Saturday 8 December 2012

Greek bond buy back broadly succeeds

Athens announced the above today. It was just sufficient to keep the IMF on board so I guess a few arms were twisted as it was privately held bonds that were tendered which includes Greek pension funds, a case of robbing Stellios to pay Stellios you might say. The price was set by what price gave the hedge funds a decent profit. They had bought the bonds when they were junk rated and yielding 25% or so. The hedgies exited with a nice profit but the Greek pension funds took a big hit.

There will be a formal announcement on Monday confirm bonds with a total face value of 30 bn € were bought in for 10 bn€ ie a write down of 65%. IMF funds were being witheld until this deal was done.

Athens has received 148.6 billion euros in EU/IMF funds since May 2010. It stands to get almost 90 billion euros more by the end of 2014.

It will all go the same way. Its called chucking good money after bad. The Greeks have paid a terrible price. Their economy has shrunk by 24% in the last 5 years and unemployment is nearing 30%.

Greek banks also tendered their bonds but then they will receive the EU/IMF funds so it was naked self interest on their part.

The can will roll on and on down the road to Euro exit.

3 comments:

ALAN WOOD said...

Hello Eric,
Am I right in thinking that this awful situation for all countries running big debts is that they have borrowed too much money and spent it on INTERNAL CONSUMPTION.
Such things as bureaucracy, public services, unemployed people, public pensions, education, health services, armed forces & infrastructure.
Funds for all these services come from taxes on the same people, plus business taxes.
Surely the solution to the whole problem is to provide employment such as to improve the country's external trade by having UK-owned businesses who will provide huge tax revenues and cut unemployment.
In my view it is this much-vaunted "globalisation" which has caused much of the problem because employment can be outsourced to countries with cheap labour. On top of that the global/non-UK companies trading here (Google)can reduce their tax paid to the UK Treasury.
I do not see a ready solution to this problem as reversing the tide of the past 40 years since joining the EEC, and stopping the influence of the USA-dominated WTO, are major hurdles.
Austerity only stems the costs of internal consumption. "Growth" from internal infrastructure projects only uses more tax money and actually adds to the problem.
Building up home-based industries earning large revenues takes years and cannot compete on a level playing field - with Asian labour costs so low.
The future for western countries with few natural carbon energy resources like oil, gas, coal or shale gas is bleak. Paying off their debts is reaching impossible proportions, as in Greece.
The GREEN lobby is effectively shackling our ability to survive economically by stifling use of fossil fuels but we cannot suddenly revert to a natural/agricultural economy.
With the shackles of the EU and the WTO they cannot compete with Asian labour costs and must sink lower.
The greater problem is population in UK and around the world. Who is trying to deal with the situation whereby population growth will exceed the ability of the planet to supply even their basic needs as in parts of Africa?

Getting this debate aired is a starting point. How do we do that ?

Am I on the right track ?

Eric Edmond said...

Yes, you have mentioned a lot of issues the political elite will not touch like overpopulation in Africa. This will be discussed in the civil service behind closed doors. The Civil Service 'solution' to the Northern Ireland trobles was to keep the lid on things until the Catholic minority had out-bred the Protestant majority and the problem will resolve itself.

The problem for the mandarins is that the Islamic community in the UK and other EU countries has adopted the same approach and is outbreeding the native idigenous population by more than 2 to 1 financed in part by our very generous child benefits.

The problem crippling the EU is lack of internal demand plus much of the Latin bloc are uncompetitive on costs with bloated public sectors. They need to get public spending down to 42% or so of GDP but with no demand for private sector goods like cars the private sector cannot fill the gap. Merkel had the right idea with her post Lehman scrappage allowance for cars. Just like Aladdin, new cars for old gets the genie out of the bottle.

I have a big doggy problem which occupies a lot of my time and energy just now.

Eric Edmond said...

Yes, you have mentioned a lot of issues the political elite will not touch like overpopulation in Africa. This will be discussed in the civil service behind closed doors. The Civil Service 'solution' to the Northern Ireland trobles was to keep the lid on things until the Catholic minority had out-bred the Protestant majority and the problem will resolve itself.

The problem for the mandarins is that the Islamic community in the UK and other EU countries has adopted the same approach and is outbreeding the native idigenous population by more than 2 to 1 financed in part by our very generous child benefits.

The problem crippling the EU is lack of internal demand plus much of the Latin bloc are uncompetitive on costs with bloated public sectors. They need to get public spending down to 42% or so of GDP but with no demand for private sector goods like cars the private sector cannot fill the gap. Merkel had the right idea with her post Lehman scrappage allowance for cars. Just like Aladdin, new cars for old gets the genie out of the bottle.

I have a big doggy problem which occupies a lot of my time and energy just now.