Friday, March 23, 2012

The Greek private sector can derail the European agreement?

If one agrees to consider that the exchange "voluntary" 206 billion euros of private sector bonds into new bonds to meet with thirty years of acceptance from 75 to 80%, 10-15% of the issue necessary to achieve the 90% level for the operation announced a new dimension. It would appear, according to the Financial Times that the Greek pension funds and funds of the unions would pray. However, they have a thirty billion of Greek sovereign bonds, such as the 15% needed to achieve 90% or more.
You read: while holders of Greek sovereign bonds across Europe and the world are preparing for bleeding, it is the Greek investors who would be choosy.

Greek banks will benefit from a recapitalization enabling them to bear the burden of conversion: their holdings of Greek debt are estimated at 50 billion euros.

Mr. Venizelos, Greek Minister of Finance, continues to be optimistic, but it does not have much ammunition. One of them is the so-called conventions of collective action (CPA): each bond contains provisions organizing the way to approve changes to the terms of the bonds during the life thereof. Greece, as an issuer, a way to activate its provisions by proposing changes or mandatory conversion of bonds. Y is she forced?

Evangelos (in Greek, the announcer of good news!) Venizelos made it clear he hoped almost unanimous agreement that "it is absurd to think that there might be a second offer."

But he will have to use its political weight and the threat while there is still time. Indeed, while the Greek sovereign bonds are subject to the law and courts Hellenic, the new loan to 30 years will be subject to the law and British courts. Bondholders have made for their participation.

Use the ACC is, however dangerous. This would be equivalent to the use of nuclear weapons: its explosion would indeed dramatic consequences far beyond Greece. This is the entire financing of the European countries that would lose its credibility and investor confidence, and this move could derail the remarkable improvement of Italian and Spanish debt in recent weeks.

The use of the ACC move renders the "selective default" in an outright default? It is doubtful that the rating agencies can be satisfied with the current Greek notes if coercive measures of one kind or another were used.

The Greek government has a few hours to force the Greek investors to return "voluntarily" in the ranks. Whatever eventually it will use the weapon, the slippage of the transaction including the private sector gave birth with forceps can only come from private investors Greek.

This is even worse than the first victims of this failure would be the Greek workers. It would be almost suicidal.

Athens is to the wall: hope this is not the Wailing Wall. The IMF estimate of a loss of around 1,000 billion euros in case of default Greek is there to remind us that the contagion effect will be enormous: it is not certain that it could be content.


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