SocGen Sums It Up: “The Time For Patching It Up Is Over”!
- Let’s hear what the professional really think about the Greek situation and not the propaganda on the MSM !
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SocGen Sums It Up: “The Time For Patching It Up Is Over”!
by Tyler Durden, http://www.zerohedge.com/
While next to impossible, now may be a good time to ignore the constant barrage of meaningless noise and flashing red headlines, which not only are contradictory but prove that Europe is literally making it all up as it goes along.
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Today is a great case in point of a tangential detour which does nothing to change the reality that Germany no longer wants Greece in the Eurozone (remember, oh, yesterday), and that the ECB is merely playing possum with PSI creditors who will block the deal with even greater vigor than before (anyone recall the FT story about the PSI deal being on the verge of collapse not due to the ECB but due to private creditors?) as the ECB’s even bigger subordination will simply make the amount of hold outs even greater. So while algos take the required 12-48 hours to figure out what just happened today, here is SocGen’s Suki Mann stepping back from the endless daily din, and summarizing what is really happening in Europe. From SocGen:
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The time for patching it up is over; Greece looks as if it can no longer stop the seams from falling apart. Restructuring (an economy) in a low (negative) growth environment simply does not work. The prescribed medicine (austerity) has failed; debt forgiveness (PSI) can’t be agreed; and we are heading for debt default. The iterative process which defines the political response on these occasions has been unsuccessful, but the time for reflection will come later. It’s been a tumultuous two years. The immediate investment case now focuses on contagion and its containment. Now we ask whether we’re really better placed to handle a default – whatever form it takes? Orderly/disorderly, much of the corporate credit universe should come through relatively unscathed, but risk asset pricing will be impacted nonetheless. Technicals of sidelined cash and an opening New Year frenzy have got us here, boosted by ECB manipulation of peripheral risk (sovereign and bank) through the LTRO. However, nearing the end game of the Greek situation now sees us with a different reality. Spreads are moving wider, the periphery is suffering the most, while turnover and secondary market liquidity have fallen off a cliff as evidenced through widening bid-offer spreads. It’s not quite the November phenomenon, because then we had massive selling of French risk in particular, so as long as investors stay with it, the widening should be contained. As ever, we’ll be fighting against the market’s mantra over the past two years, which has been to shoot first and ask questions later.
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And nowhere is this mantra more visible than in today’s… actually make that everyday’s EURUSD, and thus ES (thank you 100% recoupling between Euro and US risk) chart.
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An excellent report.
Please spend some time to read this breifing note which was written for my English speaking friends, who have no detailed professional knowledge and understanding of the background and implications of the Greek and European crisis. I feel it is important to let this public become aware of the situation in simple words , as they will have to play a role, at some stage.
My comment was also posted on Facebook and on my Blog http://timesforchange.wordpress.com
Any comments or advice will be appreciated.
Greece and Europe are holding their breath over the risk for the country to default.
Greece has been negotiating with EU and IMF for a European loan (250 billion €) to help the country get out of a very difficult financial position.
The negotiations for the necessary austerity measures that have to be introduced were negotiated with the “Troika” which represents IMF the EU and the Central European Bank.
As negotiations were progressing and the first two phases of the plan were barely implemented it became evident that pure austerity measures were not adequate to help Greece come out of such difficult situation.
It became obvious that there was a need to introduce some additional measures to set a development cycle moving, these measures have not yet been introduced.
The pressure exercised to Greek public while, at the same time, the plan failed to produce some early results, created serious doubts if the method applied was based on the right mix.
This had the effects of a violent reaction from the Greek public with serious anti European spirit on one hand while on the other hand skepticism was created within some North Europeans if the Greek debt was sustainable and worth the effort to bail out.
The situation deteriorated lately because of continuous postponements of the “Euro group” meetings and statements of the German Minister of Finance Mr Soibler and others expressing additional requirements in spite the positive approval of the plan agreed with Troika, by the Greek Parliament by a majority of two thirds.
Especially, Greece was unhappy with requests that Germany, Finland and Holland were bringing forward, that superseded constitutional and basic democratic principles, such as the timing of elections, individual written commitments of leaders of the parties supporting the current government and recently, almost last minute, added commitments from leaders of the opposition parties that are still maintaining a pro European profile.
Other behaviors, that appear suspicious to the Greek public include the rejection, on part of Germany, of cost reductions that include defense and pharmaceutical products.
It became too obvious that there is a conflict of interest, considering that the main suppliers of such products were German companies.
Let us not forget, at the same time, that some of the bigger infrastructure projects funded by EU ended up in the purchase of German equipment, traffic control, Tax system TAXIS. Athens METRO, submarines and many more. Purchases that were made not always under the most clean conditions.
Suspicion is increased even further from statements much earlier but not forgotten such as: “Go bankrupt if you want our help!! “ “Sell some of your islands!!!” Both statements made by Mrs Merkel.
Hence, two schools of thought were generated here in Greece that are shared in Europe as well.
One school of thought supported from some Northern European countries and others, they are betting their money expecting bankruptcy in Greece and some other that believe that Greece(which is currently the weaker member within the bigger players of the international Community) is a much smaller problem than the total European problem and its situation needs to be resolved as a proof of the fundamental idea that inspired the creation of “European Union”.
Greece is only a small country consisting of 2% of the European Market but it is also a striking example and a victim of conflicting interests.
How is it possible to sustain a defense budget almost 70% of the Turkish defense budget and contribute to NATO while at the same time is in conflict with Turkey, one other, NATO member, especially if most of this budget is spent for purchases from Germany, France and USA?
If Greece is left to go bankrupt it will, probably, be left in the hands of other spheres of interest, may be China or Russia or some Arab nations… It will most probably leave NATO if USA will not be involved.
Having said all that, I don’t imply that Greek politicians have not used their power unwisely, and that they have not created damages to the Greek economy for more than 30 years, but please remember that this generation of politicians derive from the, so called… ¨”heroic” resistance against a dictatorship and supported the highest democratic principles Yet, they were spoilt and corrupted within the European Union system.
I am among those who believe that European Union is a real experiment and an attempt to create a valid model that needs to prove its unique value before it can be used at a higher level within G20, NATO and UN because we will need, internationally, to develop a better model to resolve conflicts at an International level.
Unfortunately, Greece being the weakest member within EU is the first country that is put to the test. Others will follow…
Nick Kouzos
16/2/2012