EU faces crisis as IMF warns Greek debts are on explosive path

[melm00se]

Source: Telegraph

The EU faces a looming crisis which could threaten the sustainability of the eurozone as the International Monetary Fund has warned Greece’s debts are on an “explosive” path, despite years of attempted austerity and economic reforms.

Global financiers at the IMF are increasingly unwilling to fund endless bailouts for the eurozone’s most troubled country, passing more of the burden onto the EU – at a time when Germany does not want to keep sending cash to Athens.

The assessment opens up a fresh split with Europe over how to handle Greece’s massive public debts, as the IMF called on Europe to provide “significant debt relief” to Greece – despite Greece’s EU creditors ruling out any further relief before the current rescue programme expires in 2018.

Read more: http://www.telegraph.co.uk/business/2017/02/07/eu-faces-crisis-imf-warns-greek-debts-explosive-path/

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Can Greece breakout of this downward spiral short of leaving the EU and abandoning the Euro?

[geek tragedy]

1. they have to give Greece debt relief, there's really no other way out of this.

Greece has suffered--significantly--so it's not clear how much weight the "moral hazard" argument holds any more.

Compromise should be debt relief for the Greeks and a kick in the teeth for the Brits, to re-emphasize that those who try to stay in the EU get rewarded while those that don't, don't.

[melm00se]

5. which is easier:

letting Greece whither on the vine?
or
getting a majority of the EU to agree to write off any of the Greek debts?

Both can have significant implications to the EU system has a whole.

[geek tragedy]

7. the former is simpler, the latter is infinitely more practical

kind of like letting someone bleed to death on the sidewalk is simpler than trying to perform first aid or call an ambulance

[tenorly]

10. Debt restructuring would be the only way out - except that banksters don't like it.

It's not as if Greece's insolvent bonds would be a big problem for Goldman Sachs, etc. They're insured against default anyway with massive (often unregistered) Credit Default Swaps - which often mean a bigger profit for them if the debtor does default.

So much so in fact that they sometimes even convince (read:bribe) judges to force a technical default to take place by, for instance, issuing an injunction that blocks all other bondholders from collecting their payments even when the bonds are still performing. This, famously, was the case with Argentina in 2014.

Banksters don't like debt restructuring - even when they know they'll make up for the haircut with higher yields - because Credit Default Swap payouts incentivize them to force the debtor into default.

And unlike restructuring, which often takes 7 to 10 years to make the creditor whole (assuming that the bonds weren't bought for pennies in the black market, like Singer did with his Argentine bonds), CDS payouts are instant gratification.

[melm00se]

15. looking at the breakdown of the Greek bailout

the bulk of the debt is owed to sovereign nations:

€56B Germany
€42B France
€37B Italy
€25B Spain
€34B Other EU members

that's a lot of € to walkaway from and would have significant impact to the individual players and getting all of these nations to accept a restructuring plan also presents significant challenges.

- Italy, comparably, in rough economic shape.
- Spain has bounced back but that could suffer a setback this early in their recovery
- France is in good shape but Le Pen's commentary (France's economy is being dragged down by EU membership), right or wrong, will resonate with a certain part of the population and that could be a self-fulfilling situation.
- Germany is in good shape but Schäuble is concerned (and blaming the ECB for) the Euro's value is too low.

We will see if and when this issue fully comes to a head.

[tenorly]

6. But as Argentina can tell you, the establishment will gladly use vulture funds (launderers)

to stop any developing country from successfully renegotiating their debts in any way.

[geek tragedy]

9. debt held by sovereign states is a different animal than privately held (and transferable) debt nt

[tenorly]

11. I was referring to bonds held by private parties (the ones vulture funds bought from resellers).

They were issued by Argentina; but then sold by their original investors when the country had its own Greek tragedy in 2001 (worse than Greece, even).

The bonds changed hands many times until, in 2008, they were bought from a Caribbean laundry by vulture fundie and GOP bigwig PaulSinger (through his Caymans laundry, NML).

He could have sold them in 2010 and made a bundle given that Argentina had recovered strongly and their value had doubled; but his intention was to sue for an astronomical payout using a yield formula of his own design.

He ultimately got his way - but not really thanks to his pet judge (who then retired to a million-dollar Montana ranch). It was thanks to a narrow election victory by neocon candidate (and Trump friend) Mauricio Macri, who last March coughed up $9 billion to Singer ($2.3 bn) and other vulture funds and minor holdouts.

I figure the GOP and its SuperPACs will probably reap about a 10% of that.

[geek tragedy]

12. my point was that I don't think there are private bonds at stake

here anymore--it's state-owned debt that's the issue.

[tenorly]

13. You mean corporate bonds bought by the Greek Gov't. that are no longer performing?

[geek tragedy]

14. no, that the debt forgiveness being contemplated here would be by sovereign states

holding Greek debt. If they simply forgive the debt and expunge it, nothing for the vultures to eat.

[tenorly]

16. I see - and I wish they would.

Except that every bank and money laundry from Grand Caiman to Guernsey must have bought a few and then taken out massive CDS insurance against them.

Payouts on which they'd only receive if the bonds default (or are forced into technical default by some easily-bribed judge, as was the case with Argentina a couple of years ago).

[geek tragedy]

17. CDS's are someone else's bet, not enforceable against Greece or EU states nt

[tenorly]

18. Not against them directly, no; but they do create great incentive to force a defaut at their expense

The International Swaps and Derivatives Association - a purely private round table whose rulings are nevertheless taken as binding by states - decides when a default has been triggered, incredibly.

And, you guessed it, Singer the buzzard sits on the board.

That's how he cashed out on the CDS he took out against Argentine bonds when Griesa issued his illegal ruling in 2014.

[nikibatts]

2. Greece should build a few Trump hotels and get out of debt.

[Tom Rinaldo]

4. Not quite bold enough

They could rename the nation Trump Greece and then ask for U.S. foreign aid. That's an easy several billion right there. Of course they would be naming their country after the Trump children, not the Donald, so there would be no conflict of interests triggered off.

[Javaman]

3. the IMF expected Greece to starve it's citizens to pay off their debts...

they have already sold off all their various public assets to pay the mafia, ah hmm, the IMF and their loan shark payment rates.

now Greece, which became the model for the IMF; to show off to the world, just how compassionate the IMF can be and how understanding they have been to Greece's debt is now blowing back on them.

The EU wanted Greece to be a member so bad that they completely overlooked the fact that:

1) virtually none one in Greece bothered to pay their taxes http://www.bbc.com/news/magazine-33479946

2) there was some truly funky and illegal accounting practices being done http://www.spiegel.de/international/europe/greek-debt-crisis-how-goldman-sachs-helped-greece-to-mask-its-true-debt-a-676634.html

3) the collusion between Greece and the EU to make Greece a member http://www.truthinaccounting.org/news/detail/the-greek-crisis-the-reasons-why-and-the-lessons-available

[secondwind]

8. My husband and I stumbled onto prime beachfront real estate in the Dominican Republic, in an area

that was keep out of the public eye. We had made a wrong turn.

The for sale signs were in Spanish and English but the folks selling were Greek... most likely, Greek bankers who absconded with the money and were laundering.