On Monday night (feb. 21st. 2012), the eurogroup debated three options to reduce the Greek debt burden without boosting the funds. If the ECB waived its profits on its Greek bonds, experts say €15bn could be wiped off the country's debts. Politicians also discussed reducing eurozone interest rates or investigating whether national central banks could participate in a debt swap, though with costs to taxpayers these two are more controversial. Officials also reopened the tortuous private bondholder talks to see if Greece's private creditors would take a bigger than 50pc haircut on €200bn-worth of bonds..... Meanwhile, Economists have since grown more sanguine about prospects, largely as a result of the "Draghi bazooka" – the European Central Bank's emergency funding scheme for lenders named after ECB chief Mario Draghi. The ECB pumped €489bn into the banking system in December through its three-year funding operation, and is expected to do as much again on February 29. The move is widely considered to have staved off a banking crisis, preventing a catastrophic repeat of the credit crunch of 2008 and 2009. Within the OECD area, there was a wide divergence of performance. Early signs that the US will lead the world back to economic health were evident in the 0.7pc growth the world's largest economy posted in the final quarter. Europe pulled the OECD down, though, with the European Union as a whole contracting by 0.3pc. Overall, the 0.1pc growth was a sharp decline from 0.6pc in the previous thre months and the lowest since the area came out of recession in 2009
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Tuesday, February 21, 2012
And another warning: the recapitalisation of Greece's banks may now need to be raised to €50bn. The previous estimate, I believe, was €40bn.
On Monday night (feb. 21st. 2012), the eurogroup debated three options to reduce the Greek debt burden without boosting the funds. If the ECB waived its profits on its Greek bonds, experts say €15bn could be wiped off the country's debts. Politicians also discussed reducing eurozone interest rates or investigating whether national central banks could participate in a debt swap, though with costs to taxpayers these two are more controversial. Officials also reopened the tortuous private bondholder talks to see if Greece's private creditors would take a bigger than 50pc haircut on €200bn-worth of bonds..... Meanwhile, Economists have since grown more sanguine about prospects, largely as a result of the "Draghi bazooka" – the European Central Bank's emergency funding scheme for lenders named after ECB chief Mario Draghi. The ECB pumped €489bn into the banking system in December through its three-year funding operation, and is expected to do as much again on February 29. The move is widely considered to have staved off a banking crisis, preventing a catastrophic repeat of the credit crunch of 2008 and 2009. Within the OECD area, there was a wide divergence of performance. Early signs that the US will lead the world back to economic health were evident in the 0.7pc growth the world's largest economy posted in the final quarter. Europe pulled the OECD down, though, with the European Union as a whole contracting by 0.3pc. Overall, the 0.1pc growth was a sharp decline from 0.6pc in the previous thre months and the lowest since the area came out of recession in 2009
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Reuters is reporting that there's another sticking point, on top of the private sector involvement (see 10.08pm) -- the issue of the European Central Bank's holdings of Greek debt, and what would happen to the 'profits' it could make on these bonds if they were redeemed at face value (not the distressed prices at which the ECB bought them).
Those 'profits' (which some economists suggest are fanciful anyway), could be fed back to fund the shortfall in Greece's bailout. As reported at 7.58pm, that could trim Greece's debt-to-GDP ratio by 5.5 percentage points by 2020, or over half the shortfal....
10.56pm: A couple of UK economists are still awake, and unimpressed by the Brussels wrangling.
Sony Kapoor, director of the Re-Define think tank, argues that the Troika is playing "arithmetic gymnastics" in an attempt to the Greek numbers to add up - an exercise requiring some suppleness:
23.22 The FT is reporting that the worst case scenario would see Greece needing a €245bn bailout, up from €136bn.
22.55 Eurozone ministers discuss nominal private sector loss on Greek bonds of at least 53.5pc, rather than initial 50pc.
22.52 The Euro Group has gone back to work after a 10-minute break
With general elections due in Athens in April, Greece's increasingly febrile political landscape has become a major fear for 'troika' officials.
Lead by Germany, euro zone hardliners have voiced growing reservations about giving rescue loans to a country whose government may soon be unable, or unwilling, to deliver on reforms needed to make the moribund Greek economy more competitive.
The euro has lost almost half a cent against the US dollar in the last 90 minutes, as the lack of firm news out of Brussels worries traders.
From almost $1.325 against the dollar at 10pm, it just dropped below the $1.32 point. Not a massive move, of course, but a sign of concern. City analysts have suggested the euro could slide back towards $1.30 if the rescue talks unravel.
11.34pm: An update on the Greek polling data I popped into the blog earlier (see 10.38pm): it's now clear that support for the two pro-bailout parties (New Democracy and Pasok) have hit a record low (at 19.4% and 13.1% each).
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