Default by Greece Inevitable - Update : Heave to Oust Greece From the Eurozone

[Cassandra Syndrome]

Apologies for the source here, but they are the only ones breaking this news.

The eurozone has agreed a multibillion-euro bailout for Greece as part of a package to shore up the single currency after weeks of crisis, the Guardian has learnt.

Senior sources in Brussels said that Berlin had bowed to the bailout agreement despite huge resistance in Germany and that the finance ministers of the "eurozone" – the 16 member states including Greece who use the euro – are to finalise the rescue package on Monday. The single currency's rulebook will also be rewritten to enforce greater fiscal discipline among members.

The member states have agreed on "co-ordinated bilateral contributions" in the form of loans or loan guarantees to Greece if Athens finds itself unable to refinance its soaring debt and requests help from the EU, a senior European commission official said.

Other sources said the aid could rise to €25bn (£22.6bn), although it is estimated in European capitals that Greece could need up to €55bn by the end of the year.

Germany, the EU's traditional paymaster, but the most reluctant to come to the rescue of a fiscal delinquent in the current crisis, has played the pivotal role in organising the rescue package, the sources added.

"There have been quite intensive preparations under the eurogroup. We have the ways and means to do it," said the senior official, asking not to be named because of the subject's sensitivity.

"It will be a co-ordinated approach of bilateral contributions [between EU governments] … A bilateral contribution can be a loan or a loan guarantee. The guarantees will facilitate the kind of funds potentially needed in this context."

The rules governing the operation of the single currency proscribe a bailout for a country on the brink of insolvency. Berlin, in particular, has been worried that any bailout of Greece could be challenged in its constitutional court.

http://www.guardian.co.uk/world/2010...greece-bailout

[C. Flower]

The amount is just a little less than Anglo Irish Banks NAMAised losses.

[mutley]

Seems like the bankers won then?

http://mrzine.monthlyreview.org/2010...iou120310.html

"Germany will not give a cent to Greece," declared German Economy Minister Rainer Brüderle, a member of the liberal-democratic FDP, which is part of the coalition government with Merkel's CDU. The FDP liberals and the CSU Bavarians are fiercely opposed to saving Greece. They are waging a campaign to get the Greek government to put its fiscal house in order and make workers pay the entire bill for that through austerity measures. On the other hand, others want to prevent the Greek government from defaulting at all costs; among them are a good number of European bankers who have massively lent to Greece and would again find themselves in a very tight spot if the country didn't pay its debts. That's what explains the Deutsche Bank boss's visit to Athens in late February, with the aim of negotiating with the Greek government for possible German support.

[C. Flower]

We are all to be sacrificed on the altar of the mirthless and bloodthirsty god Systemikbank

[Xray]

Well the only way to read this is that political union will have to follow. If the stronger countries are taking one for the team here I think they can right demand control over the future way we regulated our economies and raise taxes. If I were a German tax payer you had lived within my means it would take a very long time to explain to me why i should help Ireland have a lower tax rate than Germany now.

Single currency = single economy

I always thought that, and actually think it would be a good think or could be a good think. I know many others don't. I think all taxes should be identical across the eurozone except local taxes. If not leave the currency.

[Cassandra Syndrome]

Details are sketchy. Yesterday's auction had only 1.3 bid to cover ratio this one was less than 1.

Greece reissued on Tuesday a 20- year state bond in an urgent auction which lasted just a few hours, and closed with a total of 390 million euros (about 525.8 million U.S. dollars) raised at an interest rate of 5.9 percent.

The amount gathered by the Greek Organization of Public Debt Management is much less than the target set this time. The organization sought one billion euros initially.

The development enforces the skepticism expressed by some analysts considering the short-term prospects of the Greek economy, which contradicts the government's optimism that the situation regarding the country's lending conditions in international markets in a first step will improve soon.

The latest developments in the Greek economy after the agreement of the EU leaders in Brussels last week for the support of Athens were discussed on Tuesday noon between Greek Prime Minister George Papandreou and the Bank of Greece Governor George Provopoulos.

No statements were made to the press by this time, but the government pointed to Finance Minister George Papaconstantinou who stressed that the messages Athens received from international markets since last week are positive.

Papaconstantinou added that the news will get better and better, once Greece implements fully and within the timetable the measures included in the Stability and Growth Program approved by Brussels.

Tuesday's issue of the 20-year bond follows the launch of a new 7-year bond on Monday which was characterized positive by Athens, as it resulted in 5 billion euros at an interest rate of 5.9 percent. It is high according to European standards, but it is lower than the interest rate debt-ridden Greece got the previous time this year. On Tuesday Greece offered the 7-year bond issue to private savers also.

So far this year Greece has already borrowed 23.6 billion euros, can easily meet its financing needs for April and the government is expected to make decisions on the next steps after the following weekend's Easter holidays. (1 euro = 1.3482 U.S. dollars)

http://news.xinhuanet.com/english201...c_13231364.htm

[Xray]

no wonder =
http://news.theage.com.au/breaking-n...0331-rbu9.html

[C. Flower]

I'm going to merge some of the shorter Greek threads so the information is gathered together.

[jimmymalone]

What does a failed bond auction mean? What are the consequences?

[C. Flower]

What does a failed bond auction mean? What are the consequences?

It is essentially a "promise to pay" - State borrowings.

Greece needs this money to pay its bills - public services, hospitals, schools, public sector wages and other day to day costs.

[cheal]

What does a failed bond auction mean? What are the consequences?

bankruptcy. They sell the IOU's to pay the bills. If they can no longer borrow, they can no longer sustain themselves as a country and thus will have to default on it's debt.

[jimmymalone]

Surely this is good news for the Greeks. Why can't some of our bond auctions fail? It would help us to face up to the problems a lot easier

[C. Flower]

Surely this is good news for the Greeks. Why can't some of our bond auctions fail? It would help us to face up to the problems a lot easier

The whole public service would go unpaid. Rubbish would not be collected and hospitals would close. That would certainly pull us up sharply.

Russia, even after IMF loans, went through an experience in which many public servants weren't paid for months or were only paid a fraction of their salary.

Youngdan has been trying to explain this to people, in his rather grouchy style, for a long time.

[youngdan]

If a bond auction fails it means that there was not enough people willing to lend as there was the amount that the borrower wishs to borrow.

It does not mean that a country has defaulted. That is when a country does not repay the money owed.

A country can decide to default or it can be forced to default when it has no cash when a bond matures and needs to be paid off.

So Ireland does not have to repay a big bond till Nov 2011. If it has a failed auction before then it could just balance it's budget with cutbacks of 20 billion a year or so.

If an auction is about to fail, the government can reduce the amount it borrows(this is the amount of bonds it sells)

What is important for the government is the amount it is lent but also the interesr rate.

It does not pay the same interest rate to each buyer. The highest bidders get the lowesr rate and the lowest bidders get the highest rate. Tho total cost to the government is the average rate multiplied by the total amount.

The problem with an auction with not enough buyers is that the bids get lower and lower which means these investors are getting deals.

The government can opt not to accept bids lower than a certain price. That is they refuse to pay a higher interest rate.


If the government is prepared to pay a high interesr rate then more bargain hunters will come and bid


Anyone that wants an indepth but easily understood explaination can read whatI wrote on my own site which mainly deals with money here.

http://www.realirishpolitics.org/hom...d-market-works



Or Cactus can post it to a new thread or an existing thread if she wishs

[Xray]

Surely this is good news for the Greeks. Why can't some of our bond auctions fail? It would help us to face up to the problems a lot easier

Ahahahaha, I will be facing up to the problem of getting a visa to Australia if I am not paid my wages. There would not be a sinner in the country six months after that happened. You can face it yourself.

I am not running a charity here. If we did not have the readies to run the country, you have chaos, riots, no water, power, petrol, schools, hospitals, dole. Nothing.