Friday, June 10, 2011


Increasing rate of bad news for the Euro area and its wayward peripheral members. It seems unrest is unavoidable at this point unless major, "unprecedented" (read: the ECB capitulates and starts writing checks) measures are taken quickly.

This is unlikely. This is only slightly different than bank behavior during our own financial crisis. The players are at the table, poker faces on.

(from "Canadian Business")
The macroeconomic challenges facing the world are not looking any prettier after the leak of an official analysis of sovereign debt issues in the European Union and a renewed bearish call on U.S. municipal bonds by star market watcher Meredith Whitney.
A year ago, the International Monetary Fund and the European Union cobbled together a US$161 billion bailout package for Greece on the assumption that the troubled nation—which can't pay its bills or debts—would be able to rely on capital markets to finance itself in 2012. But that is now seen as highly unlikely, according to an alarming new report by the EU, IMF and European Central Bank obtained by SPIEGEL ONLINE.
Greece’s so-called troika of saviors has concluded that reform measures have come to a screeching halt, which means the nation's financial needs will not be supported by private sector loans anytime soon and will therefore need a new bailout. And that’s a major new hiccup because European taxpayers are tired of paying for bad bets on the nation's debt issues made by international bankers and other Greek bondholders. And IMF’s statutes do not allow the institutional lender of last resort to offfer financial aid to nations that are not deemed able to meet payment obligations within 12 months.
If a debt default takes place in Greece—where GDP grew at 0.2% in the first quarter, as unemployment jumped above 16% and investment plunged almost 20%—another global credit freeze could take hold as fallout reaches far and wide. As Business Insider notes, French and German banks hold US$18.8 billion and US$26.3 billion worth of Greek debt respectively, while British banks have US$3.3 billion at stake. In the U.S., the exposure is US$1.8 billion.

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