The hurdles facing Greece
Clarissa Tan 7:00pm
Greece’s problems are far from over. As Pete said this morning, the €130 billion bailout hardly means the country is out of the woods, or that it
won’t still be ejected from the eurozone. Standard Chartered have released a handy guide to the many obstacles Greece faces. Here are some highlights:
1. The first hurdle is the private-sector debt swap due to take place March 8-11. This is when private creditors are supposed to swoop in and save the day. But, to be enticed to do so, Greek bonds will likely have to come with collective action clauses (CACs). Here’s where it gets technical — if these CACs are invoked, payouts on credit default swaps will be triggered and the impact on financial markets is highly uncertain. It’s an issue that the EU and the ECB — indeed, many global financial authorities — have been twitchy about for some time.
2. Other euro nations need to approve the so-called sweetheart deal. The Bundestag is expected to support Greece’s rescue package and its own contribution to the venture, but other parliaments — that of the Netherlands, in particular – are less gung-ho. Standard Chartered points out that the Dutch pro-European labour party, on which the government relies to pass such bailout agreements, has seen its leader quit due to the party’s growing unpopularity.
3. Then there’s the ‘ring-fencing’ part of the agreement put in to assure other euro-area members, which forces Greece to prioritise debt servicing over its other spending obligations. Athens itself needs to approve this measure, and this is not a sure-fire thing, especially as the Greek parliamentary vote on this issue takes place just before elections (pencilled in for April). The mainstream PASOK and New Democracy parties are losing support, while extremist left-wing parties are gaining, notes Standard Chartered — this could throw a spanner in the works of the austerity programme.
4. And, crucially, the Greek economy remains very weak. It’s still in deep recession, and is showing little sign of recovery yet, as Standard Chartered’s graph shows:
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Cynic
February 21st, 2012 9:28pm Report this commentPt 1
I imagine that it's as near certain that Greece isn't out of the woods as possibly can be, while H*ll will freeze over before the eurocrats will admit the failure of their pet scheme and let Greece go.
Cynic
February 21st, 2012 9:30pm Report this commentPt 2 The can will be kicked along the road until it finally hits a brick wall.
Hexhamgeezer
February 21st, 2012 10:01pm Report this commentIn short there is no deal, only more can kicking - again.
The Greeks cannot deliver. Like the euro concept itself, this 'agreement' is fantasy economics and social engineering of ridiculous proportions.
Herbert Thornton
February 21st, 2012 10:07pm Report this commentIt all sounds (to me) like yet another pointless attempt to ignore reality by - as it were - loading gold onto a heavily listing - and sinking - ship in order to 'stabilise' it.
But there is a comic side to it. I read the other day that in Greece, tax collection officials had gone on strike - and were urging Greeks not to pay their taxes.
Widmerpool
February 21st, 2012 10:16pm Report this commentHow did those smug Eurocrats in Brussels ever let this happen?
If they were working for a major international trading/financial services group they would have out of their ears a long time ago.
How can "Captain" Barroso come on TV and be so smug?
Mirtha Tidville
February 21st, 2012 10:23pm Report this commentThey just need to be let go....the pain may sharp but it will not be any worse than if Greece is allowed to linger on...If such a move brings down the EU pack of cards.....bloody good show but its the only way out for Greece and its long suffering people..
Baron
February 21st, 2012 10:27pm Report this commentThe triggering of the credit default swaps may bury us all, unless the financial authorities have a reasonably good idea how much money is at stake here invoking the CACs will be suicidal.
Noa.
February 22nd, 2012 1:51am Report this commentIt seems to be unraveling already.
*ttp://www.telegraph.co.uk/finance/financialcrisis/9097004/Battle-over-EU-financial-firewall-threatens-to-derail-Greek-bailout.html
"The IMF will refuse to make extra cash available to the EU and will threaten to pull the plug on its contribution to Tuesday's 130bn bailout of Greece unless the eurozone creates a 750bn fund, a move opposed by Germany."
David L
February 22nd, 2012 9:29am Report this commentThere is less chance of yesterday's package working than there is of me signing a petition demanding the reinstatement of Gordon Brown as Prime Minister.
I give it three months to unravel. Quite apart from the risks (risks?) of Greece not achieving the highly improbable levels of assumed growth, the Greek Elections look likely to return a very different Government, which will be committed to rejecting what amounts to compulsory economic euthanasia.
This deal is a dead parrot. Time to shift our attention to the resultant contagion. Starting with Portugal.
oldtimer
February 22nd, 2012 9:46am Report this commentIt is not a question of if it will fall apart, only a question of how and when. As you point out there are plenty of candidates; the politicians just do not want it to be them taking the blame. They want to be able to blame someone else.
El Sid
February 22nd, 2012 1:48pm Report this comment@Baron/Clarissa
Everyone was scared about the CDS issue initially, just because it was an unknown. But then officials rang round the banks and decided it wasn't that scary a problem - 3.2bn is one number that's been mentioned, peanuts in this context.
El Sid
February 22nd, 2012 1:51pm Report this commentMore worrying is
i. The seventy billion that the EFSF is going to have to raise from the markets in short order in order to fund this thing. When even the IMF is cutting its participation because it's worried it's too exposed to Europe.
El Sid
February 22nd, 2012 1:52pm Report this commentb)Legal challenges from hedgies holding the English-law bonds, supposedly there's several where the awkward squad have got blocking stakes of over 25%.
c)The medium-term prospects for Greece - will they need another 50bn in a couple of years time?
Steve S
February 22nd, 2012 2:38pm Report this commentIf you really think that Greek elections will take place in April, you are naive. There will be so much pressure to put these elections back and Puppet Papademos will duly oblige.
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