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Greek Default: Why Now May Be Best Time to Do It
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Greek Default: Why Now May Be Best Time to Do It

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Eurozone crisis live: German investor group recommends rejecting Greek debt deal | Business | guardian.co.uk


Eurozone crisis live: German investor group recommends rejecting Greek debt deal


Deutsche Schutzvereinigung für Wertpapierbesitz just released a statement advising private creditors holding short-term debt that they should not swap their existing securities for new long-term Greek bonds.

DSW argued that investors would be better advised to sit tight. Why? Becuase if the overall take-up of the offer comes in above 90%, their debt would probably be paid off at face value, meaning they avoid the haircut.

If, though, the PSI take-up is between 75% and 90% then a mandatory exchange will be triggered (so investors would be no worse off than if they'd taken part voluntarily).

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Last edited by GridKing; March 5th, 2012 at 09:42 AM.
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Goldman Secret Greece Loan Shows Sinners

Goldman Secret Greece Loan Shows Sinners - Bloomberg

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20% ?


Greek Debt Private Investors Join Swap - Bloomberg

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Analysts said the Institute of International Finance February 18 document, marked "IIF Staff Note: Confidential" may have been designed to alarm investors into participating in the exchange.

"There are some very important and damaging ramifications that would result from a disorderly default on Greek government debt," the IIF said in a document obtained by Reuters.

"It is difficult to add all these contingent liabilities up with any degree of precision, although it is hard to see how they would not exceed 1 trillion euros."


Bondholder group sees 1 trillion euro Greek default risk | Reuters

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Greek Finance Minister Evangelos Venizelos warned Athens' private creditors on Monday not to hold out but take the bond swap on which a second bailout of the debt-ridden country depends because it was the best deal they would get.

"Whoever thinks that they will hold out and be paid in full, is mistaken," he said. "We are ready to activate CACs (collective action clause to enforce losses) if needed," he said.

Greek finance minister tells bondholders swap offer is final | Reuters

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Cash-strapped Greece begins its bid to raise funds… by selling off Corfu

Cash-strapped Greece begins its bid to raise funds¿ by selling off Corfu | Mail Online

Every moment I wake up I realize I know nothing, and then I smile...
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It isn't yet known if Greece's debt restructuring will trigger payouts on insurance-like contracts called credit-default swaps covering the government's debt. But if it does, it will touch off the biggest-ever CDS auction for sovereign bonds and determine how much banks and others will have to pay to settle the swaps.

Billions of dollars are at stake. The net amount of Greek CDS outstanding--after offsetting trades are cancelled out--is $3.2 billion. That is the maximum expected to change hands between CDS buyers and sellers, assuming every party that sold protection will have the cash to meet its obligations. If not, that sum could grow.

The International Swaps and Derivatives Association estimates 93% of all CDS are subject to collateral arrangements, potentially reducing the risks of a messy fallout.

Whatever happens to Greek CDS in the wake of the restructuring is likely to happen quickly. "There are a lot of trades to settle and it's a big event under quite a pressured timetable," said one trader familiar with the preparatory work being done.

If Greece compels investors to accept its proposed debt exchange, in which investors would write off 53.5% of what Greece owes, a market participant can ask the industry committee that arbitrates CDS deals, convened by ISDA, to declare a "credit event." The so-called Determinations Committee for Europe has the final say about whether payouts are warranted.

With the credibility of the CDS market at stake and so much already known about the terms of Greece's offer, a swift decision is likely. "Someone is going to ask the ISDA Determinations Committee for a ruling on this very, very quickly," if the restructuring proceeds and any creditors are forced into it, said Otis Casey, credit analyst at CDS data provider Markit in New York.

If a "credit event" is declared, ISDA will decide whether to hold an auction to determine the value of Greece's debt--and, thus, how much will be paid out on CDS.

Based on where CDS were trading Wednesday, the recovery value on Greek debt is expected to be around 24% of the bonds' face value, according to Markit data. Banks and others who sold protection would then be obligated to make up the difference, meaning holders of CDS would be paid out at 76 cents on the dollar.

More than 50 such CDS auctions have happened since an industry-wide protocol called the "Big Bang" applied this settlement method in March 2009. One, in 2008, settled $400 billion in CDS tied to failed investment bank Lehman Brothers Holdings Inc. The biggest sovereign auction so far was for a net $473 million of CDS on Ecuador in January 2009.

Markit and Creditex, a broker of CDS between dealers, run the auctions.

An ISDA spokeswoman said in an e-mailed statement Wednesday other credit events "have been handled smoothly" and the association "expects the same if and when a credit event occurs with regard to Greek sovereign CDS."

ISDA said in January that Greek CDS payouts would likely be warranted if Greece enforced collective-action clauses (CACs), forcing investors who had planned to hold out to accept the restructuring. Since Greece is reported to have between 58% and 76% of private creditors signed on so far, it may need to use the CACs to lift the participation rate over the 90% required level.

Greece needs to get 66% of a quorum of at least half of its domestic-law bondholders to proceed in the deal, or a minimum of 59 billion euros ($77.5 billion) of the 177 billion euros in Greek debt covered by Greek law, assuming the 50% quorum is reached. About 11% of the debt is covered by international law.

A spokeswoman for ISDA said the association expects if "the CACs are exercised and announced in a form binding on all holders, the [Greek debt] exchange will happen almost immediately after that," and any CDS auction would likely follow.

The offer to private investors is on the table until 20:00 GMT on Thursday but the exchange is due to settle by March 12, meaning an auction would likely come soon after.

A single auction would be held, the ISDA spokeswoman said. That is unlike some corporate restructuring credit events, where several auctions are held to deal with a range of bond maturities.

A hedge fund manager trading in sovereign CDS, though no longer in Greek CDS, agreed the process behind the auction "seems pretty orderly."

CDS auctions are supposed to ensure the payouts are in line with losses on the relevant bonds or loans, however. And in the case of Greece, there is no talk yet of CDS holders being able to deliver obligations that they will receive under the exchange that aren't obligations of Greece.

In the exchange, private creditors are getting new Greek bonds with lower coupons and longer maturities, short-dated securities issued by the European Financial Stability Facility and warrants providing additional returns after 2015 if Greece's GDP exceeds current forecasts. It is possible the ISDA committee will say that only the new Greek bonds may be deliverable since they are the only strict debt obligations of Greece. ISDA declined to comment.

CDS holders are expected to be able to deliver the new domestic-law debt given to private creditors in the exchange as well as foreign-law Greek bonds. The old Greek bonds will most likely be cancelled out after the exchange.

Investors going into the auction want to be holding the cheapest possible debt to maximize CDS payouts, if they are delivering bonds and not settling in cash. The cheapest bond to deliver among the new debt is the longest maturing security, due in 30 years.


Greek Debt Restructuring Expected To Put CDS Market To Test - WSJ.com

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A decade ago, Argentina too went through a systemic Sovereign Public Debt collapse resulting in social turmoil, worker hardship, rioting and street fights with the police.
Some months before Argentina exploded, then-President Fernando de la Rúa – forced to resign at the height of the 2001 crisis – had called back as finance minister the notorious pro-banker, Trilateral Commission member and Rockefeller/Soros/Rhodes protégée Domingo Cavallo.
Cavallo was the gruesome architect of Argentina’s political and economic capitulation to the US and UK when he was President Carlos Menem’s foreign minister and economy minister in the ’90s.
Menem and Cavallo are primarily responsible for Argentina’s signing of a formal Treaty of Capitulation with the UK/US after the 1982 Falklands War, opening up our economy to unrestricted privatization, deregulation and grossly excessive US Dollar-indebtedness, almost tripling our sovereign debt in a few short years (see my February 11, 2012 article British Laughter in the Falklands).
The Plan? Prepare Argentina for planned weakening, bankster take-over and collapse, so that a new weakening-takeover-collapse cycle could begin. In 2001, Cavallo was back to finish his work…
During that very hot summer in December 2001, true to its Latin temperament, Argentina even had four (yes, 4!) presidents in just one week. One of them, Adolfo Rodriguez Sáa, who only lasted three days, at least did one thing right, even if he did it the wrong way: he declared Argentina’s default on its sovereign debt.
All hell broke loose! The international bankers and IMF did everything they could to break Argentina’s back; global media pundits predicted all kinds of impending catastrophes. Debt default meant Argentina would have to weather the pain and agony alone, being cast out by the “international financial community”.
‘You’re not the boss of me!’
But no matter how bad it got, it would always be better to do that without the bankers, without the IMF’s, European Central Bank’s, US Fed’s and US Treasury’s “help”. Better to sort out your mess on your own, than to have parasitic banker vultures carving out their pound of flesh from your nation’s decaying social and economic body.
And how bad did it get in 2002? A 40 per cent drop in GDP; 30 per cent unemployment; 50 per cent of the population fell below the poverty line; dramatic, almost overnight, devaluation against the US Dollar from 1 peso per dollar to 4 pesos per dollar (then it tapered down to 3 pesos per dollar); if you had a US dollar Bank account, the government forced you to change it into pesos at the rate of 1.40 pesos per dollar.
What did Argentina’s government do wrong? In the months leading to collapse it bowed to all the bankers and IMF-mandated measures and “recipes”, which were actually the very cause of collapse: Argentina was loaned far more than it could pay back…. And the banker knew it! This was described in our December 19, 2011 article, Argentina: Tango Lessons.
Successive governments since then have continued to be functional to banker interests by rolling over debt 30 to 40 years, aggregating huge interest and in 2006 paying the full debt to the IMF – almost US$10 billion in full, cash and in US dollars (sole entity given most-favoured creditor status).
Same vultures circling Greece
Today, Greece is confronted with a similarly tough decision. Either it keeps its sovereignty, or it capitulates to the “Vulture Troika” – the European Central Bank, European Commission and International Monetary Fund – who work for the Bankers, not the People.
Not surprisingly, today we find that Greece too has a Trilateral Commission Rockefeller/Rothschild man at the helm: Lucas Papademos who is doing the same things Argentina did in 2001/2.
Argentina not only suffered Cavallo, but President De la Rúa himself was co-founder of the local Global Power Masters lobby, CARI – Argentine International Relations Council – local branch of the New York-based Council on Foreign Relations, networking with the Trilateral Commission / Bilderberg mafia.
Greece today should do what Argentina did a decade ago: better to endure pain and hardship, and sort out the mess made by your politicians in connivance with international bankers on your own, wielding whatever shred of sovereignty you still have than allowing the Banker Vultures sitting in Frankfurt, New York and London decide your future.
It’s the Neocolonial Private Power Domination Model, stupid!
Or do you think it’s just bad luck, bad judgment and coincidence that countries – Greece, Argentina, Spain, Italy, Portugal, Brazil, Mexico, Iceland, Ireland, Russia, Malaysia, Ukraine, Indonesia, South Korea, Thailand, France, even the US and UK – always borrow too much from the bankers and then “discover” that they cannot pay it back and that, symmetrically, the same bankers – CitiCorp, HSBC, Deutsche, Commerz, BNP, Goldman Sachs, Bank of America, JPMorganChase, BBVA lend too much to countries and then “discover” they cannot collect?
No! That is the very yellow-brick road that leads to the Emerald City of “debt restructuring”, “debt refinancing”, and “sovereign debt bond mega-swaps” that snowball sovereign debt, spreading it over 20, 40 or more years into the future. That guarantees unimaginably colossal interest profits for the Mega-Bankers and for all those nice politicians, media players, traders and brokers, without whom that would not be possible.
This is a Model. It must keep rolling and rolling and rolling… As this Monster Machine steams forwards, it completely tramples on, overruns, destroys, flattens and obliterates people, jobs, workers, health services, pensions, education, national security and just about everything human on its path. Run by parasitic usurer technocrats, it does not care what it destroys because it has no ethics; no Christian, Muslim or Buddhist morals. It only worships a greedy golden idol of money, money and more money. This is 21st-century Money Power Slavery.
Three generations of Argentines saw hopes dashed and dreams thwarted by this Monster Machine, suffering the hardship, woes and humiliations that come when countries give up sovereignty.
Bring back the drach!
So, Greece: Just default on your “sovereign debt”! Just revert to the drachma! Just say “No, thanks!” to the German bankers and the Troika Vultures.
Please, Greece: just say “No!” to your Trilateral Commission president!
You will be setting a strong precedent for your European neighbours. Like Spain, which is hurting so badly right now for similar reasons. Like Italy, with its Trilateral Commission Prime Minister Mario Monti (also Trilateral’s European Chairman!).
Greece, the Cradle of Democracy, can teach the world a lesson in True Democracy by kicking these parasites out of the country, which will hopefully trigger kicking them out of Europe and one day, kicking them out of the global economy.
Because what Greece and Argentina and Italy and Spain suffer today is not True Democracy, but rather a distorted bastard imitation that systematically yields control to the Global Power Masters at the Trilateral Commission, Bilderberg and Mega-Banking Overworld. They run the whole “democracy show”, whereby all countries end up having “the best democracy that money can buy”… which is no democracy at all…
The Money Power juggernaut is steaming full speed towards us all. If Greece falls, who’ll be next? Spain? Italy? Portugal? Argentina (yet again!!!)?
So what if Greece’s reverting to the drachma marks the beginning of the end for the euro? Let Italy revert to the lira, Spain to the peseta, Portugal to the escudo…! A National Currency is a key National Sovereignty factor.
All governments should understand that you either govern for the people and against the bankers; or you govern for the bankers and against the people.


Argentine advice for Greece: ?Default Now!? — RT

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Greece to Announce Swap Results Friday Morning - WSJ.com

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BBC News - Why Greece won't go away


The real story
So, given that failure is not an option, in all likelihood a last-minute deal will be stitched together in the time-honoured European fashion.

But here's the thing. It doesn't matter.

The focus on the Greek government's ability to repay its debts completely misses the point.

The real question is whether Greece has the political will to remain in the euro.

Here are the four statistics that really matter:

since joining the euro in 2001, Greek unit labour costs (a measure of wage competitiveness) have risen 32% compared with Germany
Greece's current account deficit - a broader measure of its trade deficit - was running at 10% of GDP (total economic output) in the middle of last year, according to data compiled by Bloomberg
Greek households and companies withdrew 28% of the deposits they held in Greek banks in the three years to November last year, and the rate of withdrawals has been accelerating
Greece's economy shrank 5.5% last year, has shrunk a cumulative 12% since 2008, and is expected to shrink another 2.8% this year

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