Eurozone debt crisis
From The Telegraph:
21.44 Germany OK. Still AAA. Portugal is not. Rating cut by two notches. It's now considered below investment grade, or "junk".
21.39 Italy cut two notches to BBB+. Austria also loses its AAA crown, down one notch to AA+.
21.38 Right, they are coming thick and fast now. Spain has been downgraded two notches to "A", from "AA-".
Finland is OK. Still AAA
21.44 Germany OK. Still AAA. Portugal is not. Rating cut by two notches. It's now considered below investment grade, or "junk".
21.39 Italy cut two notches to BBB+. Austria also loses its AAA crown, down one notch to AA+.
21.38 Right, they are coming thick and fast now. Spain has been downgraded two notches to "A", from "AA-".
Finland is OK. Still AAA
From The Telegraph:
21.50 Right let's get a sensible list out:
France CUT one notch to AA+
Austria CUT one notch to AA+
Italy CUT two notches to BBB+
Spain CUT two notches to A
Portugal CUT two notches to BB (junk)
Belgium AFFIRMED at AA (the country was cut in November)
Austria CUT one notch to AA+
Malta CUT one notch to A
Cyprus CUT one notch to BB
Luxembourg AFFIRMED at AAA
Germany AFFIRMED at AAA
Slovenia CUT one notch to A+
Slovakia CUT one notch to A
Ireland AFFIRMED at BBB+
The Netherlands AFFIRMED at AAA
Estonia AFFIRMED at AA-
All outlooks are negative (meaning the countries could face further downgrades) EXCEPT Germany, and weirdly, Slovakia.
21.50 Right let's get a sensible list out:
France CUT one notch to AA+
Austria CUT one notch to AA+
Italy CUT two notches to BBB+
Spain CUT two notches to A
Portugal CUT two notches to BB (junk)
Belgium AFFIRMED at AA (the country was cut in November)
Austria CUT one notch to AA+
Malta CUT one notch to A
Cyprus CUT one notch to BB
Luxembourg AFFIRMED at AAA
Germany AFFIRMED at AAA
Slovenia CUT one notch to A+
Slovakia CUT one notch to A
Ireland AFFIRMED at BBB+
The Netherlands AFFIRMED at AAA
Estonia AFFIRMED at AA-
All outlooks are negative (meaning the countries could face further downgrades) EXCEPT Germany, and weirdly, Slovakia.
An interesting assessment (from http://online.barrons.com/article/SB500 ... rticle%3D1):
The members of the euro zone agreed in December that each country could have a structural deficit of no more than half a percent of GDP. If a deficit goes above 3% of GDP, the country will be sanctioned. This agreement now has to be ratified in all countries. But when you agree to such a prescription and you are uncompetitive, your currency is overvalued by 30%, you can’t devalue, and your nominal interest rates are too high, that is a recipe for a depression. It is a death sentence. Several countries won’t ratify the contract, and the next day their markets will be repriced accordingly. They will exit the euro, and the turmoil will go to the next level. Greece is bust in either case. If you can devalue your currency by 40% or 50% in that situation, at least you will have the chance to see the sun again and recover.
The banking system goes bust. Assume Greece won’t repay anything, or at most 10% of its total debt. It is not just the government but the private sector that is bust. That means banks in other countries will be in trouble, which means they will be nationalized. Governments won’t have the money to pay for this, so they will assume even more debt. That is the chain of events I expect in 2012, and if you believe it won’t affect the U.S. you are dreaming. The estimated notional value of the over-the-counter fixed-income-derivatives market in Europe is estimated to be about 60 trillion euros. There are many links to the U.S. banking system, although we don’t yet know who is positioned how. If one country exits the euro, all hell will break loose.
Every European country will be in recession in 2012, and probably in 2013.
The members of the euro zone agreed in December that each country could have a structural deficit of no more than half a percent of GDP. If a deficit goes above 3% of GDP, the country will be sanctioned. This agreement now has to be ratified in all countries. But when you agree to such a prescription and you are uncompetitive, your currency is overvalued by 30%, you can’t devalue, and your nominal interest rates are too high, that is a recipe for a depression. It is a death sentence. Several countries won’t ratify the contract, and the next day their markets will be repriced accordingly. They will exit the euro, and the turmoil will go to the next level. Greece is bust in either case. If you can devalue your currency by 40% or 50% in that situation, at least you will have the chance to see the sun again and recover.
The banking system goes bust. Assume Greece won’t repay anything, or at most 10% of its total debt. It is not just the government but the private sector that is bust. That means banks in other countries will be in trouble, which means they will be nationalized. Governments won’t have the money to pay for this, so they will assume even more debt. That is the chain of events I expect in 2012, and if you believe it won’t affect the U.S. you are dreaming. The estimated notional value of the over-the-counter fixed-income-derivatives market in Europe is estimated to be about 60 trillion euros. There are many links to the U.S. banking system, although we don’t yet know who is positioned how. If one country exits the euro, all hell will break loose.
Every European country will be in recession in 2012, and probably in 2013.
Euler wrote:Greek debt restructuring talks collapse
Eurozone crisis: How the figures stack up
http://edition.cnn.com/SPECIALS/davos/?hpt=hp_c2
I think we should move to Estonia!
http://edition.cnn.com/SPECIALS/davos/?hpt=hp_c2
I think we should move to Estonia!
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CaerMyrddin
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Greece Could Default Outright, Maybe it Should, For it Now Has a Primary Surplus - http://www.forbes.com/sites/timworstall ... y-surplus/
Apparently, the Greeks are being asked to 'legally commit itself to giving absolute priority to future debt service'. In other words, if there's an outbreak of bird flu in Greece, then Greece won't be able to lower its debt repayments temporarily to buy medication...
Jeff
Apparently, the Greeks are being asked to 'legally commit itself to giving absolute priority to future debt service'. In other words, if there's an outbreak of bird flu in Greece, then Greece won't be able to lower its debt repayments temporarily to buy medication...
Jeff
Greece falters in debt talks with creditors - http://www.telegraph.co.uk/finance/fina ... itors.html
I wonder whether this is a game of brinkmanship - a battle of wills to see who blinks first...
Jeff
I wonder whether this is a game of brinkmanship - a battle of wills to see who blinks first...
Jeff
Athens buildings burn as lawmakers weigh austerity - http://uk.reuters.com/article/2012/02/1 ... SU20120212
Greece passes crucial bailout vote as country burns - http://www.telegraph.co.uk/finance/fina ... burns.html
BTW, I see the BBC still don't know the difference between rioters and protesters, despite describing as protesters the rioters in the UK last summer:
'The vote came amid violent scenes in capital, Athens, and elsewhere, with protesters outside parliament throwing stones and petrol bombs'. (From http://www.bbc.co.uk/news/world-europe-17007761)
Jeff
BTW, I see the BBC still don't know the difference between rioters and protesters, despite describing as protesters the rioters in the UK last summer:
'The vote came amid violent scenes in capital, Athens, and elsewhere, with protesters outside parliament throwing stones and petrol bombs'. (From http://www.bbc.co.uk/news/world-europe-17007761)
Jeff
'A eurozone government source has reportedly told Dow Jones that both a troika presence and an escrow account is needed in Greece before a bail-out can proceed. An escrow account would ensure Greece gives priority to debt servicing.'
From http://www.telegraph.co.uk/finance/debt ... -live.html
I hope for the Greece's sake that they don't agree to this.
If Greek tax revenue goes into an escrow account (presumably controlled outside of its borders), then Greece are playing with fire. For example, what if Greece makes noises about leaving the Euro, and the bondholders obtain a court order to freeze the account, as a precautionary measure?
Jeff
From http://www.telegraph.co.uk/finance/debt ... -live.html
I hope for the Greece's sake that they don't agree to this.
If Greek tax revenue goes into an escrow account (presumably controlled outside of its borders), then Greece are playing with fire. For example, what if Greece makes noises about leaving the Euro, and the bondholders obtain a court order to freeze the account, as a precautionary measure?
Jeff