plan B, or C, D, E…
The Greek government’s cost of borrowing has hit a new high as talks on a joint eurozone and International Monetary Fund (IMF) rescue plan begin.
The interest rate on 10-year government bonds hit 8.3% – the highest since the euro was introduced.
Rates rose as it became clear that talks over the aid package may not be finished until days before a multi-billion-euro loan is due for repayment.
Investors are becoming more convinced that Greece will need to be rescued.
Greece’s finance ministry said the talks with the European Commission and the IMF would take about two weeks, with a joint text issued on about 15 May. […] (BBC)
It would appear that Greece is about to hit the button
Wednesday, April 21, 2010 1:27:13 PM
Greece Fin Min: Will make decision on whether or not to trigger the aid mechanism soon – Notes that the IMF will have discussions over the competitiveness of the country. No further austerity measures this year are likely.
The question of EU financial aid to debt-stricken Greece is marred by contradictory reports of a bailout. The European Commission and the German government both denied the existence of an alleged €20-25 billion bailout plan as an EU mission landed in Greece yesterday (22 February) to assess the country’s rescue plans.
A Commission official denied allegations that the EU is reviewing a bailout package for Greece to the tune of €20-25 billion after the Germany’s Der Spiegel magazine allegedly got hold of a paper from the country’s finance ministry detailing the terms of Berlin’s contribution.
The EU formalised its support for a Greek rescue, should the time come, at an EU summit two weeks ago, but member states refused to say how much a bailout could cost and how the money would be raised (EurActiv 17/02/10).
“Greece has not requested a single euro,” the Commission official told the press, rejecting claims that calculations of individual member states’ shares of a bailout were afoot.
John Taylor, chairman and chief executive officer of FX Concepts LLC, the world’s largest currency hedge fund, sees the euro dropping to $1.20 by August, and believes parity is possible. Be very careful, because as of today Goldman is now accumulating euros (as per its just released Sell recommendation). More from Taylor: “It’s going to be quick because things are really falling apart…. Some of these [countries] have to be thrown out [of the EMU]. If you look at a country like Latvia, which has been effectively in the Euro, has been saved by the European Commission and the IMF much like they are suggesting Greece will be, their retail sales were down 30% last year, the GDP was down 18%, it is expected to drop another 8% this year. Latvians are starving, the place is a disaster area: that’s what you have to go through to be a part of the Euro.” On whether his firm has felt any political pressure on putting on bearish euro bets: “None at all. We are SEC regulated and the information is there, but nobody seems to be caring.” Lastly, Taylor ridicules the WSJ story about the restaurant-based collusion: “Yes, they had a meeting and talked about how bad the euro was. But that they in fact had some impact: their assets are 1% of the daily volume. Somebody like us, we have a bigger position against the euro than those people put on.” Taylor says in the next three to six months, the dollar will be strongest against the euro, and Eastern European currencies. In a longer horizon, he says to be long Asia and short the euro. Bottom line: sell Europe, buy everyone else. And join the bandwagon… Just as Bernanke prepares the dollar’s next suicide move with inflation obviously not working.
The regulatory fall-out from the Greek debt crisis grew on Wednesday as EU and US authorities said they would probe trades in the euro and the market in sovereign credit default swaps. European Commission officials said they would use a meeting as early as Thursday with banks and regulators to discuss regulation of trading in sovereign CDS, which have become politically contentious amid Greece’s financial crisis. The US justice department said it was also examining hedge fund trades against the euro.