Don't Shoot the Messenger

The Greek Tragedy Continues

The future of the Eurozone is decidedly hanging in the balance at the moment. As I said earlier in the week, the problem isn’t a simple question economics anymore: everything now is all about credibility, about who does what, and when, and how everyone else reacts. As the crisis trundles on and on, news that Greek bond spreads have hit ever higher post European Monetary Union records has become such a regular event that the process now seems almost a monotonous one. However, what happened on what we could now call this week’s Greek “Black Thursday” certainly marked a new, and more worrying milestone in the ever evolving crisis. The news the other day that Greece has demanded the activation of the EU-IMF loan – news which apparently took even the EU Commission itself by surprise it seems – only adds to the general sense of confusion that abounds.

The problem we are presented with is not only that Greek 10-year bond yields reached 8.83 per cent, their highest levels since 1998, or that the cost of insuring Greek government debt against default hit a record high of 616 basis points. The really disturbing development was that spreads on government bonds all around Europe’s periphery – including countries like Hungary and Bulgaria – widened sharply, raising heightened concerns that Greek contagion may move from being a mere possibility to becoming a reality. And the cost of protecting peripheral eurozone borrowers against default also hit record levels, with Spain and Portugal touching record highs for their Credit Default Swap prices.

The surge in Greek bonds followed news that Eurostat, the European Union’s statistical service, had revised its estimate of the country’s 2009 deficit to 13.6 per cent of gross domestic product from 12.7 per cent, and the announcement that Moody’s Ratings Agency had downgraded Greek sovereging debt to A3 from A2.

Markets are obviously nervous at the moment, and understandably so, with two issues in the forefront of their minds. In the first place the real level of commitment of core Europe, and especially Germany, to supporting the periphery through several years of difficult and painful structural adjustment is far from clear. On the other, the ability of political leaders in Greece and other affected countries to carry their citizens with them through the sacrifices which will be required to maintain the monetary system intact continues to remain in doubt.

German voters are notably uneasy about lending money to Greece, and a sizeable majority of them are against any form of aid. Reticence on the part of Angela Merkel’s coalition partner also makes obtaining parliamentary backing for the loan difficult, and the FDP senior spokesman on financial questions, Frank Schaeffler, stated bluntly this week that either Greece needed to intensify its austerity plan or it should leave the Euro.

Most observers, however, consider a Greek withdrawal to be only a remote possibility, given that any return to the Drachma would make the country’s debts even less payable. In fact the threat to the integrity of the currency union comes from an altogether different quarter. What is in now increasingly in doubt is the ability of Germany’s political leadership to carry voters with them should either Greece decide to default while continuing with Euro membership, or should other member countries be forced to apply for loans.

At the same time, some sort of Greek default is now no longer simply a theoretical possibility among many others, indeed talk of the inevitability of some form of debt restructuring (albeit voluntary) grows with every passing day. Erik Nielsen European Economist with Goldman Sachs said this week he is expecting Greece to offer some sort of “voluntary debt-restructuring” to creditors over coming months, while JP Morgan issued a research note saying that while such restructuring may not be imminent, the move would make sense given that Greece could be seen as “the sovereign analogue of a ‘bad’ company with a bad capital structure”.

Restructuring is simply a polite word for default, with the difference that it is normally carried out by agreement. The most likely form of restructuring in the present context would be debt rescheduling, whereby short and medium-term debt is converted into a long-term version, as happened with the so-called “Brady bonds” devised by the US Treasury to resolve the debt difficulties of a number of Latin American countries in the late 1980s.

One indication that the ground may be being prepared for some kind of restructuring can be found in the decision reported by German Deputy Finance Minister Joerg that any aid to Greece would come in the form of pooled loans from the euro-zone countries and not through the purchase of Greek bonds. Plans to purchase bonds are “off the table,” he said. This procedure implies that government loans would be strongly guaranteed, while private bond holders would really pay the price for the Greek “rescue”.

At the same time voices are now being raised asking whether it would not be a better idea for Germany, rather than financing more and more loans, simply to put its losses down to experience and go back to the Deutsche mark? According to Joaquin Fels, Chief Global Economist at Morgan Stanley, the Greek rescue measures could “set a bad precedent for other euro- area member states and make it more likely that the euro area degenerates into a zone of fiscal profligacy, currency weakness and higher inflationary pressures over time,” in this case “countries with a high preference for price stability, such as Germany, might conclude that they would be better off with a harder but smaller currency union.”

Evidently such statements can be read as bargaining postures, attempts to get politicians and voters in the South of Europe to focus their minds on the problem in hand, but they can also be read as warnings of what could happen if they do not. At the present time the situation is extraordinarily confused. Greek Prime Minister George Papandreou’s formal request for financial financial support seems to have taken almost everyone completely by surprise although it shouldn’t have, since as I reported in my earlier post the Greek Finance Minister George Papaconstantinou had previously warned that his country could call on loan backup from the EU and the IMF even while talks with the 20 strong EU, ECB and IMF mission were continuing. Actual details of the level of financial support which will be offered remain scant at this point. According to G20 sources who spoke to Reuters, the Greek government have only asked at this point for a first tranche downpayment, to give them working capital to keep going while the talks continue (think of the JP Morgan distressed company talks with the receiver analogy). What is quite striking, however, is how the government let things come to this pass before striking the decisive agreement – evidently they could not hold out till after the German regional elections, and that is another worrying sign. When all is said and done, one thing is obvious, the forthcoming loan will clearly have some kind of super-senior status (which means it would be payable before ALL other creditors – German voters would settle for nothing less), and this implies that it is likely to be existing bondholders, and not EU national governments, who are going to be invited to pay for the Greek bailout. How they will react to this realisation is what remains to be seen in the days and weeks to come.

Originally published at Global Economy Matters and reproduced here with the author’s permission. 

Opinions and comments on RGE EconoMonitors do not necessarily reflect the views of Roubini Global Economics, LLC, which encourages a free-ranging debate among its own analysts and our EconoMonitor community. RGE takes no responsibility for verifying the accuracy of any

114 Responses to “The Greek Tragedy Continues”

pickup womenMay 30th, 2011 at 3:44 pm

This one is an inspiration personally to uncover out rather more related to this subject. I must confess your knowledge prolonged my sentiments as well as I am going to proper now take your feed to remain up to date on each coming blog posts you would possibly possibly create. You might be worthy of thanks for a job completely performed!

Kristine OrlandMay 31st, 2011 at 3:27 am

Amazing blog. I was checking constantly this blog and I am quite impressed! Extremely helpful information specifically the first part. I care for such info a lot. I was looking for this particular info for a long time. Thank you and best of luck.

Trent UnreinMay 31st, 2011 at 5:10 am

Amazing article. I was checking continuously this blog and I’m quite impressed! Very useful information specially the last part. I care for such info a lot. I was seeking this certain info for a very long time. Thank you and best of luck.

Georgeanna ZappoloMay 31st, 2011 at 8:37 am

Great post. I was checking constantly this blog and I’m quite impressed! Extremely useful info specially the last part. I care for such info a lot. I was seeking this particular info for a very long time. Thank you and best of luck.

blu356ble765May 31st, 2011 at 9:55 am

Can I simply say what a aid to seek out someone who actually is aware of what theyre talking about on the internet. You definitely know how you can carry an issue to light and make it important. More individuals must learn this and perceive this facet of the story. I cant consider youre not more fashionable since you positively have the gift.

graphics tabletsMay 31st, 2011 at 10:31 am

Good post. I be taught one thing more challenging on totally different blogs everyday. It’ll at all times be stimulating to learn content material from other writers and apply somewhat one thing from their store. I’d favor to make use of some with the content material on my weblog whether you don’t mind. Natually I’ll give you a hyperlink on your internet blog. Thanks for sharing.

beer college drinking gameMay 31st, 2011 at 12:23 pm

I precisely wished to thank you so much all over again. I’m not certain the things that I might have undertaken without the hints documented by you about such a problem. This has been an absolute distressing scenario for me personally, however , coming across the well-written way you solved the issue took me to leap for joy. I am just happy for the service and trust you are aware of an amazing job you are always accomplishing training many others by way of your blog post. More than likely you have never met any of us.

garmin 305June 2nd, 2011 at 11:16 pm

I was looking for some good blog post about this issue . Searching in Yahoo I managed to find this great site. After reading this information Im really glad to say that I most definatelly found just what I was looking for. I will make sure to remember this website and come back here on a constant basis. Thanks!

Buster LeaphartJune 5th, 2011 at 5:36 am

Hello would you mind letting me know which webhost you’re utilizing? I’ve loaded your blog in 3 completely different web browsers and I must say this blog loads a lot faster then most. Can you suggest a good hosting provider at a reasonable price? Thank you, I appreciate it!

Renata GoedeJune 6th, 2011 at 11:49 am

Good day I am so thrilled I found your weblog, I really found you by mistake, while I was researching on Askjeeve for something else, Regardless I am here now and would just like to say kudos for a marvelous post and a all round interesting blog (I also love the theme/design), I don’t have time to go through it all at the minute but I have bookmarked it and also added in your RSS feeds, so when I have time I will be back to read a great deal more, Please do keep up the superb job.

Ernesto DepreeJune 6th, 2011 at 1:14 pm

Thank you for so extreme an excellent blog. where else could one gain this one sort of info written within very one incite full way? I have a delivering as a result of i am impartial today functioning on, moreover I even have be trying as terribly info.

Sharyn CarrikerJune 7th, 2011 at 5:09 am

Now you’ve got your new website and also youe keen to start making some sales! But, how will you make sales if you do not have high volumes of tourists to your website?

Cristopher MowanJune 7th, 2011 at 3:58 pm

Hello! I just wanted to ask if you ever have any trouble with hackers? My last blog (wordpress) was hacked and I ended up losing a few months of hard work due to no data backup. Do you have any solutions to prevent hackers?

HTC Infuse 4G AccessoriesJune 7th, 2011 at 9:04 pm

I’ve been exploring for a bit for any high-quality articles or blog posts on this kind of area . Exploring in Yahoo I at last stumbled upon this site. Reading this info So i’m happy to convey that I’ve a very good uncanny feeling I discovered exactly what I needed. I most certainly will make certain to do not forget this web site and give it a look on a constant basis.

massage tableJune 7th, 2011 at 9:08 pm

Im no professional, but I feel you just made the best point. You certainly know what youre talking about, and I can seriously get behind that. Thanks for being so upfront and so truthful.

computer repair technicianJune 8th, 2011 at 3:51 am

Its like you read my mind! You seem to grasp a lot approximately this, such as you wrote the book in it or something. I think that you simply can do with some percent to force the message house a bit, however other than that, this is great blog. An excellent read. I will definitely be back.

LED light bulbsJune 8th, 2011 at 4:01 am

With havin so much content do you ever run into any issues of plagorism or copyright infringement? My site has a lot of completely unique content I’ve either created myself or outsourced but it appears a lot of it is popping it up all over the web without my authorization. Do you know any solutions to help reduce content from being stolen? I’d genuinely appreciate it.

Ralph LaurenJune 8th, 2011 at 10:11 am

Thank you for making the trustworthy strive to give an explanation for this. I think very strong approximately it and would like to be told more. If it’s OK, as you attain more extensive wisdom, might you mind including more posts very similar to this one with more information? It might be extremely helpful and useful for me and my colleagues.

Jamel SilanoJune 8th, 2011 at 7:11 pm

Thank you for another fantastic blog. Where else might one get that sort of knowledge written in such a perfect way? I actually have a presentation that i am presently acting on, and that i have been probing for such data instead.

Kayleen SchreckhiseJune 8th, 2011 at 8:20 pm

Hi there! I just wanted to ask if you ever have any problems with hackers? My last blog (wordpress) was hacked and I ended up losing many months of hard work due to no data backup. Do you have any solutions to protect against hackers?

מגרש לרכביםJune 9th, 2011 at 2:09 am

היי אני רוצה להמליץ לכם על חברה בתחום מכירת רכבים המתמחה בשרותי טרייד אין לסוכנויות רכב ולקוחות פרטיים . באתר, מידע רב המלווה בתמונות מכירת הרכבים ורשימה המתעדכנת באופן שוטף עם הרכבים הנמצאים במקום ומיועדים למכירה.

Band SawJune 9th, 2011 at 2:28 am

Hey there this is a wonderful article. I’m going to email this to my friends. I stumbled on this while searching on google I’ll be sure to come back. thanks for sharing.

Philips LED light bulbsJune 9th, 2011 at 3:13 am

My programmer is trying to persuade me to move to .net from PHP. I have always disliked the idea because of the expenses. But he’s tryiong none the less. I’ve been using Movable-type on numerous websites for about a year and am nervous about switching to another platform. I have heard very good things about Is there a way I can import all my wordpress posts into it? Any help would be really appreciated!

Baltimore RoofersJune 9th, 2011 at 2:14 pm

Many thanks for making the effort to talk about this, I feel strongly about this and enjoy learning a great deal more on this matter. If possible, as you gain knowledge, would you mind updating your website with a great deal more details? It’s very helpful for me.

Condooms bestellenJune 9th, 2011 at 2:21 pm

Information given by you is really very useful and valuable for me. I have to write an article in my class about this theme and thanks a lot for it. I even didn’t know about Laboratory and Unarmed stick insects. Thanks a lot

nurit 2085June 9th, 2011 at 7:18 pm

I simply wanted to generate a quick comment so that you can express gratitude to you personally for the people wonderful pointers you’re posting at this site. My own time consuming internet investigation has right at the end of the day been rewarded with good quality means to show to my guests. I will claim that most of us website visitors are truly endowed to take place in a fantastic network with lots of marvellous people who have useful hints. I find myself quite privileged to possess used your webpages and show off forward to really more fabulous minutes reading here. Thank you for several things.

EvelyneJune 10th, 2011 at 2:51 am

It’s a great pleasure to visit your website and to enjoy your excellent work! You have fine ideas. Really looking forward to read more! 🙂

click hereJune 10th, 2011 at 4:11 am

You ought to really take into consideration engaged on growing this blog into a significant authority on this market. You evidently have a grasp handle of the topics everyone seems to be searching for on this web site anyhow and you would actually even earn a buck or two off of some advertisements. I might discover following current subjects and elevating the quantity of write ups you place up and I guarantee you’d start seeing some amazing targeted visitors in the close to future. Only a thought, good luck in whatever you do!

LG Revolution Screen ProtectorJune 10th, 2011 at 4:35 pm

There are certainly numerous particulars like that to take into consideration. That is a great level to bring up. I provide the thoughts above as general inspiration however clearly there are questions like the one you carry up the place an important factor will be working in trustworthy good faith. I don?t know if greatest practices have emerged round things like that, however I’m certain that your job is clearly identified as a good game. Each boys and girls feel the affect of just a moment’s pleasure, for the rest of their lives.

Bail BondsJune 10th, 2011 at 10:15 pm

Took me awhile to read all of the comments, but I genuinely enjoyed the write-up. It proved to be incredibly helpful to me and I am sure to all the commenters here! It is usually nice whenever you can not only be informed, but also engaged! I’m certain you had enjoyable writing this article.

barron thomas scamJune 11th, 2011 at 12:25 am

Today, I went to the beach with my children. I found a sea shell and gave it to my 4 year old daughter and said “You can hear the ocean if you put this to your ear.” She placed the shell to her ear and screamed. There was a hermit crab inside and it pinched her ear. She never wants to go back! LoL I know this is entirely off topic but I had to tell someone!

Sasha GreyJune 11th, 2011 at 9:21 am

I have been reading your entries right through my morning break, and I will have to admit the entire article has been very enlightening and very well written. I assumed I’d permit you to realize that for a few explanation why this weblog does now not view neatly in Web Explorer 8. I want Microsoft would stop changing their software. I have a question for you. Might you thoughts exchanging weblog roll links? That may be in point of fact neat!

nras propertyJune 11th, 2011 at 10:43 am

Hi there, I simply hopped over on your web page by means of StumbleUpon. Not one thing I’d generally learn, however I preferred your feelings none the less. Thanks for making something worth reading.

fabrica de bolsasJune 12th, 2011 at 2:19 pm

I feel that may be an enchanting element, it made me assume a bit. Thank you for sparking my thinking cap. Infrequently I get so much in a rut that I simply feel like a record.

FreeipadsJune 12th, 2011 at 10:44 pm

Youre so cool! I dont suppose Ive learn something like this before. So nice to seek out any individual with some authentic ideas on this subject. realy thank you for starting this up. this website is one thing that is wanted on the net, someone with a bit of originality. helpful job for bringing something new to the web!

Dominick GodbyJune 13th, 2011 at 1:52 am

Spot on with this write-up, I actually suppose this web site wants much more consideration. I’ll probably be again to learn much more, thanks for that info.

green iphoneJune 13th, 2011 at 10:25 am

Whats up are using WordPress for your blog platform? I’m new to the blog world but I’m trying to get started and set up my own. Do you require any html coding expertise to make your own blog? Any help would be really appreciated!

Jeromy NakashimaJune 13th, 2011 at 11:16 am

That which you said manufactured a lot of sensation. But, believe about this, what in case you added somewhat material? I imply, I dont desire to let you know how you can operate your website, but what should you additional something to probably get peoples interest? Much like a video or even a photograph or two to have folks thrilled about what youve got to say. In my impression, it will make your web site come to existence a little bit.

create softwareJune 13th, 2011 at 3:09 pm

Spot on with this write-up, I really assume this web site wants far more consideration. I’ll probably be once more to learn far more, thanks for that info.

fabrica de bolsasJune 13th, 2011 at 5:41 pm

Hey, I simply hopped over in your website online by the use of StumbleUpon. Not one thing I might typically read, but I preferred your thoughts none the less. Thank you for making one thing worth reading.

electronic cigarette forumJune 13th, 2011 at 9:04 pm

Hi there! I know this is kinda off topic but I was wondering which blog platform are you using for this site? I’m getting tired of WordPress because I’ve had issues with hackers and I’m looking at options for another platform. I would be awesome if you could point me in the direction of a good platform.

Leah ArchulettaJune 13th, 2011 at 9:15 pm

I am often writing a blog and i really appreciate your content. This great article has really raised my interest. I’m going to bookmark your website and keep checking for new information.

Philips LED light bulbsJune 13th, 2011 at 11:08 pm

My spouse and I absolutely love your blog and find most of your post’s to be exactly I’m looking for. Do you offer guest writers to write content to suit your needs? I wouldn’t mind writing a post or elaborating on most of the subjects you write related to here. Again, awesome weblog!

AutokrediteJune 14th, 2011 at 12:36 am

Es ist gerade einmal neun Jahre her, seit#seit dem Zeitpunkt#seit dieser Zeit#seitdem#seither# das#dasjenige#dies# Strombelieferungsmonopol in Deutschland gefallen#Gefallen finden an#im Krieg gestorben#gernhaben#in jemanden verliebt sein#lieben#mögen#vergöttern# ist. Bis#Solange bis# dahin#dorthin# konnte jeder Haushalt, jedes Unternehmen und jede öffentliche Einrichtung den Strom ausschließlich# #nur#lediglich#einzig und allein# vom jeweils zuständigen regionalen Stromversorger beziehen.

HTC Trophy Screen ProtectorJune 14th, 2011 at 9:43 am

Its rare for me to discover something on the net that is as entertaining and fascinating as what youve got here. Your page is sweet, your graphics are outstanding, and whats more, you use reference that are relevant to what youre talking about. You are definitely one in a million, keep up the good work!

heren ondergoedJune 14th, 2011 at 11:28 am

Its not the case that reader must be completely agreed with author’s views about article. So this is what happened with me, anyways its a good effort, I appreciate it. Thanks

lingerieJune 14th, 2011 at 12:27 pm

Trying to find an erotic product or service or something alot more soft and enchanting? Full figure lingerie comes in any style you want from silk nightwear to help you sexy corsets.

הפקות חתונהJune 14th, 2011 at 5:19 pm

הי אני רוצה להמליץ על אולם אירועים עם נגישות נוחה במיוחד מצפון ודרום בשל הקרבה לכביש 6, המקום 3 דקות ממחלף עירון ל חדרה, כך תוכלו לדעת שהחופה שלכם, תתחיל בזמן.

iPhone No CameraJune 14th, 2011 at 6:37 pm

Amazing blog! Is your theme custom made or did you download it from somewhere? A theme like yours with a few simple adjustements would really make my blog shine. Please let me know where you got your theme. With thanks

Teddy BeltramiJune 14th, 2011 at 9:05 pm

Im impressed, I must say. very rarely do I discovered a blog thats both educative and entertaining, and let me tell you, youve hit the nail on the pinnacle. Your opinion is outstanding; the matter are a few things that not lots of people are speaking intelligently about. Im extremely happy that I stumbled across this in my explore for something regarding it.

Watch Transformers 3 Dark of the Moon Online FreeJune 15th, 2011 at 7:02 am

hey there and thank you for your information – I’ve definitely picked up something new from right here. I did however expertise several technical issues using this web site, as I experienced to reload the site many times previous to I could get it to load correctly. I had been wondering if your web host is OK? Not that I am complaining, but slow loading instances times will very frequently affect your placement in google and could damage your high quality score if advertising and marketing with Adwords. Anyway I am adding this RSS to my email and could look out for a lot more of your respective intriguing content. Ensure that you update this again very soon..

hostingJune 15th, 2011 at 11:23 am

Extraordinary this put up is totaly unrelated to what I used to be searching google for, however it was listed at the first page. I assume your doing something proper if Google likes you adequate to position you at the first web page of a non comparable search.

Webmarket ProtocolsJune 15th, 2011 at 2:02 pm

We shown your website the previous week so i happen to have been browsing that habitually. You will get a number of information there we absolutely love your personal style of any web page absurdly. Support the tasks!

Baltimore RoofersJune 15th, 2011 at 3:05 pm

I was very happy to find this site on yahoo.I wished to say many thanks to you with regard to this great post!! I certainlyenjoyed every little bit of it and I’ve you bookmarked to have a look at new stuff you post.

colon cleanse, colon cleanserJune 15th, 2011 at 8:49 pm

You ought to essentially take into consideration working on creating this blog into a major authority in this market. You evidently have a grasp handle of the subjects everyone is searching for on this web site anyhow and you could possibly certainly even earn a buck or two off of some advertisements. I might explore following current subjects and raising the quantity of write ups you place up and I assure you’d start seeing some superb targeted traffic within the near future. Only a thought, good luck in whatever you do!

ipod docking stationJune 15th, 2011 at 9:10 pm

The information you provided here’s extremely precious. It been found this sort of pleasurable surprise to acquire that awaiting me when I awakened today. These are constantly to the level as well as simple to know. Thanks a ton for that valuable ideas you’ve got shared in this article.

Lighting EffectsJune 15th, 2011 at 10:54 pm

What are you saying, man? I understand everyones got their own thoughts and opinions, but really? Listen, your web log is awesome. I like the energy you put into it, particularly with the vids and the pics. But, come on. Theres gotta be a better way to say this, a way that doesnt make it seem like everybody here is stupid!

life insuranceJune 16th, 2011 at 5:33 am

This can be a very amazing powerful resource that you’re offering and you simply provide it away cost-free!! I that is comparable to discovering websites ones are aware of the particular worth of offering you an excellent learning resource for zero cost. We truly dearly loved examining this site. Regards!

M1 Re-contractJune 16th, 2011 at 6:25 am

Hi there would you mind letting me know which web host you’re using? I’ve loaded your blog in 3 completely different internet browsers and I must say this blog loads a lot quicker then most. Can you recommend a good hosting provider at a honest price? Thanks, I appreciate it!

Three 2 OhJune 17th, 2011 at 2:19 am

Fantastic, are you looking for real estate in Longwood, FL? Learn where the deals are, get foreclosure lists and find homes for sale in Lake Mary.

HTC Trophy AccessoriesJune 17th, 2011 at 4:15 am

Much gratitude for this piece, I make an effort to research as much info on the subject as I can. Anticipate you will continue to write information on here so I can return once in a while.

bettingJune 17th, 2011 at 7:53 am

I think that may be a fascinating point, it made me assume a bit. Thanks for sparking my pondering cap. Sometimes I am getting such a lot in a rut that I simply really feel like a record.

kidney stones cureJune 17th, 2011 at 1:06 pm

Have you ever considered about including a little bit more than just your articles? I mean, what you say is fundamental and everything. But think of if you added some great photos or videos to give your posts more, “pop”! Your content is excellent but with images and videos, this website could certainly be one of the very best in its field. Awesome blog!

Sherril DikemanJune 17th, 2011 at 1:12 pm

Superb blog! Do you have any suggestions for aspiring writers? I’m hoping to start my own blog soon but I’m a little lost on everything. Would you propose starting with a free platform like WordPress or go for a paid option? There are so many choices out there that I’m totally overwhelmed .. Any tips? Thanks!

Most Read | Featured | Popular