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Olli Rehn, nominated as commissioner for economic and monetary affairs
, called on European nations to bring down their deficits, including Greece, where, he said, the problem was “a very serious one” that could spill over.
“It is not so serious yet that it would threaten stability of the euro zone,” he said.
New York Times January 11, 2010
Enligt marknaden för CDS-kontrakt, är det just nu allra högst risk att låna ut till Ukraina, Argentina och Venezuela.
Grekland, Island, Lettland och Dubai är andra länder som hamnar i pestligan på den internationella marknaden för statspapper med urusla kreditbetyg.
DI 11/1 2010
The European Central Bank has given its clearest warning to date that
there will be no EU bail-out for Greece if it fails to control its spiralling deficit,
raising the stakes in a game of brinkmanship over the future of the euro.
Ambrose Evans-Pritchard, 6 Jan 2010
Nice pic of dark clouds over Acropolis
Jurgen Stark, the ECB's chief economist and the powerful German member on the bank's inner council, said Greece's problems are entirely "home-made" and do not meet the terms required to trigger the rescue mechanism under EU treaty law, which is limited to countries that face severe difficulties "beyond their own control".
"The Treaties set out a 'no bail-out' clause, and the rules will be respected. This is crucial for guaranteeing the future of a monetary union among sovereign states with national budgets. Markets are deluding themselves if they think that the other member states will at a certain point dip their hands into their wallets to save Greece,"
“The unthinkable -- that the ECB would not accept sovereign securities from a member as collateral -- has become a measurable risk, and one exclusively controlled by Moody’s,” Nielsen said. Moody’s is now the “de factor decision maker on Greek eligibility.”
Bloomberg 18 december 2009
Former Bank of England policy maker Willem Buiter said Greece may be the first major country in the European Union to default on its debts since the aftermath of World War II.
Bloomberg Dec. 9 2009
“It’s five minutes to midnight for Greece,” Buiter, who will join Citigroup Inc. as its chief economist next month, said in a Bloomberg Television interview today.
“We could see our first EU 15 sovereign default since Germany had it in 1948.”
We are headed towards a situation in which the risk of financial distress and contagion leads to an unconditional bail-out, whether or not Greece is reforming sufficiently.
The reasons we are at this juncture lie in the nature of the stability and growth pact. It is a fair-weather construction, ill-suited to crisis.
Wolfgang Münchau, FT December 13 2009
Greece defies Europe as EMU crisis turns deadly serious
Euroland's revolt has begun.
Greece has become the first country on the distressed fringes of Europe's monetary union to defy Brussels and reject the Dark Age leech-cure of wage deflation.
Ambrose Evans-Pritchard, 13 Dec 2009
If Greece were to impose the draconian pay cuts under way in Ireland (5pc for lower state workers, rising to 20pc for bosses), it would deepen depression and cause tax revenues to collapse further. It is already too late for such crude policies. Greece is past the tipping point of a compound debt spiral.
Ireland may just pull it off. It starts with lower debt. It has flexible labour markets, and has shown a Scandinavian discipline. Mr Papandreou faces circumstances more akin to those of Argentine leaders in 2001, when they tried to cut wages in the mistaken belief that ditching the dollar-peg would prove calamitous. Buenos Aires erupted in riots. The police lost control, killing 27 people. President De la Rua was rescued from the Casa Rosada by an air force helicopter. The peg collapsed, setting in train the biggest sovereign default in history.
Kommentar av John Livsey (14/12 07:37):
Trichet, who is no fool, made an interesting commment last week. He said that the ECB will begin to demand A ratings from at least two rating agencies on bonds whih are deposited with the ECB. This will soon disqualify Greek bonds.
The issue here is access to liquidity. There is an urban legend dear to Euro fans that claims that the EB has never followed the same path as the BoE and the Fed in supplying liquidity during this crisis. Of course, this is hopeful nonsense. The ECB has been accepting bonds on deposit and handing out cash Euros in exchange in huge amounts to Banks in countries at risk, notably Ireland, but also Spain, Greece, Hungary and so on. It's called the Liquidity Facility.
The funny thing is that the amount of cash that the ECB has supplied to Greece in particular seems to be far larger than Greece should require, by most estimates. So what's up?
What's up seems to be that Greek Banks have figured out a way to arbitrage the system. They have Greek Bonds which have fallen sharply in price since Greece dropped to a BBB rating - and stinks up their balance sheets - so they simply deposit those Bonds with the ECB for cash, and then turn around and use the new cash to buy much higher quality German sovereign Bonds. Greek Banks get the cash and the ECB assumes the risk of default.
It's a cute game, but now Trichet has put them on notice that pretty soon the ECB will no longer accept Greek Bonds. It just takes one more rating agency to drop Greece to BBB and then the game is up. That could happen this week.
Greek Banks aside, I wonder what Greece does when it needs cash and the ECB refuses its Bonds. Maybe the real straw in the wind here is the ECB getting ready to refuse sovereign Bonds from a Euro area member state as collatoral. Who expected that ever to happen?
On a side note, people keep telling AEP that he's always predicting awful things for the Euro. A broker I know commented to me this week "There is a difference between being wrong and being early."
Another comment on the same page:
The only reasons the US dollar works in America are
1. The annual movement of households between the individual states for economic reasons. This is approximately 2.5% and because of euroland differences in culture, language, schooling etc, it is impossible over here.
2. Automatic transfers, through Washington, from the wealthy to the needy states which would otherwise be able to boost economic activity by devaluing, were they not locked into the dollar. These automatic transfers equate to over 25% of USA GDP. The equivalent percentage in euroland is less than 2 percent.
Ergo, the euro cannot survive. In the mid 1990s, Professor Alan Walters predicted 20 years and it is worth remembering that when a currency goes, it is almost as sudden as an earthquake, so great are the internal pressures that have been building up beneath the surface.
S&P's decision triggers jump in bond spreads to over 200bp;
a downgrade would put Greek government bonds at a level below ECB-accepted collateral;
Rating agency plans visit within 10 days ahead of a final decisionl;
Kathimerini reported that European officials agreed not to put on further pressure on Greece for 40 days;
Trichet says he is not happy about Ecofin's decision to water down EU supervisory reform;
Eurointelligence 8/12 2009
Standard & Poor's has put Greece on negative credit watch
"The situation in Greece is very difficult," ECB chief Jean-Claude Trichet told the European Parliament's economic committee. "So this calls for very difficult, very courageous but absolutely necessary measures."
BBC 7 December 2009
The Mediterranean country's debt stands at more than 110% of GDP.
Separately, the president of the European Central Bank (ECB) said Greece needed to take "courageous" measures.
David Marsh, author of The Euro: The Politics of The New Global Currency, said the danger for EMU laggards is that the ECB will begin to tighten before they are out of trouble.
It is German recovery that threatens to stretch the North-South divide towards breaking point.
Ambrose Evans-Pritchard, 22 Nov 2009
Eurozone creditors – German banks? – hold €200bn of Greek debt. Greek banks have borrowed €40bn from the ECB at 1pc, playing the "yield curve" by purchasing state bonds.
Greece current account deficit hit 14.5 pc of GDP in 2008. External debt has reached 144p (IMF). The interest spread between 10-year Greek bonds and German bunds has jumped to 178 basis points. Greek debt has decoupled from Italian debt. Athens can no longer hide behind others in EMU's soft South.
David Marsh, author of The Euro: The Politics of The New Global Currency, said the danger for EMU laggards is that the ECB will begin to tighten before they are out of trouble.
It is German recovery that threatens to stretch the North-South divide towards breaking point.
Ambrose Evans-Pritchard, 22 Nov 2009
The Euro: The Politics of the New Global Currency
by David Marsh
The spread between Greek bonds and German bunds widened to 153 basis points
FT Alphaville 2009/11/17
The Athens-based central bank said Greek lenders as a whole had borrowed amounts that were proportionally greater than other countries in the 16- nation euro area, the Web site said, without saying where it got the information.
Greek banks have borrowed a total of 42 billion euros ($63 billion) of the 570 billion euros the ECB has pumped into the system, according to Euro2day.
Thirteen members of the European Union have been told to take action and get their budget deficits back in line.
EU requirements mean that they should not exceed 3% of the country's GDP.
EU's economy commissioner, Joaquin Almunia, saved his harshest criticism for Greece. Mr Almunia said the country had taken "no effective action".
BBC 11 November 2009
Varför ska Sverige gå med i EMU?
Framför allt Grekland, Irland och Spanien har under senare år haft kraftiga överhettningar som inte har dämpats tillräckligt av den gemensamma penningpolitiken.
Dessa överhettningar har bidragit till att de pågående konjunkturnedgångarna i dessa länder har blivit särskilt djupa.
Lars Calmfors Sieps JULI Nr 6-2009
Being a member of the eurozone doesn’t immunize countries against crisis.
In Spain’s case (and Italy’s, and Ireland’s, and Greece’s) the euro may well be making things worse.
Paul Krugman, New York Times January 19, 2009
The PIIGS
The euro zone faces tough times as the PIIGS — Portugal, Ireland, Italy, Greece and Spain —
will need a flexible exchange rate to compensate for the economic slowdown
so some of them may decide to break free from the single currency's straightjacket
Hugh Hendry, Chief Investment Officer and Partner at Eclectica, CNBC 12/1 2009
EMU ökar spänningarna i medlemsländerna
Situationen som man ser i dag tror jag inte ska uppfattas som extrem. Det kommer att uppkomma situationer där konjunkturutvecklingen skiljer sig mycket mer åt mellan länderna än i dag”, säger Lars Calmfors
DI reporter Jonas Ohlin 7/1 2005
Grekland har presenterat för låga, felaktiga uppgifter om storleken på de grekiska budgetunderskotten de senaste åren
Ekot 22/9 2004