European Union

Meanwhile, Over in Europe

Mark Noonan6 Comments

From Ekathimerini:

The government is facing the possibility of not being able to pay wages and salaries in October if its international creditors do not approve the pending 8-billion-euro sixth installment immediately.

The country’s foreign lenders have made disbursement conditional on the government’s adoption of new measures that will target the collection of at least 1.7 billion euros. Without the sixth tranche, the public purse will be 1.5 billion euros short on October 17.

The prospect of a freeze in payments appeared even more serious on Thursday, after Greek commercial banks failed to cover the sum of 300 million euros of supplementary, noncompetitive bids for Tuesday’s auction of T-bills, providing only 155 million. The shortfall is interpreted as a clear message by banks to the government that they are unwilling to fund future issues of T-bills…

Greek one year bonds are approaching 100% as the financial world fully expects a Greek default some time in the next 12 months – which means that Money is figuring there is nothing the European Union can do to avoid default.  Money is right – there isn’t anything.  Oh, they could maybe put it off for a while, but they can’t stop it.  Greece owes too much money and no elective government of Greece would ever have popular support for bankrupting the people of Greece so that banksters can be bailed out (a dictatorship could do it…and one does wonder if the Euroweenies are considering that?).

And once Greece does default, look out!  The financial world will be in for a crash like no one has ever seen before.

HAT TIP:  Mish’s

UPDATE:  More on the Eurocalypse.

IMF Official Expects Greek Default

Mark Noonan5 Comments

Over at Noonan for Nevada I note that Greek one year bonds have rocketed to an amazing 72%, now comes this Zero Hedge:

While the US was panicking over a double zero jobs report, things in Europe just fell off a cliff. As both the WSJ and Reuters report, it seems that the second Greek bailout, following repeated and consistent disappointments by Greece which has resolutely refused to comply with the terms of its fiscal austerity program, has just collapsed.And with the US closed on Monday: long a counterbalance to European risk pessimism, this week (especially with the news fro the latest FHFA onslaught against global banks) may just be the one that “it” all comes to a head. But back to Europe, and more specifically Greece, which it now appears is doomed. “I expect a hard default definitely before March, maybe this year, and it could come with this program review,” said a senior IMF economist who is keeping close tabs on the situation. “The chances for a second program are slim.” …

And remember, Italy and Spain are also on the financial chopping block – it has just been the belief of the Eurozone leaders that if they can save Greece, they can save the entire Eurozone.  Maybe that was true, but what has become clear by now is that Greece cannot be saved…the financial requirements to be placed upon the people of Greece are not politically possible for an elected Greek government to impose (additionally, in my view, even if the Greek people willingly embraced the austerity measures it would not be enough…Greece – like Spain, Italy and so many other nations – owes more than it can ever repay).  So, default.

Some rumors have had it that all the Eurozone leaders were ever trying to do was find a safe place to crash land the Greek economy…knowing all along that default was necessary, they just wanted it to happen in the least damaging manner possible.  I don’t hold to that view – Greek default being inevitable, the sooner it happens, the better.  The longer you keep trying to bail out Greece the more debt is involved and thus the bigger the hit when the default happens.  I think the Ruling Class of Europe really thought they could manage this…the Masters of the Universe never imagined that there wasn’t some way to borrow, print and steal their way out of the jam, as they have done so many times in the past.

But now they are rather stuck…no one in Europe wants to get further on the hook for Greece.  Default must happen, and keeping things afloat even for another full year won’t make it any better for those who continue to extend Greece credit.  Maybe there are one or two more rabbits for the European Central Bank to pull out of the hat, but I don’t think so.  Get ready for an interesting financial time.