Grekland Fas 1

Grekland Fas 2


EMU Spricker
EMU Collapse

EMU Start page

Grekland Fas 3

Euron efter Greklands "räddning" den 21 februari 2012

Rolf Englund blog om Grekland

We on the part of the IMF have made a major concession - we had argued that these debt-relief measures should be approved up front
and we have agreed that they will be approved at the end of the program,” said IMF Director of European Department Poul Thomsen,
Bloomberg 25 May 2016

The IMF and calling Berlin’s bluff over Greece
Wolfgang Münchau, FT 22 May 2016

IMF insists on debt relief, but Germany resists.

Germany are trapped in the lie that Greece is solvent, which is what their own backbenchers were told.
Without that lie, Greece would no longer be a eurozone member.

But the lie cannot be sustained.
IMF insistence on debt relief is what could expose this lie.

If Europe wants to continue to ‘extend and pretend’ so be it. But it should be with their own money

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Christine Lagarde letter to Eurozone finance ministers demands:
drop all the talk about new austerity measures and quickly agree a plan for debt relief
so that a deal can be met before a possible Greek default in July.
Peter Spiegel, FT Alphaville 6 May 2016

Greece faces more than 10 billion euros of debt repayments in June and July
which may strain its finances
Bloomberg 4 April 2016

Juncker: Greece is and will irreversibly remain a member of the euro area
BBC, August 14, 2015

My criticism of eurozone policy towards Greece is not the harshness of the adjustment
but its fundamental macroeconomic illiteracy.

Wolfgang Münchau, July 21, 2013

Martin Wolf:
There are no /Greek/ government deficits to finance consumption (or almost none).
So money would be used to pay interest and amounts due
Rolf Englund blog 9 July 2015

Nobody was forced to lend to Greece.
Initially, private lenders were happy to lend to the Greek government on much the same terms as to the German government.
Then, in 2010, it became clear the money would not be repaid.
Rather than agree to the write-off that was needed, governments (and the International Monetary Fund)
decided to bail out the private creditors by refinancing Greece.

Martin Wolf, FT 21 April 2015

Greek PM Alexis Tsipras: "We do not need an agreement. We need a solution"
BBC 5 June 2015

"For a small, open economy like Cyprus,
Euro adoption provides protection from international financial turmoil."
18/01/2008, Trichet

Keep Talking Greece - Greek News in English, Blog


IMF demands debt relief as price for involvement in Greek bail-out
Telegraph 14 January 2016

IMF remained cool over the prospect of providing more financial aid to Greece,
insisting its support was still conditional on the EU granting Greece substantial debt relief.
"In addition to a comprehensive policy package, Greece also requires debt relief from European partners," said IMF spokesman Gerry Rice.

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Greece's creditor powers have delayed talks over reducing the country's debt mountain
for fear of emboldening anti-austerity forces in the southern Mediterranean, its finance minister has claimed.
Telegraph 10 November 2015

Euclid Tsakalotos said EU lenders would not discuss the question of Greece's debt burden, which stands at 200pc of GDP, until after the Spanish elections are held in the new year.

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IMF could now see its involvement when its Greek programme ends in March 2016.
In debt sustainability analysis carried out by body, it has suggested Greece may need a full moratorium on payments for 30 years to finally end its reliance on international rescues.
Telegraph 1 October 2015

Grekiska banker skyldiga 1.000 miljarder
Detta diagram fann jag i en artikel av Marin Wolf i Financial Times.
Rolf Englund blog 2015-12-23

Bank resolution will become more complicated after January 1, when new eurozone rules will force depositors to face the costs of rescue programmes.
Under the EU’s Bank Recovery and Resolution Directive (BRRD),
shareholders and depositors will have to take a hit worth 8pc of their total liabilities before lenders receive official sector aid.
Telegraph 19 Sep 2015

Greece could struggle to win German support for its third bailout programme after
IMF confirmed last night that it was not yet prepared to put any cash into the deal.
The Times, August 12 2015

"The International Monetary Fund... is throwing up its hands collectively despairing at a programme that is simply founded on unsustainable debt...
and yet this is a programme that everybody is working towards implementing."
He added: "Ask anyone who knows anything about Greece's finances and they will tell you this deal is not going to work,"
BBC 12 August 2015

Bernanke Isn’t Serious
His latest on Greece and the euro suggests that the deeper problems lie not in Greek fecklessness
but in the refusal of the core — basically Germany — to allow either monetary or fiscal policies that would offset the downdraft from austerity in the periphery.
He even questions the sacred status of “structural reform”
Paul Krugman 17 July 2015

When the French finance minister Mr Sapin arrived in Brussels at midday, he received a shock:
Wolfgang Schäuble, the German finance minister, was armed with a one-page paper advocating
a Greek “timeout from the eurozone” for “at least the next five years”

if Athens did not accept the bloc’s exacting conditions for a new bailout.
FT 17 July 2015

“The eurozone is going through a war of religion with a northern Europe that’s Calvinist and that doesn’t want to forgive the sinners,
and a Catholic Europe in the south that wants to turn the page,” said Emmanuel Macron, the French economy minister and former Rothschild banker.

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Om man ger ett treårigt lån till Grekland på t ex 100 miljarder euro,
skall man då bli förvånad om Grekland efter tre år kommer tillbaka och vill låna 100 miljarder igen
så att de kan lösa det förfallande lånet?
Rolf Englund blog 9 juli 2015

So why don't we have a major crisis in Turkey and why is Turkey not on the brink of default when neighboring Greece is?
The answer is simple - It's the exchange rate exchange rate regime stupid!
The Market monetarist, 7 July 2015

Euron förvärrar den grekiska krisen
SvD-ledare signerad Ivar Arpi, 6 juli 2015

At the end of the day, the central issue behind the Greek crisis hasn’t changed: it is still, ultimately, a question of who, picks up the bill.
If everyone avoids their share, the result is unfortunate.
If, as with Germany in 1990, everyone accepts their share, the result is tranquillity.
Germans, however, wanted to be reunited. It is still far from obvious that the nations of Europe feel the same way about each other.
Stephen King, HSBC’s Chief Global Economist and author of When the Money Runs Out, FT 6 July 2015

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Stephen King at IntCom

Om greker flyttar sina pengar från grekiska till tyska banker, stiger då Greklands skulder?
Rolf Englund blog 2015-07-06

Därför avgår Varoufakis
Rolf Englund blog 2015-07-06

How Merkel Failed Greece and Europe
Der Spiegel 3 July 2015

IMF admits: we failed to realise the damage austerity would do to Greece
Guardian, 5 June 2015

Greece needs €60bn in new aid, says IMF
Financaial Times 2 Juky 2015

Dear Mr Tsipras,
You should not be reluctant to leave the euro.
Even if you somehow manage to cobble together a deal with the creditors, this would not solve your country’s crisis.
Roger Bootle 21 June 2015

You may recall that your country’s situation was closely examined in a report, lead-authored by me, which won the 2012 Wolfson Prize.
My advice builds on that report. I have ten key points:
I realise that your government is strapped for cash and you will not be wanting to fork out for expensive consultancy.
(Did you not employ Goldman Sachs to ease your passage into the euro? That must have cost a pretty penny.)

But you can download
our report for free from the Capital Economics website.

They are obsessed with the financial problem, i.e. with getting their money back.
But your fellow Greeks’ plight derives from your economy’s catastrophic loss of output.
Even if Greece is granted a significant amount of debt forgiveness, this would do next to nothing to bring an economic recovery.

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Mario Dragi at Golddman Sachs

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The spectacle is astonishing.
The European Central Bank, the EMU bail-out fund, and the International Monetary Fund, among others,
are lashing out in fury against an elected government that refuses to do what it is told.

They entirely duck their own responsibility for five years of policy blunders that have led to this impasse.
Ambrose Evans-Pritchard 19 June 2015

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Greece has nothing to lose by saying no to creditors
If it were to default on its official-sector debt, France and Germany stand to forfeit €160bn
Wolfgang Münchau, FT June 14, 2015

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Most people also understand that the Greek debate is not just about Greece but also about whether or not several other countries
— Spain, Portugal and Italy among them, and perhaps even France — will also have to restructure their debts with partial debt forgiveness.
What few people realize, however, is these countries have effectively already done so once.
Michael Pettis February 25, 2015

It is Europe, as much as Greece, which is opposing a settlement
IMF in an awkward position, because its doubts on the sustainability of Greece's debts cut two ways.
Either Greece, burdened with massive unemployment, would have to raise taxes and cut public spending further;
or some of its debt would have to be written down.
Bloomberg editorial, 12 June 2015

IMF is also frustrated that the European side has been unwilling to address the issue of Greece’s debt pile seriously.
According to the IMF’s calculations, putting the Greek economy on a sustainable path now requires
— at the very least — an extension of the maturities on Greece’s outstanding debts.
But European officials, wary of public opinion, have been reluctant to discuss even that.
FT June 11, 2015

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IMF åker hem därför att de är missnöjda med EU?
Rolf Englund blog 11 June 2015

I vastly overestimated the risk of /Euro/ breakup, because I got the political economy wrong
— I did not realize just how willing euro elites would be to impose vast suffering in the name of staying in.
Relatedly, I didn’t realize how easy it would be to spin a modest upturn after years of horror as success.
Paul Krugman, NYT 10 June 2015

Bildt, Mona, Ingvar Carlsson och krisen i Grekland
Rolf Englund blog 7 juni 2015

Saying no would be to plunge a whole financial system into chaos
The ECB reportedly provided extra liquidity to the Greek economy on Wednesday
upped its emergency liquidity assistance (ELA) from €80.7bn to €83bn,
a move that could keep the domestic economy afloat as Greeks continue to pull their cash from the country.
Telegraph 10 June 2015

Greek Banks On Verge Of Total Collapse:
Bank Run Surges "Massively" As Depositors Yank €700 Million Today Alone
Tyler Durden, zerohedge, 5 June 2015

Att på den gemensamma marknadens grund bygga en fullt fungerande ekonomisk och monetär union
har visat sig svårare än vad många insett

Carl Bildt, DN Debatt 23 juli 2012

Själv röstade jag ”ja” till att Sverige skulle gå med i valutaunionen vid folkomröstningen 2003
Jag har svårt att tro på idén om en långtgående centralisering av finanspolitiken
Alternativet är en partiell eller total upplösning av valutaunionen
jag tvivlar på att befolkningen i länder med statsfinansiella problem kommer att acceptera förmynderi och bestraffning beslutade av politiker i andra länder
Assar Lindbeck, DN Debatt 17 juli 2012

Germany and Greece’s other creditors continue to demand that Greece sign on to a program
that has proven to be a failure, and that few economists ever thought could, would, or should be implemented.
Joseph Stiglitz, Project Syndicate 5 June 2015

Greek PM Alexis Tsipras: "We do not need an agreement. We need a solution"
BBC 5 June 2015

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IMF has betrayed its mission in Greece, captive to EMU creditors
The IMF’s Original Sin in Greece was to let Dominique Strauss-Kahn hijack the institution
to save Europe's banks and the euro when the crisis erupted, dooming Greece to disaster.
Ambrose Evans-Pritchard, 5 June 2015

The IMF remains sceptical about Greece’s ability to meet the ambitious budget surplus targets
and continues to seek assurances that eurozone governments would agree to restructure Greek debt
— mostly now held by EU creditors — if a credible reform programme is not implemented.
FT 2 June 2015

Will the ECB play its trump card over Greece's future?
So if the ECB's governing council took the view that the Greek banks were not solvent
it would have to tell the Bank of Greece to pull the plug.

Would they?
BBC 2 June 2015

It’s time for Greece to put itself out of its misery.
It must stop hoping for a miracle, default on its debts and exit the euro.
Allister Heath, Telegraph 1 June 2015

Ideally, the Greek government would choose to press the Grexit button itself. But if it decides instead to cling on indefinitely, the rest of the eurozone should find a way of forcing it out of the single currency as soon as possible.
That would go against the EU’s imperialistic mindset, for sure, and would violate the infamous acquis communautaire rule:
the view that EU integration should never be allowed to be reversed in any area and in any country.

But it’s the only way to end the current nonsense, and the only hope for a country that has been suffering horrendously for years.

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Sleepwalking into the Abyss

European Commission chief Jean-Claude Juncker meanwhile has favoured keeing the country in the euro at all costs,
consistently warning against the fall-out from a Greek exit.
"Anyone who doesn’t see there is a humanitarian crisis in Greece is deaf and blind to what is happening there,"
Mr Juncker told a German newspaper on Monday.

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The top-level huddle lasted past midnight Tuesday morning at Germany’s government headquarters with Chancellor Angela Merkel, IMF chief Christine Lagarde, European Central Bank President Mario Draghi, French President Francois Hollande and European Commission President Jean-Claude Juncker in attendance.
The goal was to hammer out an offer that Greece could consider in coming days, according to two people familiar with the plan.

After Merkel left, her office put out a statement saying the five leaders “agreed that work must now be continued with greater intensity”
and that “they have been in closest contact in recent days and want to remain so in the coming days, both among themselves and naturally also with the Greek government.”

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That's the theory of Hans Werner Sinn, one of the German government's economic advisers.
"The Greek government is driving up the costs of Plan B for the other side, by allowing capital flight by its citizens.
If it so chose, the government could contain this trend with a more conciliatory approach, or stop it outright with the introduction of capital controls.

But doing so would weaken its negotiating position, and that is not an option ... private capital is being turned into public capital.

Basically, Greek citizens take out loans from local banks, funded largely by the Greek central bank, which acquires funds through the European Central Bank’s emergency liquidity assistance (ELA) scheme. They then transfer the money to other countries to purchase foreign assets (or redeem their debts), draining liquidity from their country’s banks."

Plan A and Plan B

Deposit outflows from Greek banks accelerated this week,
with about €800m withdrawn on Wednesday and Thursday alone
FT 29 May 2015

A First-Hand Account Of The Greek Bank Run
by Tom Winnifrith of Share Prophets, via zerohedge

“The Greek government would do well to act quickly because it is five to midnight for the Greek banks,”
Andreas Dombret, an ECB Supervisory Board member, said in an interview with Bild Zeitung published Monday.

Tsipras might seek the intervention of German Chancellor Angela Merkel and French President Francois Hollande.
The three leaders are scheduled to hold a call on Sunday evening

Defiant Tsipras threatens to detonate European crisis rather than yield to creditor "monstrosity"
Ambrose Evans-Pritchard 31 May 2015

Writing for Le Monde in a tone of furious defiance after the latest set of talks reached an impasse, Mr Tsipras said the eurozone's dominant players were by degrees bringing about the "complete abolition of democracy in Europe" and were ushering in a technocratic monstrosity with powers to subjugate states that refuse to accept the "doctrines of extreme neoliberalism".

"For those countries that refuse to bow to the new authority, the solution will be simple: Harsh punishment. Judging from the present circumstances, it appears that this new European power is being constructed, with Greece being the first victim," he said.

Ingen fara, fattas bara
The European Central Bank Wednesday left the level of emergency cash available to Greek banks unchanged from a week ago at 80.2 billion euros /743 miljarder SEK
Greek lenders still have a liquidity buffer of about 3 billion euros
Bloomberg onsdag 27 maj 2015

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Mohamed A. El-Erian:
A significant amount of potentially unpayable Greek debt has been transferred from private creditors
to public balance sheets underpinned by European taxpayers.

via Rolf Englund blog 25 maj 2015

The admission that the euro was a mistake should not be confused with a desire to dissolve it. That would be even more catastrophic.
It is merely a recognition that we are trapped in a dysfunctional monetary system.
Enlargement and the euro are two big mistakes that ruined Europe
Wolfgang Münchau FT 1 November 2015

I was among those who supported monetary union at the time of its introduction.

Advocates of the euro at the time came from two different groups, who struck a Faustian Pact.

Members of the first group believed the euro as constructed would fail, and hoped it would somehow be fixed.

The others thought the system would stay rigid, and bend the economies of its members into a new shape.

My quarrel is with the speed of accession, and the criteria that aspiring members have to meet.
Just as countries have maximum absorption capacities for migrants, the EU has a maximum absorption capacity for new members.
I have no idea what that number is in any given time period, but it surely is not 13 members in a single decade.

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Wolfgang Münchau

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The eurozone countries must accept some economic truths
— all expressed accurately, albeit not diplomatically — by Yanis Varoufakis, Greek finance minister.
Wolfgang Münchau, FT 17 May 2015

They should begin by recognising that austerity was an unqualified disaster.

They should also think differently about debt sustainability.
When they drew up the latest Greek loan programme in 2012, together with the International Monetary Fund, they first calculated the outstanding debt,
then made some wildly optimistic assumptions about growth, and then calculated the fiscal surpluses needed for the country to pay down that debt.

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Europe's Crisis and America's Economic Future

"The strong do as they can and the weak suffer what they must." —Thucydides

Europe’s leaders decided to create a monetary union of 18 nations without control of their own money, without democratic accountability, and without a government to support the Central Bank. This bizarre economic super-power was equipped with none of the shock absorbers necessary to contain a financial crisis, while its design ensured that, when it came, the crisis would be massive. When disaster hit in 2009, Europe turned against itself,
humiliating millions of innocent citizens, driving populations to despair, and buttressing a form of bigotry unseen since the Second World War.

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Greece's onerous obligations to the IMF, the European Central Bank and European governments can be traced back to April 2010,
when they made a fateful mistake. Instead of allowing Greece to default on its insurmountable debts to private creditors,
they chose to lend it the money to pay in full.
Ashoka Mody, Bruegel 21st April 2015

At the time, many called for immediately “restructuring” of privately-held debt, thus imposing losses on the banks and investors who had lent money to Greece.
Among them were several members of the IMF’s Board and Karl Otto Pohl, a former president of the Bundesbank and a key architect of the euro.

The IMF and European authorities responded that restructuring would cause global financial mayhem.

As Pohl candidly noted, that was merely a cover for bailing out German and French banks, which had been among the largest enablers of Greek profligacy.

The IMF's big Greek mistake
Ashoka Mody, Bruegel 21st April 2015

- Den stora risken var att Grekland skulle utlösa en kris i italienska, franska och tyska banker.
Nu finns i praktiken en EU-garanti för de utestående grekiska statsobligationerna.
Anders Borg, TT februari 2012

Nobody was forced to lend to Greece.
Initially, private lenders were happy to lend to the Greek government on much the same terms as to the German government.
Then, in 2010, it became clear the money would not be repaid.
Rather than agree to the write-off that was needed, governments (and the International Monetary Fund)
decided to bail out the private creditors by refinancing Greece.

Martin Wolf, FT 21 April 2015

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Juncker: ‘There will be no default’
Politico 20 april 2015

He declined to elaborate on the nightmare scenarios he sees potentially unfolding but warned that the failure to keep Greece afloat would “lead us to consequences that people don’t know the amplitude about.”
“We are prepared for all kinds of events but I am excluding at 100 percent this Grexit, or Greek exit,” Juncker said. “There will be no default.”

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Jean-Claude Juncker

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"Default necessary but Grexit is not"
- "A Greek default must go the whole way and leave the euro"

Wolfgang Münchau and Roger Bootle 19 April 2015

Why Europe Needs to Save Greece
Anders Borg, Project Syndicate 12april 2015

Barry Eichengreen: French and German banks have been able to sell their holdings of Greek government bonds, largely to the ECB,
which has acted as bond purchaser of last resort.
via Rolf Englund blog med länk till Anders Borg om detta

Accidental exit from the eurozone is quite likely — not because Greece or its partners want it
Exit would transform the eurozone from an irrevocable currency union into a regime of hard exchange-rate pegs.
That would be the worst of both worlds: neither as credible as a union nor as flexible as floating rates.

Martin Wolf, FT 31 March 2015

Greek and German leaders meet amid cash shortage fears
BBC 23 mars 2015

Mr Tsipras has reportedly already warned Mrs Merkel Greece will not meet imminent debt payments without new aid.

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It is a sign of low expectations in the handling of the Greek debt crisis
when a deal to keep the country from chaos for four months at the most and only 72 hours at the least
is hailed as a great breakthrough.
FT View 22 February 2015

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I have been pro-EU all my adult life and a proponent of monetary union,
but it is increasingly hard to argue the case for a union that behaves in this manner.

I always felt that euroscepticism was an irrational gut instinct.
But today there exist perfectly rational reasons to op­pose membership both of the eurozone and the EU itself.
Wolfgang Münchau, Financial Times, March 1, 2015

The economic equivalent of a ceasefire agreement is a debt rollover of an insolvent state. In Europe, we have had both in the past three weeks.
Europe’s political and economic diplomacy is focused solely on averting imminent catastrophe with no strategic purpose.

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I boken Vår framtid i Europa, uttalade jag mig, i maj 1971, för EEC och mot eurons föregångare Werner-planen.

EMU:s vacklande Ja-sägare

On Friday, Greek depositors transferred more than €1bn of bank deposits abroad.
The bank system would have collapsed within days without an extension.
And Athens had no plan for a euro exit.

It had no choice but to cut a deal in which the Germans prevailed on all the substantive issues.
Wolfgang Münchau, FT Sunday 22 February 2015

SPIEGEL: Mr. Varoufakis, you have referred to the European Union's bailout policy for Greece as "fiscal waterboarding." What exactly do you mean by that?
Varoufakis: For the past five years, Greece has been subjected to austerity measures that it cannot, under any circumstances, meet.
Our country is literally being pushed under water. Just before we suffer an actual cardiac arrest, we are granted a momentary respite.
Then we're pushed back under water, and the whole thing starts again.
My aim is to end this permanent terror of asphyxiation.
Der Spiegel 16 February 2015

SPIEGEL: Going back to your metaphor, who is the torturer that keeps pushing Greece under water?

Varoufakis: The troika of technocrats sent periodically to Greece to enforce an unenforceable program, technocrats representing the European Commission, the European Central Bank and the International Monetary Fund. I have nothing against these three institutions as such. However, they sent a cabal of technocrats to Greece to implement and monitor an entirely destructive program.

SPIEGEL: You are talking about officials who were sent there to do their job.

Varoufakis: And fine people they were. But they were sent to implement a program that caused great damage. We know there were also some pretty good guys in the CIA who took part in the waterboarding interrogations against their will and ended up in awful moral dilemmas.

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Weimar and Greece
Paul Krugman, 15 February 2015

Weimar, it’s never about the deflationary effects of the gold standard and austerity in 1930-32,
which is, you know, what brought you-know-who to power.

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More here

Eurozone must not allow Greece to become another Lehman Brothers
Greece and Germany have been playing a dangerous game of bluff over the future of the eurozone.
The Guardian 15 February 2015

It’s mid-September 2008. The seventh anniversary of the 9/11 terrorist attacks has just been marked.
And an American investment bank called Lehman Brothers is in trouble.

Lehman is not a particularly big bank. It is not thought to be systemically important for the rest of the global financial system.
So when the US authorities are unable to find a private-sector buyer for the stricken bank, they allow it go to the wall.

Everyone knows what happened next. Confidence that there would be no contagion from Lehman proved spectacularly misplaced.
Within days, the entire global financial system was brought to the brink of collapse. Banks were bailed out, credit dried up and the global economy entered a deep recession from which it has yet to fully recover.

Lehman is a cautionary tale for eurozone finance ministers when they sit down in Brussels on Monday to decide what to do about Greece. Like Lehman, Greece is considered small fry. It is not seen as systemically important. There is confidence that the single currency could cope with a Greek exit.
Well, perhaps it could.

Can Merkel et al really be sure that there will be no contagion effects from Greece, no sell-off in Italy, Spain and Portugal as the markets speculate on which country might be next?

Today’s calm can easily become tomorrow’s panic. The reason the financial markets could turn nasty is that the departure of Greece from the eurozone would mark the first time in more than half a century that the drive towards greater integration had been reversed.

Politically, this would be a big and dangerous moment.

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Är det tyskarna som är The Good Guys inom Euroland?
Rolf Englund 15 Februari 2015

The banks in Greece will not open on Monday, I guess
Rolf Englund, 14 February 2015

Greece: What are the options for its future?
Jamie Robertson BBC World News 12 February 2015

The Obama administration, Caroline Atkinson, the US deputy-national security adviser, has leapt to the defence of Greece,
warning Germany and Europe’s creditor powers that they must meet Athens half-way
to avert a potentially dangerous rupture and a euro break-up.
Ambrose Evans-Pritchard, 13 February 2015

Caroline Atkinson, the US deputy-national security adviser, said the eurozone authorities had imposed the main burden of adjustment on the weaker deficit states and should do more to accept their share of responsibility for the euro crisis. “They have asymmetric rules. They need to make it socially fairer,” she said.

“It is important for creditors to take into account that Greece has had a very sharp drop in incomes, real wages, and output as well as a big rise in unemployment,” she told a gathering at Chatham House in London.

Full text of Ambrose

Chatham House

Caroline Atkinson, Deputy Assistant to President Obama and Deputy National Security Advisor for International Economics
Chair: Sebastian Mallaby, Paul A. Volcker Senior Fellow in International Economics

Click for her speech

Doing the same thing and expecting different results, Einstein is supposed to have said, is the definition of insanity.
In the euro zone it is the ordinary line of business. The fundamental contours of the dispute have not changed.

The new Greek government, priced out of private markets, needs financial help from its euro-zone partners but insists it will leave behind the bail-outs and "fiscal waterboarding" to which its predecessor succumbed.
The euro zone, led but in this case not dominated by Germany, demands that the price of such help is an extension of the current Greek bail-out
The Economist, Friday 13th February 2015

All eyes now turn to a second Eurogroup meeting, on Monday. This probably represents the last chance for Greece to secure a bail-out extension, given that such a change would have to be approved by several euro-zone parliaments.

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Greek banks probably lost about 21 billion euros ($24 billion) of deposits in the past two months.
Bloomberg, 5 February 2015

Greek Finance Minister met ECB president.
Analysts said the ECB statement was a sign the meeting had not been a success.
ECB has effectively just given a green light for Greek bank runs
Rolf Englund 5 februari 2015

What is needed is not structural reform within Greece and Spain so much as structural reform of the eurozone’s design
and a fundamental rethinking of the policy frameworks that have resulted in the monetary union’s spectacularly bad performance.
Joseph E. Stiglitz, Project Syndicate 3 February 2015

Hittills har EU-ledarna varit beredda till nästan vad som helst för att förhindra att Grekland lämnar eurosamarbetet.
Man har varit rädd för att överträda ”ett kritstreck” som skulle kunna skapa ohanterliga förväntningar om att fler länder ska göra det.
Lars Calmfors DN 2 februari 2015

Strategin innebar dels att kravet på åtstramningar blev större än om en statsbankrutt tillåtits, dels att åtstramningarna kom att ses som något utifrån påtvingat.

Därmed lyckades övriga euroländer med bedriften att ge hjälp som i stället kom att uppfattas som en orsak till problemen. Det kunde bara resultera i valframgångar för populistiska protestpartier på det sätt som skett.

Ett grekiskt utträde skulle förmodligen resultera i en kaosartad situation i landet med bankrusningar, en ny valuta som faller kraftigt i värde och hög inflation.
Kanske behövs en sådan demonstration för att vaccinera väljarna i andra euroländer med stora problem mot populistiska vänstersprång i den ekonomiska politiken.

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Lars Calmfors om EMU

Some eurozone policy makers seem to be confident that a Greek exit from the euro, hard or soft,
will no longer pose a threat to the other periphery countries.

They might be right; then again, back in 2008, US policy makers thought that the collapse of one investment house, Bear Stearns,
had prepared markets for the bankruptcy of another, Lehman Brothers.
We know how that turned out.
Kenneth Rogoff, Project Syndicate, 2 February 2015

First and foremost, the eurozone countries’ decision to admit Greece to the single currency in 2002 was woefully irresponsible, with French advocacy deserving much of the blame.
Back then, Greece conspicuously failed to meet a plethora of basic convergence criteria, owing to its massive debt and its relative economic and political backwardness.

Second, much of the financing for Greece’s debts came from German and French banks that earned huge profits by intermediating loans from their own countries and from Asia.
They poured this money into a fragile state whose fiscal credibility ultimately rested on being bailed out by other euro members.

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– Vi vet alla nu, och vi visste alla då, att Grekland fuskade med sin statistik
berättar Pascal Lamy, WTO-chefen som på nittiotalet var EU-kommissionens ordförande Jacques Delors högra hand
Teresa Küchler, SvD 29 februari 2012

EMU Collapse

The biggest threat is that the European Central Bank ceases to fund Greece's banks.
ECB may well feel obliged to turn off the tap, since right now it is only financing those banks
because the country is officially complying with the terms of its IMF and eurozone bailout
The moment that Greece was deemed not to be in compliance, it is difficult to see
how the ECB could continue to provide emergency liquidity assistance to Greek banks.
Robert Peston, BBC economics editor, 2 February 2015

The game is up. It’s time for Greece to leave the eurozone and move on
The stand-off between Greece and the rest of the eurozone will escalate,
neither side will blink and the country will default
Allister Heath, Telegraph 29 Jan 2015

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There is now a clear threat of Grexit.
In 2011-12 Mrs Merkel did not want Germany to be blamed for another European disaster,
and both northern creditors and southern debtors were nervous about the consequences
of a chaotic Greek exit for Europe’s banks and their economies.
The Economist, editorial, Jan 31st 2015

Greek Credit Risk Spikes, Default Probability Tops 70%
New Greek Finance Minister Yanis Varoufakis reality-exposing comments yesterday,
"the problem with the bailout is that it wasn’t really a bailout... it was an extend and pretend,
'it was a vicious cycle, a debt-deflationary trap, which destroyed our social economy."
zerohedge 28 January 2015

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The idea that the Greeks will run large fiscal surpluses for a generation,
to pay back money creditor governments used to rescue private lenders from their folly
is a delusion.
Just 11 per cent of the loans directly financed government activities.
Martin Wolf, FT January 27, 2015

The loans supplied by the eurozone and IMF amount to the huge sum of €226.7bn

But this went overwhelmingly not to benefiting Greeks but to avoiding the writedown of bad loans to the Greek government and Greek banks.

Just 11 per cent of the loans directly financed government activities.

Creditors have a moral responsibility to lend wisely. If they fail to do due diligence on their borrowers, they deserve what is going to happen.

In the case of Greece, the scale of the external deficits, in particular, were obvious. So, too, was the way the Greek state was run.

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Det är Greklands konstnadsläge/växelkurs, Stupid
Det är inte Greklands skulder som är huvudproblemet.
Det är kostnadsläget.
Rolf Englund 2015-01-27

Why aren't markets panicking about Greece?
Robert Peston, BBC economics editor, 26 January 2015

Greece's debt problem is worse today than it was when it was rescued.
To state the obvious, it is the collapse in the economy which has done the damage.

So just maybe, after Greeks have made a colossal and some would say pointless economic sacrifice,
Germany will allow a rescue that permits the country a fighting chance of crawling out from beneath its colossal debts.

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We discussed this several years ago - in a democracy, austerity will eventually fail at the ballot box.
The people will not tolerate 25% unemployment forever - with no hope in sight.
CalculatedRisk, 25 January 2015

Att den grekiska statsskulden måste skrivas ned, som Syriza kräver,
borde inte vara kontroversiellt. Den går ändå inte att betala.

DN-ledare 2015-01-24

Eurons livslögn: Grekland kommer att återbetala lånen på 2.088 miljarder kronor
Rolf Englund 2013-08-26

Governments that commit themselves to painful reforms, but receive no help from demand-side policies, will be discredited and then rejected.
The eurozone might soon find itself coping with populist governments of the left or right utterly opposed to the policies imposed upon them.
Martin Wolf, FT 22 January 2015

Two Greek banks have applied for emergency funding from the European Central Bank as a “precautionary measure”
against a possible run on deposits ahead of a critical general election on Jan 25, a senior Athens banker said on Friday.
FT 16 January 2015

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Here’s one road map for a Greek eurozone exit
One possible path was detailed by economist Roger Bootle, the plan won the 2012 Wolfson Economics Prize,
which was a contest for proposals on how to dismantle the eurozone.
MarketWatch Jan 7, 2015

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Greece exit
“In the short run, it would be Lehman Brothers squared,” Eichengreen warned.
Kenneth Rogoff, a former chief economist at the International Monetary Fund and a Harvard professor, said the euro “is a historic disaster.”
“I think there may be no way to end to euro crisis,” Feldstein said.
MarketWach 5 January 2015

A Greek exit would likely spark runs on Greek banks and the country’s stock market and end with the imposition of severe capital controls, said Barry Eichengreen
The exit would also spill into other countries as investors speculate about which might be next to leave the currency union, he said.

He predicted that European politicians would “swallow hard once again” and make the compromises necessary to keep Greece in the currency union.

Kenneth Rogoff, a former chief economist at the International Monetary Fund and a Harvard professor, said the euro “is a historic disaster.”
“It doesn’t mean it is easy to break up,” he said.

Martin Feldstein, a longtime critic of the euro project, said all the attempts to return Europe to healthy growth have failed.
“I think there may be no way to end to euro crisis,” Feldstein said.

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Om Grekland lämnar valutasamarbetet
Förutsättningarna för att hantera denna påfrestning är betydligt bättre än för några år sedan
menar tongivande ekonomer som SvD Näringsliv talat med 5 januari 2015

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This is going to be the year in which the eurozone will have its moment of truth.
Three scheduled elections — in Greece this month; in Portugal and in Spain in the second half of the year —
will tell us whether the EU’s approach to crisis resolution works politically or not.
Wolfgang Münchau FT January 4, 2015

Greece economic depression depth is similar in scale to the US depression in the 1930s, but without the subsequent recovery.

My preferred indicator for the continuing eurozone depression is not the rate of unemployment, but the rate of employment. The former does not capture the large number of disheartened people who have simply dropped out of the labour market altogether.

The Spanish employment rate fell from 66 per cent of the employment-age population to 56 per cent between 2007 and 2014.
In Greece that number is below 50 per cent.

With existing policies, Spain and Greece have no chance of reverting to normal levels of economic activity within a generation.

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Eurozone’s weakest link is the voters
The euro crisis is back.
The rise of anti-system parties threatens a currency that depends on consensus
Gideon Rachman, FT December 29, 2014

Investors seem to be betting that the people of Italy, Spain and France will peek at the chaos in Athens,
shudder—and stick to the austerity that Germany’s Angela Merkel has prescribed for them. But that seems too sanguine to this newspaper.
It is hard to believe that a Greek crisis will not unleash fresh ructions elsewhere in the euro zone
not least because some of Mrs Merkel’s medicine is patently doing more harm than good.
The Economist editorial 3 January 2015

There was a worrying echo this week of the Lehman crisis of September 2008.
Then the widespread assumption was that the global financial system was robust enough to cope with the failure of a single investment bank.

Now investors are putting their trust in the resilience of unemployment-plagued countries like France, whose president has record levels of unpopularity, and Italy, whose economy has shrunk in constant prices in the first 14 years of this century (even Greece’s GDP is higher now than it was in 1999).

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So desperate has their position become that Greeks may be about to vote for economic and political suicide
rather than tolerate any more of the medicine prescribed to them by Berlin and Brussels.
Jeremy Warner, Telegraph 29 Dec 2014

Policy makers remain wilfully blind to the reality that the debt problem is unresolved,
and that the eurozone’s outstanding public sector borrowings will never be repaid in full.

The West German economic miracle was launched from a clean balance sheet while the Allies remained heavily indebted.
John Plender, FT December 29, 2014

As a percentage of gross domestic product, government debt rose across the eurozone from 66 per cent in 2007 to 95 per cent in 2013 — with Greece, Italy, Portugal and Ireland all well above 100 per cent.

Central bank bond-buying is no panacea: the main effect is simply to raise asset prices, which benefits the rich. An uneven distribution of income and wealth thus makes it harder to galvanise the real economy.

Economists at the Bank for International Settlements, the central bankers’ bank, add that policy has exacerbated the problem because it has failed to lean against booms,
and has eased aggressively during busts, inducing a downward bias in interest rates and an upward bias in debt levels.
That, in turn, makes it harder to raise interest rates without damaging the economy, thereby creating a debt trap.

The logical way forward is debt forgiveness. Yet a moralistic perception of creditors as inherently virtuous and debtors as profligate sinners stands in the way
(no matter that such “profligates” as Spain and Ireland entered the crisis with government debt way below the German level). So, too, does a selective German historical memory.

The paradox of the German view on debt is that Germany has been the biggest developed world beneficiary of debt forgiveness in recent memory. In the postwar London Debt Agreement, German external debt was substantially written off or deferred. The West German economic miracle was thus launched from a clean balance sheet while the Allies remained heavily indebted.

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London Debt Agreement

John Plender

Eurons livslögn: Grekland kommer att återbetala lånen på 2.088 miljarder kronor
Rolf Englund blog 2013-08-26

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The spectre of Greece's exit from the single currency - or "Grexit" - once again.
Eurozone policymakers have consistently ruled out that possibility because they are wary of opening Pandora's box.
Linda Yueh, BBC Chief business correspondent, 29 December 2014

It may be unsurprising, since Greece has only just emerged from six years of recession; when it has been that long, it is really more of a depression.
The economy is more than 25% smaller now than in 2008, unemployment is around 25%, and roughly a quarter of households live in poverty.

Some 100,000 businesses have closed, and there are many who wonder what could get the economy going,
as borrowing costs (yields on 10 year government bonds) have climbed back to 8%, a level considered to be unaffordable.
Greece faced those levels when it first sought a rescue.

Eurozone policymakers have consistently ruled out that possibility /exit/ because they are wary of opening Pandora's box.
Their concern is if one weak country leaves the eurozone, then markets will pick off the next weakest one and so on.

Borrowing costs for those economies will rise, making it impossible for governments to finance themselves, and it becomes a self-fulfilling prophecy of sorts.

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Snap elections in Greece open the way for an anti-austerity government
and a cathartic showdown over the terms of euro membership.
Yields on 3-year Greek debt surged 185 basis points to 11.9pc
Ambrose Evans-Pritchard, 29 Dec 2014

German finance minister Wolfgang Schauble warned Greeks not to play with fire by pressing impossible demands. “Fresh elections won’t change Greece’s debt. Each new government must fulfil the contractual obligations of its predecessors. If Greece chooses another way, it’s going to be tough,” he said.

Sources close to Mr Tsipras say he is braced for a showdown with the ECB at any time and knows that loss of bank support would force Greece’s ejection from EMU in short order. Yet they say he intends to call the bluff of EU leaders, calculating that they have invested too much political capital in Greek bailouts to let the crisis spin out of control.

Contagion has been limited so far. Michael Hüther, head of the German Institute for Economics (IW), said spill-over effects no longer pose the same danger now that backstop machinery is in place. “Monetary union can handle a Greek exit,” he said.
Yields on Italian and Spanish debt spiked on Monday but remain blow levels earlier this month before the latest spasm of the Greek crisis began. “Athens is no longer the tail that can wag the Spanish and Italian dogs,” said sovereign bond strategist Nicholas Spiro.
“Everything hinges on the ECB. There will be no contagion long as the markets believe that the ECB will come out with all guns blazing and launch quantitative easing on a meaningful scale,
but they are deluding themselves because this is not going to happen and that is when the trouble will start,” he said.

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Nine charts showing why Greece has to leave the euro

Eurozone’s weakest link is the voters
The euro crisis is back.
The rise of anti-system parties threatens a currency that depends on consensus
Gideon Rachman, FT December 29, 2014

There is no chance whatsoever of Greece, or for that matter several other periphery Eurozone economies, repaying their debts.
Jeremy Warner, Telegraph 16 December 2014

For Greece, this would be the same with or without Mr Tsipras’s unhinged political agenda.

Only the creditor nations of the north refuse to acknowledge this reality.

The current set-up is completely unsustainable.

New research by the credit rating agency Standard & Poor’s lends strong support to this contention.

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It beggars belief that Athens will ever repay all its debts.
Tony Barber, FT December 12, 2014

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The euro is still vulnerable, and Greece is not the only problem
Even if the immediate threat of break-up has receded, the longer-term threat to the single currency has, if anything, increased.
The Economist, Dec 13th 2014 print

The euro zone seems to be trapped in a cycle of slow growth, high unemployment and dangerously low inflation.

Mr Draghi would like to respond to this with full-blown quantitative easing,
but he is running into fierce opposition from German and other like-minded ECB council members (see article).

Fiscal expansion is similarly blocked by Germany’s unyielding insistence on strict budgetary discipline.
And forcing structural reforms through the two sickliest core euro countries, Italy and France, remains an agonisingly slow business.

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The euro is in greater peril today than at the height of the crisis
Insurrectional electorates more likely to vote for a new generation of leaders
Wolfgang Münchau, FT November 9, 2014

The yield on Greece’s 10-year bonds – the benchmark rate at which Athens can borrow money from financial markets –
had moved from 7 per cent to almost 9 per cent.
Financial Times 16 October 2014

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Remember Europe?
You know — the place with the common currency that almost fell apart two years ago because of trouble in Greece,
prolonged recession and fighting among political leaders over the best way out of the mess.
Until a few days ago, international investors seemed to have forgotten that there was ever anything wrong on the Continent,
as they lined up to buy bonds from Spain, Italy and even Greece
New York Times 16 October 2014

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Why eurozone should monitor US Supreme Court decision on Argentina
Can bondholders demand full repayment of what they lent to a country even when others have settled for a haircut?
Linda Yueh, BBC Chief business correspondent, June 2014

Argentina's 2002 default of around $100bn was the largest at the time, until Greece's around 200bn euros debt restructuring.

Most of Greece's bonds didn't have those clauses. In other words, some creditors like the European Central Bank can be accorded special treatment, which arguably helped politically - since the central bank likely didn't take losses like private creditors.

But, there was a minority of Greek bondholders that did, since such clauses tend to exist for bonds governed by English or Swiss law.

There are other complications as to whether a debt restructuring can really be "voluntary" if the alternative is no payment at all.

Whether it's voluntary or not matters since it could trigger payout on credit default swaps (CDS), which act as a form of insurance against government default.

It would constitute a technical default and have the impact as if debt was not paid, which tends to make a country a pariah on international bond markets for years. It's essentially what every country seeks to avoid.

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Clinging to my naive faith in the integrity of contracts, I assume that ISDA will soon trigger the credit default swaps on Greek debt.
This will happen once Athens activates its retroactive law to coerce bondholders (the Collective Action Clauses).
Here is a chart from Paulo Batori at Morgan Stanley on winners and losers. It does include the hedge funds.
Ambrose Evans-Pritchard, 7 march 2012

Greek default looms as voluntary debt deal looks set to fail
Louise Armitstead, Telegraph, 3 Mar 2012


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This month marks the fourth anniversary of the May 2010 financial rescue of Greece.
Clearly, the supposed experts who predicted the imminent disintegration of the eurozone have been proved wrong.
But it is equally likely that those now declaring that the crisis is over will be proved wrong as well.
Barry Eichengreen, Project Syndicate, 12 May 2014

Europe’s Plan Z - The Grexit gamble
Part two of Peter Spiegel’s series from behind the scenes on how the euro was saved
"no single Plan Z document was ever compiled and no emails were exchanged between participants"
Financial Times 14 May 2014

Greece has reached a deal with international lenders that will allow it to unlock a much-needed €10bn tranche of bailout aid.
The €10bn payment will cover a similar amount of sovereign bond repayments coming due in May
FT 18 March 2014

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- Den stora risken var att Grekland skulle utlösa en kris i italienska, franska och tyska banker.
Nu finns i praktiken en EU-garanti för de utestående grekiska statsobligationerna.
Anders Borg, TT, SvD papper 22 februari 2012

EU lånar ut ytterligare 10 miljarder euro (89 miljarder kronor) till Grekland.
Grekland löser in statsobligationer för samma belopp
Då blir dom banker glada som har varit dumma nog att köpa grekiska statspapper.
Rolf Englund blog 21 mars 2014

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Yanis Varoufakis:
What You Should Know About Greece’s Present State of Affairs
Greece has been, and remains, a failed social economy - a failed nation-state
naked capitalism, March 2, 2014

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– Vi vet alla nu, och vi visste alla då, att Grekland fuskade med sin statistik
berättar Pascal Lamy, WTO-chefen som på nittiotalet var EU-kommissionens ordförande Jacques Delors högra hand
Teresa Küchler, SvD 29 februari 2012

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Members of a European Parliament committee investigating the role of the troika
call to replace this “interim” institution by a “more democratically accountable and transparent” inspection process
“We need more transparency, more democratic legitimacy,” Othmar Karas, the conservative Austrian MEP leading the inquiry.
“All instruments of the EU must be based on community law,” he added.
His colleague, the French Socialist MEP Liem Hoang Ngoc, was more categorical, declaring that there was “no legal basis for the actions of the troika.”
Eurointelligence 31 January 2014

Hoang Ngoc emphasised the need for debt relief if Greece is to emerge from a spiral of austerity.
“Without a debt restructuring, Greece won’t have the room to manoeuvre for less austerity,” he said,
noting that a restructuring could take the form of extended maturities or lower interest rates on loans.



Greece may need a third aid package as soon as next year,
Klaus Regling, the head of the European Stability Mechanism (ESM) permanent bailout fund is quoted as saying
Greece might not be in a condition to raise money by selling sovereign debt on the open market in 2014.
Der Spiegel, October 04, 2013

So far, Greece has received two large bailouts.

The first aid package included €110 billion, the second bailout package, which was agreed to in 2012 and came to a total value of €164 billion.

Matters continue to worsen in Greece. In the second quarter of 2013, the already ailing Greek economy contracted by 4.6 percent,
and unemployment now stands at a record 27.6 percent.

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'Greece Can Never Pay Back Its Debt'
George Soros, Der Spiegel, 7 October 2013

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Eurons livslögn: Grekland kommer att återbetala lånen på 2.088 miljarder kronor
Rolf Englund blog 2013-08-26

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Roubini about Greece
RGE vs. consensus: We remain more cautious than consensus on Greece’s prospects for three reasons: First, we have a more negative view on eurozone (EZ) growth; second, we argue that political risk and fiscal policy uncertainty are higher than consensus believes today; finally,
private demand will remain depressed for a long period,
as households have already run down their assets and have few resources left in reserve.
Roubini Monitor Spotlight, 1 October 2013

Angela Merkel: Greece should never have been allowed in the euro

Ms Merkel’s finance minister, Wolfgang Schaeuble, admitted last month that Greece will need another bailout, raising fears among Germans that they will have to foot the bill.
On Sunday, the Chancellor refused to rule out another aid package but dismissed debt haircuts, which would hurt Germany as the country with the largest exposure to Greece.
“I am expressly warning against a haircut,” she said. “It could create a domino effect of uncertainty ... in the eurozone.”

Greece moved to the center of the German election campaign four weeks before election day,
as the SPD escalates its attacks over Merkel’s crisis response
With the European debt crisis in its fourth year, Merkel’s party allies have begun to address openly the prospect of a fresh Greek aid package.
Bloomberg, August 25, 2013

Merkel's Conservatives Split on Greek Aid
Schäuble, a senior member of the CDU, said that Athens would need more financial assistance
beyond the €230 billion it has already been promised to keep it solvent through the end of 2014.
Der Spiegel, 22 August 2013

Fotnot: 230 miljarder euro, i lån, är cirka 2,000 miljarder svenska kronor, för att Grekland skall klara sig till slutet av 2014.
Sedan skall pengarna återbetalas, någon gång, eller skrivas av.

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Greece Needs a 21st Century Marshall Plan
It is clear by now that the European Union’s policies in Greece have failed.
Dimitri B. Papadimitriou, Bloomberg, Aug 12, 2013

At their White House meeting last week, U.S. President Barack Obama assured Greek Prime Minister Antonis Samaras of his support as Greece prepares for talks with creditors on additional debt relief amid record-high unemployment.
The U.S. should also endorse a new blueprint for recovery based on one of the most successful economic assistance programs of the modern era: the Marshall Plan.

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Beträffande tilltron till den svenska växelkurspolitiken vill jag erinra om att den privata räntebärande nettoskulden till utlandet den 30 juni 1990 var 473 miljarder, en ökning med mer än 200 miljarder på ett år.

Är då 473 miljarder i privat utlandsskuld mycket eller litet?
Jag håller just på med en bok om det svenska biståndet till u-länderna - Bistånd med slagsida - och råkade därvid på några uppgifter om Marshall-hjälpen.
Omräknat till dagens priser och växelkurser uppgick Marshall-hjälpen till 382 miljarder svenska kronor.

Den privata lånestocken är således cirka 100 miljarder större än Marshall-hjälpen.

Rolf Englund, Nationalekonomiska föreningen, 16 januari 1991

Marshall-hjälpen och nästa svenska devalvering
Mycket förtroligt Eyes Only
Sänt till Carl Bildt 90-11-02
Utlagt på Internet 96-10-29
Rolf Englund

The IMF’s latest report on Greece lays bares the country’s grotesque situation, and exposes the charade of EMU policy. It states that public debt will reach 176pc of GDP this year.
“The commitment of Greece’s European partners to provide debt relief as needed to keep debt on the programmed path remains, therefore, a critical part of the program,” said the Fund.
All EMU “solidarity” so far has been in the form of loans, adding further debt. There have been no grants or transfers. The moment that this starts to cost real money, we will enter a new phase of the EMU saga.
This cannot be countenanced before the German elections in September, and for the sake of appearances it cannot be carried out immediately afterwards either. That would be too cynical.
Ambrose Evans-Pritchard, August 1st, 2013

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Elva latinamerikanska länder, med Brasilien i täten, sågar IMF:s fortsatta stöd till det konkursmässiga eurolandet Grekland.
Lånevillkoren uppfylls inte, anser ländernas regeringar, som avstod från att rösta när den senaste utbetalningen av grekiska nödlån godkändes.
Dagens Industri, 31 juli 2013

During the current calendar year, Greece's mountain of debt will grow by around €330 billion
The only thing left that can help Greece pull itself out of the crisis is a debt haircut by public creditors.
Whether one wants to call that step a haircut, debt forgiveness or a state bankruptcy is of secondary importance
Der Spiegel, July 18, 2013

The interest payments the Greek state has to send abroad are making the recession even worse, which in turn is causing debt levels to rise. How is Greece ever going to get itself out of this vicious circle?

2012 private creditors forgave a part of Greece's debt. But it was already clear at the time that it wouldn't go far enough.

In order to truly and sustainably help the country out, public creditors (e.g. the governments of countries like Germany) would also have to write off part of the money they lent to Greece.

Currently, two-thirds of Greece's bonds are held by public creditors abroad.

Whether one wants to call that step a haircut, debt forgiveness or a state bankruptcy is of secondary importance

The worst cannot be prevented -- it can only be delayed by repeatedly providing Greece with new loans and leading the people to believe that the sums given will someday be paid back. If need be, they can also just extend the period on the loans to future generations of politicians.
That's precisely the approach being taken by Schäuble and Chancellor Angela Merkel.

Federal elections in Germany take place on Monday, Sept. 22

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Indeed, German Finance Minister Wolfgang Schäuble ruled out such a possibility just last week.
Greece is expecting a second debt haircut from its European creditors following the German election,
the country's economy minister said on Tuesday. First, though, Athens must prove that it has done enough
to receive the next tranche of badly needed bailout money.
Der Spiegel, June 2, 2013

With German elections just three months away, Berlin is eager to avoid any talk about yet another debt haircut for ailing Greece.
Indeed, German Finance Minister Wolfgang Schäuble ruled out such a possibility just last week.
It is clear, he said, "that we aren't going to undertake such a debt reduction."

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Eurokrisen handlar om bankerna
Rolf Englund 26 april 2013

French and German banks reduced their exposures to these markets by some 30-40 percent
between mid-2011 and the third quarter of last year
David Lipton, First Deputy Managing Director IMF, April 25, 2013

Eurozone finance ministers reached a long-delayed 130 bn euro second bail-out for Greece early on Tuesday
after strong-arming private holders of Greek bonds to take even deeper losses than they had accepted last month.
Financial Times 21 February 2012

- Den stora risken var att Grekland skulle utlösa en kris i italienska, franska och tyska banker.
Nu finns i praktiken en EU-garanti för de utestående grekiska statsobligationerna.
Anders Borg, TT, 22 februari 2012

Grekpaketet handlar om bankstöd och imperiebyggande
Rolf Englund blog 10 maj 2010

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If Greek (and Portuguese and Irish, etc.) debt returned a modest premium (2-3%) over German or French debt, then the spread was worth it to the bank managers and shareholders. After all, the regulators had said there was no risk; it was easy money.
Even economists can figure out how to make money at a "modest spread" on 40 times leverage with no risk.
Just ask those clever guys at Long Term Capital.
If Greece were allowed to default, then what would that imply about other peripheral-country debt?
The word contagion slipped into the economic lexicon as Merkel and Sarkozy (and many other European leaders) openly worried that
if Greece were allowed (or forced) to exit the euro, the entire euro experiment might be called into question.
John Mauldin 25 January 2013

As I have written about at length, the European banking system is a systemic disaster. The regulators ENCOURAGED (there is no graphic strong enough to express the outrageousness of such a design) their banks to buy government debt and allowed them to leverage that debt by up to 40 times.

This was on the theory that no sovereign (European) government could actually default, so therefore there was no need to actually reserve capital against the possibility of a default.

And if Greek (and Portuguese and Irish, etc.) debt returned a modest premium (2-3%) over German or French debt, then the spread was worth it to the bank managers and shareholders.

After all, the regulators had said there was no risk; it was easy money.

Even economists can figure out how to make money at a "modest spread" on 40 times leverage with no risk. Just ask those clever guys at Long Term Capital.

And if the spread was 2%? Then back up the truck and give me some more. 100% on your capital per year with no risk? Where do I sign up?

And thus the EU found itself in a credit crisis when Greek debt started to rise in risk, having already been decimated by the subprime crisis. Someone finally noticed that Greece could not hope to pay off its debt.

However, German and French banks had so much Greek (and other peripheral-country) debt that if Greece defaulted they would be bankrupt.

That would of course force the respective governments to capitalize their banks to keep their countries afloat. But then that would call into question their own credit worthiness as we are talking a great deal of money.

And if Greece were allowed to default, then what would that imply about other peripheral-country debt? The word contagion slipped into the economic lexicon as Merkel and Sarkozy (and many other European leaders) openly worried that if Greece were allowed (or forced) to exit the euro, the entire euro experiment might be called into question.

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Long Term Capital

It all went wrong in 2010. The crisis in Greece was taken, wrongly, as a sign that all governments had better slash spending and deficits right away.

Austerity became the order of the day, and supposed experts who should have known better cheered the process on, while the warnings of some (but not enough) economists that austerity would derail recovery were ignored.
Paul Krugman, New York Times 6 January 2013

Interndevalvering (Ådals-metoden)

Acropolis Adieu med Mireille Mathieu och Angela Merkel
Rolf Englund blog 6 december 2012

Bloomberg News sued the ECB
The papers may illuminate the role the central bank played as Greece covered up its deficit for almost a decade
Han som då var chef för Greklands motsvarighet till Riksgälden, var den som talade hos SNS och förklarade att allt var på rätt väg, och som jag då skrattade åt helt ostentativt
Rolf Englund blog 28 november 2012

Läs mer här

Europe’s Plan C for Greece Is No Better Than Plans A or B
Bloomberg, Editors, Nov 28, 2012

Europe’s leaders have reached Plan C in their efforts to rescue Greece. Unfortunately, it lacks a crucial element also absent in Plans A and B: adequate debt relief.

The agreement between euro-area finance ministers and the International Monetary Fund is welcome and overdue. It provides much-needed support for a Greek government that has taken enormous political risks to meet the conditions for aid. It also puts an end to weeks of bickering between Europe and the IMF over how to cover Greece’s funding shortfall -- a delay that had threatened to undermine faith in the bailout program, even among Greeks who believe in making the changes and sacrifices demanded.

The deal, however, doesn’t do enough to address the biggest issue: a Greek government debt burden that, at about 170 percent of gross domestic product, remains unbearable under any reasonable scenario. The agreement assumes that Greece will largely grow its way out of the problem, reducing its debt to less than 110 percent of GDP by 2022 even as it endures the crushing austerity required to sustain a budget surplus of 4 percent of GDP. In other words, this is just the latest in a long line of stopgap measures to fend off the kind of disorderly default and euro exit that could trigger contagion in the much larger economies of Spain and Italy.

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In a characteristically outraged comment, Holger Steltzner writes in Frankfurter Allgemeine Zeitung that Wolfgang Schauble can no longer claim the rescue of Greece did not cost any money.
An interest moratorium constitutes a debt restructuring in all but name.
It makes no difference to the taxpayer whether he get less in terms of interest rates, in terms of repayment, or in terms of both.
Eurointelligence 28 november 2012

The illusionists keep on pretending that Greece could ever repay its debt. He also makes the point that the bond repurchasing programme is unlikely to succeed, as the market price is likely to be too low. The joker in all of this is the ECB, which will ultimately foot the entire bill through monetary financing – another taboo term like debt restructuring. He says it will be interesting to see whether Angela Merkel can really keep the lid on all of this until the elections.

Euro-zone finance ministers meeting in Brussels this week have been unable to reach an agreement with IMF
on how to ensure that Greece's debt load comes down to manageable levels.
Germany and other European countries continue to reject a new debt haircut.
The standoff could become dangerous.
Der Spiegel, 21 November 2012

Orsaken till Greklands depressionsliknande nedgång verkar att huvudsakligen bero på åtstramningspolitiken
Danne Nordling 20 november 2012

Det pågår en omorientering av de ekonomiska analyserna av Europas problem. Den förda åtstramningspolitiken börjar alltmer ifrågasättas. Ett exempel på detta är IMF med Christine Lagarde i spetsen.

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A visibly angered Mrs Lagarde, the managing director of the IMF, shook her head and rolled her eyes
at the announcement /by Jean-Claude Juncker, president of the Eurogroup/ that breaches the Washington-based fund’s condition that Greek debt must become sustainable by 2020.

“We clearly have different views,” she said.
Daily Telegraph och Financial Times 13 November 2012
Very nice pic

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Euroländer och ECB oense om skuldlättnader
Grekland ska den 16 november återbetala ett förfallande lån på 5 miljarder euro
och har inga pengar till detta om landet inte får ytterligare stöd.
WSJ och SvD Näringsliv 6 november 2012

Enligt källor till WSJ ska ECB vara berett att sälja sina grekiska statsobligationer för samma pris som de köptes för. Detta skulle ge Grekland lättnader på 8 miljarder euro, men det täcker bara till en liten del av Greklands finansieringsbehov. Enligt ECB-företrädare måste merparten av arbetet göras av Europas regeringar.

Detta upplägg skulle vidare kräva att euroländerna lånar mer pengar till Grekland för att landet ska kunna köpa tillbaka sina obligationer, vilket euroländerna tidigare har vägrat att göra.

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Plats för skratt om Grekland
New debt forecasts dash Greece hopes
The German bloc will have to take its bitter medicine in Greece
Financial Times och Ambrose, October 31st, 2012
Rolf Englund blog 31 oktober 2012

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Francois Hollande will travel to Berlin with leaders for crisis talks on Tuesday
after Germany said a Greek sovereign debt restructuring was “out of the question”
Louise Armitstead, Daily Telegraph Chief Business Correspondent, 6:59PM GMT 29 Oct 2012

On Monday, the French president met with Jim Yong Kim, head of the World Bank, and IMF chief Christine Lagarde, as well as leaders of the World Trade Organisation and the OECD, to discuss solutions for Greece, including a debt buy-back. The group will talk about the ideas with Ms Merkel on Tuesday.

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Greece's international creditors have proposed that the country receive another debt writedown,
this time from EU governments (OSI)
Fresh aid for Athens, they argue, has been inevitable for months,
but leaders have shied away from telling the truth.
Der Spiegel, 29 October 2012

SPIEGEL has learned that the troika of inspectors from the European Commission, European Central Bank and International Monetary Fund is proposing a further debt cut for Greece, in a move that would for the first time cost taxpayers money because public creditors, meaning EU governments, would be called on to write off a portion of their claims.

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With two weeks to go before the EU has to decide on how to fund Greece
Spiegel reports Merkel rejects OSI, but ready for a third Greek programme
though no OSI ahead of the 2013 elections
Eurointelligence 29 October 2012

Spiegel Online reports the chancellor cannot sell OSI to the Bundestag in an election year, while bankers fear a return of market chaos, as such a process would invariably coincide with a messy political process.

(Delaying OSI for another year, while possible, would significantly increase the risk of a major political backlash, as the Greek debt will have increased, and GDP decreased, by then. We continue to see that Greece will end up defaulting on all its debt – except that of the IMF, the ECB, and domestic residents. The political delay of OSI ensures that the eurozone crisis will continue for much longer than necessary. The purpose of a debt buyback programme is merely to signal action when there is none. Debt buybacks don’t work, as market prices adjust quickly.)

Spiegel Online

Germany was now ready to accept a two-year extension of the Greek programme,
but there would be no new money, leaving Greece itself to fund the gap –
something that is simply not going to happen.

Wolfgang Münchau, Financial Times, October 28, 2012

En av få vedertagna sanningar inom statsvetenskapen att demokratier inte går i krig med varandra, oavsett om de går samman i politiska unioner eller inte.
Den ”demokratiernas fred” som förutspåddes av Immanuel Kant har idag solitt stöd i forskningen.
Däremot hade Angela Merkel inte mötts av upplopp i Aten om det inte hade varit för euron.
Paulina Neuding, jurist och chefredaktör för det borgerliga samhällsmagasinet Neo, Kolumn SvD 20 oktober 2012

Anders Borg tror att Grekland kan komma att tvingas lämna eurozonen
– Skulle man lämna eurosamarbetet är det troligt att man får tillbaka sin konkurrenskraft
och då kanske Grekland kan komma på fötter vart efter.
– Det är en smärtsam och komplicerad väg
men det är svårt att se en alternativ väg som skulle kunna fungera.
Ekot 12 oktober 2012

Ur Metro 3 september 2012

Snipers, Commandos to Welcome Merkel in Greece
CNBC, 8 October 2012

Armageddon i Grekland den 18-19 Oktober:
How much more pain can the people take?
BBC via Rolf Englund blog

Grekland, Tyskland och IMF vid avgrundens rand
Rolf Engund blog 30 september 2012

The debate over whether the U.S.’s largest banks are too big is heating up.
Since the 2008 financial crisis, the perception has taken hold among some analysts and economists that certain U.S. institutions are too big to fail, meaning they would have to be bailed out to protect the financial system in the event of another calamity.
The continued downward spiral in Europe raises a similar question: Are some banks too big to save, meaning their collapse could dramatically worsen the euro crisis
(as happened in Ireland in the fall of 2008 and is happening now in Spain and Greece)?
Simon Johnson, who served as chief economist at the IMF in 2007 and 2008, Bloomberg 3 September 2012

Men hade det inte varit bra om Grekland i stället för att misskötas från Aten hade styrts från Bryssel?
Ett ett sådant system, med en gemensam finansminister för alla euroländer, skapar lika många problem som den löser.
Jag tänker inte enbart på det demokratiskt tvivelaktiga med ett sådant arrangemang, eller ens på svårigheten att
skapa legitimitet för nedskärningar av pensioner, skolor och sjukvård i Grekland beslutade av anonyma makthavare i Bryssel
Mats Persson,professor vid institutet för internationell ekonomi, Stockholms universitet, DN Debatt 19 juni 2012

De som fortfarande tror att eurokrisen handlar om lata greker som inte vill göra rätt för sig
bör titta närmare på det spanska exemplet. Eller det irländska.

Europa har slagit in på en kamikazekurs som ser ut att leda mot att euron bryts sönder.
/Spanien/ riskerar att dras ned i en negativ spiral som kan knäcka bank­systemet, orsaka en statsbankrutt
och leda till att Spanien lämnar den euro­peiska valutaunionen.
Peter Wolodarski, Dagens Nyheter 3 juni 2012

If the Greek people get their euros out of the system, then there is very little pain of exit.
With the banks and government insolvent, repudiating the debt and reintroducing the drachma is a winning strategy!
The fact that this is even possible is amazing. The Greeks have nothing to lose if they can keep their deposits in euros and exit!
David Zervos, managing director and chief market strategist of Jefferies and Company, via John Mauldin, 26 May 2012

Rumours – detailed by the bank of Tokyo Mitsubishi-UFJ – that a Greek exit is now imminent.
The bank said there was speculation that a “planned departure” would take place over the weekend of June 2 and 3
Telegraph 25 May 2012

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Levelling out competitiveness in the euro area will be costly
Greece must lower its real exchange rate, by cutting prices and wages.
This is proving a painful process.
Nice chart EMU Unit Labour Cost 1999-2013
The Economist online May 22nd 2012

Grekland besparades både kommunismen och uppgörelsen med den;
landet hamnade efter 1945 på “rätt” sida.

Richard Swartz, kolumn DN 26 maj 2012

Glömt är också att Grekland efter kriget gick igenom ett inbördeskrig mellan den politiska högern och vänstern som intill denna dag kluvit samhället, en spricka som med hjälp av bland annat massiva euro-krediter kunnat spacklas över, men som kan spricka upp igen.

Europa säger till Grekland: om ni inte sparar och reformerar kastar vi ut er. Grekland svarar: varsågod! Gör det då! Men ni vågar inte.

Vi är inte ens ense om vad Europa egentligen är. Hur stort är det? Var ligger dess gränser?

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The charismatic /han kör en BMW-MC till parlamentet/ Greek leftist who could determine the fate of the euro
begins a tour of European capitals on Monday
"We are not at all an anti-European force"
CNBC 21 May 2012

"We are not at all an anti-European force. We are fighting to save social cohesion in Europe.

We are maybe the most pro-European force in Europe, because its dominant powers will lead the union into instability
and the euro zone to collapse if they insist on austerity," he said.

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His party Syriza, or Radical Left Coalition, came a shock second place in the May 6 election
An eloquoent, skilled performer who shuns neck ties and likes to get around on his motorcycle, Tsipras can be a fiery orator in parliament, railing against austerity.

Born four days after the fall of Greece's military dictatorship in July 1974, Tsipras became leader of the Left Coalition in 2008 and was elected to parliament in 2009.

Telegraph 15 May 2012

Peter Wolodarski, PJ Anders Linder och Grekland
Rolf Englund 20 maj 2012

Mohamed A. El-Erian om Grekland, Mercedes, Staten och Kapitalet
Via Rolf Englund blog 21 maj 2012

Grekland, Mercedes, Staten och Kapitalet
En kvinna i Grekland har köpt en Mercedes.
Daimler-Benz AG har fått sina pengar för bilen.
Det är någon bank som, dumt nog, har lånat ur pengarna till kvinnas bilköp.
Rolf Englund 19 maj 2012

Den tyska regeringens talesperson sa att landet har en plikt att förbereda sig för en eventuell grekisk exit från euroområdet.
Samma signaler kommer nu från EU-kommissionen och ECB. Båda jobbar båda med förberedelser inför ett eventuellt grekiskt utträde,
uppger EU:s handelskommissionär Karel De Gucht
DI 18 maj 2012

Charismatic, eloquent and defiant, the leader of Greece's Radical Left party, Alexis Tsipras,
visited Berlin on Tuesday to ram home the message that he will scrap austerity if he wins the June election,
and that no one, not even mighty Germany, has the right to evict Greece from the currency.
Der Spiegel 22 May 2012

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Greek leftist Alexis Tsipras delivers 'message of friendship' to Germans
Leader of Syriza insists Greece is not seeking to blackmail Germany during his charm offensive in Berlin
Guardian 22 May 2012

The leader of Greece's radical left coalition, Alexis Tsipras, has appealed to Germans to show solidarity towards the embattled, debt-ridden Greeks,
telling them that his country's economic woes were those of a whole continent.

On the Berlin leg of a charm offensive to win over European politicians, the 37-year old, whose Syriza coalition has a good chance of securing victory at a repeat election on 17 June, stressed that he wanted to work with the Germans to "find a solution to our joint problem".

Alexis Tsipras, described as 'Greece’s Che Guevara' in the German press, on his charm offensive in Berlin.
Photograph: Sean Gallup/Getty Images

Grekiska vänsterledaren:
Ge oss lån annars betalar vi inte
En finansiell kollaps i Grekland skulle tynga övriga eurozonen och leda till eurozonens kollaps, enligt Alexis Tsipras
DI 2012-05-18 08:43

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It’s Spain
Greece no longer holds the dubious honour of being centre stage in the eurozone crisis.
Long-held worries about the health of Spanish banks have given rise to concern about the chance of bank runs,
the worst nightmare of policy makers and investors alike.
Financial Times 18 May 2012

Fears about contagion from Greece have pushed Madrid’s stock market to 2003 levels and its premium to borrow over Germany to euro-era records.

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The clock is now showing one minute to midnight. Greece is probably beyond saving.
The early signs of bank runs in Spain and other peripheral economies suggest the virus of contagion is taking hold even before Athens makes up its mind in a second general election.
Policy makers have less time than they thought only a few days ago.
Philip Stephens, Financial Times 17 maj 2012

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The German government says a Greek euro exit would be expensive, but could be handled
“Two years ago this would have been like jumping off the 10th floor and the outcome would have been deadly”, the paper quotes an unnamed government source.
“Now it would be like jumping off the 2nd floor – a couple of broken bones, but not deadly.”
Rainer Brüderle, the FDP’s chief whip in Bundestag, told Handelsblatt
Eurointelligence Daily Briefing, 18 maj 2012


Bagdad Bob: There are no Americans in Bagdad

Europe’s hapless politicians, having asserted that exit from the single currency was impossible,
must now claim that exit would be relatively easy.
Only then can they plausibly threaten the Greek electorate with expulsion if they vote the wrong way.
John Kay, Financial Times 22 May 2012

But exit was never impossible, never easy and even when it was publicly unthinkable central banks would have been negligent not to have put in place contingency plans.

That is why even though Greece is a small part of the eurozone, a Greek exit is an existential threat to it.

Once a path to exit has been defined, business and individuals will have a template for understanding the consequences of further unwinding.

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hapless - deserving or inciting pity; "a hapless victim"; "miserable victims of war"; "the shabby room struck her as extraordinarily pathetic"- Galsworthy; "piteous appeals for help"; "pitiable homeless children"; "a pitiful fate";
"Oh, you poor thing"; "his poor distorted limbs"; "a wretched life"
misfortunate, pathetic, piteous, poor, miserable, pitiable, pitiful, wretched
unfortunate - not favored by fortune; marked or accompanied by or resulting in ill fortune; "an unfortunate turn of events";
"an unfortunate decision"; "unfortunate investments"; "an unfortunate night for all concerned"

If Greece goes:
An exit is likely to shatter faith in the eurozone’s integrity for ever
Martin Wolf, Financial Times, May 17, 2012 7:10 pm

The eurozone either is an irrevocable currency union or it is not. If countries in difficulty leave, it is not.

It is then an exceptionally rigid fixed-currency system.
That would have two dire results:

people would not trust in its survival and

the economic benefits of the single currency would largely disappear.

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A Greek exit from the euro area has the potential to be
EU’s most economically and politically destructive event of a generation
Bloomberg Opinon, Editors, May 16, 2012 1:00 AM GMT+0200

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Om att äta kakan, ha den kvar, eller sälja den på kredit till Grekland
Rolf Englund 17 maj 2012

Top of page - News - Start page

Article 66 of the Treaty can be invoked to stop Greek outflows
to Switzerland, but not to Germany, at least not legally.
Wolfgang Münchau, Financial Times 20 May 2012

Article 66 of the Treaty on the Functioning of the European Union says the freedom of capital movement can be suspended but only in relation to third countries.

The article can be invoked to stop Greek outflows to Switzerland, but not to Germany, at least not legally.

That is one of the reasons why a eurozone exit cannot be legally accomplished inside the EU.

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Would it surprise you to know that Europe’s taxpayers have provided
as much financial support to Germany as they have to Greece?
Bloomberg, Editors 24 May 2012

Grekland betalar 5 procents ränta på sitt nya lån på marknaden.
Är det mycket eller lite?
Skall Du låna i riksbanken för 0,75 % och göra en Carry Trade?
Rolf Englund blog 10 april 2014

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Five reasons investors are now loving Greek debt
CNBC 10 April 2014

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Fears are growing that the eurozone’s proposed new banking regime will be too bureaucratic for the task of handling a sudden collapse of a cross-border institution.
The latest proposals could see up to 126 people being consulted on how to wind up a bank,
even though agreement might need to be reached over the course of a weekend while financial markets are closed.
Financial Times, 15 December 2013

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Why Austerity Still Isn't Working in Greece
Representatives of Greek business are now convinced that the country cannot survive without yet another debt haircut.
The subject is politically sensitive, especially in Germany, because this time a debt haircut would also affect public creditors,
which already hold 80 percent of Greek sovereign debt.

In other words, a large share of German assistance loans would be irretrievably lost.
Der Spiegel, July 9, 2013

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Indeed, German Finance Minister Wolfgang Schäuble ruled out such a possibility just last week.
Greece is expecting a second debt haircut from its European creditors following the German election,
the country's economy minister said on Tuesday. First, though, Athens must prove that it has done enough
to receive the next tranche of badly needed bailout money.
Der Spiegel, June 2, 2013

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As parliament prepared to sit on Thursday evening,
the government submitted a bill seeking the power to impose capital controls on banks,
"The purpose of this law is, in case of an emergency for purposes of public order or security
CNBC/Reuters Thursday, 21 Mar 2013 | 3:29 PM ET

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Bank resolution will become more complicated after January 1, when new eurozone rules will force depositors to face the costs of rescue programmes.
Under the EU’s Bank Recovery and Resolution Directive (BRRD),
shareholders and depositors will have to take a hit worth 8pc of their total liabilities before lenders receive official sector aid.
Telegraph 19 Sep 2015

The rules have been designed to prevent the taxpayer bail-outs which imperiled governments in Spain and Ireland in the wake of the financial crisis.
Deposits under €100,000 will still be protected under the new regime.
But the BRRD could well be flouted as soon as it comes into force at the start of the year.

ECB president Mario Draghi has explicitly ruled-out depositor haircuts claiming they would be “harmful for the Greek economy” which is set to slump into a 2pc recession this year.

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The European Central Bank has for the first time published its
rule book for giving emergency loans to ailing lenders,
breaking with the secrecy that fuelled controversy over the programme during the financial crisis.
FT 19 June 2017

The ECB on Tuesday 20150707 released a document explaining how its so-called emergency liquidity assistance works
and how “provision of ELA at overly generous conditions... could increase the risk of moral hazard
on the side of financial institutions or responsible authorities”

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ELA explainer: How the emergency liquidity programme works
FT 6 July 2015

The idea behind emergency support such as ELA was first encapsulated by Walter Bagehot, former editor of the Economist, in an 1873 book entitled Lombard Street: A Description of the Money Market.

The idea works because if people think their bank has access to central bank funds, they’re less likely to need to withdraw their savings.

The other national central banks and the ECB’s governing council can block requests from the Bank of Greece with a two-thirds majority. This happened last week, when the council froze ELA at €89bn

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The fear of default is rapidly being overtaken by a separate
— and possibly more dangerous — ticking time bomb: the solvency of Greece’s banks.

ECB’s own rules may soon prevent it from extending further help, paving the way for a Greek exit from the eurozone.
FT 19 June 2015

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Saying no would be to plunge a whole financial system into chaos
The ECB reportedly provided extra liquidity to the Greek economy on Wednesday
upped its emergency liquidity assistance (ELA) from €80.7bn to €83bn,
a move that could keep the domestic economy afloat as Greeks continue to pull their cash from the country.
Telegraph 10 June 2015

Yves Mersch, a member of the ECB's executive board, has said that
the provision of ELA "has to be weighed against the risk of overturning the entire Greek financial system".
"The risk of saying no would be to plunge a whole financial system into chaos," he said.

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Greek Banks On Verge Of Total Collapse:
Bank Run Surges "Massively" As Depositors Yank €700 Million Today Alone
Tyler Durden, zerohedge, 5 June 2015

Greek banks already depends on the ECB for some €80.7 billion in Emergency Liquidity Assistance which was about 60% of total deposits in the Greek financial system as of April 30.

In other words, they are woefully insolvent and only the day to day generosity of the ECB prevents a roughly 40% forced "bail in" deposit haircut a la Cyprus.

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Will the ECB play its trump card over Greece's future?
So if the ECB's governing council took the view that the Greek banks were not solvent
it would have to tell the Bank of Greece to pull the plug.

Would they?
BBC 2 June 2015

The ECB did publicly threaten to put a stop to ELA for the Cypriot banks, unless there was an international bailout that would ensure they were solvent.

There was a similar threat to Ireland in correspondence which has since been published.

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A First-Hand Account Of The Greek Bank Run
by Tom Winnifrith of Share Prophets, via zerohedge

Friday I opened a bank account in Greece and made a deposit. Okay it was only 10 Euro,
I need to put in another 3,990 Euro to get my residency papers so I can buy a car, a bike and a gun, but it was a start.
But the scenes at the National Bank in Kalamata were of chaos, you could smell the panic and they were being replicated at banks across Greece.

For tomorrow is a Bank Holiday here and if you are going to default on your debts/ switch from Euros to New Drachmas a bank holiday weekend is the best time to do it.

And with debt repayments that cannot be met due on June 5 (next Friday) Greece is clearly in the merde.
If it defaults all its banks go bust.

The Government did not put up a default notice on Friday as I half expected. The can kicking goes on. The ATMs will be emptied this weekend and on Tuesday and in the run up to a potential default day next Friday the banks will be packed again with folks taking out whatever money they can.

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Deposit outflows from Greek banks accelerated this week,
with about €800m withdrawn on Wednesday and Thursday alone
FT 29 May 2015

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As Greece approaches the mathematical limit of its entitlements under the ELA program,
the ECB may find itself in the untenable position of acting as judge, jury and executioner.
Mark Gilbert, Bloomberg 19 May 2015

Greek bank shares slide to record low as ECB considers pulling the plug
European Central Bank draws up plans to limit emergency assistance
as Alexis Tsipras gears up to meet Chancellor Merkel on Thursday
Telegraph 21 April 2015

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Greece is expected to run out of cash as soon as April 9
- ECB höjer Emergency Liquidity Assistance till grekiska banker till €71.3bn, cirka 664 miljarder kr.
Rolf Englund 26 Mars 2015

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On Friday, Greek depositors transferred more than €1bn of bank deposits abroad.
The bank system would have collapsed within days without an extension.
And Athens had no plan for a euro exit.

It had no choice but to cut a deal in which the Germans prevailed on all the substantive issues.
Wolfgang Münchau, FT Sunday 22 February 2015

For the creditors this demand was an absolute taboo.
Their preferred strategy is to extend the loans, cut interest rates on the Greek loans a little and pretend the country is still solvent.

Greece will need a fully worked-out plan B to signal to their partners that Greece is determined to achieve sustainability
— inside or outside the eurozone — whatever it takes.

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Impose capital controls in Greece or repeat the mistake of Cyprus
Hans-Werner Sinn, FT 16 February 2015

The Greek central bank should not be allowed to live beyond its means.
Assistance for the country’s commercial banks should be capped at €42bn.

The Greek government should then set up capital controls to stop money from leaving the country and keep its banks solvent.

The Cypriot example should not be repeated.

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"For a small, open economy like Cyprus, Euro adoption provides protection from international financial turmoil."
18/01/2008, Trichet

The banks in Greece will not open on Monday, I guess
Rolf Englund, 14 February 2015

Kan ECB garantera 2.318 miljarder kr hos de grekiska bankerna?
Nej, ta ut pengarna i tid.
Rolf Englund 17 februari 2015

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So what are the theoretical and political limits to liquidity provisioning by the ECB?
In a normal bank-run, a central bank needs to provide unlimited liquidity to allow all depositors to withdraw their cash if they wish to.
For the Greek banking system, the theoretical limit would be the size of all deposits.
The Greek banking system has a pretty large deposit base of 243.8 billion
Guntram B. Wolff, Bruegel 17th February 2015

So could the ECB go ahead and just fund the 243.8 billion - 2.318 miljarder SEK - with ELA?
This is a tough call and my answer would clearly be "it depends".

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In recent weeks, the central bank has already raised the ELA ceiling available for Greece's lenders to €65bn as deposit outflows have increased.

ECB; expansion of so-called Emergency Liquidity Assistance by about 5 billion euros to Greece on Thursday
Bloomberg, Friday 13th 2015

Read more here

Spricker - EMU Collapse

Greek banks probably lost about 21 billion euros ($24 billion) of deposits in the past two months.
Bloomberg, 5 February 2015

Depositors are withdrawing money now because they’re worried a refusal by the government to extend the bailout when it expires at the end of the month could lead to an exit from the euro area.

That would mean waking up one morning and finding their savings converted to drachma, which would face a steep devaluation.

Putting the money in another European bank or keeping it as cash at home would protect them from losses.

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Greek Finance Minister met ECB president.
Analysts said the ECB statement was a sign the meeting had not been a success.
ECB has effectively just given a green light for Greek bank runs
Rolf Englund 5 februari 2015

The biggest threat is that the European Central Bank ceases to fund Greece's banks.
ECB may well feel obliged to turn off the tap, since right now it is only financing those banks
because the country is officially complying with the terms of its IMF and eurozone bailout
The moment that Greece was deemed not to be in compliance, it is difficult to see
how the ECB could continue to provide emergency liquidity assistance to Greek banks.
Robert Peston, BBC economics editor, 2 February 2015

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There is now a clear threat of Grexit.
In 2011-12 Mrs Merkel did not want Germany to be blamed for another European disaster,
and both northern creditors and southern debtors were nervous about the consequences
of a chaotic Greek exit for Europe’s banks and their economies.
The Economist, editorial, Jan 31st 2015

There are broadly three possible outcomes: the good, the disastrous,
and a compromise to kick the can down the road.

The history of the euro has always been to defer the pain, but now the battle is about politics not economics—and compromise may be much harder.

The ECB is adamant that it cannot provide emergency liquidity to Greece’s banks or buy up its bonds unless Mr Tsipras’s government is in an agreed programme with creditors,
so any impasse is likely to trigger a run on Greek banks

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The extraordinary thing is that there hasn't yet been a bank run across the Mediterranean
Daniel Hannan, March 18th, 2013

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Bank Run
Att regeringen till en början ville konfiskera även mindre sparkapital sågs av många cyprioter
som ett försök att rädda sin status som skatteparadis genom att minska slaget mot de stora rika
– på de egna småspararnas bekostnad.
Teresa Küchler, SvD Näringsliv, 20 mars 2013 kl 06:31

Men försöket att rädda statusen som skatteparadis som försäkrar ryska oligarkers rikedomar genom att stjäla gamla cypriotiska farmödrars sparpengar har förståeligt nog orsakat våldsam vrede på ön. Det är alltså inte konstigt att de försöker att ta ut allt de äger.

Bankerna kommer att hållas stängda till och med i morgon torsdag. Fram till dess kommer den cypriotiska regeringen och trojkan att vara under stor press att ta fram ett nytt avtal som försäkrar cyprioterna om att banker är säkra att bevara sina besparingar hos.

För om alla cyprioter begär sina pengar på en gång så kollapsar bankerna, och med dem Cypern.

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What does a guarantee mean?
The argument for deposit insurance is that banks are inherently unstable, by virtue of their economic function;
they borrow money in the form of deposits (which can be instantly withdrawn) and lend to businesses on a longer-term basis.
The Economist, Buttonwood, March 19th 2013

They are thus vulnerable to destabilising and self-fulfilling bank runs.

But the counter-argument is that of moral hazard; depositors have no incentive to choose between banks on grounds of riskiness, and bank executives can take risks knowing that they are underwritten by the insurance scheme.

Some jurisdictions tried to offset this by limiting the guarantee; such was the case in Britain up until 2007, when only 90% of deposits between £2000 and £35000 were covered. But the Northern Rock panic showed that even the prospect of a 10% loss caused panic so the scheme was quickly extended.

A deposit insurance scheme is designed to cope with the failure of an individual bank. But it may cause the entire banking system to become riskier.

In countries which can print their own currencies, governments can guarantee deposits in nominal terms, but not in real ones.

The low interest rates that have propped up the banking system have eaten away at the purchasing power of savings;
since 2009, British savers on a 40% tax rate (around 3.8 million middle class people) have seen a 6.8% decline in the purchasing power of their savings, even if they put the money in the best-paying accounts.

That is on a par with the lower Cypriot levy.

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EU:s bankunion har ingen backstop.
Backstop? De är en Lender of Last resort, helt enkelt.
Rolf Englund blog 24 mars 2014



De som i dag har pengar i banker på Cypern kommer, om euroministrarna får som dom vill, att få upp till 9,9 procent av pengarna konfiskerade.
Dessutom kommer EU att kräva krafttag mot skattefusk och penningtvätt.
Varför skall de då ha kvar sina resterande 90,1 procent på banken på Cypern?
Risken är uppenbar, tycker jag i efterhand efter att ha läst det på nätet.
Det jag har läst är en artikel av Felix Salmon, Reuters, March 19, 2013


We know that it’s workable because it has been put forward by none other than Lee Buchheit and for decades, in dozens of sovereign contexts, every time that Lee Buchheit has said something can be done, he’s been absolutely right.

Here’s the short, three-page paper: it’s called Walking Back from Cyprus, and it’s authored by Buchheit, the godfather of sovereign debt restructuring, and his frequent collaborator, Mitu Gulati of Duke University.

Their plan is simple:
First, leave all deposits under €100,000 untouched. Hitting those deposits was by far the biggest mistake of the Cyprus plan as originally envisaged, and everybody would be extremely happy if guaranteed depositors could be kept whole.

Second, term out everybody else by five years, or ten if they prefer.

That’s it! That’s the whole plan, and it’s kinda genius.

The Plan is here

Cyprus rescue breaks all the rules
So what is seen by many as profoundly shocking about the terms of the rescue of Cyprus by the rest of the eurozone and the International Monetary Fund is that both of these principles have been broken.
Retail savers are being punished, by a levy of 6.75% on savings up to 100,000 euros.
And bondholders aren't being touched.
Robert Peston, BBC Business editor, 18 March 2013

Reform of how to mend broken banks, which has been negotiated globally and in Europe since the Crash of 2007-8, has been based on two central principles.
First, that the savings of ordinary people should be protected, up to a high threshold - or 100,000 euros in the European Union for example.
And that financial institutions which lend to banks by buying their bonds should incur losses when banks are bailed out:
bondholders should, to use the jargon, be bailed in, as part of resolution plans.

The logic behind these tenets is simple: financial institutions ought to be sophisticated enough and informed enough to assess the risks of lending to a bank, and therefore deserve to be punished when their judgement is awry; most of the rest of us can't possibly know if our high street banks are making reckless gambles.

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Genom att även konfiskera småsparares pengar upphävs en princip som gällt sedan den amerikanska depressionen på 30-talet:
att den lille mannens pengar är skyddade.
Den så kallade insättningsgararantin är själva fundamentet för det moderna banksystemet och
hjälper till att förhindra förödande så kallade bankrusningar.
Andreas Cervenka, SvD Näringsliv 18 mars 2013

Europe is risking a bank run
With the agreement on a depositor haircut for Cyprus
the eurozone has effectively defaulted on a deposit insurance guarantee for bank deposits.
Its purpose is not to provide absolute certainty, but to prevent bank runs, which is what happens when you go after small depositors.
Wolfgang Münchau, Financial Times, March 17, 2013

If one wanted to feed the political mood of insurrection in southern Europe, this was the way to do it.
The long-term political damage of this agreement is going to be huge.

In the short term, the danger consists of a generalised bank run, not just in Cyprus.

As in the case of Greece, the finance ministers said: “Don’t worry, this is a unique situation”.
The bond haircut in Greece is indeed different to the depositor haircut in Cyprus.
And when they repeat this elsewhere, it will be unique once more.

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IMF and the German government want to reduce the size of any loan to Cyprus by forcing it to “bail in” the creditors of Cypriot banks,
both bondholders (a tiny share of the liabilities) and uninsured depositors (who account for a lot).
But this could cause panic among depositors in Italy, Spain and other euro countries with troubled banks.
The Economist, March 16th 2013, print edition

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Kommentar av Rolf Englund:
Det bör observeras att bankerna på Cypern, som hade mycket grekiska statspapper, gjorde stora förluser när EU tvingades innehavarna av sådana papper att skrivera "friviligt" skriva ner värdet med 75 procent.
Det bör också noteras, vilket professor Pelotard har påpekat för mig, att om reglerna om bankerna fått gå omkull och om insättningsgarantin hade följts
så hade "småspararna", med upp till 100.000 euro, klarat sig. Däremot hade de som hade större fordringar förlorat det mesta av sina pengar.
När euroministrarna svek insättningsgarantin gjordes detta således i syfte att skydda insättarna med stora belopp i de cypriotiska bankerna.

Bank run


Unintended consequences
Bail-in fears grow for big depositors in euro periphery
The latest initiative to build a resilient eurozone “banking union” may have the opposite effect and
spark renewed capital movement away from the continent’s troubled southern economies while benefiting banks in the north.
Financial Times, July 1, 2013

Analysts warn the latest initiative to build a resilient eurozone “banking union” – which will put deposits by large corporations at risk of being “bailed-in” to rescue trouble-hit banks – may have the opposite effect and spark renewed capital movement away from the continent’s troubled southern economies while benefiting banks in the north.

Unlike domestic depositors, large foreign depositors usually have easy alternative homes for their money. When fears of a eurozone break up were at their most acute, bankers say international companies were routinely sweeping accounts daily to remove funds from potentially vulnerable countries, with knock-on effects for economic growth.

“The bail-in agenda makes a lot of sense, but like all policies there are unintended consequences,” says Mr Bradshaw. “After these proposals I expect the trend would be for companies to hold their cash in large, systemic financial institutions in core countries such as France or Germany.”

Other, knock-on consequences could be to shunt senior unsecured bank lenders further down the credit hierarchy, leading them to demand more compensation for the greater risks they are shouldering. In turn, that will increase banks’ financing costs.

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Banking Union

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IMF warns eurozone on capital flight
Financial Times, October 9, 2012

The IMF has warned that unless the eurozone resolves its capital crisis, European banks’ balance sheets will contract severely, further damaging growth and pushing unemployment beyond already record highs in the region.

In its global financial stability report, the IMF concluded that capital flight from the eurozone’s periphery to the bloc’s core, driven by fears of a break-up of the currency union, had sparked “extreme fragmentation” of the euro area’s funding markets. The fund said this was causing renewed pressure for banks to shrink their balance sheets, particularly those in countries with fiscal woes.

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In the end, market processes will overwhelm them.
The bond markets are currently the most obvious threat.
But I suspect that the irresistible pressure will come as depositors move more euro deposits out of the vulnerable countries and into German banks.

Greek depositors are already protecting themselves against the consequences of a Greek default and euro exit by shifting the risk onto European taxpayers.
When the country in question is Spain or Italy the amounts involved will be so huge that the ECB would have to stop its recycling activities pretty quickly.
And that would send these countries into a banking crisis from which the only escape would be euro exit.

Roger Bootle, Telegraph 24 June 2012

The central bank of Spain just released the net capital outflow numbers and they are disastrous.
During the month of June alone $70.90 billion left the Spanish banks and in July it was worse at $92.88 billion which is 4.7% of total bank deposits in Spain. For the first seven months of the year the outflow adds up to $368.80 billion or 17.7% of the total bank deposits of Spain and the trajectory of the outflow is increasing dramatically.
Reality is reality and Spain is experiencing a full-fledged run on its banks whether anyone in Europe wants to admit it or not.
ZeroHedge, 2 September 2012

The Spanish ten year now yields a 6.81% and their thirty year is yielding 7.34%. Spain has now set up a fund for its regions to tap of $22.6 billion and this, in my opinion, will not even be close to what is asked for or required with the regions needing some $50-75 billion in assistance in my estimation.
Many of the regions in Spain are not paying suppliers or their other local debts and the situation is clearly out of control.

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Investerare flyttade ut den rekordstora summan 219,8 miljarder euro,
motsvarande runt 1,8 biljoner kronor, från Spanien under det första halvåret 2012.

DN/TT 31 augusti 2012

Det är en dramatisk förändring jämfört med samma period förra året, då Spanien hade ett kapitalinflöde på 22,5 miljarder euro.
Under helåret 2011 plockades dock sammanlagt 68,3 miljarder euro ut ur Spanien.

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Grekland, Portugal och Spanien hör inte hemma i eurosamarbetet.
Men mycket prestige har investerats i projektet och man kommer säkert att försöka hålla dem under armarna så länge det går.

Magnus Henrekson, professor nationalekonomi SvD Näringsliv 27 juli 2011

The Euro Crisis Is Back From Vacation
Here is a guide to the new season’s most intriguing (and terrifying) story lines.
New York Times, 28 August 2012

Imagine you have a bank account in Greece and you hear a rumor that your bank may soon switch your money from euros to drachmas, which will be worth a lot less. Most rational people would withdraw their money and deposit it in a German bank.

When Spaniards see Greeks heading for the German border, they’ll withdraw, too. And then perhaps thousands of Italians will also.

What’s guaranteed to make Europe’s lousy situation even lousier is a run on banks in struggling countries that would precipitate their collapse

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Det finns en klar risk att den spanska staten själv får svårt med betalningarna och att den plötsligt inte kan låna mer pengar på marknaden.
Inte heller kan den inhemska centralbanken finansiera kapitalbehovet genom att trycka mer pengar, eftersom Spanien är medlem i euron.
Detta inser omvärlden och begär en ännu högre ränta för att låna ut till Madrid.

Så riskerar landet att dras ned i en negativ spiral som kan knäcka bank­systemet, orsaka en statsbankrutt och leda till att Spanien lämnar den euro­peiska valutaunionen.

De som fortfarande tror att eurokrisen handlar om lata greker som inte vill göra rätt för sig bör titta närmare på det spanska exemplet. Eller det irländska.

Europa har slagit in på en kamikazekurs som ser ut att leda mot att euron bryts sönder.
/Spanien/ riskerar att dras ned i en negativ spiral som kan knäcka bank­systemet, orsaka en statsbankrutt
och leda till att Spanien lämnar den euro­peiska valutaunionen.
Peter Wolodarski, Dagens Nyheter 3 juni 2012

Valutaflykten medför en sådan credit crunch att bankerna inte hinner driva in 14 gånger de undandragna beloppen genom uppsagda lån.
Om spanjorerna tar ut 100 mdr € från bankerna måste dessa vid ett kapitalkrav på 7 procent
säga upp lån på bortemot 1 400 mdr € för att inte gå i konkurs.

Det kan bli svårt att hinna med.
Danne Nordling 2 juni 2012

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"Nu har det vänt"
Has Draghi Won the Battle With Financial Markets?
CNBC 10 Jan 2013

Since late July, yields on Spanish government bonds have fallen more than 200 basis points, while European shares have climbed almost 15 percent and the euro has rallied 10 percent against the dollar.

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TARGET-2 Imbalances
"The Debt Crisis Is Eating Its Way Ever Further Into Europe's Core"
Tyler Durden zerohedge 10 January 2013

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Target 2 is the mechanism by which money is transferred around the euro area to ensure that each national central bank has sufficient euros to fund its banking system.
Accumulated cross border claims are now so extreme that they threaten to leave German taxpayers with huge losses
should the euro break up, or any one of its members leaves.
Jeremy Warner, 1 October 2012

The economist who has done the most to raise the profile of this issue is Hans-Werner Sinn, head of the Munich-based Ifo Institute. Germany would lose the thick end of a €1 trillion, he has written, should Greece, Ireland, Portugal, Spain and Italy leave the euro, or around a quarter of GDP.

All money systems are a version of Europe’s Target 2, which is merely an interbank payments system for cross border transactions. When contained within countries, nobody even bothers to think about the way the system works. It’s plainly not going to matter, for instance, if a big trade and capital imbalance develops between the north-east of England and the South East, if only because there is a unified banking and fiscal system to intermediate. If there is a sudden rush of deposits out of the North East to the South, it makes no difference to the banks involved; their net position in terms of assets and liabilities is unaffected.

But it is certainly true that one way or another – whether through the banking system or the Bundesbank – Germans were always going to be on the hook for all that bad lending. When the debtor borrows too much, the creditor always pays.

Germans are therefore being somewhat naïve in making debt mutualisation a red line issue when it comes to solutions. In fact, the debt has already been mutualised. The ECB has been intermediating the risks all along.

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Target 2 Outflow
The euro graph of doom
What it shows is the now extreme flight of foreign capital from Spain and Italy.
Jeremy Warner, Telegraph July 17th, 2012

The graph only goes up to the end of January, but we know that the phenomenon has got, much, much worse since then.

The outflows are compensated for by "target 2" inflows from the European Central Bank, which in turn borrows the money from the eurozone's creditor central banks, in particular the Bundesbank.

The flight to safety has prompted a collapse in yields on government bonds in Germany, the US, Switzerland, Sweden, and to some extent the UK too.

The foreign investor withdraws his money from the Spanish or Italian bank and deposits it with an apparently "safer" German bank, which in turn lends the money to the Bundesbank, from where it finds its way back through the ECB via the target 2 system to the original Spanish or Italian bank.

It sounds like Alice in Wonderland, but in fact is no different from what happens in the money system within national borders.

If there is a sudden outflow of capital from, say, Lancashire, the Bank of England will call on the consequent surplus accumulating elsewhere to plug the gap so as to ensure that the Lancashire banking system can continue to fund itself. What makes it different in the eurozone is that the same thing is happening between countries.

Within countries, there is a general sense of in it together, backed by a common fiscal framework, that makes it tolerable. But when it is between countries unsupported by fiscal transfers, it obviously becomes more problematic.

Deposits made through German banks are in essence funding Spanish and Italian assets on an ever expanding scale.
If these countries left the euro, then Germany would face massive, unfunded liabilities.

What's building up is as much a disaster for Germany as everyone else.

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EMU Start

There is an unfortunate logic to bank runs.
The rational thing for any depositor to do is to join in the run if there is even the smallest possibility that the bank really is in danger of failing.

If you pull your money out and the bank survives, the costs of your mistake are tiny compared to the costs if the bank fails with your money in it.
New York Times 31 May 2012

Target 2 flows
It appears that close to a trillion euros in Target 2 loans were owed to the European Central Bank
by central banks of countries with leaky banking systems at the end of April.

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Eurozone leaders may be nearing a “break the glass” moment:
when one smashes the pane protecting the emergency fire alarm.
Robert Zoellick, Financial Times 31 May 2012
Fotnot: The writer is president of the World Bank Group

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Det som förvånar mig mest är att grekerna inte har stormat bankerna. Det är märkligt.
Uttagen har hittills skett i slowmotion. Frågan är vad som händer om det inträffar.

Bengt Dennis, SvD Näringsliv 13 mars 2012, reporter Therese Larsson

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Bankers said up to 800 million euros ($1 billion) were leaving major banks daily and
retailers said some of the money was being used to buy pasta and canned goods
CNBC 13 June 2012

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One Sunday in October 2008, Alistair Darling flew back from Washington to find Britain on the brink of banking meltdown.
The chancellor was told by his Treasury officials that unless a rescue plan was announced by the time the City opened for business the following morning,
there was no guarantee that cashpoints would work and that cheques would be honoured.

Larry Elliott, Guardian, 31 May 2011

Back from the Brink: 1000 Days at Number 11
Alistair Darling, Amazon Kindle

ECB, Lender of last resort, current account
As Paul Krugman said to me earlier this week on his trip to London,
if the eurozone is going to end, it's a fair bet that the process will start with a Spanish bank run

Stephanie Flanders, BBC Economics editor, 1 June 2012

Data published by Spain’s central bank showed
€ 97 bn had been pulled out in the first quarter – around a 10th of the country’s GDP
Financial Times 31 May 2012

Bank of Spain data showed a net 66.2 billion euros was sent abroad last month,
the most since records began in 1990.
CNBC 31 May 2012

"What we need first of all is for the Spanish government to tell us its restructuring plans for Bankia,
what options it is considering," said European Commission spokesman Amadeu Altafaj in a radio interview.
"From there, we will study the plans and see whether they comply with requirements for public aid."

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Europe’s leaders can’t save their currency union without figuring out a way to salvage the region’s banks. Spain is a perfect place to start.
By accepting joint responsibility for injecting capital into a single country’s banks, the nations of the currency zone
would be taking another step toward financial federalism and collectively backed euro bonds.
Bloomberg, editors, 31 May 2012

“Can anyone in the US imagine ever designing a system so fundamentally flawed? It’s insane!
Without some form of FDIC insurance and national banking resolution authority, the European Monetary System will surely tear itself to shreds.
In fact, as Target2 imbalances rise, it is clear that Germany is already being placed on the hook for Greek and other peripheral deposits.
The system has de facto insurance, and no one in the south is even paying a fee for it. Crazy!
David Zervos, managing director and chief market strategist of Jefferies and Company, via John Mauldin, 26 May 2012

“In the last couple days I have spent a bit of time trying to find any legal construct which would allow the ELA to be turned off for a member country. I can't.

That doesn't mean it won't be done (as the Irish were threatened with this 18 months ago), but we are entering the twilight zone of the ECB legal department. Who knows what happens next?

“The reality is that European Monetary System was broken from the start. It just took a crisis to expose the flaws.

Because the member nations failed to federalize early on, they created a structure that allows strategic default and exit to tear apart the entire financial system. If the Greek people get their euros out of the system, then there is very little pain of exit. With the banks and government insolvent, repudiating the debt and reintroducing the drachma is a winning strategy! The fact that this is even possible is amazing. The Greeks have nothing to lose if they can keep their deposits in euros and exit!

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Target 2

Why the euro is doomed to fall apart:
it was an incredibly stupid idea in the first place

Tim Worstall, Senior Fellow at the Adam Smith Institute in London
Telegraph, 9 May 2012

Adam Smith Institute

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Capital flight has cut foreign holdings of Spanish debt from 50pc to 37pc since January.
Spain's banks -- including Bankia -- have been propping up the state with €316bn borrowed from the ECB
Now the state is propping up banks.
Ambrose Evans-Pritchard, 28 May 2012

Barclays Capital says Spain's housing crash is only half way through. Home prices will have to fall another 20pc to clear an overhang of one million excess properties. That will bleed banks to death.

The Centre for European Policy Studies puts likely write-offs at €270bn. Much of the loss would land on the state, as in Ireland. The risk is that Spain's public debt will surge above 100pc of GDP.

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As I mentioned a couple of weeks ago,
the biggest short-term risk to the stability and cohesion of the eurozone
is that banks in the financially stretched southern European countries run short of cash,
as their depositors and creditors withdraw their money faster than it can be replaced by the European Central Bank
Robert Peston, BBC Business editor, 8 May 2012

If, as seems likely, the Commission says quite soon that it is full steam ahead to the creation of a pre-funded scheme that would give retail depositors across Europe the confidence that their savings up to 100,000 euros are safe, that might well be a good thing in the long term.
But quite apart from the obvious problem that these things take an age to agree in the detail and then implement, such a scheme misses the point of the current crisis.
It would give no protection against the biggest immediate risk for depositors, which is that the value of their savings could halve in a devaluation.

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"The moment they start saying, 'Don't worry, your money will be safe,'
is the moment you should withdraw your money from the bank,"
In Spain, investors watch for run on banks
As depositors worry about their money, observers warn of panic.
Banks and the government issue statements aiming to calm the public
Los Angeles Times, 27 May 2012

"The moment they start saying, 'Don't worry, your money will be safe,' is the moment you should withdraw your money from the bank,"
said Julian Mezzadri, 37, who took all of his savings out of a Madrid bank two weeks ago
He said he and his wife now keep their money hidden in a box.

Mezzadri was born in Argentina, and even though he has lived in Spain since he was 3, he is haunted by his native country's 2001 economic collapse.

When Spain's housing and job markets collapsed, the cajas were hit hardest because they specialized in construction and real estate lending, and their investments were not as diversified as those of national or global banks.

The previous Socialist government's strategy was to force mergers of small cajas, combining their assets to try to strengthen them against losses.

Instead, the result in most cases was simply bigger banks with bigger debts.

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A single currency can be maintained if no-one worries if they're holding German, Spanish or Greek euros.
Well, savers are worrying now. An "intra-euro bank-run" has been happening for months, with deposits heading for the Teutonic core.
Liam Halligan, Telegraph 26 May 2012

It probably is about time to judge the euro zone as a failed idea,
Tyler Cowen, professor of economics at George Mason University, New York Times May 26
The basic problem is that many people won’t keep their euros in a Greek bank, and perhaps not in a Spanish bank, either, when those euros can be moved to Germany or some other haven.
Yet German citizens do not appear ready to guarantee Spanish banks or, by extension, the whole credit system of Spain and the other periphery nations.
och Rolf Englund om Mats Johanssons omsvängsledare dag ett SvD, 27 maj 2012

Finance alone
S&P slashed its ratings on the creditworthiness of five Spanish banks on Friday,
just as one of them — Bankia, the nation’s largest real estate lender —
requested an additional 19 billion euros in rescue funds from the country, far beyond initial government estimates.
New York Times 25 May 2012

Bankia, formed in a seven-way merger in 2010, was meant to be the government’s flagship project to consolidate the savings banks, or cajas.

Instead, its forced rescue has prompted broader concerns among investors about whether Spain can still finance alone the rescue of such banks.

As a result, some analysts are warning that the outflow of money from Spain — so far relatively limited and led by foreign investors — could turn into a full-fledged bank run.

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It is only a trickle so far, and not nearly enough to constitute a classic bank run. But
these growing transfers of deposits out of troubled Spanish banks reflect a broader fear that the country’s problems
could make it hard for Spaniards to get to their money if banks fail and cannot be supported by the government.
Herald Tribune 24 May 2012

But for European policy makers and economists, the possibility of mini-runs on banks spreading from Greece to other, bigger countries like Spain — with 1 trillion euros, or $1.25 trillion, in bank deposits — poses a much more serious risk.

In Greece, more than two years into its financial crisis, nearly one-third of the country’s bank deposits have already left the country.

There has been no such exodus in Spain so far, where over the last year about 4.3 percent of bank deposits, or 41 billion euros, the equivalent of about $51 billion, has been transferred out of the country.

But that amount is in addition to a decline of 140 billion euros in foreign-owned financial assets in the last year, like the sale by foreigners of Spanish government bonds.

The trend worries European officials.

The idea of euro zone-wide deposit insurance has been around for a long time, but it faces the obvious political hurdle of German taxpayer resistance to backing 2.8 trillion euros worth of deposits in risky countries like Spain and Italy, as well as those that have already been bailed out — Greece, Ireland and Portugal.

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The first rule of ELA is you don’t talk about ELA.
ECBis trying to limit the flow of information about so-called Emergency Liquidity Assistance,
which is increasingly being tapped by distressed euro-region financial institutions as the debt crisis worsens.
Bloomberg 25 May 2012

Under ELA, the 17 national central banks in the euro area are able to provide emergency liquidity to banks that can’t put up collateral acceptable to the ECB. The risk is borne by the central bank in question, ensuring any losses stay within the country concerned and aren’t shared across all euro members, known as the euro system.

Each ELA loan requires the assent of the ECB’s 23-member Governing Council and carries a penalty interest rate, though the terms are never made public. Owen estimates that euro-area central banks are currently on the hook for about 150 billion euros ($189 billion) of ELA loans.

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Despite efforts at official reassurance, no one really knows the consequences of a Greek exit from the euro zone,
or how rapidly big countries like Spain and Italy, and their banks, will feel the effects.
The point of no return may be approaching faster than anyone anticipated
Steven Erlanger, The New York Times 20 May 2012

However cavalierly some European officials talk of “managing” a Greek exit, the political and financial costs would represent a fundamental challenge to the European Union and its credibility, and the point of no return may be approaching faster than anyone anticipated.

The stresses on the system are now so great that to contain panic and contagion, while protecting countries too big to bail out, would require political choices and financial commitments that many countries, including Germany, Finland and the Netherlands, seem unlikely to make

As European officials try to send strong messages to Greek voters about the consequences of an exit, a continuing run on Greek banks — a panic that threatened to spread to Spain last week — could force the European Central Bank to jettison Greece anyway by refusing to replace the euros fleeing the country for lack of proper collateral.

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Some put it simply, like economist Rolf Englund who campaigned against the euro back in 2003.
“I think the euro will collapse before Sweden joins”
RT (Russian Television) 17 February 2012

Greklands fyra största affärsbanker får kapitaltillskott från eurozonens krisfond EFSF.
Det uppges röra sig om motsvarande 163 miljarder kronor.

DN/TT 22 maj 2012

EFSF skickade redan i april, inom ramen för det andra stödprogrammet till krislandet Grekland, över totalt 25 miljarder euro till en grekisk stabilitetsfond för finanssektorn.

Det är ur denna pott som de grekiska bankerna nu får stöd på 18 miljarder euro (163 miljarder kronor).

– Med dessa EFSF-obligationer kan vi återigen finansiera oss hos Europeiska centralbanken (ECB), säger en bankkälla till Reuters.

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Emergency Liquidity Assistance (ELA)
Greece is on Life Support From the ECB, 100 billion euro
Most Greek banks are currently cut off from the usual ECB lines of credit.
They no longer have sufficient collateral.
Der Spiegel 21 May 2012

These zombie banks are being kept alive with help from the so-called Emergency Liquidity Assistance (ELA) -- a rescue aid program managed by head of Greece's central bank, George Provopoulos. At every session of the ECB Governing Council, he has to have these special allocations approved.

Last Tuesday, the ceiling for the amount of aid that Provopoulos is allowed to give his banks was even raised again, from roughly €90 billion to €100 billion.

But the Council is harboring increasing doubts about this permanent subsidy.

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RE: The Ultimate Article about EMU and the Eurocrisis
Time to plan a velvet divorce for the euro
In the coming months, Europe may be forced to decide
Sacrificing national self-rule on the altar of the euro is inherently objectionable
– and would invite a nationalist backlash across Europe.

Gideon Rachman, Financial Times 21 May, 2012

A bank run is now happening within the eurozone
The fear of bank runs is deeply ingrained in all economists who know anything about the genesis of the Great Depression in the United States in the early 1930s.
Then, the failure of the Bank of United States in December 1930 led to multiple bank runs across the country.
Bank failures in the following two years wiped out personal savings and greatly exacerbated the collapse of demand in the economy.
Gavyn Davies, Financial Times May 20, 2012

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A great deal of attention is being heaped on the possibility of a bank run across the eurozone.
But something just as important is currently happening: a bond run.
Foreign investors have left the government and corporate bond markets of Italy and Spain in droves in the past year
The worry would be that the process carries on for some time as it has done in Greece, Ireland and Portugal.
Financial Times 23 May 2012

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Would Northern Rock or Lehman Brothers have survived if they had had more capital?
Sadly not.
For the reality is that it is not the amount of capital a bank holds that protects it in a crisis,
but its ability to access ready cash for its immediate needs.
Financial Times, 20 January 2012

What the markets are saying is that they are afraid Spain may ultimately go the same way as Greece,
and prove unable to repay its debts, so they are moving their money to the safety of German bonds.
BBC 18 May 2012

Spain and full text

Bank runs

Greece’s exit from the euro
As the economist Barry Eichengreen, the leading authority on these matters, has argued, it
would provoke “the mother of all financial crises.” The contemplation of this possibility by EU leaders is making matters even worse.

Greece has no chance of recovery while this danger hangs over its economy.
Clive Crook, Bloomberg, May 16, 2012

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Adopting the euro is effectively irreversible
Leaving, given the anticipated devaluation, would trigger the mother of all financial crises
Barry Eichengreen 4 May 2010

National households and firms would shift deposits to other Eurozone banks producing a system-wide bank run.

Investors, trying to escape, would create a bond-market crisis.

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"Ett Ja är för evigt, ett Nej kan man ändra"
Det blev ett kraftfullt nej i folkomröstningen 2003
Vilket skäl upplevde du som starkast?
Nej-sidan hade det överlägsna argumentet att man inte var emot EMU men ville vänta och se
Ett ja var definitivt, ett nej kunde också vara ett ja
Göran Persson i en intervju med Newsmills chefredaktör PM Nilsson, 2012-01-09

An 'Orderly' Greek Exit Is Not Possible
We should be under no illusions that a Grexit will be very, very painful for the European Union and indeed everyone else,
it will generate a banking crisis that will reverberate around the world and will take many years to sort out.
It will be 2008 all over again but raised exponentially in severity
Moorad Choudhry, Treasurer, Corporate Banking Division, RBS, CNBC 16 May 2012

That the Greek economy is in a straitjacket and cannot progress while in the euro is not argued; that it is structurally unfit for it to be a member of a currency union with (say) Germany and Holland is also irrefutable.

But the latter is no different to the state of affairs that existed back in 2001 when Greece entered the euro. The original sin was then, now it’s time to suffer the consequence.

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– Vi vet alla nu, och vi visste alla då, att Grekland fuskade med sin statistik
berättar Pascal Lamy, WTO-chefen som på nittiotalet var
EU-kommissionens ordförande Jacques Delors högra hand

Teresa Küchler, SvD 29 februari 2012

Yanis Varoufakis talks again, insults everybody
The ex-Greek finance minister closes out a difficult year by torching his former Eurogroup colleagues. CERULUS 12/24/15

Germany wants IMF-style conditionality imposed on Greece more or less indefinitely.
But both the Greek government and the staff of the IMF dislike this possibility.
The former hates it because it wants a free hand.
The latter hate it because they fear the conditions for successful programmes do not exist.
This being so, they cannot, in good conscience, recommend one to the board.
Martin Wolf, FT 22 December 2015

The Greek economic crisis has blighted the country and the eurozone for six years.

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Bank Run

IMF at IntCom

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Greece will have to leave EMU whoever is elected
Ambrose, 17 June 2012

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Spain and Italy
At some point the Greeks will say: we cannot continue with the euro and instead we will reintroduce the drachma
Greece can become competitive again. First, the tourists will return.
The, the Greeks will stop importing more agricultural products from France than they export.
That will give a boost to the domestic economy. Third, the capital that was pulled out of the country will return.
Hans-Werner Sinn, president of the Ifo research institute, Deutsche Welle 17 June 2012

There isn’t much that Germany has in common with Greece but in one regard the two countries are actually quite similar
– both say they want the euro but neither is prepared to do the things necessary to keep it.
Jeremy Warner, 30 May 2012

In an elaborate payment system that began after the May 6 election that brought down the Greek government,
meant to ensure that the Greeks do not touch the cash,
the big three creditors are now wiring bailout payments to an escrow account in Greece.
There the money sits for two or three days — before much of it is sent back to the troika as interest payment

on the Greek bonds that Europe accepted under terms of the bailout deal struck in February.
Internetional Herald Tribune 29 May 2012

“Why are we doing it like this?” Mr. Mayer said. “Because we’re Europe.”

About three-quarters of Greece’s debt, or €182 billion, is now effectively owned either by the Union, the E.C.B. or the I.M.F., according to estimates by the investment bank UBS.

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Inte bra för Grekland - Tyskarna kanske inte känner sig välkomna i Grekland?
Greece's tourism industry, crucial to its ailing economy, has been hit hard
One industry leader reports bookings have been down 50 percent since the vote.
Der Spiegel 21 May 2012

Picture: Empty sunbeds on the island of Lesbos.

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Om Grekland faller – vilket verkar troligt – kan mycket väl Spanien, Portugal, Italien och Irland stå på tur.
IMF krävde i likhet med dagens EU/IMF att Argentina skar ned ordentligt i sina utgifter för att få nya lån.
I efterhand har valutafonden medgett att man skrev ut en felaktig kur för Argentina.
Peter Wolodarski, Signerat DN 20 maj 2012

We have no idea whether the euro survives,
but we know the mechanism through which it would collapse: a bank run.
Eurointelligence Daily Briefing, 18 maj 2012


Following the downgrade of 16 Spanish banks by Moody's, the focus in the euro crisis is back on the banking sector.
Greeks are withdrawing hundreds of millions from their accounts, with reports that the same is happening in Spain.
Experts are calling on the European Central Bank to step in and prevent full-scale bank runs.
Der Spiegel 18 May 2012

For months now, wealthy individuals in crisis-hit countries have already been moving billions of euros abroad out of fears about the stability of the financial systems in their own countries.

Until recently, however, there had been few signs of abnormal behavior in terms of ordinary savers withdrawing cash.

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Suddenly, it has become easy to see how the euro
— that grand, flawed experiment in monetary union without political union —
could come apart at the seams.
Things could fall apart with stunning speed, in a matter of months, not years.
Paul Krugman, New York Times 17 May 2012

Greece is experiencing what’s being called a ‘‘bank jog’’ — a somewhat slow-motion bank run, as more and more depositors pull out their cash in anticipation of a possible Greek exit from the euro.

Europe’s central bank is, in effect, financing this bank run by lending Greece the necessary euros; if and (probably) when the central bank decides it can lend no more, Greece will be forced to abandon the euro and issue its own currency again.

This demonstration that the euro is, in fact, reversible would lead, in turn, to runs on Spanish and Italian banks.

Once again the European Central Bank would have to choose whether to provide open-ended financing; if it were to say no, the euro as a whole would blow up.

Italy and, in particular, Spain must be offered hope — an economic environment in which they have some reasonable prospect of emerging from austerity and depression.
Realistically, the only way to provide such an environment would be for the central bank to drop its obsession with price stability, to accept and indeed encourage several years of 3 percent or 4 percent inflation in Europe (and more than that in Germany).

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Risken för uttagsruscher är ett av de starkaste argumenten mot att låta Grekland lämna euroområdet.
När spararna i länder som Spanien och Portugal då skulle få svart på vitt att en euro inte alltid är en euro,
utan kan omvandlas till den gamla valutan och kanske halveras i värde, blir det rationellt att ta ut
Eftersom sannolikheten för att Grekland ska lämna euron är reell har risken för uttagsruscher ökat.
Viktor Munkhammar, DI 18 maj 2012

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Deposits are fleeing Greek banks at an accelerating pace.
If financial panic forced a Greek exit before the vote,
it would wreck the credibility of pledges that banks across the euro zone are safe.
The Economist print, editorial, 19 May 2012

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The euro area financial market, in all segments and maturities does not function properly,
as banks deposit their excess liquidity with the central bank instead of lending to other banks.
Price stability is not in danger right now. The euro might be.
Lorenzo Bini Smaghi, Financial Times 23 July 2012
The writer is a visiting scholar at Harvard and a former member of the ECB’s executive board

Cross-border banking flows have dried up. Households and firms across the union borrow at rates that depend more on the respective sovereign risk – just look at Spain, today, for example – than on their intrinsic creditworthiness. Interest rate decisions made by the central bank are not able to affect monetary conditions in the desired way in a large part of the euro area.

The euro area crisis may have reached a point in which it can hardly be resolved unless the policy authorities are determined to take bold actions.

It also requires that the central bank takes more drastic measures to ensure that there is a single monetary policy throughout the euro area, consistently with its mandate.

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Europe faces a dilemma
It cannot yield to Greek requests to renegotiate the programme
On the other hand, there is no doubt that if Greece leaves the eurozone the contagion will be devastating
Lorenzo Bini Smaghi, Financial Times 16 May 2012

Those who suggest that markets are now well prepared for such an event and that most of the costs would be borne by the Greek economy seriously underestimate the channels of transmission of systemic crises following a sovereign debt crisis and a bank run

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Lorenzo Bini Smaghi, a longtime Italian member of the European Central Bank's executive board, has tendered his resignation, according to Bloomberg.
He will go to Harvard January 1. November 10, 2011

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EMU Start

A tsunami of capital flight from Greece threatens to overwhelm the authorities,
forcing the country out of the euro before fresh elections in June
Ambrose Evans-Pritchard, 16 May 2012

The crisis is replicating the pattern of fixed-exchange ruptures through history.

Britain was forced off the Gold Standard in 1931 after pay-cut protests in the navy triggered capital flight.

Greek banks have lost 30pc of their deposits since late 2009.

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Sweden's bank rescues in the early 1990s – it was not the bail-out that saved Sweden's financial system, the country recovered only by ditching its exchange peg and regaining its freedom of action.

Depression buffs will note the parallel with Britain's infamous budget in September 1931. Though few had any inkling at the time, Snowden's austerity drive would soon push British society over the edge.

It set off a mutiny – a Royal Navy mutiny at Invergordon over pay cuts, in turn triggering a run on sterling. The pound was forced off Gold within days.

Ambrose Evans-Pritchard, Daily Telegraph 12 Apr 2009

Krugman alltför optimistisk om tidsplanen för Eurodämmerung
Det är väl mer fråga om veckor, dagar eller timmar?
Rolf Englund, 14 maj 2012

Kommer långivare och medborgare att vara säkra på att Grekland var ett specialfall?

Kommer försiktiga företag och privatpersoner att börja flytta sina pengar från länder som Portugal, Spanien och Italien för säkerhets skull,
när de sett sina tidigare eurobröder och systrar bli av med sina besparingar vid det grekiska utträdet.
Vid ett sådant scenario räcker brandväggarna ingenstans.
Staffan Sonning, Ekot 16 maj 2012

I stället krävs dramatiska och snabba förändringar i hela eurozonens krishanteringssystem – först obegränsad pengatryckning och utlåning av Europeiska centralbanken (ECB) för att undvika omedelbart sammanbrott. Och därefter möjligen en snabb marsch mot en finanspolitisk union där ännu mer av den politiska makten flyttas till Bryssel, kanske gemensam upplåning med efterföljande fördelning till medlemsländerna.

Det är mycket svårt att se hur euroledarna i elfte timmen skulle klara av att enas kring en sådan helomvändning.

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Bank deposits, /in Greece/ are now being withdrawn at the rate of around 3 bn euros a week
Alistair Osborne, Telegraph 16 May 2012

Grekland är inget särfall, bara ett extremfall
Rolf Englund 5 februari 2012

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“Provopoulos told me that of course there’s no panic but there’s great fear which can evolve into panic,” the president said.
Greek President Karolos Papoulias was told by the nation’s central bank chief that financial institutions are worried about their survival as Greeks pull out euros
Greeks have withdrawn as much as 700 million euros and the situation could worsen
according to the transcript of the president’s meeting with party leaders on May 14 that was published yesterday
Bloomberg, May 16, 2012, 10:35 AM GMT+0200

The risk of a run on Greek banks is “a very serious problem,” Yannis Ioannides, professor of economics at Tufts University in Massachusetts, told Bloomberg Television. He said the European Central Bank needs to guarantee deposits held by the region’s lenders to guard against contagion. “That’s the only way to kill a bank run: not words but deeds.”

Banks in downtown in Athens were open as normal today with no signs of unusual activity.

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Could the euro survive a Greek exit?
The point is that the eurozone crisis is a sovereign debt crisis and an inextricably connected banking crisis
Any business of any nationality will find it extremely difficult to leave its money in euros in a bank in a country perceived to be at risk of following Greece out the door.
Citizens too, if they are able to do so, have a huge economic incentive right now to take their money out of Greek banks,
and either hold it in cash or transfer it to a perceived safe haven, such as Germany.
Robert Peston, BBC Business editor, 14 May 2012

A Greek departure from the euro, which accelerated withdrawal of cash from banks in other vulnerable economies, would surely create the imperative for yet more emergency ECB lending to banks.

And since the European Central Bank and the national central banks insist on lending only in return for collateral, there is a danger that banks would shortly run out of collateral of sufficient quality.

Which means the ECB would face the uncomfortable choice of turning off the life support, and see quite a few banks falling over, or lending on the basis of inadequate security - and thus taking significant credit risks with these loans.

If you want to know more about this, you could watch "The Great Euro Crash, with Robert Peston" this coming Thursday on BBC2 at 9pm

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about 6 billion worth of bonds
Greece will pay the remaining holders of a bond that matures on May 15,
avoiding default on the first issue to expire after the biggest sovereign debt swap in history
CNBC 15 May 2012

Greece completed a huge debt restructuring in early March, swapping a nominal amount of 177 billion euros of government paper held by private creditors for new securities as part of its second rescue package.

A few investors held out, however, rejecting the swap offer accepted by 96.9 percent of bondholders who suffered a real loss of 75 percent.

That left about 6 billion worth of bonds that the Greek government must decide how to handle.

"The bond will be paid," the official, who did not want to be named, told Reuters.

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The International Swaps and Derivatives Association said Friday
that the Greek government's use of collective-action clauses, or CACs, to amend to terms of Greece-issued bonds
qualifies as a "credit event" for Greece. A credit event requires a payout to those who held credit default swaps as insurance
to protect themselves in the event of a Greek default.
The ISDA decision could trigger payouts on $3.2 billion of those insurance-like contracts
MarketWatch, 9 March 2012

Expelled from the eurozone, Greece might prove more dangerous to the system than it ever was inside it
– by providing a model of successful recovery
Arvind Subramanian, Financial Times 14 May 2012

Eurogroup Chairman Jean-Claude Juncker:
"I made it perfectly clear that nobody was mentioning an exit of Greece from the euro area.
I am strongly against. We are 17 member states being co-owners of our common currency.

"I don't envisage, not even for one second, Greece leaving the euro area. This is nonsense, this is propaganda.
with more of the same, from businessinsider, 14 May 2012

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Merkel: I Won't Take Part In Pushing Greece Out Of Euro
and It’s necessary to create a political union
Via Rolf Englund blog 2012-02-10

Bagdad Bob: There are no Americans in Bagdad

Det är sällan som väntade riskfaktorer som får börsen på fall långsiktigt och
jag bedömer därför inte det uppenbara hotet från Grekland som så allvarligt.
Sammantaget är jag fortsatt positivt till börsen och den dämpade stämningen stärker mig än så länge i min tro
Dawid Myslinski, DI 16 maj 2012 09:27

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”Jag tror att man överdrivit rädslan lite för att Grekland ska lämna.
Jag tror att Junckers besked kommer att lugna marknaden något”
säger Henrik Degrér, allokeringsstrateg på Handelsbanken 15 maj 2012.

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After Greek voters rejected austerity in last week's election Europe has been searching for a Plan B
It's time to admit that the EU/IMF rescue plan has failed.
Greece's best hopes now lie in a return to the drachma.

Der Spiegel, Staff, 14 maj 2012

At the Chancellery in Berlin, the television images from Athens now remind Merkel's advisers
of conditions in the ill-fated Weimar Republic of 1919-1933.

Der Spiegel, Staff, 14 maj 2012

What we think the end game looks like:
1. Greek euro exit, very possibly next month.
2. Huge withdrawals from Spanish and Italian banks, as depositors try to move their money to Germany.
Paul Krugman, New York Times, May 13, 2012

Sannolikt lämnar Grekland euron
Resten av Europa har nu bättre chanser än för två år sedan att hantera förlusterna på de grekiska fordringarna.
SEB förordar en mer expansiv politik både för Sverige och Euroland.
Danne Nordling, 8 maj 2012

Grekerna borde rimligtvis införa en "grekeuro" (inte den komprometterade drachman). Denna kommer att börja gälla med kursen 1:1 men inte vara konvertibel.
Det förutsätter att man klarar att sätta upp elektroniska hinder mot valutaflykt och upprätta gränskontroller som hindrar smuggling till viss del.
Centralbanken kan då skapa nya pengar som kan hålla bankerna under armarna och möjliggöra att staten kan få låna till budgetunderskottet.

SEB ansluter sig idag tydligare till det växande lägret av ekonomiska bedömare som påfordrar en mer expansiv politik: världen borde byta krisstrategi.

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Man behöver inte tro på Keynes teorier från 1930-talet för att se både
den politiska och ekonomiska faran i en finanspolitik som spär på nedgången.

Det långsiktigt nödvändiga – att sanera skuldsatta ekonomier – är inte en klok strategi i ett akut läge.
Peter Wolodarski, DN 13 maj 2012

Kan verkligen krisen för de spanska bankerna bero på de dåliga statsfinanserna i Grekland?
Naturligtvis inte. Det förstår väl vem som helst, är det naturliga svaret.
Men sanningen är ju den att den svenska regeringen och S-ledaren Löfven och Dagens Nyheter och
Svenska Dagbladet och alla andra eurokramare, fortfarande håller fast vid den analysen.
Rolf Englund 11 maj 2012

Greece’s motorcycling Marxist, Alexis Tsipras rides to parliament on a German-made BMW
It’s too late for Germany to save the euro
Jeremy Warner, Telegraph 10 May 2012

Michael Portillo makes a very good point about the Greece crisis.
Rescuing not Greece but the banks and the reputation of the politicians

Europe must prepare for an exit from the eurozone that has become probable rather than possible.
The private sector has pulled back from exposure to Greece. International banks have taken haircuts of more than 50 per cent on their Greek bonds.
IMF and ECB will suffer big losses. While this will hurt, the pain should be manageable.
Financial Times, editorial, 8 May 2012

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For many countries no plausible exit exists from depression, deflation and despair.
Martin Wolf, Financial Times 8 May 2012

With almost all votes counted,
centre-right New Democracy is leading with 18.9%, down from 33.5% in 2009
Centre-left Pasok is in third place with 13.2%, down from 43.9%

BBC 7 May 2012

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Greklands Doomsday Machine for the euro
The immediate fate of Greece - and the euro - is in the hands of a boyish motorcycle Marxist.
Greece has the "ultimate weapon". It can bring down the whole European system if EU leaders refuse to soften the terms
Ambrose Evans-Pritchard, 8 May 2012

The Greek elections were the real shocker – not predicted by the polls.
The combination of New Democracy and Pasok have failed to obtain a majority
– and this despite the fact that the largest party gains an extra 50 seats.
It is impossible to achieve both a stable government,
while maintaining a broad-based coalition in support of the programme.

Eurointelligence 7 May 2012

Dagens Nyheter förklarar inte hur en sådan politik skulle kunna rädda Grekland, Portugal, Spanien och Italien
och göra det innan det folkliga missnöjet, som tidningen anser vara delvis berättigat, exploderar.

Rolf Englund 6 maj 2012

Konstruktionen kring euron har inte varit fel
Euron är numera kärnan i det europeiska samarbetet.
Jan Björklund, Birgitta Ohlsson, Carl B Hamilton och Olle Schmidt, SvD Brännpunkt, 9 september 2011

Det var ett mycket allvarligt misstag att förespråka en svensk anslutning till EMU.
Alla som var för EMU i folkomröstningen har förbrukat sitt förtroende och bör avgå
Rolf Englund 13 april 2012

Det vore nästan oförskämt att vädja till grekerna om stöd för socialistpartiet Pasok eller det borgerliga Ny demokrati i dagens parlamentsval.
Genom fyra decennier av misskötsel och inkompetens har de båda sorglöst turats om med att leda landet ned i dagens ekonomiska kvicksand.
Pasok och Ny demokrati har kallats partier men mest varit utväxter på klanerna Papandreou respektive Karamanlis.
DN-ledare, signerad Gunnar Jonsson, 6 maj 2012

Över tre fjärdedelar av grekerna vill behålla euron. Lika många är dock emot räddningspaketen.

Pasok och Ny demokrati ställs till svars både för den djupa krisen och för att agera utlandets lakejer när de stramar åt.

Pasok och Ny demokrati skulle således bilda en sällsynt svag regering med folkmajoriteten emot sig.

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Dagens Nyheter

Greklands långivare betalar pengar till sig själva, i första hand till stora banker och försäkringsbolag i Västeuropa. Och med intill visshet gränsande sannolikhet kommer Grekland inte heller att kunna betala tillbaka dessa nya lån varför Svarte Petter till sist lär hamna hos de europeiska (läs: tyska) skattebetalarna.

Svarte Petter lär till sist lär hamna hos de europeiska (läs: tyska) skattebetalarna
Det är begripligt att politiker som gärna vill bli omvalda föredrar att presentera ett gladare budskap,
vars visserligen orealistiska innehåll förhoppningsvis inte genomskådas förrän efter nästa val.

Europas politiker har här ett gemensamt intresse. Ännu en gång har de därför ägnat sig åt sin bästa gren: att vinna tid.
Richard Swartz, kolumn DN 14 april 2012

Ibland får man intrycket att den politiska klassen har mycket vaga föreställningar om hur ekonomin i flera syd- eller östeuropeiska länder verkligen fungerar

Särskilt i Östeuropa framstår dilemmat med exemplarisk tydlighet.

I svindlande tempo gick man från brist till överflöd. Bara en hake fanns – i öst fanns inga pengar att köpa varorna från väst för. Alltså försågs östeuropéerna med frikostiga krediter från de nya affärsbanker som också de kom från väst. Men av krediter i en sådan omfattning hade varken stat eller konsument någon erfarenhet. Resultatet är flera ekonomier där fortfarande mycket lite produceras och på en omfattande skuldsättning som enda, vacklande grund.

Stora delar av Sydeuropa är ett snarlikt fall.

Vad ska de leva av i framtiden? Det verkar ingen veta. Bara att en hel livsstil måste läggas om och att Kina, långt mer än Tyskland, är orsak till detta.

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EU:s storbanker, diskret uppmuntrade av den politiska klassen, har med spenderbyxorna på lånat ut pengar
som om euroobligationer – garanterade av en för alla, alla för en – redan vore ett faktum.
Men nu har de tvingats upptäcka att det inte står Europa utan Italien, Grekland, Spanien eller Frankrike på skuldbreven.
Och Tyskland insisterar på att så ska det också förbli
Richard Swartz, Kolumn DN 12 novenber 2011

Grekiska banker rapporterade stora förluster.
Resultaten tyngs av nedskrivningar på värdet av statsobligationer
Företag och hushåll har fortsatt att ta ut sina tillgångar eftersom de befarar att banker ska gå omkull, och insättningarna har krympt dramatiskt.
I det andra stödpaketet för Grekland har omkring 50 miljarder euro öronmärkts för bankstöd.
DNT/TT 20 april 2012

Fotnot: 50 miljarder euro är drygt 440 miljarder kronor.

Greek Banks Post $37 Billion Losses on Debt Restructuring
Bloomberg 20 April 2012

Greece’s four biggest banks, including National Bank of Greece, said they wrote down about 25 billion euros in the combined value of their Greek government bond holdings.

Greece’s bank- recapitalization body yesterday got 25 billion euros in a first tranche of funds, or half the total assigned for the purpose, as part of a second bailout by the European Union and International Monetary Fund.

The IMF, EU and European Central Bank, the so-called troika of agencies overseeing the Greek financing, plan to help capitalize banks with incentives for private investors.

The goal is to bring core tier 1 capital to 9 percent of assets by the end of September.

“The whole plan for the future is really not clear because the conditions for the recapitalization are not clear,” Alpha Bank General Manager Artemis Theodoridis said “What we found out in the last few days is that they will not be clear, at least the legal framework, before the elections,” he said.

The country is due to hold general elections May 6.

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Går Tyskland med på att rekapitalisera spanska banker?
Borg, Rehn, Lagarde och Pakistans ledande Financial Daily
Rolf Englund blog 21 april 2012
Tänk om SvDs ledarsida vore lika duktiga som dom i Pakistan.


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As Hope Fades in Greece, an Elderly Pensioner Is Driven to Suicide
Many anti-austerity protesters blame the debt crisis on Greek politicians, whom they call traitors and thieves.
Politicians here are so hated these days that many cannot walk in public without being pelted with yogurt and eggs.
TIME 5 April 2012

Read more

Why wasn’t Greece allowed to restructure its debt two years ago, before its economy contracted by 15 percent,
and before it was necessary to impose a haircut on private sector borrowers, destabilize the government and the economy,
illegally implement retroactive collective action clauses, and trigger credit default swaps?

High Frequency Economics’ founder and chief economist, Carl Weinberg asked in the report
. CNBC 20 March 2012

“It was inconvenient for the banks, that is why,” he said.

In a March report on the global economy, Weinberg said EU leaders had deliberately delayed Greece’s restructuring, to the detriment of its economy, in order to give banks time to prepare for the hit on their debt holdings.

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SOU 1999:150 av Torsten Sverenius
Det var också detta intervenerande, att man stödköpte kronor, som enligt Hans Tson Söderström och Nils Lundgren blev det kronförsvaret som kostade skattebetalarna mest,
frånsett de svårberäknade följderna för hela samhällsekonomin.

I den läsvärda boken Ekonomisk Politik. En vänbok till Assar Lindbeck (SNS Förlag 1995) bidrar de båda ekonomerna med ett intressant kapitel kallat Kronförsvaret hösten 1992 - var det värt sitt pris?

Den absoluta lejonparten av de totala kostnaderna för Riksbanken åsamkades under den sista veckan före kronans fall, när Riksbanken frångick sin tidigare strategi att försvara kronan genom räntehöjningar för att i stället övergå till direkta interventioner på valutamarknaden. Sedan kommer en anmärkningsvärd mening:

Detta strategibyte gav privata aktörer som litat på Riksbankens utfästelser om fast kronkurs möjlighet att gå ur sina valutalån, men öppnade samtidigt möjlighet för utländska och inhemska spekulanter att ta position mot kronan.

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A 77-year-old Greek pensioner distraught over his financial state shot himself in the head in the capital’s busy main square near Parliament on Wednesday morning.
“I don’t want to leave debts to my children,” he shouted before pulling the trigger, witnesses said.
The location, Syntagma Square, is a focal point for frequent public demonstrations and protests.
New York Times 4 April 2012

"a threat not just to Spain but to the whole EU"
The decisive test of the euro area’s plans for economic recovery was never Greece but Spain,
and the European Union shows every sign of failing it.
Bloomberg, editorial 5 April 2012

Greek banks hit by the debt-swap may not need all of the €50bn earmarked by the EU and IMF
to restore capital needs for the country's financial sector according to central bank governor George Provopoulos.
Eurointelligence/WSJ 19 Mars 2012

Jag har gott hopp om att krisen i Euroland kan isoleras till Grekland
De åtgärder som vidtagits inom euroområdet bedöms tillräckliga för att återskapa
förtroendet för de europeiska ekonomierna, säger Gösta Karlsson, t f chefsekonom på Unionen
Leif Petersen, SvD/e24 16 mars 2012

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Is the IMF already assuming Greek failure?
FT, Peter Spiegel, 19 March 2012

Lagarde said, “…the challenges confronting Greece remain significant,
with a large competitiveness gap, a high level of public debt, and an undercapitalised banking system.”
New York Times 15 March 2012

Rolf Englund blog

See also

IMF godkände ett räddningslån värt 28 miljarder euro till Grekland
1,65 miljarder euro ska omedelbart betalas ut
DN/TT 15 mars 2012

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Private investors may have lost nearly 75% of the present value of their holdings of Greek debt.
But since the deal only involves the privately held debt, it reduces the total stock of Greek debt by less than 30%
Stephanie Flanders, BBC Economics editor, 9 March 2012

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Slutet är att Grekland på något sätt lämnar eurosamarbetet.
Det sker de närmaste tolv månaderna – om inget mirakel inträffar och sådana är som bekant sällsynta
Bengt Dennis, SvD Näringsliv 13 mars 2012, reporter Therese Larsson

Jag kan föreställa mig att ett samhälle som det grekiska klarar sig utan kontanter i någon vecka... Det där är trivialiteter, det går att improvisera...Det är effekterna på den reala ekonomin som är viktiga, resten klarar man upp

En ny drachma kommer att falla 40–60 procent, bankerna kollapsar, och jag utgår från att det internationella samfundet fortsätter att stötta Grekland, men i begränsad omfattning.

Det som förvånar mig mest är att grekerna inte har stormat bankerna. Det är märkligt. Uttagen har hittills skett i slowmotion. Frågan är vad som händer om det inträffar.

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"Fasta växelkurser känns för Sveriges del som ett mindre naturligt val efter händelserna 1992 och den svåra fortsättningen under 1993.
I stora delar av Europa råder dock fortfarande uppfattningen att fasta växelkurser är inte bara önskvärda utan också hanterbara."
Bengt Dennis i sin bok

Lars Jonung, ny ordförande för Finanspolitiska Rådet, har en fråga att besvara

Lars Jonung var på sin tid, vid kronkursförsvaret 1992, rådgivare åt statsministern, Carl Bildt.
Finansministern hette Anne Wibble.

Dåvarande riksbankschefen Bengt Dennis:
"En ständig källa till oro både i finansdepartementet och Riksbanken var dock statsministerns ekonomiske rådgivare,
professor Lars Jonung, som under hösten förespråkade att gällande kronkurs skulle överges."
Mer här

Men han måtte väl ändå ha upplyst Bildt och Wibble om sin uppfattning. Det var hans jobb.
Då är den ännu obesvarade frågan:
När sade Jonung vad till Bildt och Wibble?

Finansmarknaderna har redan underkänt räddningspaketet till Grekland,
som euroländerna sa ja till i fredags

Ekot söndag 11 mars, kl 12:18

Tidningskrönikan: Få tror att Grekland klarar sig

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Grece to exit euro and Portugal likely to be the next to restructure
Nouriel Roubini, CNBC 9 March 2012

Skuldnedskrivningen motsvarar tre fjärdedelar av vad det står på papperet.
I utbyte får investerarna förutom nya säkrare obligationer även kontantcheckar och andra godsaker.
Grekiska banker får kapitaltillskott
DN-ledare, signerad Gunnar Jonsson, 10 mars 2012

Erik Åsbrink, Rolf Englund och Lars Wohlin i TV om eurokrisen
SvT Paly via Rolf Englund blog 10 mars 2012

Den stora frågan är fortfarande om pengaflödet till Grekland innebär något annat än att köpa tid.
Ränteinbetalningarna kommer att fortsätta att vara en svår belastning på den grekiska ekonomin i flera decennier framåt.
Ekot, Staffan Sonning, 9 mars 2012

Redan i april kommer nästa stora test av hållbarheten i räddningsplanerna. Då arrangeras parlamentsval i landet och utgången är oviss. De två stora partierna som ingår i dagens koalitionsregering, socialistpartiet Pasok och konservativa Ny Demokrati, har fått se sitt väljarstöd haverera under krisperioden.

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Klockan tickar obönhörligt för Grekland. Prick klockan nio i kväll svensk tid löper erbjudande för en skuldavskrivning ut.
På spel står hela stödpaketet som mödosamt förhandlats fram med regeringen i Aten, med risk för en okontrollerad betalningsinställelse som tvingar landet att lämna eurozonen.
– Kostnaderna skulle i så fall knappast understiga 1000 miljarder euro, varnar det inflytelserika Institute of International Finance

Grekland beskrivs i rapporten som den första brickan i ett dominospel som kan få Portugal och Irland att falla, sedan Italien och Spanien.
Krisen fortplantar sig genom banksystemet och griper sedan in på den reala ekonomin.
Tomas Lundin, SvD Näringsliv 8 mars 2012 (ett värdigt sätt att fira den Internationella Kvinnodagen)

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President Nixon: Well, I don't give a (expletive deleted) about the lira.
USA:s president och alla vi andra borde inte bekymra oss om Liran och Drachmern
Rolf Englund blog 21 juni 2011


If Greece doesn’t have to pay what it owes, why should we?
The private sector is being asked to write off more than 70 percent of the face value of their Greek government bonds
It seems likely that other nations may seek to follow Greece’s path to debt relief.
John Carney, Senior Editor,, 8 March 2012

The private sector is being asked to write off more than 70 percent of the face value of their Greek government bonds in return for new debt. This will help Greece meet its debt obligations and enable it to tap into bailout funds from the EU and IMF.

It seems likely that other nations burdened by heavy debt loads and high interest rates may seek to follow Greece’s path to debt relief. If Greece doesn’t have to pay what it owes, they might argue, why should we?

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Argentina’s Sovereign Bondage
Anne Krueger, Project Syndicate 9 July 2014

When private firms (or subnational governments) become insolvent, there are normally legal bankruptcy procedures to determine what to do. Without such procedures, a market economy would be unable to function. In part, this is because creditors would otherwise stop extending credit and demand repayment at the first sign of trouble. This is because the first creditors to be paid would receive the full amount owed to them, leaving less for later creditors – and thus creating an incentive for all creditors to rush for the exits even before debt servicing had become impossible.

Sometimes, creditors agree to exchange the old bonds for new ones, which have either a lower face value or lower interest payments. Few governments refuse to pay at all in any form.

Argentina defaulted on its debt in 2001. After several difficult years, the country managed to negotiate an exchange of outstanding bonds for bonds with a considerably lower face value. About 93% of creditors accepted the exchange and received new bonds with a face value that was about one-quarter of that of the old bonds. After 2005, Argentina maintained debt service on the new bonds.

The US Second Circuit Court of Appeals ruled that Argentina was bound to honor its obligations to the holdout bondholders in the same proportion (namely 100%) as the holders of the exchange bonds. It was that ruling that the Supreme Court recently upheld.
Under the court order, Argentina may not pay the holders of the new bonds unless it also pays the holdouts, and no US financial institution can serve as an intermediary to make payments for Argentina. As a result, Argentina must either pay the holdouts in full or default on the new bonds.

Since the Argentine crisis, most new bonds have been issued with collective action clauses (CACs), under which bondholders are obliged to accept restructuring if a specified share (usually around 70%) agree to it.

Until the euro crisis, it was generally believed that problems servicing sovereign debt occurred only in emerging markets and the least developed countries.

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Anne Krueger, a former World Bank chief economist and former first deputy managing director of the International Monetary Fund, is Professor of International Economics at the School of Advanced International Studies, Johns Hopkins University, and Senior Fellow at the Hoover Institution, Stanford University.

Argentina har lånat i utländsk valuta
Things sometimes go wrong. Sometimes this is due to bad luck and sometimes to irresponsibility.
But society needs a way to allow people to start over again. This is why we have bankruptcy.
The eurozone has put its members in the same position: for each government, the euro is close to being a foreign currency.
Martin Wolf, 24 June 2014

Anne Krueger fortsätter bara helt lugnt att fråga varför länder inte skulle kunna gå i konkurs
Krueger är en ekonomiprofessor som brukade styra Världsbanken och har även varit chefsekonom på IMF
Jenny Nordberg, SvD 20 januari 2013

Det vore väl en bättre variant, anförde hon, än att banker lånar ut obegränsat, i vetskapen om att när ett land inte kan betala så får bankerna tillbaka sina pengar ändå – av allmänheten. Då får exempelvis IMF rusa in med räddningspengar, för att de utländska lånen ska kunna betalas av. Sedan får ett lands befolkning några generationer på sig att mödosamt betala av till IMF, medan löner, pensioner och allmän service stryps. Men bankerna har redan fått betalt för länge sedan.

Lobbyorganisationen Institute of International Finance, IIF, där Jacob Wallenberg nu är vice ordförande, protesterade – det skulle dämpa låneviljan hos banker, och det skulle inte bli lika lätt för länder att få tillgång till kontanter.
Det vore just själva poängen det, förklarade Anne Krueger när jag intervjuade henne.

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Kanske det är en amerikansk kvinna, Anne O. Kreuger, professor i nationalekonomi vid Duke University, North Carolina, Världsbankens chefsekonom 1982-1986, som har formulerat den viktigaste lärdomen från kommandoekonomins sammanbrott. I en intervju hösten 1990 (DI 24/10) i samband med sitt besök i Stockholm för årets Ohlin-föreläsningar sade hon: - På 1950- och 1960-talen underskattade vi nog hur mycket skada en felaktig ekonomisk politik kunde åstadkomma.
Förord till boken "Till vänster om marknaden - Bistånd med slagsida" av Rolf Englund, Timbro 1991.

The PSI deal has substantial sweeteners;
and with three quarters of Greek debt in the hands of official creditors by 2014,
Greece’s public debt will be almost entirely socialised.
Nouriel Roubini, FT 7 March 2012

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Official creditors will be left to suffer most of the huge additional losses that remain likely on Greece’s still unsustainable debt in future.

Greece on brink of default as bond deal falters
Less than half of Greece’s international creditors had agreed to a vital bond swap on Wednesday night,
leaving Athens dangerously exposed to default.
Daily Telegraph 7 March 2012

The International Swaps and Derivatives Association said Friday
that the Greek government's use of collective-action clauses, or CACs, to amend to terms of Greece-issued bonds
qualifies as a "credit event" for Greece. A credit event requires a payout to those who held credit default swaps as insurance
to protect themselves in the event of a Greek default.
The ISDA decision could trigger payouts on $3.2 billion of those insurance-like contracts
MarketWatch, 9 March 2012

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The high participation rate is only possible through the use of CACs, which will make the offer binding on all holders of Greek-law bonds.
That in turn will almost certainly trigger pay-outs under credit default swap insurance.
Financial Times 9 March 2012

Once the CACs are triggered, all €177bn worth of bonds issued under Greek law – or 86 per cent of all Greek debt in private sector hands – will be swapped for a cash payment equivalent to 15 per cent of their original holding.

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Greece's private sector creditors feel they are being forced into accepting a dramatic writedown of what Greece repays them.
And if that were not to trigger CDS payments, what would?
Robert Peston, BBC Business editor, 8 March 2012

To put it another way, if ISDA's decision-making committee rules that Greek CDSs are useless for compensating those who had bought the CDSs to protect themselves from the very events that are happening, then it is difficult to see how any CDS contract written on any sovereign credit would have a value.

That, for example, would mean that those who had bought $320bn of protection against default by the Republic of Italy would probably have to write off most of that $320bn, because the insurance contract would be seen to be almost useless.

And there would equally be huge losses for those holding $163bn of protection taken out against Spain, $45bn taken out against Ireland,

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More about bond swap

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Papanicolaou and his predecessor, Christoforos Sardelis,
revealing details for the first time of a contract that helped Greece
mask its growing sovereign debt to meet European Union requirements
Bloomberg, 6 March 2012

“The Goldman Sachs deal is a very sexy story between two sinners,” Sardelis, who oversaw the swap as head of Greece’s Public Debt Management Agency from 1999 through 2004, said in an interview.

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Det har senare visat sig att föredragshållaren hos SNS, som jag skrattade åt, inte bara hade varit Bo Lundgrens grekiska motsvarighet som riksgäldschef,
det var just han /Christoforos Sardelis/ som var med om dölja det verkliga läget genom att med hjälp av Goldman Sachs göra swapar.
Rolf Englund blog 24 januari 2012

– Vi vet alla nu, och vi visste alla då, att Grekland fuskade med sin statistik
berättar Pascal Lamy, WTO-chefen som på nittiotalet var EU-kommissionens ordförande Jacques Delors högra hand
Teresa Küchler, SvD 29 februari 2012

Läs mer här

Allt fler anser att det inte kommer att räcka och att Grekland måste lämna eurozonen.
En av dem är Nobelpristagaren Paul Krugman.
Enligt Greklands finansminister är det ett "betydande antal" politiker från alla partier
som skickat sina pengar utomlands. Och då talar han bara om de politiker som flyttat ut
minst 100 000 euro, alltså nära en miljon svenska kronor

Ekot 28 februari 2012

Sen 2009 har nästan en tredjedel – 28 procent – av privatpersoner och privata företags tillgångar flyttats ut ur Grekland och i säkerhet ibland annat Schweiz.

Det här har bidragit till att det grekiska banksystemet måste få ännu mer stöd.

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Fiscal irresponsibility; Greece, but nobody else.
Italy ran deficits in the years before the crisis, but they were only slightly larger than Germany’s
(Italy’s large debt is a legacy from irresponsible policies many years ago).
Portugal’s deficits were significantly smaller, while Spain and Ireland actually ran surpluses

Paul Krugman, New York Times, February 26, 2012

Oh, and countries that aren’t on the euro seem able to run large deficits and carry large debts without facing any crises.
Britain and the United States can borrow long-term at interest rates of around 2 percent; Japan, which is far more deeply in debt than any country in Europe, Greece included, pays only 1 percent.

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If you have a printing press you don´t go bankrupt
Rolf Englund 2011 and BBC

The greatest threat to the euro is that Greece will make a success of default and devaluation.
Suppose that once the new drachma has fallen by 30pc to 50pc, Greece begins to show signs of growth.
How would it then be possible to persuade the electorate of Spain, Portugal, Italy, and even Ireland, that there is no alternative to years of misery?
It is all very well building firewalls to stop financial contagion, but how do you build firewalls around the voters?
Roger Bootle, Daily Telegraph 26 February 2012

While questions on Greece’s remaining in the euro “have their justification,”
Merkel warned that a failure of the 17-member euro might endanger the Europe Union and the global economy.
Bloomberg 27/2 2012

Varje gång ett viktigt förfallodatum inträffat, ända sedan euroländerna gav det första nödlånet i maj 2010,
har de privata placerarna lastat av en del av sina innehav på skattebetalarna
Mats Persson, professor i nationalekonomi vid IIES, Stockholms universitet,
ledamot av Kungliga Vetenskapsakademien och av Nobelkommittén för Ekonomipriset
SvD Brännpunkt 24 februari 2012

- Den stora risken var att Grekland skulle utlösa en kris i italienska, franska och tyska banker.
Nu finns i praktiken en EU-garanti för de utestående grekiska statsobligationerna.
Anders Borg, TT, SvD papper 22 februari 2012

Greklands Default
Avskrivningen av 70 procent av skulderna till de privata fordringsägarna är den stora händelsen
Det har media missat.
Rolf Englund blog 20 februari 2012, 21:30

Greek Default
The write-down of 70 percent of debts owed to private creditors is The Big Event
The media have missed it.
Rolf Englund blog 20 February 2012, 21:30

If Europe wants to know how Greece's crisis ends
Asia provides some vital clues, ones being actively ignored at the moment.
William Pesek, Bloomberg 23 February 2012

Å ena sidan ger loppet Grekland möjlighet att komma i mål som ett annat land.
Å andra sidan kommer det att ta tid innan grekerna ens har målet i sikte.
Även under gynnsamma omständigheter blir det svårt att skapa den uppslutning
kring reformerna och tilltro till framtiden som är avgörande för att nå fram

SvD-ledare signerad Claes Arvidsson, 23 februari 2012

Merkozy borde gå hem och leta i sina glesa bokhyllor efter de tre grekiska tragöderna:
Aischylos, Euripides, och Sofokles.
Vilket de borde gjort innan de beviljade Grekland det senaste nödlånet på 130 miljarder euro
Nils-Eric Sandberg, Kristiandsbladet 23 februari 2012

Förr eller senare måste Grekland lämna eurozonen. Då kan landet klara sig, efter en låneavskrivning och depreciering av den gamla valutan. Det kan då bli mycket billigt att åka till Grekland och bada.

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Risken är stor att det nya räddningspaketet också bygger på alltför optimistiska antaganden,
och att Greklands skulder så småningom måste skrivas av helt
Medelhavsländerna kan inte klara sin skuldkris om de inte lyckas med konststycket att spara och veva i gång tillväxten samtidigt
Svenskt Näringslivs chefsekonom Stefan Fölster, DI 22 februari 2012

This new monetary union is built on hope and on permanent financial support -- and is therefore based on an imbalance of power between the strong and weak.
Neither Europe nor Greek society can tolerate that in the long run.
Die Welt via Der Spiegel 22 februari 2012

Expecting the Greeks to tighten their belts again is unrealistic.
One should not push people beyond the limit of their endurance. Such pressure is stupidity, not policy.
The people of a great nation will not starve to pay an exorbitant debt to foreign creditors forever
Gregorz Kolodko, former deputy prime minister and minister of finance of Poland, Financial Times February 21, 2012

Greece: Dangerous precedent?
In the long history of governments borrowing more than they can afford,
this represents a remarkably huge, unprecedented write-off

Robert Peston, BBC Business editor, 21 February 2012

In the cold light of day, it is not clear which is the more depressing: that successive Greek administrations ever thought it sensible to borrow as much as they did, or that banks and investors thought it wise to lend to them.

Those who believe in the pure rationality of markets or of the state may need to re-examine their respective faiths.

The governments of the eurozone have said they will not take any interest on their central banks' holdings of Greek bonds till 2020 and will also parlay any profits on their holdings of these bonds into a reduced interest rate on their rescue loans to Greece.

These different sacrifices for central-bank holders of the bonds are being made because the central banks wish to maintain the curious fiction that they were not taking risks with their own solvency when purchasing government bonds.

They don't want the humiliation of taking direct losses on the bonds and being forced to ask eurozone taxpayers for additional capital to strengthen the ECB's balance sheet.

Finally, and to state the bloom' obvious, what we had overnight is an agreement in principle, not a final definitive rescue of Greece.

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Troligen har inget land i fredstid tvingats ge upp så mycket av sin nationella politiska suveränitet
Staffan Sonning, Ekot 21 Februari 2012

Grekland har också tagit på sig att inom två månader stifta en ny lag som tvingar landet att alltid sätta avbetalningar på statsskulden före alla andra utgifter.
I teorin skulle en sån lag innebära, att Grekland först måste betala tillbaka lån som förfaller innan de exempelvis betalar ut löner till läkare, sjuksköterskor och andra offentliganställda.

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Over the next two months Greece has promised to adopt legislation
“ensuring that priority is granted to debt-servicing payments”,
with a view to enshrining this in the constitution “as soon as possible”
Charlemagne, The Economist 21 February 2012

Greece will be expected to deposit a quarter’s worth of debt-service payments into a “segregated account” that will be monitored by the troika (made up of the commission, the ECB and the IMF).

These arrangements may not amount to the budget “commissarr” once threatened by some creditors, but the effect may be pretty much the same.

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Tyskland vill att en ny budgetkommissionär, utsedd av eurozonen,
ska få makt att lägga in veto mot den grekiska regeringens budgetbeslut
om de inte är i linje med de mål som satts upp av långivare.
DN/TT 28 januari 2012

If too many private lenders opt out, it’s back to the drawing board.
Ditto if voters in Greece force the government to renege on promises to cut the minimum wage,
make advance debt-service payments into an externally monitored account,
change the constitution to prioritize debt repayment,
accept oversight of public accounts by an on-site team of EU officials, and more

Clive Crook, Bloomberg 23 February 2012

That’s only a partial list of what might still derail the agreement.

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Fitch Cuts Greece, Near-Term Default ‘Highly Likely’
In Fitch's opinion, the exchange, if completed, would constitute a 'distressed debt exchange' (DDE)
CNBC, 22 Feb 2012

“In Fitch's opinion, the exchange, if completed, would constitute a 'distressed debt exchange' (DDE) in line with its criteria and consequently yesterday's announcements set in motion the agency's process for reviewing Greece's issuer and debt securities ratings,” Fitch said in a statement.

Fitch said it would review its stance on Greece again once the debt swap had been completed

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Grekland skall byta obligationer för 206 milljarder euro
Nej, inte 206 miljoner euro. 206 miljarder euro.
Rolf Englund blog 25 februari 2012

More than 97 percent of the outstanding bonds of Spain, Italy, Portugal and Belgium are governed by local law.
In theory, these countries could enact legislation similar to Greece’s
New York Times, 24/2 2012

and thus pass on the cost of reducing their debt to well-heeled bondholders, rather than to retirees and civil servants.

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It also remains to be seen how many private holders of Greek debt will sign up for the
-- allegedly voluntary -- bond swap, which is expected to reduce Greece's total debt
by €107 billion, from the current level of over €350 billion
Der Spiegel, 22 February 2012

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"... as voluntary as a confession to the Spanish Inquisition."
Martin Blessing, chief executive of Commerzbank comments
on his options when confronted with the Greek debt write-down.
Daily Telegraph, 24 February 2012

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The Roman Inquisition was one of several inquisitions conducted under the auspices of the church.
These had a conviction that the cause was not only just but also so urgent that nothing must stand in the way:
not practical considerations and certainly not competing considerations of principle or moderation.
Cullen Murphy, New York Times February 11, 2012

Därför lämnar Grekland euron
Inget färdigt avtal finns med de privata långivarna om skuldnedskrivning
Sannolikt närmar sig den faktiska nedskrivningen i så fall 75 procent
Viktor Munkhammar, DI 21 februari 2012

Enligt den nya planen ska de nu skriva av 53,5 av de nominella fordringarna och dessutom acceptera ännu lite lägre kupong på de nya obligationer de får i utbyte mot de gamla.

Att döma av vad som framkommit förutsätts 95 procent av långivarna gå med på detta. Det verkar osannolikt men går att lösa genom att införa tvingande klausuler. I så fall utlöses kontrakten på skydd mot betalningsinställelse, vilket tekniskt innebär betalningsinställelse, något som dock inte längre verkar oroa beslutsfattarna alltför mycket.

För att få lånet ska Grekland dessutom genomföra ytterligare åtstramningar.

Var tillväxten ska komma ifrån är helt enkelt mycket svårt att se i ett land som hittills har misslyckats kapitalt med att genomföra tillväxtfrämjande reformer.

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Does the October 26 Eurozone deal for Greece qualify as a credit event?
ISDA - International Swaps and Derivatives Association

The vast majority of the funds in the €130bn programme will be used to finance the bond swap and ensure Greece's banking system remains stable:
some €30bn will go to "sweeteners" to get the private sector to sign up to the swap,
€23bn will go to recapitalise Greek banks.
A further €35bn or so will allow Greece to finance the buying back of the bonds.
Next to nothing will go directly to help the Greek economy,Reuters reports.

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De nya nödlånen på 130 miljarder euro som eurozonens finansministrar i dag väntas besluta om kommer inte att hjälpa Grekland överhuvudtaget.
Istället kommer pengarna bara att hjälpa de internationella banker som har fordringar på Grekland och förvärra situationen för landet ytterligare
Hans-Werner Sinn, chef för det inflytelserika ekonomiska Institutet Ifo i München, skräder inte orden i en intervju i tidskriften Der Spiegel.
Ekot, 20 februari 2012

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intervju i tidskriften Der Spiegel

QUOTE OF THE DAY, Daily Telegraph briefing 21 februari 2012:
"The politicians know [the second bailout can’t save Greece]. They want to gain time until the next election.
I think we’re wasting time by doing this. Greece’s external debt is rising with every year that passes until it leaves the currency union.
We’re getting ever further away from solving the problem."

Hans-Werner Sinn

, the head of Ifo, a German think tank.

I andra EU-länder har det gått bättre. Italien och teknokraten Mario Monti är ett nästan ett skolboksexempel på hur det kan skötas.
Han klev in, kavlade upp ärmarna medan han förklarade att nu måste vi alla hugga i och satte igång reformarbetet.
SvD-ledare signerad Daniel Persson, 21 februari 2012, med länk till Martin Ljung

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Martin Ljung - Vi Ska Klara Av'et

Nu är man tvärtom inne på femte året med fallande BNP, vilket visar på behovet av tillväxtfrämjande reformer.
Johan Schück, DN Ekonomi 10 februari 2012

Svenska Dagbladet

ECB har haft huvudrollen i spelet bakom kulisserna.
Med centralbankens exklusiva rätt att trycka obegränsade mängder pengar har man gjort just det.
Ekot 21 februari 2012

De grekiska statsobligationerna styrs av grekisk lag, och det har pratats om lagstiftning
Problemet är att en del av skulderna – uppskattningsvis runt 30 till 40 miljarder euro – styrs av brittisk lag.
Jonas Fröberg, SvD Näringsliv 17 februari 2012
RE: Insiktsfullt med litterära kvaliteter

a “voluntary” deal
Although Greek bondholders agreed in October to accept a 50 per cent cut in the face value of their bonds
in face-to-face negotiations with Nicolas Sarkozy, France president, and German chancellor Angela Merkel,
they will now be offered a “voluntary” deal with a haircut of 53.5 per cent, eurozone officials announced.
Financial Times 21 February 2012

Greece has asked private-sector creditors that hold about EUR200 billion in Greek government debt
to take a 50% reduction in the face value of bonds, and a 70% reduction in their net present value.
Dow Jones Newswires February 20, 2012

The writedown, or "haircut", of up to 70% on Greek bonds
s being bought at the expense of up to €30bn in sweeteners,
financed by the eurozone bailout fund, the European Financial Stability Facility.

Guardian, 16 February 2012