17th June 2011
The Guardian, this morning, says that the IMF under a new acting chief, American John Lipsky, is forcing Germany's hand and has secured agreement on a climbdown from the German position of forcing bondholders to share the pain.
Some of those bondholders include the French. The Boston Herald reports on Moody's threat to downgrade French banks Soc Gen, BNP Paribas and Credit Agricole over ownership of Greek bonds and Greek banking subsidiaries.
In London, yesterday's market report from the Telegraph dug out two pessimists among many.
Tanrich Securities' Vice-President Jackson Wong in Hong Kong said: "Greece is like a Lehman Brothers situation, except a country version. It's magnifying uncertainty right now, even though most banks don't have much exposure to the euro debt situation."
The Telegraph also reported Nout Wellink, governing council director of the European Central Bank, not cheering everyone up by telling Dutch newspaper Het Financieele Dagblad that a new Greek aid package would carry so many uncertainties and risks that a doubling in the bail-out fund would be necessary to take into account the contagion risk for both Ireland and Portugal.
On the paper's message boards Simon Black was aghast at how the money involved was increasing:
"Last week we were being warned that with only Euro444bn. In its bailout fund to help 'struggling Eurozone countries', the ECB was itself in danger of collapse. Now we are told the bailout fund has more than doubled to Euro1.5 trillion. So where has that money come from?"
A report elsewhere in the newspaper will give Mr Black cold comfort, suggesting that Germany was insisting that the EU Financial Stabilisation Mechanism be used, which could see Britain required to contribute as much as £7bn.
multisitio made a very practical point:
"Costing Britain a lot of money this little business at current strong euro exchange rates!"
In the US, there was a great deal of cynicism about Greece paying anything back long term. Here is Peter Boockvar on the US's Big Picture website writes:
"The ECB is in a dream world thinking the Greeks can pay back what is owed and the ECB's polluted balance sheet is the major impediment to a deal. Spanish bonds are no longer immune as their 10 yr yield is rising to an 11 yr high and 5 yr CDS is back above the concerning level of 300 bps, a 5 month high after they sold 8 and 15 yr paper in a total amount that was below what they hoped for. $ and euro swap spreads are spiking to 6 month highs."
The Wall Street Journal's the Source Blog asks "Who wants the worst job in Europe? in a report on the finance minister Greek Finance Minister George Papaconstantinou (if he still has his job at time of publishing).
The minister has been demonised by Greek protesters.
The blog set out three problems – "Mr. Papaconstantinou has developed a long-standing relationship with the EU and the IMF. A new Athens front man at this late stage could be a setback for talks to secure a new aid package for Greece that could run up to €100 billion when all is counted.
"The second is finding someone who would want the worst job in Europe. Few have Mr. Papaconstinou's credentials. Insiders say some likely candidates lack either financial know-how, international experience or even English skills.
"The one standout possibility right now is former ECB governor Lucas Papademos, who hasn't spoken publicly about how he would receive a summons.
"The third is that a prolonged government crisis would dash whatever confidence there still is in Greek prospects, derail relations with the EU and IMF and make a default very likely within a few weeks"
Another blog on The Source by Alen Mattich bleakly suggested that: "Whatever international bodies do, it won't be enough if, fundamentally, the Greeks feel they're better off out of the single currency than in it."
In a similar vein, FTAlphaville blog argues that now the real risk to Greece is not the protracted row with Germany. It reports JP Morgan's David Mackie view that the real risk to Greece is Greece.
"It is increasingly likely that a new government will be formed which will want to renegotiate the terms of the package with less fiscal austerity and fewer asset sales."
Europe's most senior civil servants are also concerned. A leaked report from the BBC reported by Joe Lynam suggests that the European Commission is profoundly worried about Greece.
The BBC reported that "A leaked document said the European Commission had a profound sense of foreboding" about Greece and the future of the eurozone and this was apparently in reaction to the "damning failure" of eurozone ministers to agree a new bail-out for Greece last night.
A few days before, the Charlemagne column in the Economist was suggesting that Greece was teetering on the edge.
But was it right with this more upbeat sentence? "In the end, a new rescue will be agreed. If there is one thing on which all Greek parties, inc
luding the anti-EU communists, agree it is that Greece must not leave the euro."
We'll know if that's right in the next few weeks.
And any silver lining? Well back to the Big Picture blog .
The VIX, a US volatility index, also known as the fear index is not, according to this graph – all that frightened – according to this analysis. Probably not so good in Athens.
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