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FT.com / Global Economy - Soros warns Europe on brink of disintegration
... "It is 50-50 whether the eurozone breaks up. The damage that break up would cause is so great, that I think that as people realise it, they will pull back from the brink," Soros told the Financial Times in an interview. "But we are at the brink now...a solution has to be found in a matter of days."

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"Greece is willing to take the steps and has taken steps which are necessary to get through this crisis. Now Europe has to do its part to help Greece through," he said.

"Unfortunately there are problems with Germany because it does not want to be the deep pockets helping out the profligate southerners which got into trouble. [But] if that is the case, the euro is in danger and the European union is in danger. I just hope that Germany will be helpful."

Soros, who famously made around a $1bn profits almost two decades ago by betting on sterling's exit from the Exchange Rate Mechanism, argued that "having a common currency was very sensible for a common market." However, he stressed that Europe now faced a test. "Is there the political will to keep Europe together? If there is not I think that there will be a process of disintegration."

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"Currency traders find it very difficult right now to speculate because public opinion is very much aroused. If I were running a hedge fund now I would be wary of making money because the political consequences would be too severe," he said. "I don't think that hedge funds are playing much of a role [in the current crisis] - it is not fertile ground. There is a kind of witch-hunt looking for someone who is profiting."



The point is not to be right, but to get to right.
by marco on Sun Apr 11th, 2010 at 11:34:29 AM EST
Greece Wins EU45 Billion Aid Pledge to Blunt Crisis (Update2) - Bloomberg.com
European governments offered debt- burdened Greece a rescue package worth as much as 45 billion euros ($61 billion) at below-market interest rates as they try to end its fiscal crisis and restore confidence in the euro.

Forced into action by a surge in Greek borrowing costs to an 11-year high, euro-region finance ministers said they would offer as much as 30 billion euros in three-year loans in 2010 at around 5 percent. That's less than the current three-year Greek bond yield of 6.98 percent. Another 15 billion euros would come from the International Monetary Fund.
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With the euro facing the sternest test since its debut in 1999, the 16-nation bloc maneuvered around rules barring the bailout of debt-stricken countries, aiming to prevent Greece's financial plight from spreading and to mute concerns about the currency's viability. Germany also abandoned an earlier demand that Greece pay market rates.



"Ce qui vient au monde pour ne rien troubler ne mérite ni égards ni patience." René Char
by Melanchthon on Sun Apr 11th, 2010 at 01:30:42 PM EST
[ Parent ]
If this is confirmed, it's a considerable change for the better.
by afew (afew(a in a circle)eurotrib_dot_com) on Sun Apr 11th, 2010 at 03:14:45 PM EST
[ Parent ]
FT.com / Europe - Eurozone makes €30bn Greek promise
Eurozone members have made a commitment to providing up to €30bn in loans to Greece over the next year to help stave off a debt crisis that has roiled financial markets and posed the most serious challenge to the euro in its history.

Those funds were agreed during an extraordinary teleconference of eurozone finance ministers on Sunday and would be supplemented by contributions from the International Monetary Fund that could yield an additional €15bn (£13.2bn, $20.2bn) according to European officials.

The rates charged to Athens would be around 5 per cent for a three-year fixed loan - above the IMF's standard lending rate but below those currently demanded by jittery investors. Two-year Greek bonds were last week trading at 7.45 per cent.



"Ce qui vient au monde pour ne rien troubler ne mérite ni égards ni patience." René Char
by Melanchthon on Sun Apr 11th, 2010 at 03:34:31 PM EST
[ Parent ]
I would point out that what bonds are trading at in the aftermarket is a bit different than the price that Greece sold bonds at.

Two weeks ago Greece sold 5 billion euros worth of 7 year bonds at 5.9%.

https://news.fidelity.com/news/news.jhtml?articleid=201003291146RTRSNEWSCOMBINED_ATH005323_1&IMG =N&ccsource=rss-investing-stocks

So, the difference we see here is 5% for 3-year bond from Europe versus a 5.9% 7-year bond from the market. Longer-term bonds have higher rates so, it would seem to me, that Greece is not even getting a percentage point less than the market rate.

Of course, one could also argue that Greece's deal for bonds at that 5.9% rate is purely a result of implicit EU guarantees to its stability.

by Upstate NY on Sun Apr 11th, 2010 at 04:28:35 PM EST
[ Parent ]
I haven't looked at the details - and I'm absolutely open to the idea that the EU is screwing Greece over - it seems to me that the 5% is a meaningful guarantee, because most of the descriptions of "Doomsday in Greece" have all been about the escalation of borrowing costs - which are now (for a while at least) pinned around 5%...
by Metatone (metatone [a|t] gmail (dot) com) on Sun Apr 11th, 2010 at 04:31:41 PM EST
[ Parent ]
5% is a very good rate for Greece in this atmosphere.

Whether it will enable them to cut into their deficit is another story. That all depends on what they do in the market with this 5% peg. 40 billion from the EU and IMF at, say, 4.6% (3/4 EU loan at 5% and 1/4 IMF loan at 3.25%) may be offset by much higher loans at either 6 or 7% in the market. If Greece can sell at 6%, then the mix with the 4.6% will help them to slog through. But if they are selling at 7%, then the 4.6% may not be enough.

Other factors come into play, such as Greece's forecast uses 4.5% as the number to predict next year's deficit. Also, older Greek bonds from the pre-eurozone days are maturing. Wolfgang Munchau has stated that Greece's bond structure shows a healthy mix with a long average maturity at low rates and the bonds expiring shortly are at high rates.

We shall see.

by Upstate NY on Sun Apr 11th, 2010 at 04:39:33 PM EST
[ Parent ]
One weird thing that I can't get my head around, a country is allowed to borrow 10x what it gives to the IMF.

If true, Greece should have given the IMF $10 billion about a decade ago.

I have no idea how that formula works but surely the amount given to the IMF should be a percentage of GDP and not an arbitrary "donation."

by Upstate NY on Sun Apr 11th, 2010 at 04:42:25 PM EST
[ Parent ]
This is Munchau on the deal:

http://www.ft.com/cms/s/0/762c8ebc-4596-11df-9e46-00144feab49a.html

I wonder what he would say knowing the amount is for half of what he thought.

by Upstate NY on Sun Apr 11th, 2010 at 05:00:24 PM EST
[ Parent ]
Just as an FYI, all the Greek gov'ts official estimates for the next two years assume an average bond yield rate of 4.5% and 2% contraction. The contraction at this point may be greater, and the bond yields at 5% and recent deals at 5.9% may drive up their portfolio above that 4.5% peg, which would make Greek estimates shy of the reality.

So, it's hard to say whether this is a good thing.

On the positive side, the long-term bonds that are maturing were sold BEFORE Greece entered the eurozone in 2002, and those bonds had a hefty yield in the 7% range.

by Upstate NY on Sun Apr 11th, 2010 at 04:32:19 PM EST
[ Parent ]
2 to 1 odds on the eurozone surviving? I'll bet on such odds.

Wind power
by Jerome a Paris (etg@eurotrib.com) on Sun Apr 11th, 2010 at 02:56:20 PM EST
[ Parent ]
OK, all the maths specialists:

50-50 is 2/1?

Or is it evens ?

by afew (afew(a in a circle)eurotrib_dot_com) on Sun Apr 11th, 2010 at 03:16:17 PM EST
[ Parent ]

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