Tag Archives: Hellas

Famous last words.

Vi begynner med Jon Corzine. Han er tidligere Goldman Sachs trader, legendarisk for sin risikoprofil og tidligere guvernør i New Jersey. I går gikk MF Global, finanshuset han tok over etter New Jersey, til skifteretten og erklærte konkurs.

Forliset av MF Global blir trolig en topp 10 konkurs i USA, etter f.eks. Worldcom, Enron, Washington Mutual og Lehman. Kort fortalt overinvesterte Corzine i europeiske gjeld og ikke fortalte det til noen. Når investorene krevde å få vite plasseringene, kom det for en dag. Og den ekstra risikopremien investorene krevde, da de fant ut hva han hadde investert i, hadde Corzine ikke på bok. I et siste forsøk på å selge MF Global, fikk han noen på kroken. Men avtalen falt sammen etter at Interactive Brokers fant noen hull. Pengehull.

Dermed konkurs. Dermed ‘hva i alle dager’ når man leser hva Corzine sa forrige uke. Forrige uke!

The spread between interest earned and the financing cost of the underlying repurchase agreement has often been attractive even as the structure of the transaction themselves essentially eliminates market and financing risk.

Next!

Har du fulgt noen Eurokrise-live-blogger, så har det vært mye ‘famous last words’ idag:

«It’s all over. The government is about to collapse,» said an official.

«Forget the referendum and even the vote of confidence. The government could crumble tonight,» says one veteran socialist.

Hva heter det i tennis?

Unforced error?

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Seks grunner Hellas burde gå konkurs. Av Michael Schuman.

Du har kanskje tenkt tanken? La seigpiningen stoppe, legg planer blant få byråkrater og annonser en styrt konkurs av Hellas (meg):

Six reasons why Greece should default – The Curious Capitalist – TIME.com: «As global stocks tank over rising fears of a double-dip recession, one country at the center of the storm has never exited the recession – Greece. Amid its increasingly severe debt crisis, the Greek economy is in its third consecutive year of contraction, and, under pressure to slash state spending and stabilize its national debt, there is little hope that the situation will turn around any time soon. The IMF doesn’t expect positive annual growth in the country until 2013! Earlier this week, the government approved yet another package of austerity measures, including cuts to pensions and public sector workers and a program to tax the poor. The measures are an attempt to appease Greece’s creditors in the euro zone, who are demanding even harsher steps in return for continuing a $150 billion bailout given to Athens last year. Without those rescue funds, Greece could default on its debt.

That default is something Europe has been struggling to avoid for a good 18 months. But more and more, I’m coming to believe Greece should default. Here’s why:

The prevailing wisdom concerning Greece is that a default on its $400 billion of sovereign debt would be a catastrophe for the world’s financial markets and help speed the global economy towards a renewed recession. We can’t rule out that possibility. European banks are already under pressure (watch for more on that in this space), and losses inflicted by a Greek default, though unlikely to topple European banks, could heighten concerns about the health of Europe’s financial sector, sending global markets into turmoil, worsening the euro debt crisis, and leading to something truly ugly. That would especially be the case if panicky investors fled the bonds of other indebted euro zone countries, like Italy and Spain, possibly causing the collapse of the monetary union. None of this is certain, of course, but we can’t predict how the global economy would react to a Greek default, especially with sentiment already so weak. The general thinking is: Why take the risk? Keep bailing out Greece.

The counter argument, though, is that we’d all be better off if Greece just defaulted. I’ve made the case before that a continued bailout of Greece was a bad idea, and the more I watch what’s happening in the Greek crisis, the more I think Athens needs to just throw in the towel, default, and start over.

First, a Greek default is inevitable. It is not a matter of if, but how. A default is built into the terms of the proposed second bailout package, in which private creditors are expected to swap or roll over their holdings of Greek bonds, taking a loss in the process. That would be an “orderly” default, perhaps, through which the process could be carefully controlled to minimize the impact on financial markets compared to a “disorderly” default, in which Greece just says: “We won’t pay!” But it is still a default.

Second, because of that reality, investors are already assuming Greece will default, and are preparing for it. I’ve argued in the past the Greece is not Lehman Brothers, and its default would not have the same disastrous effect on the global economy, to a great degree because there would be no shock value from a Greek default, as there was with Lehman. Greece has been on an obvious downward spiral for nearly two years now. Its one-year bonds are trading at a yield well over 100% — a clear indication investors believe a default is coming. Since the markets are already anticipating a default, there isn’t as much downside in actually having one.

Third, the reason everyone assumes a default will happen is that the bailout program is not working. It has been 17 months since the first bailout of Greece in May 2010, and the situation in the country has only worsened. Its debt level is not under control, contagion hasn’t been squashed, and there is no hope that Greece can return to private capital markets for funding at any point in the foreseeable future. There is a high probability that the EU is simply throwing good money after bad by continuing the current strategy.

Fourth, the main reason the bailout is failing is that no one believes that Greece can fix its finances and reform its economy under the austerity program imposed by the terms of the rescue. Greece is already missing its budget deficit targets, even with all of the cutting and tax hikes. That’s because the adjustment demanded is simply not politically, socially, or even mathematically possible. Since the austerity program is causing the economy to shrink, reducing debt and deficits is just that much more difficult. You end up like a dog chasing its tail. Due to the contraction of GDP in the first half of the year, economist Ken Courtis points out that to keep its government debt to GDP ratio flat, Greece would have had to reduce its debt by an (annualized) 8.3%. “In most languages this would be called impossible,” Courtis comments. Increasingly, it appears the only way out is through a true debt restructuring – the type of process triggered by a default.

Fifth, in light of all of this, we can argue that the euro zone would do more good by using the Greek bailout money elsewhere. The leaders of the zone could, for example, utilize the funds to support Spain and Italy, the crises in which are the real threat to the future of the euro. Or maybe it’s best to use the Greek bailout funds to recapitalize and shore up the European banking sector, which would minimize the impact of a Greek default. What I’m saying here is that the hundreds of billions being tossed at Greece might do a better job of ending the debt crisis if employed in ways that could truly bolster investor confidence in the monetary union and its financial system. Economist Nouriel Roubini recently made this point:

Illiquid but potentially solvent economies, such as Italy and Spain, will need support from Europe regardless of whether Greece exits (the euro zone); indeed, a self-fulfilling run on Italy and Spain’s public debt at this point is almost certain, if this liquidity support is not provided. The substantial official resources currently being wasted bailing out Greece’s private creditors could also then be used to ringfence these countries, and banks elsewhere in the periphery.

Sixth, the bailout program is pushing Greece towards complete economic and social turmoil. The economy is practically in free fall – GDP shrank 7.3% in the second quarter, after an 8.1% contraction in the first. Protesters are regularly out on the streets. Unemployment stands at 16%. And there is no light at the end of the tunnel. Yes, the Greeks made a mess of their economy, and now they have to pay the price of fixing it. But at the same time, almost the entire process of adjustment has been imposed onto the Greeks. There has been an attempt on the part of the euro zone leadership to protect Greece’s creditors as much as possible, mainly to hold off bailouts of the banks themselves. Though private sector creditors will absorb losses as part of the second bailout program (assuming it happens), Greece in the end is getting very minimal debt reduction in the process. Roubini calls the deal “a rip-off” because the amount of reduction is “close to zero.” So the current strategy is cruel, and in my opinion, simply unsustainable.

So the Greeks should just stop paying their debts and force a restructuring that will allow the country to return to true economic health. If necessary, Greece should leave the euro zone and use its own currency, giving the country the ability to print money, pay its bills, and inflate the economy. Such a process will be painful for everyone. The Greeks will still have to undergo an excruciating process of reform. The EU will have to act immediately to shore up European banks and protect Spain and Italy from contagion. But like pulling off a bandage quickly, the pain will be sharp, but brief, and we can then all move on. At least to the next crisis.»

(Via The Curious Capitalist.)

Bare å lese grunn nummer 6 er en grøsser.

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Hellas og revisorproblemer. Møt Benfords lov.

I en ny artikkel forsøker forfatterne å ettergå budsjettene til medlemsland i EU, spesielt for å bruke Benfords lov til å kikke etter uregulariteter.

Greece and Benford’s Law:

To detect manipulations or fraud in accounting data, auditors have successfully used Benford’s law as part of their fraud detection processes. Benford’s law proposes a distribution for first digits of numbers in naturally occurring data. Government accounting and statistics are similar in nature to financial accounting. In the European Union (EU), there is pressure to comply with the Stability and Growth Pact criteria. Therefore, like firms, governments might try to make their economic situation seem better. In this paper, we use a Benford test to investigate the quality of macroeconomic data relevant to the deficit criteria reported to Eurostat by the EU member states. We find that the data reported by Greece shows the greatest deviation from Benford’s law among all euro states.

The full article is here, hat tip goes to Chris F. Masse.

(Via Marginal Revolution.)

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Spiegel Online har en tredelt serie om tyske planer for Hellas. Verdt noen minutters lesing.

Spiegel Online, del 1, side 1:

Euro-Zone Exit Scenarios: Germany Plans for Possible Greek Default – SPIEGEL ONLINE – News – International: «The rest of the euro zone is losing patience with Greece. German Finance Minister Wolfgang Schäuble is no longer convinced that Athens can be saved from bankruptcy. His experts at the Finance Ministry have been working on scenarios exploring what would happen if Greece left the euro zone. By SPIEGEL Staff.

Herman Van Rompuy is an influential man in Europe. He is already president of the European Council, the assembly of the European Union’s heads of state and government. Soon he will also serve as the chief representative of the euro zone, if all goes according to plan.

Van Rompuy’s new role as «Mr. Euro» is a highly prestigious position. German Chancellor Angela Merkel thinks highly of the unassuming Belgian politician, who conceals a propensity for toughness and efficiency behind his seemingly humble appearance.
One of Merkel’s European counterparts felt the brunt of Van Rompuy’s unconventional charm last Monday, when he took Greek Prime Minister Georgios Papandreou to task in a telephone conversation. The representatives of the European Commission, the European Central Bank (ECB) and the International Monetary Fund (IMF), known as the troika, had left the crisis-ridden country in protest a few days earlier, because the Greek government had, once again, circumvented agreements it had made.

We have a problem, Van Rompuy said at the beginning of the conversation. Unless Greece delivers, he told Papandreou, the next tranche of aid would not be paid. Papandreou understood immediately: Van Rompuy was telling him the Europeans were on the verge of cutting off funding to his country.

A lot of people in Europe are displeased with Greece at the moment. «We cannot be satisfied with the latest reports from Greece,» an irritated Chancellor Merkel said last week. «The troika mission must be continued and brought to a positive conclusion,» said German Minister Wolfgang Schäuble. Even Euro Group President Jean-Claude Juncker, normally not one to engage in fearmongering, took Greece’s prime minister to task on the phone. «Things are not moving at the right pace in Greece,» he said after the conversation. «There are no results.»

Losing Patience

The tougher talk is much more than show. The rest of Europe is losing patience with Athens. And after 18 months of crisis in the country, there is still no improvement in sight. Key economic figures are worsening, and there are growing doubts over whether the Greek government truly understands how serious the situation is.

In European capitals and at the European Commission, some are beginning to wonder whether the efforts of the last year-and-a-half were in vain. The partner countries have already provided Greece with €110 billion ($152 billion), and a second bailout has already been agreed upon. But Europeans are now beginning to realize that they have spent a lot of money for nothing.

The disappointment runs particularly deep in Berlin, where the government’s crisis-management policy has clearly been going around in circles. In the beginning, the chancellor said that the Greeks ought to help themselves out of their own crisis. Then came the first and subsequently the second aid package. The new approach, the government said, was to rescue Greece so that the other debtor nations would be spared.

Now the Germans have come full circle, and the prevailing emotion is fear of a never-ending debacle in Athens. «Enough is enough,» says one senior government official, adding that Berlin has lost patience with the Greeks. With a mixture of resignation and fatalism, Merkel and Schäuble are facing up to the inevitable and thinking the previously unthinkable: Greece is going bankrupt, and not even its withdrawal from the monetary union can be ruled out anymore.

Between Desperate and Hopeless

The planning for the day of reckoning is already underway, in departments at the Finance Ministry in Berlin as well as in task forces at the EU in Brussels. German Finance Ministry officials hope that a Greek bankruptcy would be manageable, as long as European politicians keep their cool and the bailout funds are increased as planned.

The motivation here is to send a signal, not only to Berlin’s European partners, but also to skeptical politicians in Germany’s coalition government. The message is that Europe also has an alternative to helping: If necessary, it can also withdraw its help.

The subject was discussed at a dinner last Tuesday at the German Finance Ministry, to which Finance Minister Schäuble had invited his counterparts Finnish Finance Minister Jutta Urpilainen and Dutch Finance Minister Jan Kees de Jager.

Officially, the ministers were there to discuss the collateral the Finns want to receive from the Greeks in return for further aid. But the real issue was the escalating crisis in Athens. The attendees were all aware that the situation in Greece is now fluctuating between desperate and hopeless, and that bankruptcy is probably unavoidable. The only differences of opinion were over the consequences.

Schäuble argued that the Greeks should remain in the monetary union, even after a so-called haircut. De Jager, however, was not opposed to their leaving the euro zone. The attendees did agree that the ultimate consequences are up to the Greeks themselves: The other members of the euro zone do not have the option of ejecting them from the monetary union.

Calculating the Consequences

Schäuble is convinced that things cannot continue as they are. He shared his concerns and conclusions in several conversations with close associates last week. Each time, his message was that he no longer believes that the Greeks will be able to fulfill the stipulated conditions, and that they are likely to run out of money as early as October.

Finance Ministry officials have already calculated the consequences. Last week, an envoy from Berlin presented the results to Germany’s partners in Brussels.

There are basically two possibilities for a Greek bankruptcy, the German official said: Either the country remains in the monetary union, or it withdraws.

Either option would involve a haircut, meaning that Greece would only service a certain share of its debt, such as 50 percent. This would translate into significant losses for Athens’ creditors, like the European Central Bank (ECB), other European Union countries and banks, insurance companies and financial institutions throughout Europe. Schäuble’s envoy presented his Brussels audience with the results of the German Finance Ministry’s simulations, and said that the goal should be to contain the damage caused by these losses.

The European Financial Stability Facility (EFSF) plays a key role in their considerations. The Finance Ministry wants the Luxembourg-based facility, headed by German economist Klaus Regling, to be provided as quickly as possible with the new competencies that were agreed upon at the crisis summit in late July. Once that happens, there will be a good chance of protecting the rest of the euro zone from the disruptions emanating from a Greek default.

Preventive Credit

The German plans focus on two instruments. First, Schäuble’s officials advocate the use of preventive credit lines, which would involve the EFSF issuing bridge loans to financially weak countries. Second, they want to provide financial injections for banks to stop them getting into difficulties.

Entire countries and their banking sectors could be protected with the two instruments, Schäuble’s man in Brussels argued. The loans would help Italy and Spain, but also small countries like Cyprus, who could find themselves unable to borrow money from fearful investors following a Greek bankruptcy.
Banks in many euro-zone countries could eventually find themselves dependent on the billions from Luxembourg, because they would have to write down their holdings of Greek government bonds. Greek banks would suffer the most from the consequences of a national bankruptcy. For this reason, German officials argue, it is quite conceivable that Greek banks could still receive aid even after the Greek government itself had been cut off from EFSF assistance. As the financial crisis showed, banks are deeply interconnected across national borders. If one major bank fails, others can easily be dragged down with it.

Such consequences are to be expected regardless of whether Greece keeps the euro or withdraws from the euro zone. In reality, Athens would have no choice: The government could only hope to boost its languishing economy if Greece reintroduced its own currency and sharply devalued the new currency against the euro.»

Les videre her

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Oljefondet holdt greske statsobligasjoner til 4,9 mrd. ved inngangen til 2011. 3,5 til Q2.

Screen shot 2011 09 12 at 18 39 32 Dette er fra årsrapporten 2010, og av de 4,9 mrd. har Oljefondet solgt unna ca. 1,4 mrd. til andre kvartal 2011:

The holdings of bonds issued by the sovereign states Greece, Portugal, Ireland, Spain and Italy amounted to NOK 93.7 billion as of the end of the second quarter 2011. Of this amount, bonds issued by the Greek government were NOK 3.5 billion.

Dette er selvfølgelig direkte eksponering, her er noen indirekte:Screen shot 2011 09 12 at 18 40 07Screen shot 2011 09 12 at 18 40 38Screen shot 2011 09 12 at 18 40 51Screen shot 2011 09 12 at 18 41 28
Ikke misforstå, en gresk konkurs er det få som tjener på. Norge og Oljefondet er eksponert, men langt ifra fatalt.

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Hvordan er pasienten doktor? Han har 117 i feber! #hellas

Screen shot 2011 09 12 at 21 53 45 Det har vært en dårlig dag for Hellas. Økonomisidene hos nettavisene har gått bananas med dramatikk, situasjonen er alvorlig. Det skulle ikke være noen tvil at de greske myndighetene har iverksatt tiltak som ikke har vært i nærheten av hva som har vært nødvendig. Problemet løser seg ikke ved å be pressen holde seg unna mens de viktige menneskene diskuterer de viktigste sakene og ikke gjør noe med saken.

Eiendomsskatten som skulle tette igjen hullet i budsjettet har ikke imponert markedet. ECB har kjøpt greske statsobligasjoner, men ikke i stor nok grad. Reformene i finanspolitikken har vært for lite, for sent. Fagforeningene valgte å tråkke i våt sement og er nå på veien til bunns. Merkel hjelper ikke.

Sannsynligheten for at Hellas trer ut av EU og gjeninnfører drakmer har akkurat økt dramatisk. Og det bare på èn dag.

Øverst i posten var greske 1-års obligasjoner. Her er 2 og 10:
Screen shot 2011 09 12 at 21 52 33Screen shot 2011 09 12 at 21 53 01
Hellas er konkurs om ikke mange dagene.

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Eiendomsskatten, nå også i Hellas. Lurer på hvorfor? (Hvordan fylle hull-i-budsjett-utgave.)

Ettersom denne posten om eiendomsskatten er den mest leste her på bloggen, sender vi nå oppmerksomheten til Hellas. Her er Reuters:

Greece on Sunday announced a new tax on real estate to make up for budget slippage and meet this year’s deficit target, its finance minister said after an informal cabinet meeting.

Eiendomsskatten finner veien til Hellas, og grunnen for å innføre den er den samme som mange av Norges kommuner gir for innføring. Fylle hull, øke inntekter. Så enkelt.

Så hvordan skal denne skatten innkreves?

«It is a special levy on property which will be collected through electricity bills,» Finance Minister Evangelos Venizelos told reporters.

Det er ca. 4 Euro per kvadratmeter og skal, ifølge finansdepartementet tette underskuddet og nå underskuddsregler satt av EU.

Sist jeg sjekket var 2-års greske statsobligasjoner på 57%.

Igjen blir neste uke en gresk prøvelse.

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Hellas nedgradert, igjen.

Standard & Poor’s har akkurat nedgradert Hellas fra B til CCC. La oss først definere hva ‘B’ og ‘CCC’ betyr:

  • ‘AAA’ — Extremely strong capacity to meet financial commitments. Highest Rating.
  • ‘AA’ — Very strong capacity to meet financial commitments.
  • ‘A’ — Strong capacity to meet financial commitments, but somewhat susceptible to adverse economic conditions and changes in circumstances.
  • ‘BBB’ — Adequate capacity to meet financial commitments, but more subject to adverse economic conditions.
  • ‘BBB – Considered lowest investment grade by market participants.
  • ‘BB+ — Considered highest speculative grade by market participants.
  • ‘BB’ — Less vulnerable in the near-term but faces major ongoing uncertainties to adverse business, financial and economic conditions.
  • ‘B’ — More vulnerable to adverse business, financial and economic conditions but currently has the capacity to meet financial commitments.
  • ‘CCC’ — Currently vulnerable and dependent on favorable business, financial and economic conditions to meet financial commitments.
  • ‘CC’ — Currently highly vulnerable.
  • ‘C’ — Currently highly vulnerable obligations and other defined circumstances.
  • ‘D’ — Payment default on financial commitments.

Nedgraderingen er i all hovedsak endring fra ‘currently has the capacity to meet financial commitments’, til ‘currently vulnerable … to meet financial commitments’.
Dette fra Wall Street Journal:

The downgrade reflects our view that there is a significantly higher likelihood of one or more defaults, as defined by our criteria relating to full and timely payment, linked to efforts by official creditors to close an emerging financing gap in Greece. This financing gap has emerged in part because Greece’s access to market financing in 2012 and possibly beyond, as envisaged in the current official EU/IMF program, is unlikely to materialize.

This lack of access, in our view, creates a gap between committed official financing and Greece’s projected financing requirements. Greece has heavy near-term financing requirements, with approximately EUR95 billion of Greek government debt maturing between now and the end of 2013 along with an additional EUR58 billion maturing in 2014.

Moreover, the downgrade reflects our view that implementation risks associated with the EU/IMF program are rising, given the increasingly complicated political environment in Greece coupled with its current difficult economic climate.

S&P’s argumenterer for at Hellas kommer til å få svi når krisepakken til EU og IMF er oppbrukt:

This financing gap has emerged in part because Greece’s access to market financing in 2012 and possibly beyond, as envisaged in the current official EU/IMF program, is unlikely to materialize.

Husk at S&P’s nedgradering er ‘bare en mening’ fra ratingbyrået, men det er lettere å forstå hvorfor nedgraderingen på offentlig gjeld skjer og ikke CDS/CDO papir.

Uansett er det dårlig nytt for Hellas:
Chart
Grafen viser hvor høy rente markedet setter på 10-års obligasjonene til den greske stat. Ville du betalt 17% rente på huslånet ditt?

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Krugman om Hellas. Rettere sagt, mer fra Krugman om Hellas.

Denne uka kom det ubekreftede rapporter om at greske myndigheter vurderte å forlate euro samarbeidet. Dette ble raskt tilbakevist, og presiseringer om at diskusjonen gjeldt restrukturering av gjeld ble gjort på nytt. Så Krugman plukker opp fra en kommentar om at Argentina gikk bort fra sine gjeldsforpliktelser, stengte sine banker og lot valutaen devaluere. Hva som skremmer meg mest er følgende setning:

[…]the main argument against the possibility of a euro breakup has been precisely that any hint of exit would unleash the mother of all bank runs. So how could exit take place?

Alle ‘bank-runs’ mor. Ikke hyggelig. Her er hele fra Prof. Krug:

More Greek Out – NYTimes.com: «More Greek Out
An Argentine commenter on my Greece-leaving-the-euro post notes that Argentina, in addition to letting the peso drop, both defaulted on its debt and imposed temporary restrictions on bank withdrawals. Indeed. Something similar would have to happen for a euro exit to take place.

But bear in mind that the first piece is already a foregone conclusion: everyone knows that Greece won’t repay its debt in full. The problem is that even if the country defaults on its debt, it still faces the problem of wages and prices way out of line with the core euro countries. So devaluation is what you do when default isn’t enough.

As for the second point, the main argument against the possibility of a euro breakup has been precisely that any hint of exit would unleash the mother of all bank runs. So how could exit take place? I argued some time ago that it would have to take place in the context of a banking crisis that forces a temporary closure of the banks — something along the lines of the Argentine corralito — in any case.

This is why I find it hard to see any European government making a solemn, deliberate decision to leave the euro. But I can easily see how events could lead to a situation in which euro exit becomes the least bad option.»

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