Greece activates EU-IMF bailout

RTE report that

Greek Prime Minister George Papandreou has asked for the activation of an aid package from the European Union and International Monetary Fund aimed at pulling the eurozone member out of a debt crisis.

‘It is a national and imperative need to officially ask our partners in the EU for the activation of the support mechanism we jointly created,’ Mr Papandreou said in statements broadcast live.

A report on Bloomberg highlights the import of this development

With national debt of almost 300 billion euros and a risk premium that reached 590 basis points yesterday, Greece faces a fiscal mess that threatened to spread to Spain and Portugal, forcing the EU to set up a standby aid facility. At stake is the future of the euro 11 years after its creators gave the European Central Bank responsibility for interest rates while leaving fiscal policy in national capitals.

Yesterday yields on Greek 10 year bonds spiked to almost 9% on news that their fiscal deficit was much worse than the government had claimed. Reacting to that news German paper Bild responded angrily

Europe has been stunned by more shock numbers revealing the debt crisis in Greece is even worse than first thought.

Greece is being swallowed by a debt spiral – and the bad news is that Germany could be pulled in along with it!

Now it turns out that the Greeks will need a lot more, presumably over €80bn. As a consequence, Germany’s portion will rise accordingly.

And how do the Greeks themselves respond? They strike!

Writing the Telegraph Ambrose Evans-Pritchard warned of Greek sovereign debt default

Goldman Sachs said it is expecting Greece to offer some sort of “voluntary debt-restructuring” to creditors over coming months. Erik Nielsen, the bank’s Europe economist, said the rescue formula may evolve into a mixture of loans and debt forgiveness in order to give Greece “a much longer breathing space”.

City bankers are bracing for a possible haircut of up to 50pc on €270bn (£235bn) of Greek sovereign debt, hoping that any losses will be split between creditors and some sort of EU resolution fund.

With potentially devastating knock-on effects –

Any talk of Greek restructuring is potentially dangerous. “It would cause massive [bond] spread turmoil in other peripherals if a troubled EMU member was not even given the chance to put its consolidation plans into practice,” said Marcel Bross, of Commerzbank.

Suki Mann, of Societe Generale, said such a move would be a major headache for Portugal, Spain and Ireland. “In extremis, this could lead to debt restructuring in these countries too,” he said.

Picture –

No bio, some books worth reading – The Rational Optimist: How Prosperity Evolves – Matt Ridley .

Crisis Economics: A Crash Course in the Future of Finance -Nouriel Roubini, Stephen Mihm

  • Alias

    The great thing about being a shareholder of the ECB is that Ireland will have to borrow a few hundred billion to add to its deficit in order to give Irish taxpayers’ money away to the Greeks. Will they even thank us for closing a couple of hospitals just to bail them out? No, but we’re all good EUropeans now so it is our duty as ECB shareholders to look after our fellow EU citizens even if it means neglecting the needs of our own.

    The Irish people were not told that they would have to bail out other states when they approved the Maastricht Treaty. In fact, they were repeatedly assured that all debts were sovereign and that under no circumstance could this nation find itself liable for the debts of other nations. Not only that but they now find that they are also liable for the debts owed by privately-owned financial institutions to other privately-owned financial institutions in the EU and that they as a nation must ensure that no German or French bank loses money as a result of its reckless lending to Irish banks.

    Still, the muppets went and approved the Lisbon Treaty which gave even more power over their financial affairs to the EU so they fully deserve the consequences of their ongoing stupidity.

  • Congal Claen

    Just wait until Germany leaves the Euro. German bond yield would go down, whilst those countries still in the Euro would see their yield’s skyrocket. Then, the shit will really hit the fan…

  • Ireland is in enough debt without borrowing more to help Greece. The Irish government had no trouble cutting the incomes of the poorest here, they should tell Greece to sort themselves out.

  • Mack

    Pippakin –

    Scary Chart

  • Mack

    Thanks, this is worse than a Hammer Horror, everyone is bled dry!

    I cannot see how the Euro can survive this. Germany cannot be expected to bail out the entire EU.

    The Brits are not in the Euro, and in any case are not that much better off than we are, which brings me neatly to, WTF? We are in a worse position than Greece! let them bail us out.

    I know what it is: the Greeks get angry and riot, us poor deluded fools, take pay cuts, pension cuts, unemployment benefit cuts, like the docile eejits we are!

  • Mack

    Here is another one –
    External debt visualisation

    This one overstates Ireland’s woes somewhat as most of the external debt is held by IFSC entities..

  • Greenflag

    The Goldman Sachs press machine is keeping the punters from delving too deeply into how GS helped Greece via derivative investments to ‘obscure’ it’s real national debt for years . Not that the Greeks were ‘forced’ into obfuscation . Lets just say they like a lot of other govetrnments took the line of least resistance .

    When the CEO of Goldman Sachs is offering to perform two years of community service as USA Treasury Secretary then you have to know that the financial fraudsters are still up to their old games .

    I quote from one comment

    ‘In a settlement of the government’s securities fraud case against Goldman Sachs, the bank’s CEO, Lloyd Blankfein, has agreed to perform two years of community service as Treasury Secretary of the United States.

    At a press conference in New York, Mr. Blankfein said that as Treasury Secretary he would “continue to do God’s work as I did at Goldman, but at a significant pay cut.”
    A Treasury Dept. spokesperson said that by performing community service as Treasury Secretary, Mr. Blankfein will be able to do less harm to the economy because he will have significantly less power than he had as Chairman of Goldman.

    His experience at Goldman, however, will be “invaluable” in his new role as Treasury Secretary, the spokesperson said: “Lloyd Blankfein’s years of marketing worthless securities have prepared him for the important task of selling Treasuries to the Chinese.”

    Mr. Blankfein is the latest in a long line of Goldman chairmen to serve as Treasury Secretary, although he is believed to be the first to do so while wearing an electronic ankle bracelet.

    end of

    Time in jail for thieves and petty criminals and murderers but ‘financial criminals ‘ get electronic ankle bracelets ‘???

    Obama needs to back to Wall St with a couple of hundred yards of rope and hang the ‘Blankfeins’ and the rest of the criminals from any and all available lamposts on the South Seaport waterfront .

    Goldman Sachs and Bank of America and Citigroup and Morgan Stanley all are too big to fail and should be ‘downsized ‘ appropriately with any future CEO ‘s being restricted to a reasonable multiple of the average executives salary levels . If they’re making billions you can be sure it’s by stealing off the rest of society. The price for the the USA has been an extra 8.5 million unemployed and 8 million foreclosures . For the world economy the ramifications are still unfolding . Greece is only the tip of some very nasty icebergs that may yet bring down many other western governments .

    That said this economic crisis has also helped to put an end to David Cameron’s chances of becoming the next British PM .

    The centre left in the UK is not going to tolerate Tory ‘experimentation’ or any implementation of the failed ‘Milton Friedman ‘ doctrine of licensed and legalised ‘theft’ for the financial sector thieves while the rest of society gets taxed to the hilt to pay for the bastard’s greed .

  • Driftwood

    At a press conference in New York, Mr. Blankfein said that as Treasury Secretary he would “continue to do God’s work as I did at Goldman, but at a significant pay cut.”

    Greenflag, if true, that quote is pure ‘Gold’.

    The Enron film ‘Smartest Guys in the Room’ should be on the secondary school curriculum of every capitalist nation on the planet.

  • Paddy Matthews

    Eh, lads, you do realise that “quote” is satire, don’t you?

    For real-time fake news updates, follow Andy Borowitz on Twitter.

    And by the way, Mick, any chance of reinstating the “Preview Comment” option?

  • Greenflag

    Blankfein’s ‘God’ is the Golden Calf a.k.a Mammon and while I have no objection in principle to GS or other financial institutions making a few bob or a few billions I draw the line when the cost is destroying half the world’s economy and driving hundreds of millions in developing countries closer to the edge of starvation and sparking off civil wars , political unrest etc .

    I hope Obama succeeds in passing effective financial reform but I trust Sen Chris Dodds about as much as I would trust Blankfein or probably even less 🙁

  • I find all of this attempt to blame governments – either at a national or supranational level – for the current situation a bit sickening. If Goldman Sachs were masking Greek debt, they were doing it knowingly.

    Greenflag: Agreed.

    This is a failure of regulation on insofar as a mugging is a failure of criminal law rather than the act of a human being with agency.

    There’s a very narrow crossover between the political tribe that think criminality is ‘all society’s fault’ and the one that thinks the finance industry shouldn’t have been regulated, yet the spivs are now effectively using that as their defence:

    They only robbed us blind because governments failed to stop them? Yeah, right!

  • Greenflag

    The world ‘economic ‘ recovery will NOT get underway until these financial reforms are put into effect and confidence can be restored . Obama will need to bring along the UK and other financial powers with whatever proposed reforms are to take place .

  • Greenflag

    paul evans ,

    ‘This is a failure of regulation ‘

    It seems now as if the SEC ‘regulators ‘ spent much of their ‘regulatory’ time viewing ‘pornographic ‘ sites according to a recent news report . Some 33 of the ‘executive regulators ‘ were so busy not regulating or turning a blind eye that they felt forced to fill up their time at the American taxpayers expense by viewing porn during business hours . Seems the regulators also need regulation ?

    Of course GS were doing it knowingly . But ‘Government ‘ is not innocent either . The leading politicians -government and oppositions in ALL the western countries simply allowed the banking and financial sectors to run riot for reasons that were both political and personally rewarding ;(

    When push came to shove the world’s biggest banks and financial houses were able to point their combined weapons of mass financial destruction at our western politicians and say ‘Do as we say or else ‘ you as a politician/government etc will be ****ed !

  • Mack

    Paul –

    “I find all of this attempt to blame governments – either at a national or supranational level – for the current situation a bit sickening”

    Surely they were involved with massaging their own figures? I agree it doesn’t absolve complicit private companies..

  • Greenflag

    They say history repeats itself -and while Nero may have fiddled while Rome burned this can be updated to

    SEC regulators porn while Wall St sets fire to USA & World economy 🙁

  • kells

    Great time to rent a place in Greece at the minute,long term.New villas with pool in Crete are going for £450 a month,hard to beat.

  • Paul Evans et al

    Governments, many and varied are to blame. Ours may not have been, like the Americans, busy watching porn films while the monetary system burned, but if they were not, its hard to think what they were doing.

    It is the responsibility of government to protect the public, they should have been looking for just this, and they were not.