While the ECB are busy talking u the economy, Germany is slipping into recession and Greece is trying to put a positive spin on a new series of defaults.
There is a new Black Swan Event that is quietly slipping past the general public, the EU is about to default yet again it will be in Greece, and while it may not make headlines this week, it is a dire warning of what is to come in 2013.
Euro Bonds, must now be downgraded to junk, thy should be savagely discounted in the balance sheets of any holder and institutions that are still buying the instruments.
As it stands now Europe is headed to a catastrophic collapse that may spiral in to a global recession.
While the politicians are labeling the default’s as buybacks and restructures the reality is they are defaults, they are spreading and they will engulf Europe.
Greece’s Public Debt Management Agency PDMA Monday began a EUR 10-B (US$13-B) procedure, inviting private sector holders of Greek bonds to voluntarily exchange them at default rates for European Financial Stability Facility EFSF notes.
The aim was to reduce Greece’s debt load by a further 20 to 30-B Euros this year to ensure its sustainability in the next decade and open the way for the disbursement of the next bailout tranche to Athens under a deal with European Union and International Monetary Fund lenders.
The delayed rescue loans are vital to avert a disorderly Greek default and potential exit from the euro.
The move marks the second time in nine months that private bondholders are participating in a voluntary default of part of Greek sovereign debt. In March, Greece was granted a EUR 100-B writedown.
Since then, the face value of Greek state bonds has been reduced and now Greece offers participants of the debt buyback prices of some 30 Euro cents to 40 Euro cents on the face value, depending on maturities.
And things are so bad people are accepting the default settlement.
The success of the latest default scheme depends on the extent of the participation of bondholders. Greek state officials speaking anonymously to local media in Athens expressed confidence over the result, as last minute talks with representatives of the largest four Greek banks, which hold about 15 billion euros of bonds out of some EUR 60-B of eligible bonds, continued Friday.
Greek Finance Minister Yannis Stournaras said the government would push through a law to shield bankers from possible lawsuits by shareholders over the losses.
Greek banks were severely affected by the debt crisis over the past three years and suffered losses under the previous default scheme. However, they are expected to join the new buyback plan because they feel that 30 to 40% is better tan what the bonds may be worth a year from now.
Shayne Heffernan Ph.D.
Economist/Hedge Fund Manager
Shayne Heffernan oversees the management of funds for institutions and high net worth individuals. He is also an active consultant working with Corporations around the World.
He is recognized as one of the leading Economists in South East Asia, as well as the preeminent authority on ASEAN. His opinions and forecasts are widely read by decision makers in the region and Internationally.
Shayne Heffernan holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reached a peak of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.
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