Loans and Finance
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Tuesday, February 21, 2012
Greek Problem Sorted - LOL!
Some of the media are happily pumping the Eurozone line that the Greek problem is sorted, and that now the second bailout of Euro130BN has been agreed (after a marathon 13 hour session of finance ministers) we can all move on.
Not quite, aside from the fact that the Greek economy is sunk and that borrowing money to pay off debt will not resolve this problem; the private bondholders (sans ECB, which protected itself by sleight of hand last week) will have to take a NPV haircut of 74%.
Institute for International Finance (IIF) crisis resolution official Jean Lemierre was only told of the size of the haircut this morning.
The "party line" is that the creditors will voluntarily accept his haircut. The reality is that there will be a few who refuse to have their "assets" further written down, as such Greece will have to enforce the Collective Action Clauses (CAC) and force the recalcitrant bondholders to accept the 74% haircut (this of course is a default event).
Aside form that, all Greece has to do is to reduce its debt from 160%to 120.5% of GDP in 2020.
"Easy"!!!!
LOL!
This is not over, by any stretch of the imagination.
Here is the Sustainability Analysis by the Troika dated 15 February (as you can see, this will not work).
Greek Sustainability Proposal
Not quite, aside from the fact that the Greek economy is sunk and that borrowing money to pay off debt will not resolve this problem; the private bondholders (sans ECB, which protected itself by sleight of hand last week) will have to take a NPV haircut of 74%.
Institute for International Finance (IIF) crisis resolution official Jean Lemierre was only told of the size of the haircut this morning.
The "party line" is that the creditors will voluntarily accept his haircut. The reality is that there will be a few who refuse to have their "assets" further written down, as such Greece will have to enforce the Collective Action Clauses (CAC) and force the recalcitrant bondholders to accept the 74% haircut (this of course is a default event).
Aside form that, all Greece has to do is to reduce its debt from 160%to 120.5% of GDP in 2020.
"Easy"!!!!
LOL!
This is not over, by any stretch of the imagination.
Here is the Sustainability Analysis by the Troika dated 15 February (as you can see, this will not work).
Greek Sustainability Proposal
Monday, February 20, 2012
Greece Agrees To Escrow
The media report that Greece has agreed to an escrow account, whereby bailout funds will be deposited and distributed as and when Greece honours its part of the bailout deal; the escrow account formally subordinates national funding needs to those of creditors.
Government Waive VAT on Military Wives’ Charity Single
HMT have announced the following:
"The Chancellor of the Exchequer, George Osborne, has today announced that the Government will waive VAT on sales of the Military Wives choir’s Christmas single by making an exceptional one-off charitable donation to the Royal British Legion, and Soldiers, Sailors, Airmen and Families Association (SSAFA), the charities chosen to benefit from sales of the song. The donation will be equivalent to the sum of the VAT receipts collected on sales.
Recognising the service of the armed forces and the high levels of public support for the single, as well as the exceptional contribution both charities make through their work with members of the forces and their families, George Osborne and Defence Secretary Philip Hammond want to maximise the donation that the charity receives by adding the VAT equivalent.
George Osborne said:
“Our armed forces demonstrate incredible commitment to the nation and make sacrifices for all of us. The Military Wives choir is doing a great job of raising money for this hugely worthy cause. We will donate the tax collected on the single so that as much as possible of the money spent by the public on this fantastic song goes to charities helping our armed forces and their families this Christmas.”
Philip Hammond said:
“Christmas can be a particularly difficult time for our brave service personnel deployed on operations, but also for their families at home. I am delighted to be supporting the Military Wives choir in this initiative, who in turn are supporting our Armed Forces community.”
Notes for Editors
The fundraising song (Wherever You Are) is performed by
the Military Wives choir. All net record proceeds are going to the
Royal British Legion and SSAFA. For more information, visit http://www.whereveryouare.co.uk/.
The donation will be equivalent to the sum of the VAT
receipts collected on sales before the 31 January 2012 and will be
funded by HM Treasury.
Update - On 19 February 2012 the Government announced that
the sales deadline of 31 January would be extended to 31 March 2012 in
recognition of the fact that the single’s Brit award nomination is
likely to result in additional sales.
"The Chancellor of the Exchequer, George Osborne, has today announced that the Government will waive VAT on sales of the Military Wives choir’s Christmas single by making an exceptional one-off charitable donation to the Royal British Legion, and Soldiers, Sailors, Airmen and Families Association (SSAFA), the charities chosen to benefit from sales of the song. The donation will be equivalent to the sum of the VAT receipts collected on sales.
Recognising the service of the armed forces and the high levels of public support for the single, as well as the exceptional contribution both charities make through their work with members of the forces and their families, George Osborne and Defence Secretary Philip Hammond want to maximise the donation that the charity receives by adding the VAT equivalent.
George Osborne said:
“Our armed forces demonstrate incredible commitment to the nation and make sacrifices for all of us. The Military Wives choir is doing a great job of raising money for this hugely worthy cause. We will donate the tax collected on the single so that as much as possible of the money spent by the public on this fantastic song goes to charities helping our armed forces and their families this Christmas.”
Philip Hammond said:
“Christmas can be a particularly difficult time for our brave service personnel deployed on operations, but also for their families at home. I am delighted to be supporting the Military Wives choir in this initiative, who in turn are supporting our Armed Forces community.”
Notes for Editors
D Day For Greece?
Today, according to the media, is "D Day" (Decision Day) on the second Greek bailout.
Most in the mainstream media, egged on by spin and hype from the usual suspects in the Eurozone, are predicting that the bailout will be agreed and that the Euro130BN will be handed over to Greece without further ado.
However, scratch beneath the surface and the picture isn't quite so rosy.
In the event that the deal is agreed today, acceptance by Greece of the terms of the deal will in effect mean that it has defaulted.
For why?
The ECB has done a better deal for itself than other bondholders, and those that hold out against this subordination will be forced to take a 70% haircut (the is a default event, by any definition of the word).
Additionally, to add to Greece's woes, the Eurozone finance ministers (ever reluctant to trust Greece) are looking into setting up an escrow account which will be used to pay the bailout in tranches (if and when Greece honours its side of the deal).
Finally, in a comment not yet picked up by some in the media, Finland has said the deal will not be approved until 12 March.
Deal done?
No!
Most in the mainstream media, egged on by spin and hype from the usual suspects in the Eurozone, are predicting that the bailout will be agreed and that the Euro130BN will be handed over to Greece without further ado.
However, scratch beneath the surface and the picture isn't quite so rosy.
In the event that the deal is agreed today, acceptance by Greece of the terms of the deal will in effect mean that it has defaulted.
For why?
The ECB has done a better deal for itself than other bondholders, and those that hold out against this subordination will be forced to take a 70% haircut (the is a default event, by any definition of the word).
Additionally, to add to Greece's woes, the Eurozone finance ministers (ever reluctant to trust Greece) are looking into setting up an escrow account which will be used to pay the bailout in tranches (if and when Greece honours its side of the deal).
Finally, in a comment not yet picked up by some in the media, Finland has said the deal will not be approved until 12 March.
Deal done?
No!
Saturday, February 18, 2012
Friday, February 17, 2012
Zen Like Calm
A mood of "Zen like calm" appears to have settled upon the Greek bailout crisis. Ahead of Monday's Eurozone vote on the second bailout, the media reports that finance ministers apparently will approve the deal.
This despite the fact that Greece's public debt will fall to 129% of GDP The target set by the Troika being 120%).
As to whether this mood of calm continues to pervade during the weekend and on Monday; we shall see, this may just be the calm before the storm.
This despite the fact that Greece's public debt will fall to 129% of GDP The target set by the Troika being 120%).
As to whether this mood of calm continues to pervade during the weekend and on Monday; we shall see, this may just be the calm before the storm.
Thursday, February 16, 2012
Greece Bailout Decision Delayed - Again!
Unsurprisingly, amid the increasingly tetchy "diplomatic" brickbats being lobbed between Greece and the Eurozone, yesterday's three-hour teleconference between Eurozone
finance ministers did not resolve the issues
regarding the second bailout.
The decision on whether to grant a second bailout (pre or post election, or even at all) has been postponed to at least Monday next week, pending further clarification from Greece as to how they will implement the austerity package and the timetable for doing so.
Don't hold your breath!
The decision on whether to grant a second bailout (pre or post election, or even at all) has been postponed to at least Monday next week, pending further clarification from Greece as to how they will implement the austerity package and the timetable for doing so.
Don't hold your breath!
Wednesday, February 15, 2012
Playing Politics With People's Lives II
Earlier today I wrote the following:
"Samaras, continuing to play politics for the benefit of the domestic audience, will (if his spokesman is to be believed) sign and send the commitment within 24 hours.
Playing politics may be all very well sometimes, unfortunately in this particular case he and others are playing politics with people's lives ."
Unfortunately it is not just Greek politicians who play politics, but Greece's paymasters in the Eurozone.
It appears, according to leaks emanating from the Eurozone bunker, that today's finance ministers' teleconference will discuss delaying the Greek bailout until after the results of the April election.
Although a bridging loan will probably be provided, ministers intend to withhold the full bailout until Greece votes in favour of austerity.
This of course is naked political blackmailing of a sovereign state by an unelected body, ie dictatorship by the back door.
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