Has the Eurozone crisis been solved ?

[FJV]

Not that a single currency stopped the Yugoslavs from fighting, though.

[Doktor]

Not that a single currency stopped the Yugoslavs from fighting, though.

Hey we had common railways, post offices, police, army, foreign policy, bank system, border controls... for over 70 years.

[Mihais]

Ohh,shut up.You're some Neanderthalians from the Balkans,you have no idea how the civilized Europeans solve things.

[Doktor]

Ohh,shut up.You're some Neanderthalians from the Balkans,you have no idea how the civilized Europeans solve things.

Hope they haven't learned anything from our break up

[snapper]

We 'civilised' Europeans always have the same answer to stopping and starting war: dictatorship The Illustrated Road to Serfdom

"Authorities in Athens are ready to enforce the controversial collective action clauses, or CACs, to impose the restructuring deal on all bondholders as the number of voluntary agreements look set to fall short of the required amount." http://www.telegraph.co.uk/finance/f...t-to-fail.html

These 'CACs' are essentialy when a debtor (Greece in this case) say 'enough trying to argue what percentage of what I owe you I shall repay; now I'm going to tell you. Now I can't pay you back everything so take 25% and think yourself lucky'. This, in other words, is a default and would trigger credit default insurance by the International Swaps and Derivatives Association’s Determinations Committee. The ECB has already said that it will no longer accept Greek bonds as security and Greece's only line of money would be the bail out and ECB 'Emergency Liquidity Assistance'.

How much more farcical is this going to get. They could have put Greece on the 'Emergency Liquidity Assistance' from the start and just printed enough money to tide them over...

[snapper]

Spanish Rebellion

So they signed the 'fiscal compact' treaty... last Friday (of course it still has to be ratified and may face a referendum in Ireland). Basicly this yet another attempt to limit national spending; Swedish Prime Minister Frederik Reinfeldt is quoted as saying: "The first thing that we do after the new rules (on budget stability) should not be to relax them."

Sure about that? The Spanish then immeadiately announced their intention to ignore these new rules. Spain announced its own target for the this years deficit of 5.8% (of GDP) instead of the EU deficit target of 4.4%. Prime Minister Mr Rajoy says this is a 'sovereign decision'. Spain says that despite ignoring this years target it will make the EU public deficit goal of 3% of GDP in 2013. So Spain could now in theory be.... fined!

"The gambit will force the EU to decide whether to punish Spain for missing the initial target. Earlier, Monetary Affairs Commissioner Olli Rehn's spokesman said that the 2011 slippage amounted to a "serious, grave" budgetary deviation." European Commission warns Spain deficit slippage is 'serious' and 'grave' - Telegraph

Of course fining Spain is the another colossal contradiction in itself. A: "I can't pay my debts"
Judge: "You're fined!"

Euripides said that those whom the Gods wish to destroy they first make mad....

At least some of the Spanish press are fully supportive; Rajoy desafía a Merkel en defensa de España- Pablo Sebastián | Republica.com

Some rough translations:

"Spain isn’t any old country that will allow itself to be humiliated by the German Chancellor."

"The behaviour of the European Commission towards Spain over recent days has been infamous and exceeds their treaty powers… these Eurocrats think they are the owners and masters of Spain."

"Spain and other nations in the EU are sick and tired of Chancellor Merkel’s meddling and Germany’s usurpation – with the help of Sarkozy’s France and their pretended "executive presidency" that does not in fact exist in EU treaties."

"Rajoy must not retreat one inch. The stakes are high and the country is in no mood to suffer humiliations from a Chancellor who is amassing all the savings of Europe and won’t listen to anybody, as if she were the absolute ruler of the Union. Merkel and the Commission should think hard before putting their hand into the sovereignty of this country – or any other – because it will be burned."

So much for fiscal compacts...

[snapper]

Deadline is passed for Greek credit swap is up (20.00 GMT). It is said that the 'haircut' was accepted by around 90% of creditors. Of course the rules say 95% are required so expect more rule bending and lies next. "90% may as well be 95%...", "we can make an exception" etc etc In 2 or 3 weeks we shall find out that the real level of acceptance was nearer 65-70% as informed sources I know have said.

Latest info is that around 85% after the CACs level of 66% was activated. In theory activating Collective Action Clauses = default. Now lets see why this isn't the case this time...

"The International Swaps and Derivatives Association (ISDA) is poised to convene again to decide if the vast restructuring amounts to a "credit event" that should trigger billions of euros of credit default insurance." http://www.telegraph.co.uk/finance/f...d-default.html

[snapper]

So the ISDA has ruled that a 'credit event' has occured:

"EMEA DC Statement
March 9, 2012

In light of today's EMEA Determinations Committee (the EMEA DC) unanimous decision in respect of the
potential Credit Event question relating to The Hellenic Republic (DC Issue 2012030901), the EMEA DC
has agreed to publish the following statement:

The EMEA DC resolved that a Restructuring Credit Event has occurred under Section 4.7 of the ISDA
2003 Credit Derivatives Definitions (as amended by the July 2009 Supplement) (the 2003 Definitions)
following the exercise by The Hellenic Republic of collective action clauses to amend the terms of Greek
law governed bonds issued by The Hellenic Republic (the Affected Bonds) such that the right of all
holders of the Affected Bonds to receive payments has been reduced.

The EMEA DC has resolved to hold an auction with respect to the settlement of standard credit default
swaps for which The Hellenic Republic is the reference entity. To maximise the range of obligations that
market participants may deliver in settlement of any such credit default swaps, the EMEA DC has agreed
to run an expedited auction process such that the auction itself will take place on March 19, 2012. In
light of this expedited auction process, market participants should submit any obligations that they
would like to include on the list of deliverable obligations to ISDA as soon as possible."

Thus the credit default insurances are triggered but this is estimated to cost 'around €3.5bn'.

Fitch credit rating agency has set Greece to 'restrictive default' as it had previously said that Greece's bond exchange "would constitute a sovereign default event".

Monsieur Sarkozy however believes the Greek problem is now 'solved'.

We are about to enter a discussion on what constitutes a 'default'. Naturaly Merkozy & Co will want to say everything is tickety boo ('solved') etc and the rest of the world will say it's a default, an event we were told would never happen;

Then-ECB Jean-Claude Trichet in April 2010: "I've always said publicly that (a Greek) default is out of the question."
Economic and Monetary Affairs Commissioner Olli Rehn in April 2010: "There will be no (Greek) default."

Of course they cannot be wrong and IF it is admitted that this was a default confidence in other Euro denominated bonds will lost; why can't Portugal and Spain do the same? So we are likely to see the Eurocrats and Merkozy etc arguing with the credit rating agencies and probably set up their own 'European credit rating agency', because when you don't like what the weather forecaster is saying you get a new forecaster. This passes for 'policy' in Brussels.

Of course one group who know they have been (literaly) shortchanged are the private holders of Greek bonds who were forced to accept the estimated 70-75% devaluation of their holdings. The Collective Action Clauses (CACs) were introduced retrospectively into Greek law and many of these bonds are held under international or Swiss law. Swiss law forbids this sort of retrospective action:

"The rule of law has been treated with contempt," said Marc Ostwald from Monument Securities. "This will lead to litigation for the next ten years. It has become a massive impediment for long-term investors, and people will now be very wary about Portugal." (Legal skull-duggery in Greece may doom Portugal - Telegraph)

So the Greeks now have aprox 107bn euros less debt most of which was owed to European banks (who have already been massively refinanced by the ECB). They will now get the bailout money presumably (130bn euros) and be able to pay the 14.5bn euros due on the 20th March. Of course if they had NOT been able to pay the 14.5bn euros this would have been a default...

So lets make this clear; Greece defaulted to aviod a default. 107bn euros of Greek debt are written off so they can accept another 130bn euros of debts. 'Solved'?

[cyppok]

I think the point of these bailouts is not the debt per se but the cash flow cycle that is circulating to "simulate" credit actions which are simply not occuring. Ergo the system as a whole and most countries and governments are on the brink of insolvency, printing money to cycle through does not negate it but only postpones it by attempting to devalue the currency at large. The sad fact is moving around electronic ones and zeroes on bank balances do not create of improve economic activity and productivity the ultimate ends and means of improved livelihoods for most people.

Overall the focus on these meaningless numbers shows how far the system is diverging from its' actual goals (improved economic activity within and without the eurozone). Once something does not perform the function which benefits others in a market it is usually replaced weather it wants to or not. The reality is very bleak and thus forces people to act and shift their economic activity from one currency or commodity to another one that is not insolvent or manipulated to a lower degree.