From Germany's reliable Der Spiegel comes the predicted but potentially destabilizing late-Friday news bomb:
Continue reading the full article at SeekingAlpha here, including thoughts on which currencies stand to benefit most from this development.
Sources with information about the government's actions have informed SPIEGEL ONLINE that Athens is considering withdrawing from the euro zone. The common currency area's finance ministers and representatives of the European Commission are holding a secret crisis meeting in Luxembourg on Friday night.
Given the tense situation, the meeting in Luxembourg has been declared highly confidential, with only the euro-zone finance ministers and senior staff members permitted to attend. Finance Minister Wolfgang Schäuble of Chancellor Angela Merkel's conservative Christian Democratic Union (CDU) and Jörg Asmussen, an influential state secretary in the Finance Ministry, are attending on Germany's behalf.
According to German Finance Ministry estimates, the currency (Drachma) could lose as much as 50 percent of its value, leading to a drastic increase in Greek national debt. Schäuble's staff have calculated that Greece's national deficit would rise to 200 percent of gross domestic product after such a devaluation. "A debt restructuring would be inevitable," his experts warn in the paper. In other words: Greece would go bankrupt.
The European Central Bank (ECB) would also feel the effects. The Frankfurt-based institution would be forced to "write down a significant portion of its claims as irrecoverable." In addition to its exposure to the banks, the ECB also owns large amounts of Greek state bonds, which it has purchased in recent months. Officials at the Finance Ministry estimate the total to be worth at least €40 billion ($58 billion) "Given its 27 percent share of ECB capital, Germany would bear the majority of the losses," the paper reads.
In short, a Greek withdrawal from the euro zone and an ensuing national default would be expensive for euro-zone countries and their taxpayers. Together with the International Monetary Fund, the EU member states have already pledged €110 billion in aid to Athens -- half of which has already been paid out.A slow motion bank run in Greece, Ireland, etc. has been taking place since this time last year. Any credible whiff of news that a Eurozone member might drop the euro currency could trigger a panic, rapidly accelerating the move out of euros, not just in Greece but other European periphery nations, into safer currencies.
Continue reading the full article at SeekingAlpha here, including thoughts on which currencies stand to benefit most from this development.
Something's very strange about this "last minute" meeting. The same Greek politicians that agreed to previous ECB/IMF/G.Sachs conditions have suddenly done an about face ? Suicidal n'est-ce pas ? I don't believe it.
ReplyDeleteHowever, I suspect that this front story is perhaps a cover for a veritable split in the euro, north and south. Such a split needs to be done as a TOTAL surprise. Why not now?
That's certainly a possibility, although I still think the overriding goal is to play for more time through the upcoming European elections.
ReplyDeleteA more likely scenario is that the meeting to discuss Greek debt restructuring is real, but the rumor of Greece leaving the euro is either:
a) Greece pressing strengthening it's debt restructuring negotiating hand by threatening a credible nuclear option (leave the euro),
or b) this leak was coordinated to keep the euro from rising further against the U.S. dollar, which seems to be working.
Thanks for replying
ReplyDelete"through the upcoming European elections" ??? They aren't til 2014. Alot of sh*t is going to hit the fan between now and then.
Re: threat to leave the euro :
This could create a serious bank run - not in either party's interest.
Re: keeping the euro from rising
This is more plausible, but there would be, IMHO, many other ways to do so that aren't so risky politically.
Also, "extreme" political parties are making massive headway lately : Finland, Scotland etc..Best to financially restructure the EU/EMU
while the masses in the core countries have not quite totally woken up to the extent of the crimes being committed by the central banking cartel/cabal.
Thanks for pointing that out. A German friend of mine tole me Merkel was facing reelection next year, which doesn't appear to be the case.
ReplyDeleteWhile there are certain exceptions which could move the election up, according to Wikipedia German elections will next be held in 2013.
http://en.wikipedia.org/wiki/Next_German_federal_election
Like the U.S., the next big election for France is next year in 2012.
I live in France. Sarkozy is toast - not war, nor bouncing babies can raise his profile. The French people's concern is ALWAYS about IF their LOCAL economy is do well. They trust their leaders other-wise - foreign policy, defence...
ReplyDeleteThe PM, Fillon is a sure bet to replace Sarko. The UMP Prez Copé is patient and sees his turn for "le Roi" en 2016.
D.S.Khan will unite the Left - although he's a feck'n marxist-socialist liberal IMF scumbag. A gut feeling is Ségolène Royal will displace DSK if his personal past creeps up on him. We'll see at the leadership convention.
The commumist Besancenot is not running in 2012.
I predict a hellova lot of shit is going to hit the fan between now and Avr/Mai 2012. Therefore, IMHO, Marine Le Pen will win, yes win! the first ballot - only, but will lose on the second as la presse française will cry "RASCISME !!", long and loud. There is always a move back to the centre after the masses let out a bit of steam.
P.S. the "sugar" article / video was excellent.