Lenders are braced for pain (or should be) because they can see how far below face value Greek bonds are trading. Viewed from a distance, the manoeuvre is also affordable: cutting Greece's debt-to-GDP ratio to the eurozone average of 85% would cost €140bn (£123bn), or about 2% of eurozone GDP, calculates thinktank Capital Economics. But big-picture calculations of affordability are one thing. Viewed from close-up, even a modest Greek buyback programme could crystallise serious losses on weak banks outside the country. And if Greece gets debt relief, who is next? In one sense, those rising Italian bond yields, expressing worries of contagion, are betraying the fear that the EU banking system simply isn't strong enough to absorb a Greek hit and the possibility of more blows from elsewhere. Eurozone leaders have themselves to blame, of course: the best time to force the struggling banks to raise more capital was last year; it may now be too late to control the fallout. As if to liven the plot further, stress tests on EU banks will be published after European markets close on Friday. That's an unpredictable, and potentially explosive, element in the mix. An emergency summit of eurozone leaders is planned the same day. That's definitely a good idea: there is an emergency.
Access Investments-Building Awareness - European Union-ROMANIA
Thursday, July 14, 2011
Lenders are braced for pain (or should be) because they can see how far below face value Greek bonds are trading. Viewed from a distance, the manoeuvre is also affordable: cutting Greece's debt-to-GDP ratio to the eurozone average of 85% would cost €140bn (£123bn), or about 2% of eurozone GDP, calculates thinktank Capital Economics. But big-picture calculations of affordability are one thing. Viewed from close-up, even a modest Greek buyback programme could crystallise serious losses on weak banks outside the country. And if Greece gets debt relief, who is next? In one sense, those rising Italian bond yields, expressing worries of contagion, are betraying the fear that the EU banking system simply isn't strong enough to absorb a Greek hit and the possibility of more blows from elsewhere. Eurozone leaders have themselves to blame, of course: the best time to force the struggling banks to raise more capital was last year; it may now be too late to control the fallout. As if to liven the plot further, stress tests on EU banks will be published after European markets close on Friday. That's an unpredictable, and potentially explosive, element in the mix. An emergency summit of eurozone leaders is planned the same day. That's definitely a good idea: there is an emergency.
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2 comments:
I don't think the countries of the Eurozone can afford 27% of their GDP. Most of the Euro economies are small, the periphery is already in crisis - I can't see Ireland, Greece or Portugal being able to contribute to a bailout - and the real cost will therefore fall on France and Germany who together make up nearly 50% of the zone's GDP. If we take out Ireland, Greece, Portugal and Italy we find France and Germany are over 60% of the zone's GDP. That suggests a trillion or more each. Surely that's not going to go down well with their respective electorates.
SHOCK NEWS !
MOODY'S TO REVIEW US TRIPLE A DEBT RATING
"RISING DEFAULT RISK"
http://www.bbc.co.uk/news/busi...
This is the awful truth anti-eu commentators have desperately tried to hide. This news has yet to be reported in the Telegraph.
This follows news that the Chinese rating also is on the verge of downgrading US debt.
Anti-eu posters have become extremely agitated and appear to have gone mad at the realisation that their beloved US is a busted flush.
They were warned that the finger they pointed at the EU would eventually be firmly pointed at the US. As Harvard Professor Niall Fergusson said "A Greek Crisis is coming to America."
There are now 4 anti-eu Chelyabinsk impersonators,
on Ambrose Evans Pritchard's blog.
This is a tremendous accolade
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