Greece

Greece’s zombie banks need rapid recaps

7 Nov 2011

The political crisis in Athens has triggered further deposit erosion and a terrible liquidity squeeze at the country’s lenders. With the ECB unwilling to provide more cash, the Greek central bank has thrown them a new emergency lifeline. But extra capital is also needed – fast.

A revived drachma would plunge – but could heal

7 Nov 2011

Greece wants to stay in the euro zone. If it were to leave, the new drachma might well follow an Argentine trajectory. The peso fell 66 percent in a few months. Then comes 30-50 percent inflation – or more. Greeks would be impoverished. But a more competitive country could emerge.

EU perched between chaos and catharsis

7 Nov 2011

The political dramas in Athens and Rome are reaching crisis point. One path leads to destruction; the other rebirth. Though there are signs of hope, a few more missteps will lead down into the chasm.

Papandreou’s climbdown brings high-priced relief

3 Nov 2011

The Greek prime minister’s referendum call amplified an already severe crisis. But the gambit may have pushed the opposition to endorse the latest EU austerity demands. If so, it’s a big relief. It is less consoling to think how much brinkmanship was needed to gain so little.

Euro zone not yet ready for Greek game of chicken

3 Nov 2011

Merkel and Sarkozy have threatened to cut Greece loose if it doesn’t back the latest bailout plan. But Europe isn’t prepared to handle the backlash. With barely a month to get its act together and a history of dysfunctional decision-making, there’s a big risk of a mega crash.

Greek politics rocks Europe’s leaky lifeboat

2 Nov 2011

The European Financial Stability Facility has scrapped a 3 bln euro bond for Ireland’s bailout. Though the delay is prudent, uncertainty caused by Greece’s referendum isn’t the only problem. Investors don’t know what the EFSF will do with its cash, or how much debt it will issue.

Euro zone should prepare to let Greece go

1 Nov 2011

The EU has tried to help Greece deal with insolvency, but a country cannot be saved from itself. The right response to a possible referendum on austerity is to draw up plans for a Greek exit from monetary union. With the right firewalls, that might even make the euro better off.

Elections are least bad option for Greece

1 Nov 2011

A collapse of the Papandreou government followed by early elections, as now seems possible, would be fraught with problems. But it wouldn’t be quite as suicidal for Greece as a referendum. At least elections would be quicker and less likely to lead to a disorderly default.

Euro crisis back to square one – or worse

1 Nov 2011

Greece’s planned referendum on last week’s bailout, announced as polls show its citizens reject it, has thrown the whole pack of cards up into the air. Bank runs, disorderly default, an exit from the euro and vicious contagion elsewhere are no longer wild scenarios.

Greek privatisation could produce double bonus

31 Oct 2011

Flogging the country’s state-owned businesses and land is mainly viewed as a way of reducing its crippling debt. But if properly handled, the process could also be a spur for broader economic reform. Dag Detter, who led the restructuring of Sweden’s public assets, explains.

Greek creditor losses could top 50 percent

31 Oct 2011

Banks have provisionally agreed to haircut their bond holdings by half, but the coupon on the new bonds they will get is still being negotiated. If the euro zone plays hardball, losses could reach 60 percent, Breakingviews latest calculator shows.

Greek haircut only resets crisis clock to 2009

27 Oct 2011

Banks have agreed to a 50 pct haircut on Greek government bonds, clearing the way for further euro zone support. But Greece’s debt burden remains higher than when the crisis began, and the country faces years of challenging austerity. Another restructuring may still be necessary.

Banks have two aces in Greek default poker

25 Oct 2011

The euro zone wants private creditors to take a 60 percent haircut on Greek debt. But this negotiating position is undermined by an irrational fear of triggering CDS, and reluctance to take a loss on governments’ Greek exposure. Banks may use this to go for a sweeter deal.

Postponing Greek pain will be costly for taxpayers

20 Oct 2011

To get Greece’s debt under control, the private sector and EU governments have to take a haircut. If a restructuring happened now, private bondholders would bear most of the losses, according to a Breakingviews calculation. But if the euro zone delays, taxpayers will suffer more.

Europe tempted to save Greek trauma for later

13 Oct 2011

Euro zone leaders may be tweaking the Greek debt swap to impose only marginally deeper losses than agreed in July. That won’t secure the country’s solvency, and defers the pain for both banks and Greece’s public creditors. But it keeps the pressure on Athens to reform.

Wall Street dealmakers get trampled by PIIGS

10 Oct 2011

The fear and uncertainty over Europe has sent the cost of U.S. credit skyward. By one closely watched gauge, junk bonds are yielding almost five percentage points more than they reasonably should. Given the bureaucratic dithering, bankers and buyout barons may be idle for a while.

Greek bonds should suffer real haircut, not trim

5 Oct 2011

Greek private bondholders are facing a bigger loss than the 21 percent agreed in July. Recent market turmoil alone could take it to near 40 percent. But if the euro zone wants to push through a more serious haircut, it must have its contagion fire hoses ready.

Greece can escape death spiral

3 Oct 2011

Athens will miss this year’s budget deficit targets, thanks to global weakness and domestic austerity. Foreign creditors will call for harsher reforms. That makes economic sense, but Greek politics are tough. A larger debt restructuring may be required to turn the country around.

Cyprus might wind up with two foreign bailouts

30 Sep 2011

The island state could soon get cheap loans from Russia, whose citizens hold large Cypriot bank deposits. That would help Cyprus’ anaemic economy recover from an explosion in July at its main power plant. But if Greece defaults, its banks may need a euro zone bailout too.

Bank funding tightens noose around Greek necks

27 Sep 2011

As the country nears default, deposits are flowing out of Greek banks again. Worse, collapsing government bond prices are making it harder to borrow from the ECB. That leaves lenders dependent on the Greek central bank – increasing the strain on struggling domestic finances.