The ISDA decision of no default is very significant. It means that insurers will not payout when a voluntary credit restructuring arrangement is reached. I am not going to argue the rights or wrongs of this but it may be a game changer.It means that future defaults are more likely as private investors will be reluctant to accept restructuring deals. Private investors will also be more reluctant to invest in further debt. A knock on effect is that the market in Credit Default Swaps is likely to dry up quickly and affect the insurance business bottom lines quite drastically. The eurozone needs to drop Greece quickly as the Euro itself is now at risk. Even Germany has no money and must borrow to lend. This is not acceptable to private investors. Printing more money is not going help matters anymore as future lenders are likely to want to do so in US Dollars which is the world anchor currency. Printing more money will only lead to the devaluation of the Euro and an increase in debt. It is time for the eurozone to accept that this European project is a failure and ditch it. The Brussels eurocrats should start looking for new jobs. Well ISDA have surpassed themselves.... so what does it take to constitute a credit event....You but a bond for 1,000,000 and you get back 250,000 doesn't sound to me like anything other than a credit event...... What a bunch of shysters..Thinking about it, haven't the ISDA just rendered all CDS worthless? In effect, haven't the ISDA just closed down a thriving financial industry - The CDS market. Lets face it, nobody is going to buy them after this...If I had paid out for CDS and was then asked to accept back 30% of what I was expecting, I think I would deem that a "Credit" event...... and look to the courts if the ISDA didn't agree....If Greece isn't a credit event, then nothing short of a nation sinking into the sea will be deemed a credit event....CDS from this announcement forward, aren't worth the paper they are printed on...The ISDA has indeed rendered all CDS worthless. Anyone holding CDS insurance on Portuguese, Spanish bonds etc now knows that the insurance they took out is not worth the paper it is written on as they could lose the vast majority of the value and not be able to claim back one Euro. What will that do to bond yields? And without credible CDS insurance, the dodgy banks holding Club Med bonds must now be regarded as being in a far worse financial state! The only thing preventing higher bond yields is the carry trade following the creation of unlimited credit by the ECB at 1%. How much more credit will the ECB have to release to keep that up?The house of cards that is the EZ looks even more shaky now...
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Make no mistake, price stability (ie inflation) is the only thing that matters to the Bundesbank. It's their "red line" & they'll fight Merkel over it if they have to.
That "red line" has been crossed so many times now and there has been nothing but resignations from Bundesbank members in response. In effect they have surrendered a long time ago and all you hear is only a bit of barking in order to not lose face.
Germany has made clear it wants to keep the EURO with (nearly) everyone in it. Having attained this position they have practically no leverage to negotiate. Keep the EZB from printing cheap money and see the rates for italian bonds hit the roof -> See how you can bailout Italy.
Meanwhile there are a lot of proponents of a european super-social-state in Germany. Create fiscal union with euro-bonds and collect taxes and revenues centrally, while also paying unemployment-benefits etc. centrally. This would in theory work as an automatic redistribution-method of money to poor members of the currency-union without the need of formal transfers and thus less bickering....in theory.
Mind though that this is an opionion not shared by most of the common citizens, it is rather a project of the societies political elites, a kind of dream-project. Martin Schulz, member of the SPD and president of the european parliament, is a bit of their poster-boy. He was stated on 28.02. :
«Der Euro-Rettungsschirm wird ausgeweitet werden, ob (Bundeskanzlerin) Angela Merkel das will oder nicht»
This translates to: "ESM-Bailout funds will be enlarged, whether (chancellor) Angela Merkel wants this or not."
The nonchalance with which Schulz declares the will of 81 million citizens represented by democratically elected Merkel irrelevant (if you like her or not) is really frightening. It is the habitus of a man who stands for a clique that mostly regards their fellow citizens as too limited to decide for their own and will graciously take this burden from them, whilst waggling his index-finger in your face.
So, what is the consideration in return for the purchase of these instruments that makes them valid contracts?
I would 1) challenge this ruling and 2) if the ruling stands, claim my premium back on the basis of an unjust enrichment arising from total failure of consideration.
i.e. If this is not an actionable event on the CDS, what is? and if other actionable events can be described how do they differ sufficiently from this one, validly to distinguish it?
If that cannot be answered satisfactorily then there are no actionable events and all the premiums should be returned with an account of all profits having arisen from the use of those monies in the interim.
I can feel a class action coming on.
PS I have framed this as an action for unjust enrichment on the basis of a failure of the contract but there could of course, in the alternative, be actions for breach of contract and consequential losses depending on the terms.
The International Swaps and Derivatives Association (ISDA) has ruled that a "credit event" has not occured for Greece.
This means insurance will not be paid out on CDS contracts.
We've heard what the ISDA has to say on the Greek debt deal: it doesn't count as a "credit event" (although it left the door open for a re-think should the CAC - new legislation that can be used to force reluctant bondholders to take a loss - be brought into play). But what do you believe? Cast your votes below.
he decision was unanimous, says the ISDA, which answered two questions:
1.) "whether the holders of Greek law bonds had been subordinated to the ECB and certain NCBs whose bonds were acquired by the Hellenic Republic prior to the implementation of new Greek legislation [collective action clauses that will force private holders of Greek debt to accept losses as long as two-thirds agree to the debt swap] such that such subordination constitutes a Restructuring Credit Event."
and
2.) "whether there had been any agreement between the Hellenic Republic and the holders of private Greek debt which constitutes a Restructuring Credit Event".
In other words...
Question: Are my CDS worth the paper they're written on?
ISDA: No.
How the hell can this NOT be a "credit event"? Is this association a sub-branch of the EU? What an utter farce.
A) I lend you n zillion.
B) You unilaterally write off over half of n zillion
C) This is not a default on your debt.
These people are taking the piss, aren't they?
Ministers released €58bn (£48bn) of cash designated to smooth the €206bn bond restructuring but withheld the remaining €71.5bn allocated to help the Greek government.
Eurozone finance ministers, who met in Brussels ahead of European Union leaders summit on Thursday night, said they would hold a conference call on Friday, March 9 - a day after the bond swap deadline - and postpone a decision until a eurogroup meeting on Monday, March 12.
The delay will push Greece to within eight days of bankruptcy - a move likely to rattle global markets and put eurozone leaders on a collision course with America and China.
World leaders have demanded immediate action to stem the crisis but Athens faces a €14.5bn bond repayment on March 20
As eurozone leaders finally launched a second, €130bn (£108bn) bailout of Greece, EU chiefs, with the exception of David Cameron and the Czech prime minister, prepared to sign the new rulebook – the fiscal pact – on Friday morning. The rules are the main part of an attempt to get the eurozone's soaring debt levels under control.
But even before the ink is dry on the treaty, an anti-austerity backlash gaining ground across the EU looks like challenging its key provisions. New data from the Netherlands – a fiscal hawk throughout the euro crisis – revealed the scale of the challenge in a country seen as one of the eurozone's success stories.
Without tens of billions in spending cuts over the next three years, the Dutch will be in serial breach of the new pact, which empowers the European commission to levy fines on fiscal sinners quasi-automatically.
The Spanish predicament is even worse as the new regime comes into force. The conservative government of Mariano Rajoy is grappling with a budget deficit last year of 8.5%, well above the pact's ceiling of 3%, making it virtually impossible to get the deficit down to the target of 4.4% this year.
While eurozone finance ministers in Brussels failed to fully approve the new Greek deal, they set the ball rolling by posting €35 bn of collateral with the European Central Bank.
But at German insistence, it appeared that the summit, which is formally focused on finding ways to boost EU growth, would not discuss increasing the bailout fund, as demanded by Washington, Beijing, and London.
The permanent fund, the European stability mechanism, is to hold €500bn, but is viewed as an inadequate firewall to stem a bond market attack on, say, Italy.
Merkel, virtually alone in the eurozone, has been resisting intense pressure to increase the firewall capacity, but German media reports on Thursday suggested she would perform a U-turn by the end of the month. "We will not be able to resist this pressure for long," she was quoted as telling cabinet colleagues in reference to urging from Washington and the International Monetary Fund.
In remarks clearly directed at Berlin, the US ambassador to the EU, William Kennard, said yesterday: "It's important that people understand we think Europe has the financial wherewithal to solve this crisis and we are confident that ultimately it will. in Brussels on Thursday
LONDON—Buyers lined up for auctions of government debt Thursday, helping drive down borrowing costs for countries across the euro zone and providing strong evidence that the wave of cash injected into lenders by the European Central Bank is finding its way to stressed governments.
If the pattern holds, it would be a sign that one of the euro zone's most acute problems—the risk of a sudden drought of financing for Italy—is fading. Yet there still are other problems, among them overhauling government budgets and persuading banks to lend to businesses and consumers.
Both are vital to generating confidence and economic growth.
But Thursday, at least, investors were optimistic.
23 rd of March he will gibve the Green Light to the ratings agencies who will formally announce the default.
They havnt defaulted yet but they will do so in 18 days and then the 23rd March will see the final nail driven home in this long longing criminal conspiracy to steal Greece and all its ciizens wealth by the filthy scum in brussels.
Normality will slowly come back to Greece as this farce has run its course as far as the markets and the US treasury are concerned.
To all who dare to confess they understand what's going on when not privy to the truth whatever that is.
Don't even bother.
Let me try and confuse you...
They're re-writing the rules of the game. Whenever lawyers are brought in to discuss "interpretations" you know someone somewhere is getting f?cked over. No one actually knows who though which is pretty funny. Politicians haven't got a clue what they're doing. They're trying to predict cause and effect. Every action they take will either have no reaction, some reaction or a huge reaction negative/positive over the short/mid/long term. Everything has become too complex for them to cope with. Now mix in that chaotic environment, lawyers re-writing the rules and politicians thinking they're acting with logic and rationale without really understanding what they're doing, you start to get my point. These guys think they know what they don't. They also don't know what they don't which is even more worrying.
What they fail to comprehend is that by trying to "control" what they don't really know, they're creating chaos. Not one single human being can predict chaos. The whole system is becoming more unstable and I can see a point in time where a tipping point will be reached. Think about it. Our entire system is connected and ever changing. This is what politicians with different interests, goals, interpretations, visions, beliefs, emotions, objectives are trying to shape.
Meanwhile cheap oil runs down further attacking the current system of perpetual growth whilst all this shape shifting is akin to re-arranging deck chairs on the titanic.
Quick move the left chair near the right, change the colours, you sit there, I'll sit here.
Like a fart in the wind...pointless
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