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Greece defaults

blogs.reuters.com

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Re: Greece defaults

#71

Post by baguasquirrel »

rajpaul wrote: post #63
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 aim is to threaten and arm-twisted big banks into exchanging their bonds" You're basically saying that Greece renegotiated some of it's debt obligations. Which is a default. "Sovereign defaults Sovereign borrowers such as nation-states generally are not subject to bankruptcy courts in their own jurisdiction, and thus may be able to default without legal consequences. One example is with North Korea, which in 198…

Maybe it would've been nicer if we just said "deep shit" instead of "default." When you owe the bank a million dollars, the bank owns you, but when you owe the bank a trillion dollars, you own the bank.

Greece knows that there are lots of important people who are overexposed. It knows that if it does the wrong thing, it could trigger a run on its creditors that is akin to what happened to Lehman. It doesn't want to be the bad guy necessarily, who does? But its finances are untenable.

Re: Greece defaults

#72

Post by nradov »

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.

Greece is a sovereign borrower not subject to asset seizure. Their debt is not collateralized.

Re: Greece defaults

#74

Post by jmitcheson »

nradov wrote: post #72
tsotha wrote: post #34

Earlier quoted context omitted.

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

Greece is a sovereign borrower not subject to asset seizure. Their debt is not collateralized.

You are thinking too literally.

http://www.google.com.au/search?&q=greece+austerity+priv...

Re: Greece defaults

#75

Post by tomkarlo »

marshray wrote: post #67
mdda wrote: post #48

Earlier quoted context omitted.

If I were worried about this point (and a holder of a lot on CDS 'insured' bonds), I'd get a friend that was immune to 'arm twisting' to buy 1MM of a particular issue, and play extremely hardball with the ECB. Eventually, a payment would not occur, and there would be a solid 'Credit Event' to trigger all the CDS.

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 bonds anyway.

Re: Greece defaults

#76

Post by nostrademons »

jeffreymcmanus wrote: post #54
achompas wrote: post #43

Earlier quoted context omitted.

Markets will respond upon opening.

They'll respond positively because fixing a problem, even if some people lose out, is always better than uncertainty.

That's how a rational person would respond. History has shown that markets are anything but rational.

Usually, when something like this happens, people wonder how deep the iceberg goes and who'll be next. Widespread panic usually follows.

Re: Greece defaults

#77

Post by parallel »

mdda wrote: post #46
parallel wrote: post #21

As I understand it you default on a loan, you don't default as an entity. So it's doesn't really make sense to talk about Greece defaulting without saying which loans they defaulted on. Hence the "kind of"/"selective" etc. I read this as Greece defaulted on kind of all it's loans, so defaulted on some and not on others. The others may have been renegotiations, longer terms etc.

Typically (for a company at least), debt has 'cross-default' provisions in it. So that failure to pay any particular creditor causes legal triggers to trip on every piece of debt. This is prevent the company persecuting particular sets of holders, and makes it a huge incentive not to miss payments to anyone. The problem with the arm-twisting idea is that it only requires one hold-out, and everyone gets pulled through…

Right, I didn't realise that mechanism existed, thanks for the heads up. It makes sense, removing the opportunity for slippery dealings with preferential treatment of some debt over the rest.

Re: Greece defaults

#78

Post by pandaassembly »

Finally the only right move to do. If you look at greece's huge debt, it was clear that - even in booming economic times - they could have never managed to pay it all back.

Yes the greece default rating, will bring some pressure to the (mostly europrean) banks, but I'm sure the world will not stop moving, it might actually be the first step out of the euro crisis.

Re: Greece defaults

#79

Post by waterlesscloud »

ugh wrote: post #16
lefstathiou wrote: post #11

FYI there is no such thing as a "kind of" or "selective" default. It's binary. You either pay back creditors what they are owed or you dont. It's rare that a company or country defaults on ALL obligations all at once. As a member of Wall Street, I appreciate the WSJ's noble attempt to sugar coat this (article below) but that doesnt change the facts. Ditto watchandwait below.., glad it finally happened. http://profess…

The question you have to ask yourself is “What does it mean?” Will readers understand what “Greece Defaults” entails? If not, then it’s the journalists job to write something else. A semantic argument won’t help you there. If it were my job to write articles about the situation I certainly wouldn’t pick “Greece Defaults” as a headline. I would mention the default in the body and explain what that actually means. Cont…

Regular readers of Felix Salmon are far more likely to understand what the word "default" means than the general public.

It's an accurate statement, it's not some semantic sideshow.

Re: Greece defaults

#80

Post by adulau »

"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 different reason that the one shown in the press IMHO. The major risk for the banks is the inability from a customer to pay their debt. With the current proposal the risk is again moved to the public sector where they will take the part of the debt that Greece cannot pay or pay with difficulties.

So for the banks, it's a great move as their current contribution is just a small part from their revenue removed of the interest rate on the debt while lowering down the risks of unpaid debt.

Without forgetting that the ECB is feeding the banks with a preferential rate (around 1%) for credit given to other countries by the banks with a higher rate (around 3-4%).

So the winner is clearly the financial sector. We removed the risks for you and States will cover by public financing. It's just like the "refinancing" for CDO in 2008...

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