– Did Greek Bond And CDS Traders Just Ring The Bell? (ZeroHedge, Mar 8, 2012)
– Greek Reports Peg PSI Participation At “Over 75%”(ZeroHedge, Mar 8, 2012)
EU
With $700 Billion In QE3 Already Priced In, Who Will Blink First?
– With $700 Billion In QE3 Already Priced In, Who Will Blink First? (ZeroHedge, Mar 6, 2012)
Something interesting happened when the ECB announced last week that its balance sheet was about to rise by €1 trillion gross, and hit a record €3 trillion net earlier today: the EURUSD barely budged. Why? Because as a reminder, the key driving relationship for relative risk performance of 2012 as we forecast back in December is the correlation of the Fed and the ECB’s balance sheets, and the EURUSD, respectively, because while we may pretend that there is still alpha in this joke of a market, the truth is that in this new normal only beta matters (the more lever the better), and the only beta that matters is that generated by relative USD strength/weakness.
In this context, we bring back readers to the chart that may be the only one that matters: the cross-correlation of the Fed/ECB total assets, and the EURUSD spot, where the first thing that stands out is that the pair should be 1000 pips lower at least. And yet it isn’t. The reason for that is that the FX market is actively expecting, despite all rhetoric otherwise, an injection from the Fed. What is convenient is that the chart allows us to calculate how much the expected QE3 will be: since the absolute value of the Fed/ECB size (currency invariant) is now 0.9685m or the lowest in history, the ratio would have to raise to 1.18 for EURUSD asset implied parity. Which means the Fed’s balance sheet would have to increase by about $650-700 billion promptly.
Read moreWith $700 Billion In QE3 Already Priced In, Who Will Blink First?
Cash-Strapped Greece To Raise Funds … By Selling Island Of Corfu
– Cash-strapped Greece begins its bid to raise funds… by selling off Corfu (Daily Mail, Mar 7, 2012):
Greece is trying to sell off a huge slab of land on the holiday island of Corfu to raise cash to tackle its debts, it emerged today.
Government officials revealed a tender has been launched for the exploitation of a large seaside plot on the western resort island.
The Hellenic Republic Asset Development Fund said it is seeking to sell the ‘right of surface’ for the 120-acre, forested property at Kassiopi for up to 100 years.
The tender is part of Greece’s bid to raise 50billion euro ($66billion) through an open-ended program of privatisations and concession sales, half of which will involve real estate.
The country has committed to raise 19billion euro ($25billion) of that sum by 2015.
Read moreCash-Strapped Greece To Raise Funds … By Selling Island Of Corfu
Former Deutsche Bank Chief Economist Prof. Norbert Walter: Germany Will Have ‘An Old Age Poverty Problem’ Close To 10 Years From Now
– Germany’s Time as Paymaster Is Running Out: Economist (CNNBC, Mar 5, 2012):
??As the euro zone’s biggest economy, and one of its most successful in recent years, Germany has shouldered the burden of helping to bail out more troubled euro zone nations
This can only last for another few years, as the country’s aging population will need to be looked after, Norbert Walter, chief economist emeritus for Deutsche Bank and managing director of Walter & Daughters Consulting, told CNBC Monday.
European Banks Now Face Huge Margin Calls As ECB Collateral Crumbles
– European Banks Now Face Huge Margin Calls As ECB Collateral Crumbles (ZeroHedge, Mar 6, 2012):
In what could prove to be the most critical unintended consequence of the ECB’s LTRO program, we note that as of last Friday the ECB has started to make very sizable margin calls on its credit-extensions to counterparties. While the hope was for any and every piece of lowly collateral to be lodged with the ECB in return for freshly printed money to spend on local government debt, perhaps the expectation of a truly virtuous circle of liquidity lifting all boats forever is crashing on the shores of reality. This ‘Deposits Related to Margin Calls’ line item on the ECB’s balance sheet will likely now become the most-watched ‘indicator’ of stress as we note the dramatic acceleration from an average well under EUR200 million to well over EUR17 billion since the LTRO began. The rapid deterioration in collateral asset quality is extremely worrisome (GGBs? European financial sub debt? Papandreou’s Kebab Shop unsecured 2nd lien notes?) as it forces the banks who took the collateralized loans to come up with more ‘precious’ cash or assets (unwind existing profitable trades such as sovereign carry, delever further by selling assets, or subordinate more of the capital structure via pledging more assets – to cover these collateral shortfalls) or pay-down the loan in part. This could very quickly become a self-fulfilling vicious circle – especially given the leverage in both the ECB and the already-insolvent banks that took LTRO loans that now back the main Italian, Spanish, and Portuguese sovereign bond markets.
This huge increase in margin calls can only further exacerbate the stigma attached to LTRO-facing banks – and as we noted this morning (somewhat presciently) both the LTRO-Stigma-trade, that we created, and the potential for MtM losses on the carry-trades that LTRO ‘cash’ was put to work in could indeed start a vicious circle in European financials, just as everyone thought it was safe to dip a toe back in the risk pool.
What should also start to worry the Germans is the fact a 37x levered
hedge-fundcentral bank with EUR3 trillion balance sheet that has extended credit in a ‘risk-managed’ approach on what appears to be an ever dwindling supply of performing collateral is starting to see dramatic ‘gaps’ in its asset-liability exposure (but rest assured Bernanke told us that our FX Swaps are safe as houses).Read moreEuropean Banks Now Face Huge Margin Calls As ECB Collateral Crumbles
The Rebellion Has Begun: Spain’s Sovereign Thunderclap And The End Of Merkel’s Europe
– Spain’s sovereign thunderclap and the end of Merkel’s Europe (Telegraph, Mar 5, 2012):
The Spanish rebellion has begun, sooner and more dramatically than I expected.
As many readers will already have seen, Premier Mariano Rajoy has refused point blank to comply with the austerity demands of the European Commission and the European Council (hijacked by Merkozy).
Taking what he called a “sovereign decision”, he simply announced that he intends to ignore the EU deficit target of 4.4pc of GDP for this year, setting his own target of 5.8pc instead (down from 8.5pc in 2011).
In the twenty years or so that I have been following EU affairs closely, I cannot remember such a bold and open act of defiance by any state. Usually such matters are fudged. Countries stretch the line, but do not actually cross it.
Read moreThe Rebellion Has Begun: Spain’s Sovereign Thunderclap And The End Of Merkel’s Europe
Oops: ECB Says Greek PSI Participation May Fall Short, As Troika Expects Third Greek Bailout
– Oops: ECB Says Greek PSI Participation May Fall Short, As Troika Expects Third Greek Bailout (ZeroHedge, Mar 4, 2012):
Following up on Peter’s summary of the if-then conditional analyses to be conducted concurrently by various classes of Greek bondholders ahead of Thursday’s PSI deadline (even as Bingham is rapidly organizing a Greek ad hoc ‘holdout’ committee to stop the PSI), here is some news that may obviate pretty much everything, and goes back to our warning from January, namely that despite all the sturm und drang, media fanfare, and threats from former Goldman-cum-JPM bankers, the hedge funds will ‘just say no’ and courtesy of basis packages (yes, the fact that Greek CDS soared to a record 76 pts upfront on Friday indicates more buyers than sellers) hold out for par recoveries in court: they would be idiots (or have a gun at their head) not to do so. To wit from Bloomberg: “Greece may fail to garner enough investors to participate in a voluntary writedown of its debt, Der Spiegel magazine reported, citing unnamed officials at the European Central Bank. A second Greek bailout is partly tied to investors’ agreeing to the writedown by a March 8 deadline.” Remember that Germany has made it very, very, very explicit that if the PSI fails, the bailout is off… just as they have planned from the get go.
We will post the Spiegel article asap. And while we wait, here is something else very special from Spiegel:
Troika expects third rescue package for Greece
The billions from the second bailout did not even have arrived in Greece, since international inspectors already have a third payment required. According to SPIEGEL information is the so-called Troika believes that another 50 billion euros would be needed
European Solidarity: ‘Everybody Knows The Spanish Are Lying About The Figures’
– European Solidarity – “Everybody Knows The Spanish Are Lying About The Figures” (ZeroHedge, Mar 2, 2012):
Back in October, when Greece was rewarded with further bond haircuts for progressively missing its economic targets, even after having gotten caught on at least one occasion making its economy appear worse than it was, we said that it is only a matter of time before “Portugal, Ireland, Spain and Italy will promptly commence sabotaging their economies (just like Greece) simply to get the same debt Blue Light special as Greece.” In the aftermath of this statement, we got the Irish and the Portuguese proceeding to slowly but surely do just that. Today, it was Spain’s turn to make it 3 out of 4 after as Reuters noted so appropriately, “Spain defies Brussels on deficit target” clarifying that “Spain set itself a softer budget target for 2012 on Friday than originally agreed under the euro zone’s austerity drive, putting a question mark over the credibility of the European Union’s new fiscal pact. Prime Minister Mariano Rajoy insisted he was acting within EU guidelines because the plan was still to hit the European Union public deficit goal of 3 percent of gross domestic product (GDP) in 2013.” That Italy is sure to follow is absolutely guaranteed, however just because the ECB is now indirectly monetizing BTPs the true impact will be delayed far more, and instead of taking prompt steps to remedy the situation, the European complacency will be accentuated by the fact that bond yields are very low, and supposedly indicates the true state of the economy. No. All it indicates is the conversion of future inflation (courtesy of €1 trillion in new money in the past 3 months) for a very temporary respite before all hell ultimately breaks loose as countries pretend everything is ok as bond yields are pushed artificially low. And in doing nothing, the fundamentals in the economy only get worse and worse. Germany knows this very well, and the Economist explains the reaction to Spain’s surprising statement today perfectly…
A novice in European summits, Mr Rajoy has been playing a strange game. He was careful not to discuss specific figures with fellow leaders. But as soon as he emerged from the summit he declared that Spain’s deficit this year would be 5.8%, rather than the agreed target ratio of 4.4%. He insisted, though, that Spain would still fall below the 3% deficit limit in 2013, as planned.
Germany, moreover, seems to be in an intolerant mood. There is irritation that the Spanish government is delaying its budget pending regional elections in Andalusia that Mr Rajoy’s party hopes to win, and suspicion that it is inflating last year’s deficit figures to blame its Socialist predecessor. The commission says it wants to double-check the numbers. But a senior source in Berlin puts it more bluntly: “Everybody knows the Spanish are lying about the figures.”
Funny. And yet the people are supposed to believe in the mumbo jumbo that is Europe’s fiscal pact, or frankly anything else? Perhaps the senior source in Berlin should have just stepped up and told the outright truth: “Everybody knows that everyone in Europe is lying about everything.”
Read moreEuropean Solidarity: ‘Everybody Knows The Spanish Are Lying About The Figures’
Euroland Will Pay For This Monetary Madness
Don’t miss:
– Euroland will pay for this monetary madness (Telegraph, Mar 1, 2012):
When something looks dangerous, it generally is. And few things look quite so high-wire right now as the European Central Bank’s efforts to hold the euro together by flooding the banking system with free money.
This week, the ECB injected a further 529.5 billion euros via “long-term refinancing operations”, or LTROs, bringing the tally to more than 1 trillion euros.
When Mario Draghi, the new ECB president, embarked on the programme shortly before Christmas, it was hailed as a masterstroke which had saved the eurozone from financial and economic calamity. Even the Jeremiahs of Germany’s Bundesbank, proud keepers of the sacred flame of monetary conservatism, were stunned into grudging acquiescence by the evident seriousness of the crisis. But now the doubts are beginning to set in, and with good reason.
RECOVERY!!!: Japanese Ambassador To Italy To Italians: ‘Japan Has Recovered!’
Recovery!!!
Worldwide: Recovery is … the Greatest Depression (& War is peace).
In Japan: Recovery is … being sacrificed to the God of nuclear power. (Japan is finished.)
“Well there seems to be a kind of plate glass barrier between the people and governments now, all over the world. The governments do one thing, and the people are kept in the dark. And nowhere is this more obvious than in Japan where people are now being sacrificed to the “god of nuclear power.” There is no other way of putting it, really.”
– Radioactive Japan: Contamination Detected In Tokyo Equal To Chernobyl Mandatory Evacuation Levels
– Japanese Ambassador to Italy to Italians: “Japan Has Recovered!” (EX-SKF, Feb. 29, 2012):
I have no information as to how the word “recovery” is defined in the post-“cold shutdown state” declaration Japan.
From Jiji Tsushin (3/1/2012):
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As one year anniversary of the March 11, 2011 disaster approaches, a symposium was held in Rome on February 29 where experts held discussions on the recovery of Japan’s disaster affected areas and on the issues that Japan and Italy face. In his speech, Ambassador Masaharu Kono thanked Italy by saying “We were overwhelmed by the “kizuna” [tie that binds; it originally meant “a leash to tie down or restrain animals”] (in the form of support from various countries)”. He declared “Japan has recovered”, urging for the resumption of the tourism to Japan and investment in Japan
Read moreRECOVERY!!!: Japanese Ambassador To Italy To Italians: ‘Japan Has Recovered!’
HILARIOUS: Ben Bernanke: ‘The ECB Is Well Capitalized’
ROFL!
– Ben Bernanke: “The ECB Is Well Capitalized” (ZeroHedge, Feb. 29, 2012):
This will be one of those “one picture is worth a thousand words” posts.
A quick preface:
During Congressional testimony, Ben Bernanke defended the Fed’s FX swap lines by saying that the ECB was “well-capitalized.” So instead of spending countless words explaining why that may not be quite so, we will merely show the bank’s total assets (net of LTRO 2) and its capital and reserves (link). The adjusted balance sheet is pro forma for today’s LTRO 2, which we noted earlier will add at least €311 billion in net assets to the ECB’s balance sheet, and potentially much more. Assuming the minimum, it means the ECB’s balance sheet will now hit €3 trillion. The capital backing these assets is €82 billion across the entire Eurosystem. In other words, the ECB’s leverage is 36.6x. This according to Ben Bernanke is “well-capitalized.”
And visually.
Irish EU Treaty Vote Threatens Chaos
– Irish EU treaty vote threatens chaos (Telegraph, Feb. 28, 2012):
Ireland has shocked Europe with plans for a referendum on the EU’s fiscal treaty, a move that risks an unprecedented fragmentation of the eurozone and a major clash with Germany.
Premier Enda Kenny said Dublin was acting on legal advice from Ireland’s attorney-general that “on balance” the fiscal compact requires a vote under the country’s constitution. “It gives the Irish people the opportunity to reaffirm Ireland’s commitment to membership of the euro,” he told ashen-faced members of the Dail.
All three major parties back the treaty but analysts say there is a high risk of rejection by angry voters in the current fractious mood. The compact gives the EU intrusive powers to police the budgets of debtor states, and has been denounced as feudal bondage by Sinn Fein and Ireland’s vociferous eurosceptics. The Irish voted “No” to both the Nice and Lisbon treaties before being made to vote again. Dublin has ruled out a second vote this time.
‘S&P Declares Greece in Default’ (Wall Street Journal) – ‘The Greek Default Begins (Sky News) – ECB Puts Greek Banks On Emergency Aid After Downgrade (Reuters)
– ECB puts Greek banks on emergency aid after downgrade (Reuters, Feb. 28, 2012):
Greece’s central bank is likely to step in to smooth funding for the country’s banks after an earlier-than-expected downgrade of the nation’s credit rating prevented them from borrowing against Greek government bonds.
– S&P Declares Greece in Default (Wall Street Journal, Feb. 28, 2012):
Greece became the first euro-zone member officially to be rated in default, 13 years after the single European currency was adopted to strengthen the European Union.
Standard & Poor’s cut Greece’s long-term credit rating to selective default from double-C. The move was expected, as S&P said this month that it would consider Greece in default if it added “collective-action” clauses to its sovereign debt, effectively forcing all bondholders to accept a bond-swap offering. …
– The Greek Default Begins (Sky News, Feb. 28, 2012):
The talking is over; it is finally happening. For the first time since World War Two, a developed nation is going into default.
That’s the significance of the events of the past 24 hours, with Greece’s debt being classified as in “selective default” and the European Central Bank banning it from its cash window. Months of planning by both banks and policymakers have gone into ensuring that Greece’s negotiated default will be a smooth painless process. We are about to find out whether that planning pays off.
Now, we shouldn’t be surprised by Standard & Poor’s decision to cut the rating on Greece’s sovereign debt from CC to SD (which stands for “selective default”). The ratings agencies had always said that, given private investors are about to lose just over half the value of their debt (through a complex bond swap), this downgrade would be a natural consequence.
Nor should we be shocked that the ECB says it will no longer accept Greek debt as collateral: in fact, the only surprise is that it’s taken this long – on the basis of the ECB’s previous policy, the bonds should have become ineligible when were first downgraded from investment status two years ago.
So Greece ‘Defaults’ And Europe Moves On …
FYI.
– So Greece ‘Defaults’ And Europe Moves On… (ZeroHedge, Feb. 28, 2012):
Via Peter Tchir of TF Market Advisors,
So far there are no dramatic consequences of the Greek default. The ECB did say they couldn’t accept it as collateral, but national central banks (including Greece’s somehow solvent NCB) can, so no real change. We will likely get a Credit Event prior to March 20th once CAC’s are used to get the deal fully done. Will the market respond much to that? Probably not, though there is a higher risk of unforeseen consequences from that, than there was from the S&P downgrade.
David Rosenberg: ‘It’s A Gas, Gas, Gas!’ – ‘So here we have real incomes and wealth both deflating and the masses believe that recession is off the table because of a liquidity-induced four-month rally in the stock market. Go figure.’
… and study the Weimar Republic!
– David Rosenberg: “It’s A Gas, Gas, Gas!” (ZeroHedge, Feb. 27, 2012):
Once again, if one wants to get nothing but schizophrenic noise from several momentum chasing vacuum tubes which very way may take the market to all time highs on 1 ES contract churned back and forth, by all means focus on the “market” which for the past three years is merely a policy vehicle of the monetary-fiscal fusion regime (thank you Plosser for confirming what we have been saying for years). For everyone else, here is the traditionally solid economic commentary from David Rosenberg. Considering that the central planners have pumped $7 trillion, or 50% of their balance sheet, in the stock market in the past 4 years, to offset precisely the warnings that Rosenberg issues on a daily basis, we are far beyond debating whether or not those who observe the economy realistically are right or wrong. The only question is whether the central banks can continue to expand their balance sheet at an exponential phase to offset the inevitable. Answer: they can’t.
Greek Farmers Offload Crops At Cost Price, Cutting Out The Middle Man
– Greek farmers offload crops at cost price (Guardian/AP, Feb. 25, 2012):
Associated Press= KATERINI, Greece (AP) — Hammered by the financial crisis that has led to ever diminishing income, a group of residents in northern Greece have joined forces with potato farmers to slash consumer prices and ensure producers can get their crop to markets by cutting out the middle man.
Hundreds of families turned up Saturday in this northern Greek town to buy potatoes at massively reduced prices, sold directly by producers at cost price. They lined up in cars and with bicycles, on foot and with scooters to collect their bags of spuds from a truck that flung its doors wide open and was doing a roaring trade in the parking lot of a local courthouse.
Farmers say it costs about 20 cents ($0.27) to produce a kilogram (2 pounds) of potatoes, but that wholesalers will only buy them for 10-12 cents to get the crop to supermarkets, where they sell for about 60-70 cents a kilogram. Faced with making a loss, many producers say they have been unable to even get their products to the market.
Read moreGreek Farmers Offload Crops At Cost Price, Cutting Out The Middle Man
Hinde Capital CEO Ben Davies: Greece Is Just A Preview Of What’s Coming For The Rest Of Us (Video)
– Ben Davies: Greece Is Just A Preview Of What’s Coming For The Rest Of Us (ZeroHedge, Feb. 25, 2012):
All eyes are on Greece these days, with hopes the situation there can soon be resolved and the global recovery kicked into high gear.
Sadly, those hopes are misguided claims Ben Davies, CEO of Hinde Capital. In fact, he says, Greece’s pain foreshadows the future awaiting the rest of the world.
It all comes down to simple math. Greece has increased its debts at a rate far faster than its income has grown. At some point, the debt became so large that the country could no longer service it.
What makes the rest of the PIIGS immune from a similar fate? Or Japan? Or the US? Or the OECD, in general?
Nothing.
Yes, Greece had a smaller, shakier economy and doesn’t have a central bank to print its own currency at will like Japan or the US. But even those countries with a printing press learn that, after a certain point, expanding the money supply only complicates the problem of too much debt by inflating key economic input costs and dangerously weakening the currency.
The Colonization Begins: Germany May Send 160 Tax Collectors To Greece
See also:
– The Greek Military Is Ready To Take Over Greece
– The Colonization Begins: Germany May Send 160 Tax Collectors To Greece (ZeroHedge, Feb. 25, 2012):
Since the European colonial state of southern Bavaria Sachs (formerly known as the insolvent Hellenic Republic) no longer even pretends to be anything less than a pass-thru funding colony of its creditors, said creditors (European banks and various insurance companies) are about to send out the first group of colonial scouts in the form of German tax collectors. Also, since as reported previously, Greece will literally have to collect taxes to fund the Second “bailout package”, which is merely a front for on ongoing Greek bailout of European banks (recall that it is Greece who is partially funding the bailout Escrow Account), said tax collectors will assist their Greek counterparts (who will rather likely miss their quote of becoming 200% more efficient in 2012) in collecting money from Greek citizens to pay off German banks. If in the process a few (or all) bars of gold end up missing, so be it.
From Athens News:
More than 160 German financial services executives are willing to come to Greece in order to strengthen the Greek tax mechanism, according to a report to be published in the German magazine ‘Wirtschafts Woche’, which will be released on Monday.
Read moreThe Colonization Begins: Germany May Send 160 Tax Collectors To Greece
Jean-Claude Juncker: ‘Greece May Need A Third Bailout’
– Juncker: “Greece May Need A Third Bailout” (ZeroHedge, Feb. 24, 2012)
The Greek Military Is Ready To Take Over Greece
– Greek military ready to intervene and take over Greek Parliament (Examiner, Feb. 23, 2012):
The Greek military is ready to take over Greece and dethrone Papademos’ led transitional government according to two sources who spoke on condition of anonymity but are high ranking members of the Greek armed forces.
The onset of the military intervention plan found its roots when Mr. Papoulias, Greek President, held a state dinner surrounded by his military leaders and asking for their support to take Greece back and protect its sovereignty.
The call for support of the military was held after the Financial Times leaked the story that Germany wanted to put Greece under the auspices of a new EU commission, led by Germany.
Such a drastic action may have serious consequences for Greece one of which is that this will definitely result in the country leaving the Eurozone, but that may be the least of their immediate problem.
France Government Asks EU To Suspend GM Crop Authorisation Based On ‘Latest Scientific Studies’ Which Show That GM Crops ‘Pose Significant Risks For The Environment’
See also:
– French Court Finds Monsanto Guilty Of Chemical Poisoning In France
– France asks EU to suspend GM crop authorisation (AFP, Feb. 21, 2012):
PARIS — France’s ecology ministry said Monday it had asked European regulators to suspend authorisation for the use of genetically modified MON 810 maize crops from US company Monsanto based on new studies.
The request is “based on the latest scientific studies” which show that the use of the GM crops “pose significant risks for the environment,” the ministry said in a statement.
‘Inside Job’ (Documentary On The Financial Crisis – Full Length HD) – Narrated by Matt Damon
Inside Job, Narrated by Matt Damon (Full Length HD) from jwrock on Vimeo.
Description:
‘Inside Job’ provides a comprehensive analysis of the global financial crisis of 2008, which at a cost over $20 trillion, caused millions of people to lose their jobs and homes in the worst recession since the Great Depression, and nearly resulted in a global financial collapse. Through exhaustive research and extensive interviews with key financial insiders, politicians, journalists, and academics, the film traces the rise of a rogue industry which has corrupted politics, regulation, and academia. It was made on location in the United States, Iceland, England, France, Singapore, and China.
It’s Official: Greece Unveils The Negative Salary, And A Whole New Meaning For ‘Pay To Play’
– It’s Official – Greece Unveils The Negative Salary, And A Whole New Meaning For “Pay To Play” (ZeroHedge, Feb. 22, 2012):
We thought we had seen it all. It turns out we hadn’t. The country that gave the world the alphabet, philosophy, and plates with funny sexually ambiguous drawings on them, has outdone itself again. Because beginning this month some Greeks will have to pay for the privilege of having a job. From the Press Project:
Salary cutbacks (called “unified payroll”) for contract workers at the public sector set to be finalized today. Cuts to be valid retroactively since november 2011. Expected result: Up to 64.000 people will work without salary this month, or even be asked to return money. Amongst them 21.000 teachers, 13.000 municipal employees and 30.000 civil servants.
Scandal: Greece To Receive ‘Negative’ Cash From ‘Second Bailout’ As It Funds Insolvent European Banks
– Scandal: Greece To Receive “Negative” Cash From “Second Bailout” As It Funds Insolvent European Banks (ZeroHedge, Feb. 22, 2012):
Earlier today, we learned the first stunner of the Greek bailout package, which courtesy of some convoluted transmission mechanisms would result in some, potentially quite many, Greek workers actually paying to retain their jobs: i.e., negative salaries. Now, having looked at the Eurogroup’s statement on the Greek bailout, we find another very creative use of “negative” numbers. And by creative we mean absolutely shocking and scandalous. First, as a reminder, even before the current bailout mechanism was in place, Greece barely saw 20% of any actual funding, with the bulk of the money going to European and Greek banks (of which the former ultimately also ended up funding the ECB and thus European banks). Furthermore, we already know that as part of the latest set of conditions of the second Greek bailout, an ‘Escrow Account” would be established: this is simply a means for Greek creditors to have a senior claims over any “bailout” cash that is actually disbursed for things such as, you know, a Greek bailout, where the money actually trickles down where it is most needed – the Greek citizens. Here is where it just got surreal. It turns out that not only will Greece not see a single penny from the Second Greek bailout, whose entire Use of Proceeds will be limited to funding debt interest and maturity payments, but the country will actually have to fund said escrow! You read that right: the Greek bailout #2 is nothing but a Greek-funded bailout of Europe’s insolvent banks... and the Greek constitution is about to be changed to reflect this!