Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Greece defaults

blogs.reuters.com

Post reply on HN
Print view View original

121–130 of 151 posts

Re: Greece defaults

#121

Post by _delirium »

tomkarlo wrote: post #75
marshray wrote: post #67

Earlier quoted context omitted.

NYT: "Holders of short-term obligations would be able to swap their notes for debt with longer maturities and backed by high-rated bonds. An organization that includes most major European banks said its members would accept the offer and expected 90 percent of all Greek bonds to be exchanged. [...] financial institutions that own Greek bonds would effectively contribute 54 billion euros through 2014, largely by accep…

If you're a huge national pension fund that holds both Greek debt AND, say, a lot more Spanish debt, it's in your interest to exchange (and prevent contagion) even if other holders are making out better by not exchanging. If everyone refuses to exchange, Greece defaults and you could see contagion that impacts the rest of your portfolio. Most major holders have probably already written down the value of any Greek bon…

I believe that's true of the large private banks also, which is part of why this group amounting to 90% is on board. It's in the rational self-interest of a bank like Deutsche Bank or Societe Generale to take a haircut on their Greek-debt portfolio if it keeps the rest of their EU bond portfolio from blowing up--- especially if they can get a deal like this one where the EU governments partially reimburse the haircut.

Re: Greece defaults

#122

Post by vladd »

pkteison wrote: post #49
jeffreymcmanus wrote: post #26

Earlier quoted context omitted.

Wrong. The way it appears now, the debt is going to be repaid over a longer period of time. Your confusion about this indicates that writers are not doing a good job explaining this to people.

Paying me, but not on the originally agreed upon schedule, is still a default. What's wrong about calling it one?

It's not written anywhere that they won't pay upon the agreed schedule.

Debtors have "an option" to gain additional guarantees at an additional cost. For debtors that don't enter into such additional contracts, Greece made all the payments up to date.

Re: Greece defaults

#123

Post by marshray »

_delirium wrote: post #121
tomkarlo wrote: post #75

Earlier quoted context omitted.

If you're a huge national pension fund that holds both Greek debt AND, say, a lot more Spanish debt, it's in your interest to exchange (and prevent contagion) even if other holders are making out better by not exchanging. If everyone refuses to exchange, Greece defaults and you could see contagion that impacts the rest of your portfolio. Most major holders have probably already written down the value of any Greek bon…

I believe that's true of the large private banks also, which is part of why this group amounting to 90% is on board. It's in the rational self-interest of a bank like Deutsche Bank or Societe Generale to take a haircut on their Greek-debt portfolio if it keeps the rest of their EU bond portfolio from blowing up--- especially if they can get a deal like this one where the EU governments partially reimburse the haircut…

OK, but what if you were using these Greek notes as collateral? Suddenly they're downgraded and you on the phone with your lenders. Are your lenders on board with this plan? They have reporting requirements too, it seems like you might be under an obligation to invoke your CDS policy if at all possible.

After all, why would the world spend $B on CDSs and then not invoke them when it came down to it?

Re: Greece defaults

#124

Post by thirdusername »

tankenmate wrote: post #94
dreww wrote: post #82

Earlier quoted context omitted.

i think this is the real story here, agreed.

The real story is that this problem has been kicked into the weeds. Greece is still fundamentally over spending; it has been spared some momentary pain, but there is far more to come. My gut feel is that it will take the larger part of 30 years for Greece to right itself unless Germany and France find some way to "pay" Greece its "dues" for keeping the Euro "artificially" low and bolstering Northern European exports…

Germany and France is part of western Europe. In Northern Europe only Finland and Estonia (as of very recently) has the Euro.

Re: Greece defaults

#125

Post by bragh »

tsotha wrote: post #34
TheAlan wrote: post #13

The raping of Greece's assets will now begin. EVERYTHING will get privatized, just like a third-world country.

Well, sure. Greece is a third-world country. And when you owe more than you can pay you have to cough up some assets.

Corriere della Sera (an Italian newspaper) claimed that Finland wanted the Acropolis of Athens as collateral for their part of the loan, so yeah, you can actually ask for way too much.

Re: Greece defaults

#126

Post by mhb »

ristretto wrote: post #103
RyanMcGreal wrote: post #97

Earlier quoted context omitted.

> Are there many developed countries where father, son and grand-son, or uncle and nephew ALL become PMs in the past 30 years? The United States springs to mind: George H.R. Bush, Jeb Bush, George W. Bush.

Is it like a political tradition that grandsons must bring the country to financial collapse?

Rags to rags in three generations.

Re: Greece defaults

#127

Post by abrenzel »

adulau wrote: post #80

"The total official financing will amount to an estimated 109 billion euro. This programme will be designed, notably through lower interest rates and extended maturities, to decisively improve the debt sustainability and refinancing profile of Greece." Markets and especially the financial sector like banks (especially French banks) owning debt from Greece (or CDO) have positively reacted to the announce for a differe…

Absolutely. Indeed risk is not even just about the "customer's" (in this case, the nation of Greece) inability to pay, but also counterparty risk. It's not just Deutschebank that's on the hook for defaulted Greek debt, but every counterparty who wrote them credit default swaps (CDS) on that debt. That's what triggered the financial crisis in 2008 - as Bear Stearns' and Lehman Brothers' cash flow from their debt holdings dried up, redemption calls for their CDS metastasized though the financial system.

If anyone is wondering why the core Euro-area (not to mention the US government) is so concerned about Greek (and Irish and Portuguese and Spanish and Italian) debt, it's less about some abstract political commitment to EU unity than it is the simple fact that a true default will destroy the European banking system.

Throwing cheap cash at the problem will work until the day that it suddenly doesn't. While the proximate cause to the original financial crisis was cash flow, that is not the ultimate cause for these problems. The problem is that risk in the financial system is (still!) extremely opaque, and it is not so much that banks are illiquid as there is almost no circumstance in which they could procure enough cash to meet calls on their outstanding CDS in the event of some "unexpected" event like subprime mortages or Greece going into default.

The US government learned the hard way what would happen if they allowed one of these overlevered banks to go under as they did with Lehman Brothers in 2008. On the other hand, national governments do not have enough capital to possibly cover the total liabilities in the financial system, nor can they even predict when and where that capital might be needed.

As with many things in life, there is no real good solution to this, and there is still lots of pain ahead.

Re: Greece defaults

#128

Post by cschmidt »

thirdusername wrote: post #124
tankenmate wrote: post #94

Earlier quoted context omitted.

The real story is that this problem has been kicked into the weeds. Greece is still fundamentally over spending; it has been spared some momentary pain, but there is far more to come. My gut feel is that it will take the larger part of 30 years for Greece to right itself unless Germany and France find some way to "pay" Greece its "dues" for keeping the Euro "artificially" low and bolstering Northern European exports…

Germany and France is part of western Europe. In Northern Europe only Finland and Estonia (as of very recently) has the Euro.

You're right of course. However, in covering the crisis people have often referred to a rough north/south divide among Euro countries. I think he was referring to big "northern" exporters like Germany and France, vs "southern" Mediterranean countries like Greece, Spain, and Portugal.

Re: Greece defaults

#129

Post by Someone »

richardw wrote: post #81
joe_the_user wrote: post #56

Earlier quoted context omitted.

Wait a gosh-darn-second - if the situation is either definite default OR not-a-default, then Greece has NOT defaulted. From the article: if you’re a holder of Greek bonds right now, you have three choices... 1. You can do nothing, and hope that Greece pays you in full and on time. (and other stuff)... The first option is by far the most interesting. No one has come out and said that Greece is going to default on bond…

The ratings agencies have said that arm-twisting bondholders to accept new bonds with less favourable conditions amounts to a default. I promise to pay you $100 tomorrow. I then tell you you'll get your money in 30 years and at a much lower interest rate. That's breaking the original promise, even though I haven't actually 'not paid you back'.

The question is whether this is arm-wrestling.

A way to describe what is happens is that the EU says "we know some people are worried about the money Greece owns them. For them, we offer insurance. We have several pricing schemes for that assurance:..."

Phrasing it that way would IMO put some spin on it, but it would not be a bland lie, either.

I think they stroke a good balance here. It is not arm-wrestling, but they likely will reach the intended goals (decrease immediate pressure on Greece, and show the world that the EU will help countries in trouble)

Re: Greece defaults

#130

Post by jarek »

Loic wrote: post #113

Nearly off topic, but all these debt issues make me think that this is why "world level" currency like bitcoin can be interesting. If it starts to spread enough to reach a critical mass over several economies, this kind of electronic currency can be the only currency disconnected from a single economy. The value of such currency would be function of the volume shared in each economy using it, where economy would be t…

Saying the entity "EU" is a single economy but the entity "US and China" isn't seems rather arbitrary to me. At the very least, euro is already a currency disconnected from a single economy, being currently connected to at least two: the relatively sane part of eurozone, and PI(B)IGS.
Post reply on HN