Posted on 03/08/2012 5:26:58 PM PST by bruinbirdman
Europe has ring-fenced Greece's debt crisis for now but its escalating recourse to legal legerdemain has shattered the trust of global bond markets and may ultimately expose Portugal, Spain, and Italy to greater danger.
"The rule of law has been treated with contempt," said Marc Ostwald from Monument Securities. "This will lead to litigation for the next ten years. It has become a massive impediment for long-term investors, and people will now be very wary about Portugal."
At the start of the crisis EU leaders declared it unthinkable that any eurozone state should require debt relief, let alone default. Each pledge was breached, and the haircut imposed on banks, insurers, and pension funds ratcheted up to 75pc.
Last month the European Central Bank exercised its droit du seigneur, exempting itself from loses on Greek bonds. The instant effect was to concentrate more loss on other bondholders. "This has set a major precedent," said Marchel Alexandrivich from Jefferies Fixed Income. "It does not matter how often the EU authorities repeat that Greece is a 'one-off' case, nobody in the markets believes them."
The ECB holds €220bn (£185bn) of Greek, Portuguese, Irish, Spanish, and Italian bonds. Its handling of Greece implicitly subordinates private creditors in each country. All have slipped a notch down the pecking order.
The Greek parliament's retroactive law last month to insert collective action clauses (CACs) into its bonds to coerce creditor hold-outs has added a fresh twist. These CAC's are likely to be activated over coming days. Use of retroactive laws to change contracts is anathema in credit markets.
This might not matter too much if Greece were really a "one-off" case but markets are afraid that Portugal will tip into the same downward spiral as austerity starts to bite.
Citigroup expects the economy
(Excerpt) Read more at telegraph.co.uk ...
What investor, public or private, is going to participate in a market where, at any time for almost any reason, 1/2 to 3/4ths of his initial investment can disappear? This act is the result of a third party, non-player, sitting off in an office somewhere deciding that it would be best if everyone in country “X’s” financial market gets a “haircut” to help the balance sheets.
Does anyone reading this post need any further proof that “professional politicians” are a deadly threat to everyone else’s health and well being? IMHO the scariest part of this whole issue is the “Professional politicas” thought they could make a massive change to the existing rules and everyone would continue to play since “it's the only game in town”.
If 2012 sees five economies collapse in Europe then 2013 will see additional economic collapses in Asia, Latin America, and North America.
Pull the five-way straps tight folks the ride is going to get real rough!
What investor, public or private, is going to participate in a market where, at any time for almost any reason, 1/2 to 3/4ths of his initial investment can disappear? This act is the result of a third party, non-player, sitting off in an office somewhere deciding that it would be best if everyone in country “X’s” financial market gets a “haircut” to help the balance sheets.
Does anyone reading this post need any further proof that “professional politicians” are a deadly threat to everyone else’s health and well being? IMHO the scariest part of this whole issue is the “Professional politicas” thought they could make a massive change to the existing rules and everyone would continue to play since “it's the only game in town”.
If 2012 sees five economies collapse in Europe then 2013 will see additional economic collapses in Asia, Latin America, and North America.
Pull the five-way straps tight folks the ride is going to get real rough!
If the world thinks Greece’s debt problem is bad, wait until the US, 42 cents on every dollar debt runs up against a wall. Whoabama what a bummer it will be.
Seems to me “professional politicians” borrowed massive sums of money to buy off voters/unions with favors - and now they don’t want to pay the piper.
There is still plenty of private property for them to confiscate.
yitbos
Looks like Greece learned a lesson from Obama’s screwing of senior creditors in the GM and Chrysler “bankrupticies”.
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