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Greek crisis

Thessaloniki shows the way forward


8 March 2012
Die Zeit Hamburg Comment




Vineyards of the Kir-Yianni domain at Naoussa, Greece.

Kir-Yanni




The Greek capital is bogged down in grievances over recession and the country’s loss of autonomy. But further east, in the Thessaloniki region, new business ideas are cropping up – and new hopes blooming. Die Zeit visited the Greeks who are trying to live off the fruits of their own hard work.


Michael Thumann

The bright red liquid spills up to the edge of the glass. Swirl, sniff, rinse, taste – and spit it out again. Stellios Boutaris is tasting the latest blend from the Kir Yanni winery. “This’ll be something!” he declares, pleased with the resulting rosé champagne that he hopes will conquer Northern Europe. “Germany is a champagne country; we’ll find buyers there.”

An hour west of Thessaloniki, in the village of Yannakohori, the reasons for the optimism become apparent. A gentle winter sun hangs over the Kir Yanni winery. Above the weak green and grey of the slopes, snow still lies on the mountains.

The business model that Stellios Boutaris believes is the model for Greece is getting off the ground here: “To do what we can do and do it really well.” For example, a good wine. Retsina, the notorious throat-scratcher from the Greeks down the street – that was yesterday. Kir-Yanni is being poured at gourmet restaurants in Athens, Thessaloniki – and, increasingly, by foreign customers.

Kir-Yanni is becoming a brand. The new Greece is growing in this Macedonian village and in the streets of the district capital of Thessaloniki, and it’s being nurtured by those Greeks who no longer expect anything from the state. Perhaps that is why it is so hard to find in Athens, among the union bosses of yesterday and the corrupt politicians who blocked reforms to serve the interests of their clientele, and the deputies who stashed millions of euros abroad.

Up in Thessaloniki, Yannis Boutaris – the father of Stellios Boutaris – was at retirement age when he found himself in a warm office in the City Hall. Until a few years ago he had managed the winery, which he had founded in 1996, by himself. Then the now 69-year-old went into politics, and a year ago he was elected mayor of the second largest city in Greece. He got there on his reputation as a successful businessman, as one who lives off his own hard work, as an anti-politician.

Congress against the ossified capital

This city on the Mediterranean Sea was once the Manchester of Macedonia. After the fall of the Iron Curtain, though, the textile mills, leather, knitting, and wool-dyeing factories migrated north to ex-Yugoslavia and Bulgaria.

Yannis Boutaris is popular with the townspeople and visitors from the EU, and that has something to do with his reforms. Boutaris brought a new broom to the city administration, cut the number of directorates, and for the first time had a job description drawn up for every city employee. That way, everyone knew who to go for for what. “This is my biggest challenge,” he says. Yannis Boutaris is expected to open up new horizons for Thessaloniki’s frustrated townspeople.

Public calls by German ministers for a Greek exit from the eurozone have helped a little there. The fact is that Thessaloniki would have nothing to offer when it comes to cheap mass-produced goods for export, so it must find something else.

So what kind of future is Greece’s second largest city planning for itself? “Small is beautiful,” Yannis Boutaris exclaims in English. Greeks should focus on the little things that they know well, he says, and then produce these at excellent quality. “We don’t sell ourselves and our products well enough,” he says, citing the example of Greek olive oil traded to Italy and rebottled as Italian olive oil. Greece, he suggests, ought to learn from the Italians how to maintain quality and brands.

Many agree. At a business conference not far from the Mayor's Office, entrepreneurs from northern Greece are gathering. Unlike in Athens, there is little whining here about the programmes of the EU and the International Monetary Fund. The meetings is a congress against the ossified capital, Athens, and the impotent central government. It’s a forum for liberal criticism of a bloated administration.

Freshen up blurry image of Thessaloniki abroad

“The state is our crisis,” says economics professor Moise Sidoropoulos. “We don’t want business people looking for handouts from the state,” calls out another. “We want entrepreneurs who go into the markets and fight.” That sounds truly scrappy. Where would the Greeks, then, find their markets?

Moise Sidoropoulos reads off a respectable list. The great fleets of Greek ship-owners must be brought back to Greece, by reducing taxes and levies on them. Alternative energy can be produced domestically: Greece has abundant wind and solar power, and a small but strong pharmaceutical industry that focuses on generic brands. Greek agriculture needs to export more quality products, and fish farms must replenish the over-fished Mediterranean. The most important industry, however, is tourism. Greece’s major resource is the beauty of the country.

That’s just how Yannis Boutaris sees it. As mayor, he has tried the freshen up the somewhat blurry image of Thessaloniki abroad, and has persuaded airlines to establish direct connections. Visitor numbers are going up fast. Trying now to bring in cruise ships, he recently visited Hamburg to learn from its successes with huge boats.

The Kir Yanni winery also figures in the mix of idyllic and modern. Stellios Boutaris no longer has anything in common with the gnarled Greek farmer of yore. Apart from growing the grapes and making the wine, he hunts for clients at wine fairs in Europe and America, and wants to sell to China too. E-shopping has long been part of his arsenal. At the click of a mouse, the Kir-Yanni wines can be delivered to your home.

This could be the look of the new Greece, if the plans works out.

Translated from the German by Anton Baer

ONE HAS TO ADMIRE THIS ENTERENTPEUR(SP?)
THINKING OF IDEAS IS THE WAY FORWARD.

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Yes Badboy, I'm sure there will be other ways the Greeks will try to better their lot, but it is the Cities most affected.

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Greece Confident of Bond Swap Approval

By LANDON THOMAS Jr.

Published: March 8, 2012





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LONDON -- As its self-imposed deadline neared, Greece looked set Thursday evening to clinch a landmark debt restructuring deal with its private-sector lenders, clearing the way for the release of bailout funds from Europe and the International Monetary Fund that would save the country from default.

Already, 60 percent of those holding Greek bonds — mostly large European banks and local institutions in Greece — have publicly agreed to swap their old Greek bonds written under local law for a package of new securities, accepting losses of as much as 75 percent in return for more secure bonds that have a greater prospect of actually being paid off.

And as the Thursday night deadline neared, reports suggested that the “voluntary” participation rate could reach 70 percent or higher.

By the terms of the newly revamped Greek bond contracts, a 66 percent participation rate would allow for Athens to invoke collective-action clauses, requiring even the holdouts to take the same losses whether they like it or not.

Given all the twists and turns in the negotiations, something could still go wrong at the last minute, participants said, but most bond investors and government officials were expecting a positive outcome.

“It’s a done deal,” said Hans Humes, the president and chief investment officer of Greylock Capital in New York, whose fund is a member of the committee of banks that negotiated the transaction. “I would not be surprised to see 75 percent.”

Greek officials said the total number of participants in the deal would be announced at 6 a.m. Friday morning, London time. The Greek Finance Ministry had been hoping to announce a 90 percent figure before activating the collective-action clauses, but it is expected to go ahead anyway as long as it reaches the legal threshold.

One remaining wild card in the deal is the €20 billion, or $26.5 billion, of Greek bonds governed by foreign law. These securities have attracted the attention of potential holdouts because they afford better legal protection and provide an easier opportunity for speculators who have bought them at a discount on the open market in hopes of extracting a better deal. Interest in these bonds may be on the wane, though, now that Petros Christodoulou, the head of Greece’s debt management agency, has vowed to wavering bondholders that there will be no sweetheart deals for hold outs.

“We know what money we have and we know what money we don’t have,” he said during a recent interview. “My blood curdles to think what happens if this deal does not get done.”

The Institute of International Finance, the global banking body that has represented private bond holders in the discussion, circulated a confidential memorandum to European leaders recently estimating that a disorderly Greek default and departure from the euro could result in losses to banks, corporations and governments of as much as €1 trillion.

Seen by many as a scare tactic, it nevertheless seems to have had an effect on some of the potential holdouts.

Put in such stark terms, many investors have come to the conclusion that it is better to accept the swap and receive a package of foreign-law Greek bonds and securities from Europe’s rescue fund than to end up with nearly worthless bonds subject to Greek law. The value of Greek 10-year bonds recently hit an all time low of 16 cents on the euro.

“This is the best offer they can make to investors,” said Ioannis Sokos, a bond analyst at BNP Paribas. “Because at the end of the day Greece has no cash.”

Still, many foreign investors believe that even with a successful debt swap, the Greek debt burden will remain untenable, well above the 120 percent of Greece’s gross domestic product that the I.M.F. considers the highest sustainable level. And with the economy still in free fall and the makeup of the next government uncertain, many analysts contend that Athens may have to restructure its debt again within a year or so.

If that proves to be the case, some hedge funds and other investors are talking about the prospects of buying the new foreign-law bonds at rock bottom prices and then fighting Greece in courts outside the country in hopes of earning a handsome profit.

The deal also will leave much of Greece’s debt in the hands of official lenders like the European Central Bank and the I.M.F., which may ultimately face large losses themselves if Greece cannot find a way to manage its finances without further bailouts.

Legal analysts contend that the Greek government’s strategy of emphasizing in such blunt terms the cost of not participating has been a significant factor behind the deal coming together so quickly.

“What is remarkable is the speed with which this has been executed — that is unprecedented,” said Michael Waibel, an expert on sovereign debt law at Cambridge University. “And this very well may have been done by design.”

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8 March 2012 Last updated at 18:40 Share this pageEmail Print Share this page


Investors are increasingly hopeful that Greece will secure a vital debt swap deal, as a Greek official said that more than 75% of bondholders had now agreed to take part.

Greece needs at least 75% of its bondholders to agree to take a cut in the value of their holdings to be able to push through the plan.

It comes ahead of a deadline of 2000 GMT on Thursday.

Shares have risen on optimism that the deal will be supported.

Both the main German and French stock indexes ended the day's trading up 2.5%, while the UK's FTSE 100 added 1.2%.

"I'm optimistic that there's going to be an agreement in the next few hours," said Charles Dallara, the head of the bank group leading the debt swap talks.

Bailout requirement

Greece has said it wants 90% of bondholders, such as banks and pension funds, to agree to take a 53.5% cut in the 206bn euros ($272bn; £172bn) of Greek bonds they hold. But it only requires a 75% take up to be able to force through the deal.

Without the deal, Greece will not receive another bailout.

So far, Germany's Munich Re, French banks Societe Generale and BNP Paribas and some pension funds have said they will sign up.

"The pace of responses to the bond offer is good, the percentage of bondholders tendering voluntarily is very high," a Greek government official earlier told the Reuters news agency.

But some small pension funds have said they will not - and others are waiting to see what hedge funds will do.

One bondholder told the BBC that he had "no incentive" to accept the deal and would not do so.

"I'm not in the business for altruistic reasons," said Patrick Armstrong, managing partner at Armstrong Investment Managers. "Capital markets function best when people are out to deliver return on capital investment."

An announcement on the take-up of the swap will appear on the Greek government's bonds website at 06:00 GMT on Friday.

'Full participation'

The European Union and International Monetary Fund have said - if the debt swap does not go through - that Greece will not get its latest bailout of 130bn euros.

Continue reading the main story
Analysis

Mark Lowen

BBC News, Athens

--------------------------------------------------------------------------------
When it comes to Greece's finances, it's rare that targets are met and things go according to plan.

But this bond deal looks like it's going that way.

Reports suggest Greece is on course to achieve the participation rate it needs for the exchange to pass with fewer problems than expected.

Over 75% of bondholders are said to have signed up; the prime minister said he expected "maximum participation".

The brinkmanship strategy from the government seems to have worked. Greece's Finance Minister warned that bondholders waiting for a better deal would be forced into the swap and would simply not receive the value of their original bonds.

If the deal goes through, there will be a new glint of hope here: a sense that Greece would be in a better position to begin to manage its debt burden.

A small but significant step forward for this recession-stricken country.

Q&A: Greek debt swap

Economic and Monetary Affairs Commissioner Olli Rehn said there would be no better offer, and the deal was vital for eurozone financial stability.

Mr Rehn said: "It is important that all investors recognise that Europe has committed the maximum funds available to this voluntary debt exchange and that full participation is necessary for the Greek programme to move forward."

The Greek Finance Ministry has made it clear that the alternative to the debt swap is a potential default.

"The republic's representative noted that if [private sector involvement] is not successfully completed, the official sector will not finance Greece's economic programme and Greece will need to restructure its debt," it said on Tuesday.

Their 107bn-euro write-off - the "haircut" - together with a huge package of public sector cuts aim to reduce Greek debt from 160% of GDP to 120.5% by 2020.

Athens was first bailed out in 2010 with 109bn euros from the EU and IMF.

As the sovereign debt woes in the eurozone continue to focus primarily on Greece, the head of the World Trade Organisation, Pascal Lamy, told the BBC that eurozone nations would have to align their economies more closely.

He said: "What the Europeans have to do is align the level of integration, of solidarity, which they have currency wise, monetary wise, with something which is economically much more convergent.

"I think that is the direction they are taking."

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8 March 2012 Last updated at 21:15 Share this pageEmail Print Share this page

The Greek government has indicated that it has secured sufficient backing for a debt swap deal that will enable it to avoid defaulting on its debts.

A Greek official told the BBC that more than 80% of bondholders had agreed to the plan, above the threshold required for Athens to be able to push through the deal.

Greece needs to carry out the debt swap before it gets a second bailout.

A formal announcement on the take-up of the swap will be made on Friday.

This is due to appear on the Greek government's bonds website at 06:00 GMT.

Shares have risen on optimism that the deal has been supported, with both the German and French share indexes earlier ending up 2.5%, while the UK's FTSE 100 added 1.2%.

In New York, the main Dow Jones index closed up 0.6%.

Bailout requirement

Greece had said it wanted 90% of bondholders, such as banks and pension funds, to agree to take a 53.5% cut in the 206bn euros ($272bn; £172bn) of Greek bonds they hold. But it only requires a 75% take-up to be able to force through the deal.

German reinsurance group Munich Re, French banks Societe Generale and BNP Paribas, and some pension funds, had said they would sign up.

But some small pension funds had said they would not back the swap, and others said they were waiting to see what hedge funds will do.

One bondholder told the BBC that he had "no incentive" to accept the deal and would not do so.

"I'm not in the business for altruistic reasons," said Patrick Armstrong, managing partner at Armstrong Investment Managers. "Capital markets function best when people are out to deliver return on capital investment."

'Full participation'

The European Union and International Monetary Fund have said that if the debt swap does not go through then Greece will not get its latest bailout of 130bn euros.

Continue reading the main story
Analysis

Mark Lowen

BBC News, Athens

--------------------------------------------------------------------------------
When it comes to Greece's finances, it's rare that targets are met and things go according to plan.

But this bond deal looks like it's going that way.

Reports suggest Greece is on course to achieve the participation rate it needs for the exchange to pass with fewer problems than expected.

Over 75% of bondholders are said to have signed up; the prime minister said he expected "maximum participation".

The brinkmanship strategy from the government seems to have worked. Greece's Finance Minister warned that bondholders waiting for a better deal would be forced into the swap and would simply not receive the value of their original bonds.

If the deal goes through, there will be a new glint of hope here: a sense that Greece would be in a better position to begin to manage its debt burden.

A small but significant step forward for this recession-stricken country.

Q&A: Greek debt swap

Economic and Monetary Affairs Commissioner Olli Rehn said earlier this week that there would be no better offer, and the deal was vital for eurozone financial stability.

He said: "It is important that all investors recognise that Europe has committed the maximum funds available to this voluntary debt exchange and that full participation is necessary for the Greek programme to move forward."

The Greek Finance Ministry had made it clear that the alternative to the debt swap is a potential default.

"The republic's representative noted that if [private sector involvement] is not successfully completed, the official sector will not finance Greece's economic programme and Greece will need to restructure its debt," it said on Tuesday.

Athens was first bailed out in 2010 with 109bn euros from the EU and IMF.

As the sovereign debt woes in the eurozone continue to focus primarily on Greece, the head of the World Trade Organization, Pascal Lamy, told the BBC that eurozone nations would have to align their economies more closely.

He said: "What the Europeans have to do is align the level of integration, of solidarity, which they have currency wise, monetary wise, with something which is economically much more convergent.

"I think that is the direction they are taking."

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Legal skull-duggery in Greece may doom Portugal

Europe has ring-fenced Greece's debt crisis for now but its escalating recourse to legal legerdemain has shattered the trust of global bond markets and may ultimately expose Portugal, Spain, and Italy to greater danger.







Marchel Alexandrivich from Jefferies Fixed Income: "It does not matter how often the EU authorities repeat that Greece is a 'one-off' case, nobody in the markets believes them." Photo: Reuters









By Ambrose Evans-Pritchard

8:59PM GMT 08 Mar 2012

133 Comments





"The rule of law has been treated with contempt," said Marc Ostwald from Monument Securities. "This will lead to litigation for the next ten years. It has become a massive impediment for long-term investors, and people will now be very wary about Portugal."


At the start of the crisis EU leaders declared it unthinkable that any eurozone state should require debt relief, let alone default. Each pledge was breached, and the haircut imposed on banks, insurers, and pension funds ratcheted up to 75pc.


Last month the European Central Bank exercised its droit du seigneur, exempting itself from loses on Greek bonds. The instant effect was to concentrate more loss on other bondholders. "This has set a major precedent," said Marchel Alexandrivich from Jefferies Fixed Income. "It does not matter how often the EU authorities repeat that Greece is a 'one-off' case, nobody in the markets believes them."


The ECB holds €220bn (£185bn) of Greek, Portuguese, Irish, Spanish, and Italian bonds. Its handling of Greece implicitly subordinates private creditors in each country. All have slipped a notch down the pecking order.


The Greek parliament's retroactive law last month to insert collective action clauses (CACs) into its bonds to coerce creditor hold-outs has added a fresh twist. These CAC's are likely to be activated over coming days. Use of retroactive laws to change contracts is anathema in credit markets.



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This might not matter too much if Greece were really a "one-off" case but markets are afraid that Portugal will tip into the same downward spiral as austerity starts to bite.

Citigroup expects the economy to contract by 5.7pc this year, warning that bondholders may face a 50pc haircut by the end of the year. Portugal's €78bn loan package from the EU-IMF Troika is already large enough to crowd out private creditors, reducing them to ever more junior status.

EU leaders said last June that "Greece is unique" and promises that haircuts would "not be replicated in Portugal". They have since pledged that the EU's new bail-out (ESM) fund will not have protected status.

Portugal has been praised by the International Monetary Fund for grasping the nettle of reform, but the IMF's own figures show that public debt may reach 118pc of GDP next year. The debts of state-owned bodies add another 10pc.

Combined public and private debt is 360pc of GDP, 100 percentage points above Greece. This is a huge burden on a shrinking economic base. Its current account deficit was still 8pc of GDP last year, much like Greece. Both countries are overvalued by 20pc on a real effective exchange rate, though Portugal has barely begun to cut unit labour costs.

Dimitris Drakopoulos from Nomura said Portugal relied on "fiscal engineering" last year to massage deficit figures, raiding 3.5pc of GDP from private pension funds.

Matters will come to a head soon. The IMF must decide by September whether Portugal needs more money and debt relief. If Portugal now spirals into a Grecian vortex, large haircuts loom. This time EU leaders will have to accept that their own taxpayers will suffer losses - avoided until now - or violate their pledge.

Bondholders are not waiting to learn whether Europe will keep its word this time. There has been no rally in Portuguese debt since the ECB flooded banks with €1 trillion. Ten-year yields are stuck at 13.2pc. Return to market access is a distant dream.

The risk for Europe is that investors will charge a "political risk" premium to invest in any EMU country subject to EU legal whim. The greater risk is that Euroland's crisis rumbles on as fiscal contraction in Italy and Spain plays havoc with debt dynamics, and reforms come much to late to close the North-South trade gap.

Europe's handling of Greece has guaranteed that global funds will rush for Club Med exits at the first sign of trouble. The next spasm of the debt crisis will that much dangerous if it ever comes. As the saying goes: Hell hath no fury like an abused bondholder.

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Clarity, Greek Style Share
Ed Conway
March 08, 2012 5:50 PM

Recommend post (4) Even during the very depths of the financial crisis there have been few stories as complex as the one reaching its climax today: Greece's negotiated default, in which it's swapping bonds owned by private sector investors with ones worth only a fraction.

One of the questions I've been slightly confused by is whether the deadline for the swap, of 8pm tonight, applied both to holders of debt issued under Greek law (about 86% of total Greek debt) and those who own the 14% chunk of Greek debt written in foreign law. The latest release surrounding the swap suggested not. But I had heard that the finance ministry was signalling that it was.

I decided to take matters into my own hands. Here's my full, unexpurgated email exchange with the Greek finance ministry.

Would welcome any interpretation of what this actually means.

Conway, Ed wrote:

Hello,

I have a very quick but quite urgent question about the debt swap today. Does today’s deadline also apply to Greek bonds issued under international law? Your release from earlier this week says the following, which implies that the deadline for these bonds is, in fact, April 11:

“The Republic’s representative explained that the Republic has fixed a delayed settlement date (11 April 2012) for the invitations made to foreign law governed Republic bonds and guaranteed bonds to comply with the notice provisions of those bonds and allow the holders to vote on the relevant proposed amendments prior to the delayed settlement date.”

Would be great to get some clarity asap.

From: ΓΡΑΦΕΙΟ ΤΥΠΟΥ ΥΠΟΥΡΓΕΙΟΥ ΟΙΚΟΝΟΜΙΚΩΝ

Today's deadline is for Greek and foreign law bondholders who declare their will and interest to participate. The actual swap is going to take place on Monday for Greek law bonds and April 11 for foreign law bonds.

Conway, Ed wrote:

So foreign law bondholders who don’t declare their will and interest to participate by today’s deadline won’t be able to participate – even if they decide they want to between now and April 11?

Thank you very much for the answer, by the way.

From: ΓΡΑΦΕΙΟ ΤΥΠΟΥ ΥΠΟΥΡΓΕΙΟΥ ΟΙΚΟΝΟΜΙΚΩΝ

They will be able to participate if they want to.

Conway, Ed wrote:

Final question: is tonight’s deadline the absolute final deadline for foreign law bondholders to participate?

I am assuming it is for domestic law bondholders?

From: ΓΡΑΦΕΙΟ ΤΥΠΟΥ ΥΠΟΥΡΓΕΙΟΥ ΟΙΚΟΝΟΜΙΚΩΝ

final

Conway, Ed wrote:

So if a foreign law bondholder says “no” today but change their mind before settlement date you WON’T accept that?

I appreciate all your help!

From: ΓΡΑΦΕΙΟ ΤΥΠΟΥ ΥΠΟΥΡΓΕΙΟΥ ΟΙΚΟΝΟΜΙΚΩΝ

don't know

So that's cleared that up, then.

UPDATE - 20.40

Have just received the following email from the ministry:

To: Conway, Ed

this is journalism at its worst http://blogs.news.sky.com/therealeconomy/Post:ab1c133a-f98e-409a-836a-934baf3721cc [That's this blog, btw - Ed]

Sorry but no more answers to questions from sky

greece bonds default foreign_law
Your Comments

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Posted by: Loyalist from South of France on March 8, 2012 8:52 PMEd'

You didn't tell the punters who " ΓΡΑΦΕΙΟ ΤΥΠΟΥ ΥΠΟΥΡΓΕΙΟΥ ΟΙΚΟΝΟΜΙΚΩΝ" was/is,,,,!!!

Well, roughly translated it is " PRESS: THE MINISTRY OF FINANCE "

If this sort of question is coming to you from the Press Office of the Greek Ministry of Finance, then it begs the question;

Does the Greek Ministry of Finance know what is going on in its own Country over this Debt Default Crisis,,,,!!!

It would appear not,,,,!!!

Anything to come back with Ed',,,,???Recommend (4)Report this commentPermalinkPosted by: Loyalist from South of France on March 8, 2012 8:43 PMAny comments Ed',,,,???

The Greeks patently have their 'Trojan Horse Plan' and Brussels know this full well,,,,!!!
When Greece get their next, (last?), tranche of Bailout Funds - 130 Billion Euros, they are then set to pay out the Bondholders,,,,!!!
Greece will then 'Default' and then leave the Euro and the Eurozone, then return to the Drachma,,,,!!!
With the Drachma then becoming 'cheap' against the Euro, the potential for Tourism, Business Investment, Holiday Home Purchases suddenly becomes once more a very attractive Proposition,,,,!!!
The Greek economy will then start to right itself without the stranglehold of Brussels dictating their [Greek] every financial move,,,,!!!
Spain will suddenly 'sit up straight' in its chair and follow suit,,,,!!!
Portugal will have taken note and adopt the same manoeuvre shortly thereafter,,,,!!!

And this is what Brussels is scared of,,,,!!!
Recommend (5)Report this commentPermalinkPosted by: nathaninlondon on March 8, 2012 6:37 PMHa ha...Saturday Night Live is gonna be looking to hire you for material like that. How do they not know details like that? Shocking!Recommend (1)Report this commentPermalinkAdd your comments

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Former Greek Finance Minister Stefan Manos says now has a job to do . It is do-able but needs a new set of Politicians .
Italy and Spain, probably Portugal as well, will suffer higher yields on Bond Sales because of this action.

The matter is being investigated by ISDA because the few bondholders who did not vote for the deal are being forced to comply and this could be seen as a Default. A Bank of America spokesman says bondholders who did not want to swap have had their Bonds altered. Foreign Greek Bonds have been given another 3 days to comply.

Other Countries will be worried that one currency will not allow any change in the value of the Bonds.

Under this credit default swap, what happens if the Insurance companies do not pay up .....will this affect other Bonds sold by othe Countries in the EURO.

Fitch has downgraded Greece to restricted default unttil the ruling by ISDA is known.

[Panda]

Editorial



A boomerang made in EU


9 March 2012




You can’t blame the EU of not holding back when it comes to getting the word out about its activities and initiatives. This week, trying to strike hard, the Commission launched a clip, The more, the stronger, which was intended to proselytise the benefits of EU enlargement to the young.

It shows a young white woman, evoking Uma Thurman in Kill Bill, who, faced with three aggressive attackers with Chinese, Indian and Brazilian features, is multiplied in order to encircle and pacify them. She and her eleven clones are then transformed to become the stars of the European Union flag. The slogan “The more we are, the stronger we are”, wraps up the video.

The clip failed to reckon on the reality that you cannot always pick and choose your web audience. In the hours after it went online, the clip came in for harsh criticism from web surfers and in the press. Accused of racism and sexism, it was withdrawn by the Directorate General for Enlargement, who acknowledged his mistake and has since apologised.

An error admitted is an error half-redressed, they say. But in both form and substance, this case is sobering in more ways than one.

As for the form, it illustrates the difficulty the EU has in talking to Europeans. Addressing half a billion people who do not speak the same languages, literally and figuratively, and who often have mixed opinions of EU institutions, is a daunting task. According to the latest Eurobarometer, only 31 percent of Europeans have a positive image of the EU, while 26 percent see it negatively.

As for the substance, as pointed out by Annika Ström Melin in the Svenska Dagbladet, the clip reinforces the tendency of European leaders, as the economic crisis deepens, to attribute the cause to external enemies. “Blaming others for one’s problems is a conventional – and dangerous – way to forge a community,” she writes. “True, Europe is exposed to global competition, especially from China. But the Union would have much more to gain by remaining united, taking advantage of the single market and speaking with one voice.”

Yet that is precisely what it doesn’t do. The lack of education, even hostility, shown by the governments towards the accession of new states to the EU, and the divisions over the crisis they have exposed, suggest they ought to be the ones getting messages encouraging more unity and openness.

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Some comments from the Telegraph


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notmanichean

02/21/2012 12:54 PM




Default Friday March 23rd. Any takers?

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Jason Aris

02/21/2012 01:06 PM




Yep, although they could pull it forward to the Friday before (16th?), really depends on whether Wall Street is ready to trigger the CDS or not

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Addons

02/21/2012 06:03 PM




In the suicidepact ('eurozone) CDS are in the region of 20 trillion euros - room for some more debt insurance. In the end it is us, the taxpayer that pays for all that, so why should our masters in the EU care?

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News Analysis

Next Time, Greece May Need New Tactics


Yiorgos Karahalis/Reuters

Greece's finance minister, Evangelos Venizelos, center, announced the deal in Athens on Friday.

By LANDON THOMAS Jr.

Published: March 9, 2012










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LONDON — Greece may have been able, and even willing, to use strong-arm tactics to persuade private-sector bondholders to join the debt deal it completed Friday to stave off default. But next time those moves might not work so well.






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Related

Greek Swap of Its Debt Appears to Be Secure (March 9, 2012)






When the heavily indebted nation confronts a new cash crunch in the coming years — as many experts and, indeed, the markets seem to believe it will — Greece will not be able to rely on deploying sophisticated legal tricks, like collective-action clauses, to force losses on relatively easy targets like banks and hedge funds.

With the completion of this deal, the International Monetary Fund and Greece’s European partners will possess 77 percent of the country’s outstanding debt. From now on, foreign taxpayers will be asked to suffer the bulk of the loss the next time Greece confronts a financial crisis — and they are likely to be much less forgiving.

The debt restructuring deal between Greece and its creditors on Friday was notable for not just its €100 billion-plus size and the 75 percent loss, or haircut, imposed upon investors. It also underscored Greece’s rapid evolution from private-sector debtor to being mostly reliant on the public sector.

In 2008, all of Greece’s debt was held by private-sector bondholders. Before the deal concluded Friday, 62 percent of its debt was held by the private sector. Now the figure is 27 percent.

In every way, Greece has become a financial ward of Europe. And, as it is likely that the I.M.F. will be more reluctant to put in new money in the coming years, it will increasingly become Europe, led by Germany, that will have to finance Greece — both directly, through country-to-country loans, and indirectly, through the European Financial Stability Facility, the euro zone’s rescue fund, to which most members of the currency union contribute.

As a rule, the I.M.F. does not accept haircuts and insists that its loans are always senior to all other obligations. European politicians, already under pressure from voters for their countries’ increasing financial exposure to Greece, will have a difficult time explaining why European obligations must be written down because Greece cannot balance its books.

And while there will be scope in a future Greek restructuring to impose losses on whatever private-sector bondholders remain, any significant debt reduction would have to include the official sector: the European Central Bank, the E.F.S.F., other European countries that made bilateral loans, and the I.M.F.

“It will happen,” said Stephane Deo, an economist at UBS in London, referring to the next Greek crisis.

Mr. Deo expects Greece to make a move in 2013, when he said the country would be able to show a primary surplus — meaning that its budget would be in balance if it did not have to pay interest on its debt. Then, Greece would in a better position to ask to stop paying interest and use its money for domestic purposes instead.

“The market is already pricing in” a second round of restructuring, Mr. Deo added, citing as evidence that the new Greek bonds issued in the deal completed Friday were trading at a discount to their par value. That, he said, reflects the view of many investors that there will be other haircuts to come.

The debt deal concluded Friday, the largest in history, will provide immediate relief to Greece, cutting back on €15 billion, or $19.7 billion, in interest and principal it was paying each year to its bondholders. And with the establishment in Greece of a system whereby tax revenue must be used first to pay off debt obligations before being spent domestically, it will no longer be easy for spendthrift Greek politicians to run budget deficits for political purposes.

The restructuring also will result in payouts on credit default swaps tied to the country’s government bonds, after a decision by the International Swaps and Derivatives Association on Friday.







A version of this news analysis appeared in print on March 10, 2012, in The International Herald Tribune.
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9 March 2012 Last updated at 21:46 Share this pageEmail Print Share this page


Greece took an important step towards its second bailout after it managed to win a crucial debt swap, European leaders have said.

The Greek deal with banks and other lenders is the largest restructuring of government debt in history.

Some lenders who lost money as a result of the debt swap will be compensated.

That is after the International Swaps and Derivatives Association classified the deal as a "credit event", triggering insurance payments.

Under the debt swap, banks and other financial institutions have agreed to exchange their existing Greek government debt for new bonds, which are worth much less and pay a lower rate of interest.

Some investors bought a type of insurance against that happening. Those payouts could be worth in total up to $3.2bn, only a small fraction of the 105bn euros ($138bn, £88bn) wiped-off Greece's debt burden.

The credit ratings agency, Moody's declared Greece in default on its debt on Friday.

It said the terms of the debt swap met its definition of a default.

The company says it will assess the affect of the latest bailout before it assigns Greece a new rating.

'Problem solved'

Eurozone finance ministers said the conditions were now in place for the country to receive its new 130bn-euro (£110bn; $173bn) bailout.

"Today the problem is solved," French President Nicolas Sarkozy said.

Greek Finance Minister Evangelos Venizelos hailed the swap as an "exceptional success".

In a statement after a conference call of finance ministers, Jean-Claude Juncker, president of the 17-nation eurogroup, said "the necessary conditions are in place to launch the relevant national procedures required for the final approval" of its bailout.

Finance ministers from the eurozone nations meet on Monday and are expected to officially sign off on Greece's second bailout.

Mr Sarkozy, who faces an election next month, added: "I would like to say how happy I am that a solution to the Greek crisis, which has weighed on the economic and financial situation in Europe and the world for months, has been found."

Holders of 85.8% of debt who are subject to Greek law and 69% of its international debt holders agreed a debt swap, according to the finance ministry.

Continue reading the main story “
Start Quote
A similar 'haircut' for private creditors, had it been attempted in 2010, would have given much greater relief. But back then, the Greek government's balance sheet was not heavy with the weight of the international community's generosity”
End Quote
Stephanie Flanders

Economics editor, BBC News

--------------------------------------------------------------------------------
Q&A: Greek debt swap
Flanders: where are we now?
Hewitt: Greece deal is temporary relief
Peston: How to love a Greek default

Athens needed to get 75% to push through the deal. The European Union and International Monetary Fund (IMF) said that if the debt swap did not go through Greece would not get its latest bailout.

EU economic affairs commissioner Oli Rehn said he was pleased with the deal but expected Greece to maintain its focus on austerity.

"I am very satisfied by the large positive turnout of the voluntary debt exchange in Greece," he said.

And a spokesman for German Chancellor Angela Merkel said take-up was "encouraging".

'Historic endeavour'

IMF head Christine Lagarde said it was "an important step that will dramatically reduce Greece's medium-term financing needs and contribute to debt sustainability".

The IMF will meet on 15 March to decide what it will contribute to the eurozone bailout.

Mr Venizelos told Greece's parliament on Friday that the debt swap - which cuts Greece's debts by around 105bn euros - meant it was a "good day" for Greece.

"We have achieved an exceptional success... and I believe everyone will soon realise that this is the only way to keep the country on its feet, and give it the second historic chance that it needs," he said.

The Greek government has promised to continue implementing austerity measures demanded by the EU and IMF.

So far the deal involves 172bn euros worth of debt, according to the Greek government website, with investors taking a total loss of up to 74%.

Market reaction to the news was subdued on Friday with little change on most European markets.

Stock exchanges had rallied strongly on Thursday on hopes that the deal would go through - with the stock market in Athens up more than 3% and the markets in Paris and Frankfurt also higher.

Greece said it had extended the deadline for bond holders not governed by Greek law to sign up until 23 March.

The deal was also welcomed by representatives of private sector lenders to Greece, who said it paved the way for agreement on the EU bailout.

"The very strong and positive result provides a major opportunity now for Greece to move ahead with its economic reform program, while strengthening the euro area's ability to create an economic environment of stability and growth," said Josef Ackermann, chairman of the International Institute of Finance, which represents private lenders.

Austerity cuts

The news comes as the latest GDP figures for Greece showed the economy contracted by 7.5% in the final three months of 2011.

The revised figures are worse than the previously estimated 7%.

The weak economic data comes ahead of a further round of austerity measures.

Continue reading the main story Crisis jargon buster
Use the dropdown for easy-to-understand explanations of key financial terms:
AAA-rating
AAA-rating
The best credit rating that can be given to a borrower's debts, indicating that the risk of borrowing defaulting is minuscule.
Glossary in full The government is pushing through spending cuts equal to 1.5% of its output, including cuts in pensions and civil service job cuts.

It has also been told to make its economy more competitive by cutting the minimum wage and making labour markets more flexible.

The aim is to cut the Greek government's debt from 160% of GDP to a little over 120% of GDP by 2020.

Some economists fear further austerity measures will damage the economy, increasing the chance Greece will require more bailouts or debt write-offs.

Others argue the economy will become more competitive, attracting investment and generating jobs.

"This does not mean the debt situation in Greece is resolved, and this is not the last time we will be hearing about this. But it is a relief that it didn't go the other way. It could have been a lot worse," said Tim Ghriskey, chief investment officer at Solaris Group in New York.
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UK in line to pay €4bn to Greece under Lagarde plan

Britain may have to contribute almost €4bn (£3.3bn) to Greece as part of a new €28bn rescue fund proposed by the International Monetary Fund.








Ms Lagarde said the move was “commensurate” both with the “long-term nature of the challenges facing Greece and the significant financial contributions provided by the private sector and by euro area member states”. Photo: AP Photo/Michel Euler


























By Louise Armitstead

8:52PM GMT 09 Mar 2012



207 Comments





Christine Lagarde, the head of the IMF, said she had consulted with the executive board about the cash injection following the completion of Greece’s €206bn debt restructuring.


In a statement tonight, Ms Lagarde said the move was “commensurate” both with the “long-term nature of the challenges facing Greece and the significant financial contributions provided by the private sector and by euro area member states”.


Although the Coalition has promised not to become involved in Greek bail-outs, Britain is liable for 14pc of the IMF’s funding.


Ms Lagarde, whose intention of supporting the eurozone has faced opposition from members, wants to use the IMF’s Extended Fund Facility (EEF), reserved for when a country “faces serious” funding problems. Ms Lagarde said the executive board would review the proposal next week.


Today Greece became the first European Union country to be declared as technically in default on its debt following the execution the biggest bond restructuring in history.



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08 Mar 2012

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09 Mar 2012

Greek bond swap: Q&A
09 Mar 2012


After a marathon seven-hour meeting, the International Swaps & Derivatives Association (ISDA) declared a “credit event had occurred” and billions of euros of credit default insurance will have to be paid out. The credit default swap (CDS) market is opaque, but analysts estimate the ruling will cost European banks around €3.5bn.

Before the ISDA announcement, Greece was declared to have technically defaulted. A total of 85.8pc of Greece’s international creditors approved the restructuring deal, which will reduce the value of their investments by 75pc. But the government said it would activate the controversial Collective Action Clauses (CACs) to impose the losses on bondholders who had not voted for the deal. Rating agencies had warned the use of the CACs would constitute a default.

Despite confusion over the details, Wolfgang Schäuble, the German finance minister, said it was a “historic opportunity for the country” while Nicolas Sarkozy, the French president, declared the Greek “problem is solved”. Lucas Papademos, Greece’s prime minister, said the “largest restructuring ever made” had delivered Greece from the “quicksand of the past months… on to solid ground”.

He said Greece understood the “significant damage” unleashed on investors and that it had “no right to squander” the debt it had been forgiven. He promised to “modernise the country, make our economy competitive, and tidy up the state”.







































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Greece

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Apparently Italian Minister who came up with this plan and I think it is diabolical the way Greece has coerced the small Investment Companies to
fall in line. How the Greek action will affect Bonds to be issued by Portugal Italy and Spain remains to be seen. The yields will probably be higher as
a result of this and at the end of the day Greece will only get E28 billion out of the E130 billion. Who will lend Greece any more money?????

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Greece

Shipwreck has been avoided


9 March 2012
To Ethnos Athens Comment16


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Greek Prime Minister Lucas Papademos has been given some breathing space.




Having succeeded in convincing between 85% and 95% of its creditors to write down part of its debt, the Greek government has finally accomplished one of the tasks expected of it. But now it will have to convince the people that the sacrifices it has demanded will not be vain.


Greece’s private-sector creditor debt swap has now been completed [with bondholders accepting new bonds worth 50% of their original investment], and deemed a major success. As the biggest write-down in history, it amounts to an effective response to all of those who considered that this objective was very difficult, or even impossible to attain.

Now we only have to complete one further step for the full application of the agreement reached on 26 October and to be assured of conditions that will give us a better chance of overcoming the crisis. It is an outcome that has many implications. First and foremost, it is confirmation that our country is beginning to regain lost credibility. And we should take advantage of this as we redouble our efforts in the next phase of a programme, and in so doing prove that we are determined not to bungle the last chance that we have been given.

Our chances of success will be increased if we succeed in assimilating all of the implications, both positive and negative, of our experience over the last two years. Avoiding the missed targets and delays that have been a feature of the manner in which we have fulfilled our obligations will be crucial, as will be the success of Lucas Papademos’ governance. With this in mind, the next government, regardless of its political colour [the date may be in April], should model its actions on those that have been implemented over the last three months.

This is perhaps the first time that our government has succeeded in fully completing a task that has been entrusted to it. And it was far from easy. Now future governments will have to prove that the sacrifices made by the Greek people over the last two years, and the sacrifices they will be asked to make in the future, were not and will not be in vain. At the same time, they will have to show that the confidence shown by our partners and creditors is fully justified.

On the web
Original article at To Ethnos el


Elections

Brussels prefers vote to be postponed

The deal with creditors is a further step towards overcoming the crisis, but Greece still presents a major political risk, argues La Tribune. The business daily notes that the EU would like the early general elections slated for next April to be postponed.


The three parties to the left of the social democratic party PASOK account for 39% of intentions to vote. [...] With such a strong hard left, there is significant risk that the current road map will be called into question.

The EU would prefer a return to the initial election calendar stipulating a vote in 2015, which would allow more time for the restoration of stability in the country. La Tribune concludes with a warning –


... the risk of an uncontrolled social explosion is at least as significant as the risk of a disorderly default.

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IMF Scales Back Greek Aid to $23.6 Billion in Nation’s Second Rescue Deal

By Jonathan Stearns and Ian Katz - Mar 10, 2012 9:33 AM GMT
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The International Monetary Fund intends to contribute 18 billion euros ($23.6 billion) in fresh funds to the second aid package for Greece, scaling back IMF help for the nation that triggered Europe’s debt crisis.

The planned IMF contribution disclosed yesterday represents 14 percent of the 130 billion-euro second rescue of Greece being arranged with the euro area. The IMF accounted for 27 percent -- or 30 billion euros -- of Greece’s initial 110 billion-euro bailout in May 2010.

“The IMF is trying to manage a difficult balance between staying involved in the rescue package for Greece while limiting the risk to its own funds,” Eswar Prasad, a senior fellow at the Brookings Institution in Washington and a former IMF official, said in an e-mail. The IMF is “increasing its overall exposure to Greece. This poses both financial and political risks for the fund.”

Two years after German Chancellor Angela Merkel insisted that the IMF play a role in aiding Greece and any other distressed euro government, the Washington-based lender has joined the U.S., Canada and other nations in pressing Europe itself to do more to stem the debt crisis.

Germany, the biggest economy in Europe, has repeatedly stalled over bolstering the euro area’s bailout firepower amid skepticism in the country about the merits of aiding euro nations that flouted European budget-discipline rules.

Smaller Role

The smaller IMF role in the latest Greek bailout leaves 112 billion euros to be provided by the euro area’s rescue fund, the European Financial Stability Facility, which sells debt to finance emergency aid. The EFSF has a capacity of 440 billion euros.

IMF Managing Director Christine Lagarde said yesterday that she plans to recommend 28 billion euros in financial aid for Greece to support its “ambitious economic program over the next four years.”

The 28 billion euros that Lagarde is proposing include 9.7 billion euros that remained from the previous support package, the IMF confirmed in an e-mailed statement yesterday. The entire 28 billion euros will need to be approved by the IMF executive board.

“Restoring competitiveness and a sustainable fiscal position will require Greece to undertake sustained and deep structural reforms over a prolonged period,” Lagarde said in a statement in Washington. “The scale and length of the fund’s support is a reflection of our determination to remain engaged.”

Biggest Restructuring

Greece yesterday pushed through the biggest sovereign restructuring in history after getting private investors to forgive more than 100 billion euros of debt, opening the way for the second bailout.

Euro-region finance ministers agreed that, with the swap, Greece had met the terms for the 130 billion-euro rescue package arranged with the IMF. Ministers freed up 35.5 billion euros in payments and interest for bondholders, with a decision on the balance of the bailout funds to be made at a March 12 meeting in Brussels.

Greece’s debt swap “exceeded expectations” and gives the country a “realistic chance” to pare down its debt and recover, Finnish Prime Minister Jyrki Katainen said in an interview today on state-owned broadcaster YLE TV1.

The euro area’s 80 billion-euro share of the first Greek rescue of 110 billion euros came from national governments. The Luxembourg-based EFSF was not involved in that package.

The EFSF is committed to providing a total of almost 44 billion euros to the rescues of Ireland and Portugal that followed the initial Greek bailout.

To contact the reporters on this story: Jonathan Stearns in Brussels at jstearns2@bloomberg.net; Ian Katz in Washington at ikatz2@bloomberg.net

To contact the editors responsible for this story: Christopher Wellisz in Washington at cwellisz@bloomberg.net; James Hertling in Paris at jhertling@bloomberg.net

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Italian Bonds in Longest Run of Gains Since 1998 Amid Economic Recovery

By Lukanyo Mnyanda and Emma Charlton - Mar 10, 2012 7:00 AM GMT
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Italian 10-year bonds rose for a ninth week, the longest run of gains since 1998, as the European Central Bank signaled the economy is stabilizing and Greece won the world’s biggest sovereign-debt restructuring.

The gains pushed Italy’s 10-year yield down yesterday to the least since June. Greece pushed through its restructure yesterday after private investors forgave more than 100 billion euros ($132 billion) of debt. German bonds were little changed as demand for safer assets waned after U.S. employers boosted hiring more than economists predicted last month. The ECB left its benchmark interest rate at 1 percent on March 8.

“For the time being, these levels are reasonable,” said Orlando Green, a London-based fixed-income strategist at Credit Agricole SA (ACA), referring to Spanish and Italian yields. “From here it’s pretty much a gradual process. The markets still need to be convinced of their fiscal credibility.”

Italy’s 10-year yield slid seven basis points, or 0.07 percentage point, this week to 4.84 percent at 4:54 p.m. London time yesterday, after dropping to 4.68 percent, the lowest since June 7. Two-year yields rose 18 basis points to 1.92 percent.

The difference in yield between Italian and German 10-year bonds shrank seven basis points this week to 3.04 percentage points yesterday, after narrowing to the least since Aug. 30.

ECB policy makers see “signs of stabilization in economic activity, albeit still at low levels,” the central bank’s president Mario Draghi said at a press conference in Frankfurt on March 8, adding that inflation will probably breach the 2 percent limit this year.

German Exports

German exports, adjusted for work days and seasonal changes, increased 2.3 percent from December, when they dropped a revised 4.4 percent, a report showed. Economists forecast a gain of 2 percent, the median of 13 estimates in a Bloomberg News survey showed. The 227,000 increase in U.S. payrolls followed a revised 284,000 gain in January that was bigger than first estimated, according to Labor Department figures yesterday.

The ZEW Center for European Economic Research in Mannheim will next week say its index of investor and analyst expectations, which aims to predict economic developments six months in advance, rose to 10 from 5.4 in February, according to the median prediction of 36 economist estimates in a Bloomberg News survey. The data is scheduled to be released on March 13.

German bonds have returned 0.3 percent this year through March 8, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Italian debt gained 13 percent, and Spanish securities rose 2.8 percent.

The German 10-year was at 1.79 percent yesterday, from 1.80 percent a week earlier.

To contact the reporters on this story: Lukanyo Mnyanda in Edinburgh at lmnyanda@bloomberg.net; Emma Charlton in London at echarlton1@bloomberg.net

To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

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6:50am UK, Sunday March 11, 2012

Greece's private creditors have agreed to bond swap deal in the biggest debt writedown in history.
It paves the way for an enormous second bailout for the country to keep Europe's economy from being dragged further into chaos.

Greece would have risked defaulting on its debt in two weeks without the agreement, sparking turmoil in the markets and sending shock waves through the other 16 countries that use the euro.

Prime Minister Lucas Papademos called the deal - which shaves some 105bn euros (£88bn) off Greece's 368bn euro (£308bn) debt load - an important "historic success" in a televised address to the nation on Friday night.

"For the first time, Greece is not adding but taking debt off the backs of its citizens."



The country said 83.5% of private investors holding its government debt had agreed to a bond swap, taking a cut of more than half the face value of their investments as well as accepting softer repayment terms for Greece.

The swap aiming to turn around the country's debt-ridden economy was a key condition to secure a 130bn euro (£109bn) rescue

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The debt exchange has played a central role in the euro area’s efforts to contain the sovereign debt crisis. To secure the next aid package, Greece needed to complete the swap and commit to making structural changes to its economy.

‘Restricted Default’

Greece’s long-term foreign and local currency issuer default ratings were downgraded to “Restricted Default” from “C,” Fitch Ratings said yesterday. The decision followed the Greek government’s announcement, endorsed by the euro area ministers, that investors with 95.7 percent of Greece’s privately held bonds will participate in the swap after collective action clauses are triggered.

The Greek Cabinet later yesterday approved use of the clauses to impose losses on all holders of Greek-law bonds involved in the exchange.

Luxembourg Prime Minister Jean-Claude Juncker, who heads the group of euro-region finance chiefs, said Greece has “the necessary conditions” in place to launch the procedures required for final approval of the rescue. He welcomed a report from European and International Monetary Fund officials on Greece’s efforts.

IMF Contribution

IMF Managing Director Christine Lagarde said yesterday she plans to recommend a 28 billion euro ($36.7 billion) contribution to the Greek rescue. That amount, which includes 9.7 billion euros that remained from a previous support package approved in May 2010, is subject to approval by the Washington- based agency’s executive board.

In addition to the money for the sweeteners, European ministers also released 5.5 billion euros for Greek interest payments and said Greece was on track to win the rest of its bailout funds. The debt swap aims to reduce Greece’s debt burden by more than 100 billion euros and lower debt to 120.5 percent of gross domestic product by 2020.

The second rescue package may not cure Greece’s long-term debt woes, said Charles Wyplosz, director of the Geneva-based International Center for Money and Banking Studies.

“We still don’t have a solution for Greece, so there will be a harder default to come,” Wyplosz said. “Greece can’t grow with this kind of debt so something more has to give.”

Reaching Target

The Greek government said it planned to reach its target for the debt restructuring, with investors holding 95.7 percent of eligible bonds taking part. The government’s figure includes using the clauses to enforce participation, a move that may trigger insurance payouts under rules governing credit-default swap contracts.

In the exchange, investors will receive new bonds with a face value of 31.5 percent of the old ones together with notes from the European Financial Stability Facility. The new debt is governed by English law and comes with warrants that will provide extra income in years when Greek economic growth exceeds thresholds. The net present value loss for investors is more than 70 percent.

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Editorials

Germany Should Bolster Chancellor’s Drive for More Europe


By the Editors Mar 9, 2012 12:01 AM GMT


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German Chancellor Angela Merkel has spent the past two years trying to convince financial markets that the single currency is good for Europe and is here to stay.

Stock-price gains and falling bond yields in 2012 would suggest she has succeeded, at least temporarily, in doing that. Now she just needs to do a better job of convincing her fellow Germans.

Merkel may have managed to secure parliamentary approval for Greece’s second bailout of 130 billion euros ($170 billion) last month, but she hasn’t done enough to educate the electorate on the benefits that the euro has brought to Europe’s biggest economy over the past decade. As Angela Cullen reports in the April issue of Bloomberg Markets magazine, repeated bailouts for the euro area’s indebted countries have left Germany’s taxpayers bewildered at the prospect of having to subsidize their less- fortunate neighbors on a permanent basis. This wouldn’t be the case if the country of 82 million people got behind Merkel’s drive for “more Europe, not less Europe.”

Corporations have been the euro’s primary defenders in Germany. It’s easy to see why: Total exports exceeded 1 trillion euros for the first time last year, thanks in large part to a currency that is much cheaper than an independent deutsche mark would be. As Chief Financial Officer Joerg Schneider of Munich Re, the world’s largest reinsurer, has said, “We haven’t pointed out enough that the euro is a massive export-support instrument for Germany.” Clearly that message hasn’t found much traction with an electorate that still yearns for the old currency: Every second German wants the deutsche mark back, according to a survey conducted in September by Focus magazine.

Statistics show the benefits reaped by Germans under the euro. Exports have more than doubled in the past decade compared with an increase of about 68 percent in the 10 years before the euro’s introduction in 1999. With the help of labor reforms under former Chancellor Gerhard Schroeder, unemployment is now 6.8 percent compared with more than 10 percent when Germany gave up the deutsche mark. Even though the fiscal burden may increase to pay for bailouts, the top rate of tax paid by most Germans on their personal income has dropped by more than 10 percentage points under the euro. Bottom line: more money for Germans.

The nation’s taxpayers should note that abandoning the euro may cost them more than staying in and providing bailout money. If Germany left the euro, the cost would be as much as 8,000 euros for every German adult and child in the first year and about 4,500 euros a person every year after that, UBS AG economists said last year. By contrast, the cost of bailing out Greece, Ireland and Portugal entirely would be about 1,000 euros per German -- in one single hit -- if those countries defaulted, bondholders took a 50 percent “haircut” and the euro area purchased all outstanding debt of the three nations.

Chancellor Merkel must appeal to Germans’ pocketbooks to garner the support she needs to rescue the euro. She also has to win over renegade elements within her Christian Democratic Union party, and heal the rift that has emerged with her Free Democrat coalition partners, to move the process forward. Her failure to secure a “chancellor majority” in the Greek bailout vote and the resignation of German President Christian Wulff amid an investigation that may lead to corruption charges have left her government politically vulnerable. She has until May 25 -- when the Bundestag is scheduled to vote on the European Union’s fiscal pact on tighter budget controls -- to muster support for her debt-management strategy and the establishment of the European Stability Mechanism as a permanent rescue fund.

We hope that the price of that support will not be the introduction of a financial-transaction tax, which the German opposition is calling for as a way to pay for the stimulus that euro-area economies need. Such a tax will not only fail to reduce volatility in financial markets, but will also end up raising costs for retail investors and consumers.

At the same time, the chancellor -- and Europe -- can ill afford to see Germany reject the fiscal pact, an idea that was German-inspired. If Merkel manages to convince her government and the German public that the euro is worth saving, her chances of another term as chancellor will be much improved when national elections come next year.

[Badboy]

1 IN 3 GREEKS ARE LIVING UNDER THE POVERTY LINE.
50% YOUTH UNEMPLOYMENT.
ELECTION CHAMPAIGN VIRTUALLY UNDER WAY
250,000 DEDEPENT ON FOOD HAND-OUTS.
SOME FARMERS ARE SELLING PRODUCTS AT DISCOUNTED PRICES

SOME EXPERTS RECKON GREECE MIGHT TAKE MONTHS TO PULL OUT OF THEIR ECONOMIC PROBLEMS.

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1 IN 3 GREEKS ARE LIVING UNDER THE POVERTY LINE.
50% YOUTH UNEMPLOYMENT.
ELECTION CHAMPAIGN VIRTUALLY UNDER WAY
250,000 DEDEPENT ON FOOD HAND-OUTS.
SOME FARMERS ARE SELLING PRODUCTS AT DISCOUNTED PRICES

SOME EXPERTS RECKON GREECE MIGHT TAKE MONTHS TO PULL OUT OF THEIR ECONOMIC PROBLEMS.

Years Badboy, they still owe the IMF for the first bail out , plus the E30 BILLION from the current bail-out . Several analysts are suggesting Greece
will default because after all these Bondholders lost so much money, who is going to buy Greek Bonds in future.???

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The EU will need to raise more Euros from 500 million to 750 million.

Spain will not meet it's target and will be looking for a bail-out.

Portugal also wants a bail out but has been meeting financial targets .

The IMF and Germany will not contribute more Funds until they see evidence of debt contraction in Euro Countries.

Morgan Stanley sees a rise in Bonds of 20%

Rochford Capital says the action of Greece was a default and the strong arm tactics used will reflect on other Countries wanting bail-outs. The problem
of Greece will not go away and it will result in 'kicking the Can down the Road' again.

The Euro has opened lower and Markets are gearing up for a collapse of the Euro eventually .

Eleven EU Countries have complained about the EU Carbon Tax which will affect their Economies, it is likely it will be scrapped because China says it
won't pay and the U'S;A is saying the proposal is illegal under International Law.

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In an effort to consolidate his wavering supporters for the first round of voting on April 22, Mr. Sarkozy, who has mixed apologies for his mistakes of tone and style with an aggressive turn to the right, promised again that he had “changed” and said that “I have learned” from his errors and challenges. He exhorted his backers to work hard for victory in the coming weeks and said, “I need you.”

Trying to recreate the excitement of his victorious 2007 campaign, Mr. Sarkozy gathered his cabinet; his wife, Carla Bruni-Sarkozy; the former prime minister Édouard Balladur; Bernadette Chirac, a politician and the wife of former President Jacques Chirac; and even the actor Gérard Depardieu to hear him threaten to pull France out of the European Union’s visa-free Schengen agreement unless Europe provides better protection from illegal immigration.

Mr. Sarkozy gave the European Union 12 months to revise and improve its rules on the Schengen accord, or else France will suspend its membership. But if he loses the election, with the second round on May 6, Mr. Sarkozy will be gone long before his deadline.

“We cannot accept being subjected to the shortcomings of Europe’s external borders,” Mr. Sarkozy said, warning that illegal immigration threatened “the implosion of Europe.”

France is not alone in its criticism of Schengen, however, or its desire to see European borders better policed.

Mr. Sarkozy also spoke of common French values, with an emphasis on avoiding religious exceptions favored by some Muslims. He said that France’s children of both genders should swim together, sit in classes together and eat the same meals in public schools, rejecting the efforts of some Muslims to separate the sexes and provide halal meals for children.

“The France you represent,” he told the crowd, is “the France of Jeanne d’Arc, the France of Victor Hugo, the France of de Gaulle, the France of Robert Schuman, the France of Jean Monnet, the France of humanists.” And he spoke with vaguely Nixonian references, calling his supporters “the silent majority” and condemning “intellectuals” who “sit around talking.” The Socialist Party is thought to have a larger share of intellectual support than Mr. Sarkozy’s Union for a Popular Movement.

But he also promised more aid for the heavily immigrant suburbs, and said that “I have no lesson to receive from a left that abandoned these neighborhoods,” though the left has been out of power for many years.

Mr. Sarkozy also promised to invest more public money to save France’s ailing steel industry, which faces Asian competition. And while denouncing protectionism, Mr. Sarkozy cited the United States and its “Buy American Act” of 1933 — signed by President Herbert Hoover — to promise a similar “Buy European” law for France, limiting public spending as far as possible to companies that have European branches.

“Why should Europe forbid itself from what the United States, the world’s most free-market country, allows itself?” Mr. Sarkozy asked. “That way companies that produce in Europe will benefit from European state money.”

While Mr. Sarkozy has crept closer to the Socialist Party candidate, François Hollande, in opinion polls for the first round of voting, he remains more than 10 percentage points behind Mr. Hollande in a projected runoff between the two men. The French in general are tired of Mr. Sarkozy and anxious about the economy and the high rate of unemployment, the highest here in 12 years. But they are not passionate about Mr. Hollande either, so Mr. Sarkozy and his aides believe they have a chance to win by citing Mr. Sarkozy’s experience, decisiveness and leadership.

The rally, at a huge convention center just northeast of Paris, was a well-designed display of political sophistication suitable for television. Supporters were brought in from all over the country. Mr. Sarkozy spoke from the center of an enormous circular stage, with a backdrop of the royal blue of the French flag and the campaign slogan “A Strong France.” Young supporters wore Sarkozy T-shirts, and the crowd shouted, “We’re going to win,” a popular chant at soccer matches.

Writing in the leftist newspaper Libération on Saturday, the columnist Paul Quinio said that the rally was nothing less than “a grand old Mass held to keep alive hope in a miracle.”

On Sunday, Pierre Moscovici, the director of Mr. Hollande’s campaign, said that Mr. Sarkozy was “using any means at hand to save his campaign — despite the dangers of division and without respect for our European partners.”

François Rebsamen, the leader of the Socialist group in the French Senate, said that “Nicolas Sarkozy has engaged in an exercise of amnesia, as if he has lived elsewhere for 10 years and suddenly discovered problems for which he is principally responsible.”

Mr. Hollande, in a speech about national defense on Sunday, repeated his call to pull French troops out of Afghanistan by the end of 2012. He said he would maintain France’s nuclear deterrent and its seat on the United Nations Security Council and would work within NATO to ensure France’s independence of action.

He also said he would support new, harsher sanctions on Iran “if necessary” to stop Tehran from developing a nuclear weapon and to avoid “a unilateral military intervention.”


Maïa de la Baume contributed reporting from Villepinte, France.








A version of this article appeared in print on March 12, 2012, on page A9 of the New York edition with the headline: Sarkozy, in Rousing Talk, Takes Conservative Stands.
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Portugal Yield at 13% Says Greek Deal Not Unique: Euro Credit

By Lucy Meakin and Keith Jenkins - Mar 12, 2012 9:55 AM GMT
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Souvenirs on display in the window of a store in Lisbon.

The good news is Greece won’t default on March 20, and 10-year borrowing costs for Spain and Italy have dropped below 5 percent. The bad news is similar- maturity Portuguese bonds still yield more than 13 percent.

Last week, Greece pushed through the biggest sovereign restructuring in history, with private holders forgiving more than 100 billion euros ($131 billion) of debt, a condition for the nation to win the bailout it needs to repay 14.5 billion euros of debt coming due next week.


















Vitor Constancio, vice president of the European Central Bank (ECB) and former Bank of Portugal governor, said that Portuguese austerity measures were on track and Greece’s debt swap would not need to be repeated. Photographer: Hannelore Foerster/Bloomberg












Portugal is raising taxes and cutting spending as it fights to meet the terms of its 78 billion-euro aid plan from the European Union and the International Monetary Fund. Photographer: Mario Proenca/Bloomberg
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Unlimited European Central Bank loans to banks have halted a bond-market rout that prompted investors to drive German yields to record lows and yield premiums on the securities of its regional peers to euro-era highs. The Italian 10-year yield has dropped more than 150 basis points and the rate on similar- maturity Spanish debt is about 80 basis points lower since the ECB announced Dec. 8 it would offer loans to financial institutions through two longer-term refinancing operations.

“The ECB liquidity is life support,” said Robin Marshall, director of fixed income in London at Smith & Williamson Investment Management, which oversees about $18 billion. “They’ve bought time but they must use the time to implement proper reform. It’s hard to see there not being more defaults, more private sector involvement. It makes it more likely we’re going to get another market rout later in the year.”

Portugal’s Borrowing Burden

Portuguese 10-year debt yields 13.71 percent, down from a euro-era record of 18.29 percent reached Jan. 31 though higher than its 2011 average of 10.17 percent. Two-year rates of 12.48 percent have doubled in the past year, though they are down from more than 21 percent at the end of January.

The ECB bought short-dated Portuguese securities on Feb. 29, according to two people with knowledge of the transactions who declined to be identified because trades with the central bank are private. That ended pause of at least two weeks in the central bank’s Securities Markets Program, through which it has bought almost 220 billion euros of euro-area government bonds.

Portugal, whose government debt is junk rated at Moody’s Investors Services, Standard & Poor’s and Fitch Ratings, risks becoming the next nation to need to restructure its debt, according to Matteo Regesta, a senior fixed-income strategist at BNP Paribas SA in London. Portugal’s deficit was 4 percent of gross domestic product in 2011.

‘Bond Vigilantes’

“The market doesn’t believe that Greece is a unique case,” said Regesta. “Portugal is very similar. It would be easy to try to placate and distract the attention of the bond vigilantes, if only policy makers would immediately close the funding gap, pre-empting any further pressure on the periphery. I’m afraid I don’t think that’s going to happen.”

Portugal is raising taxes and cutting spending as it fights to meet the terms of its 78 billion-euro aid plan from the European Union and the International Monetary Fund after it followed Ireland and Greece in seeking a bailout in April.

Vitor Constancio, ECB vice president and former Bank of Portugal governor, said March 8 that Portuguese austerity measures were on track and Greece’s debt swap would not need to be repeated. The following day, German Finance Minister Wolfgang Schaeuble called Greece a “completely unique case.”

Investors have lost 11 percent on Greek bonds since Dec. 8, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Portuguese bonds have returned 1.9 percent, lagging behind gains of 15 percent on Italian securities, 8.4 percent on Spanish debt and 1.7 percent on German bunds, the indexes show.

‘Suspicion and Alarm’

While last week’s swap reduces Greece’s privately held debt by about half, the government’s decision to force holdouts to participate may backfire by deterring investors from keeping cash in European sovereign debt, said John Wraith, a fixed- income strategist at Bank of America Merrill Lynch in London.

“Recent spread narrowing has been driven by the LTROs and shorter term and speculative buying,” said Wraith. “None of this changes the fact that important, major overseas investors view recent developments with suspicion and alarm. With such a range of damaging precedents being set, they are highly unlikely to change that view and return as fundamental, long-term holders of these bonds for the foreseeable future.”

Italy’s 10-year yield was 4.86 percent at 9:47 a.m. London time, down from a euro-era record 7.48 percent on Nov. 9. Spain’s 10-year bonds yielded 5.02 percent, with the rate on German 10-year bunds, the euro region’s benchmark government securities, at 1.78 percent.

“I’m not forecasting a second default, but the markets certainly are,” said Bill Gross, co-chief investment officer at Pacific Investment Management Co., which manages the world’s biggest bond fund. “The rules have been changed here,” he said in a March 9 radio interview with Tom Keene and Ken Prewitt

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