Monday 25 July 2011

Greek default virtually 100 per cent

Moody's downgraded Greece's bond ratings by a further three notches Monday and warned that it is almost inevitable the country will be considered to be in default following last week's new bailout package.

The agency said the new EU package of measures implies "substantial" losses for private creditors. As a result, it cut its rating on Greece by three notches to Ca -- one above what it considers a default rating. It also put eight Greek banks on review for a possible downgrade.

Though Moody's said a Greek debt default is "virtually certain," it noted that the new measures will increase the likelihood that Greece will be able to stabilize and eventually reduce its overall debt burden.

It also said the package also benefits other eurozone countries by "containing the near-term contagion risk that would likely have followed a disorderly payment default or large haircut on existing Greek debt."

In recent weeks, financial markets have been rocked by fears that much bigger economies like Spain and Italy may get dragged into Europe's debt crisis mire, which has also seen Ireland and Portugal bailed out alongside Greece.

Eurozone countries and the International Monetary Fund last week agreed to give Greece a second bailout worth C109 billion ($155 billion), on top of the C110 billion granted in rescue loans a year ago.

If all goes to plan, banks and other private investors will contribute some C50 billion ($71 billion) to the rescue package until 2014 by swapping Greek bonds that they hold for new ones with lower interest rates or slightly lower face value, or selling the bonds back to Greece at a low price

"The support package incorporates the participation of private sector holders of Greek debt, who are now virtually certain to incur credit losses," Moody's said in a statement. "If and when the debt exchanges occur, Moody's would define this as a default by the Greek government on its public debt."

Despite Greece's new package, which was more comprehensive than many in the markets had predicted, Moody's said it's going to take many years of hard graft for Greece to get complete control of its debts.

"Greece will still face medium-term solvency challenges -- its stock of debt will still be well in excess of 100 per cent of GDP for many years and it will still face very significant implementation risks to fiscal and economic reform," Moody's said.

The agency added that it will reassess Greece's rating once the bond exchange has been completed "to ensure that it reflects the risk associated with the country's new credit profile, including the potential for further debt restructurings."

On Friday, ratings agency Fitch also said Greece faced a default but that it would reassess the rating once the new bonds are issued -- implying that the bad rating might only last for a few days.

While Greece's brush with default will be a first for a euro country, the immediate practical consequences of the rating for Greece should be limited.

For weeks, the overriding fear was that, because of the bad rating, already struggling Greek banks would be frozen out of the European Central Bank's emergency liquidity operations.

However, last week eurozone leaders found a way around that threat by promising to temporarily deposit C35 billion with the ECB to boost the creditworthiness of defaulted bonds used as collateral by Greek banks, until the default rating has been lifted.

Crucially for Greece and Europe as a whole, the International Swaps and Derivatives Association, a trade association, said the new rescue deal is not expected to trigger payment of bond insurance because private sector involvement is voluntary.

Greek government spokesman Elias Mossialos brushed off Moody's downgrade as of "no practical value," arguing that domestic lenders can count on secure credit lines under the terms of the new bailout.

"Unfortunately for them, (ratings agencies) won't have anything to work on for many years," he said in a radio interview. "Perhaps the finance ministry should cancel its subscriptions, because I think the Greek government pays subscriptions to these agencies to receive their results ... I don't think we need them any longer."

 

Sunday 24 July 2011

George Osborne claimed the UK would be kept out of the latest Brussels deal to prop up the struggling Mediterranean country.

Taxpayers will have to fork out more than £1billion in a second Greek bailout – at the same time as losing millions in loan interest repayments from Ireland.


George Osborne claimed the UK would be kept out of the latest Brussels deal to prop up the struggling Mediterranean country.

But because of the UK’s multi-billion pound stake in the International Monetary Fund, the Government cannot escape contributing to the £96billion agreement.

The UK holds a 4.5% stake in the IMF, which is expected to make up around 30% of the bail-out to Greek PM George Papandreou’s debt-laden nation. The other 70% will come from countries in the Eurozone, led by Germany under Angela Merkel.

The agreement, thrashed out by EU leaders on Thursday, is the second time in a year British taxpayers have had to contribute £1billion to bail out the Greeks.




British banks are also exposed to Greece’s £298billion overall debt – which is 60% more than its annual Gross Domestic Product.

But there was good news yesterday as shares rose over the new rescue package.

UK and French markets gained more than 1% in morning trading, before slipping slightly, with the FTSE 100 index ending up 0.6% and the Cac 0.7% higher.

But last night it emerged Britain has been forced to slash the interest we charge Ireland for the £3.26billion loan made in November as part of the complex debt deal. Mr Osborne insisted easing the pressure on our near neighbours was in the UK’s “national interest”. The Chancellor said “We stayed out of the Greek bailout as promised. But, for Britain, Ireland is a special case. Our loan will help them and is in our national interest.”

He vowed the interest, which was fluctuating at around 5.9% would not fall below the 3% cost to Britain of making the loan.




The Irish government came away from the crisis summit with another victory, after Eurozone leaders announced they would continue lending it money beyond 2013 – if it is not able to borrow on the markets. Experts said this was another bailout. Despite the financial markets welcoming the deal, some critics claim it was the first step to a United States of Europe. Tory MP Douglas Carswell said it was “very bad news” and likened membership of the euro to being stuck in a “burning building with no exit”. Euro leaders also failed to dampen concerns that they were using the crisis to increase the EU’s power.

French President Nicolas Sarkozy revealed his ambition was “to seize the Greek crisis to make a quantum leap in eurozone governance”.

The latest international bail-out is seen as an attempt to finally ensure the stability of the single currency and stave off worries the debt crisis will spread to Italy and Spain.

Saturday 23 July 2011

Alleged Norwegian spree killer has EDL links

The rightwinger allegedly responsible for the Mumbai-style massacre and bombing in Norway appears to have ties with UK-based “counter-jihad movement” the English Defence League.

In online rants, alleged murderer Anders Behring Breivik describes himself as a rightwing conservative opposed to “Eurabia”, the “Islamisation of Europe” and the erosion of Christian values.

In a post on Norwegian website document.no he describes his admiration for the English Defence League, his contacts with the group and aspiration to set up a Norwegian sister organisation:

Quote:
I strongly doubt that your theory is correct. The whole conflict between GDP and EDL started with a change of leadership in the EDL for a few months ago. They threw out the racist and denounced the BNP. They chose instead SIOE's ideological basis that is more or less mainstream view on the right side in Western Europe now (Vienna School of Thought).
Nick was very offended and began to demonize the EDL. Although they are now attacking each other as they compete not at all as these are two quite different fronts. 90% of all votes in the EDL continued GDP (Since this is the only alternative to multikulti in the UK) and 90% of GDP supports EDL regardless of what Nick had to think.

Second, Labour governs intelligence service. They had never in his life supported the EDL as these create a lot of positive attention for the cultural conservative movement in the UK.

I have on some occasions discussed with SIOE and EDL and recommended them to use conscious strategies.

The tactics of the EDL is now out to "entice" an overreaction from Jihad Youth / Extreme-Marxists something they have succeeded several times already. Over The reaction has been repeatedly shown on the news which has booster EDLs ranks high. This has also benefited GDP. WinWin for both.

But I must say I am very impressed with how quickly they have grown but this has to do with smart tactical choice by management.

EDL is an example and a Norwegian version is the only way to prevent Flash / SOS to harass Norwegian cultural conservatives from other fronts. Creating a Norwegian EDL should be No. 3 on the agenda after we have started up a cultural conservative newspaper with national distribution.

 

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