Thursday, October 27, 2011

Greece: 50% off

50% off Greece © fintag

News comments:
So the banks have voluntarily agreed to take a 50% haircut. This means no credit default event and no payoffs. Oh dear.

But what does this mean?

Now the dust is settling and the EU deal is nothing but more of the same, Greece has got away with wiping off 50% of its debt. Again the Greeks have got something for nothing and the likes of Ireland who have been bailed out and are being good and cutting their costs are looking at those bad boys in Greece and wondering what they did wrong?

The EU is keen there was no Greek default. It would be bad for the Euro. So it has told debt owners you can only get 50% back. While we all try and work out what this actually means, here is a quote:

"[Europe is] a monument to the vanity of intellectuals, a programme whose inevitable destiny is failure: only the scale of the final damage is in doubt" Margaret Thatcher

So if the ECB is not the lender of last resort, is it, through the back door, being given that role in contravention of the Maastricht Treaty? Now Greece has written off half its debt, it doesn't need to bother with its austerity cuts and can continue like in the old days? Something doesn't smell right.

The upshot is the rich Greeks are buying up London real estate (so my contact at John D Wood tells me). They are stripping Greece of its wealth and are waiting for Greece to be kicked out of the Euro so they can go back and buy up the place. This 50% off deal is a bit of a bummer but give them a couple of months and Greece will be kicked out of the Euro. Looks like the rest of Europe will be asking for 50% haircuts - shame the UK / USA is not a member to enjoy this sale of the century.

Today's shorts:
CDS (seekingalpha)

Today's longs:
Help is hand to stop the hackers (reuters)

Sarkozy to be made an honorary Greek.