Loans and Finance

The Official Greek PSI Website

2012-02-25T11:04:00.003Z

The first press release from the Hellenic Republic Ministry of Finance, as per the official and newly created PSI website:

HELLENIC REPUBLIC MINISTRY OF FINANCE
Press Release
For Immediate Release
24 February, 2012

Athens, Greece. The Ministerial Council of the Hellenic Republic today approved the terms of invitations to be made to private sector holders outside the United States of bonds issued or guaranteed by the Republic and selected to participate in the exchange offers and/or consent solicitations to be made by the Republic in furtherance of the 26 October 2011 Euro Summit Statement and the 21 February 2012 Eurogroup Statement, referred to as the Private Sector Involvement. The bonds invited to participate in PSI (listed by series in Annex I) have an aggregate outstanding face amount of approximately Euro 206 billion.

The exchange offers and/or consent solicitations will permit private sector holders to exchange bonds selected to participate in PSI for (i) new bonds to be issued by the Republic on the PSI settlement date having a face amount equal to 31.5% of the face amount of their exchanged bonds, (ii) European Financial Stability Facility notes with a maturity date of two years or less from the PSI settlement date and having a face amount equal to 15% of the face amount of their exchanged bonds, and (iii) detachable GDP-linked securities issued by the Republic having a notional amount equal to the face amount of each holder’s new bonds. On the PSI settlement date, the Republic will also deliver short-term EFSF notes in discharge of all unpaid interest accrued up to 24 February 2012 on exchanged bonds. The terms of the new bonds, GDP-linked securities and EFSF notes are summarized in Annex II.

The consent solicitation relating to Greek-law governed bonds issued by the Republic prior to 31 December, 2011 (having an aggregate outstanding amount of approximately Euro 177 billion) will seek the consent of the affected holders to the amendment of these bonds in reliance on Law 4050/2012 (the Greek Bondholder Act) enacted by the Greek Parliament on 23 February 2012. The proposed amendments provide for the redemption of the affected bonds in exchange for the PSI consideration described above. Under the collective action procedures

introduced by the Greek Bondholder Act, the proposed amendments will become binding on the holders of all the Republic’s Greek-law governed bonds issued prior to 31 December 2011 identified in the act of the Ministerial Council approving the PSI invitations, if at least two thirds by face amount of a quorum of these bonds, voting collectively without distinction by series, approve the proposed amendments. One half by face amount of all the Republic’s bonds subject to the collective action procedures will constitute a quorum for these purposes. The Republic will also separately solicit consents in favour of equivalent amendments from the holders of its foreign-law governed bonds and its foreign-law guaranteed bonds in accordance with the terms of those bonds.

To satisfy regulatory requirements applicable in a number of jurisdictions, the Republic will invite the holders of certain series of bonds to participate in the Republic’s exchange offer but not its consent solicitation, and holders of the Republic’s Swiss-law governed bonds may not exchange their bonds but will be solicited to consent to their amendment. Holders will receive substantially the same consideration irrespective of whether they participate in the exchange offer and/or a consent solicitation. The Republic also intends to invite holders in the United States of America to participate in a concurrent exchange offer and consent solicitation on substantially the same terms. The Republic will not, however, deliver any EFSF notes to holders in the United States of America, who will instead be paid the cash proceeds realized from the sale of the EFSF notes they would otherwise have received.

The full terms of each invitation will be made available in electronic form only through www.greekbonds.gr. In order to participate in an invitation, holders will need to comply with the procedures and offer and distribution restrictions described in the Republic’s related invitation memorandum available online at www.greekbonds.gr.

The invitations will be subject to certain conditions, including a financing condition and a minimum participation condition. Under the financing condition, the Republic will not proceed with any of the transactions contemplated in the invitations unless it meets all of the conditions under the financing agreements entered into with the EFSF for the Republic to be entitled to receive the EFSF notes, which include the approval by EWG, at its absolute discretion, of such disbursements. In addition, unless bonds representing at least 90% of the aggregate face amount of all bonds selected to participate in PSI are validly tendered for exchange, the Republic will not be required to settle any of the exchanges. However, if the Republic receives consents to the proposed amendments that would result in at least 90% of the aggregate face amount of all bonds selected to participate in PSI (including bonds tendered for exchange) being exchanged on the terms proposed by the Republic, the Republic intends, subject to all other conditions being satisfied and in consultation with its official sector creditors, to declare the proposed amendments effective and to complete the exchange of all bonds selected to participate in PSI that would be bound by the proposed amendments.

If at least 75% but less than 90% of the aggregate face amount of all bonds selected to participate in PSI are validly tendered for exchange, the Republic, in consultation with its official sector creditors, may proceed to exchange the tendered bonds without putting any of the proposed amendments into effect. However, if less than 75% of the aggregate face amount of the bonds selected to participate in PSI are validly tendered for exchange, and the Republic does not receive consents that would enable it to complete the proposed exchange with respect to bonds selected to participate in PSI representing at least 75% of the aggregate face amount of all bonds selected to participate in PSI, the Republic will not proceed with any of the transactions described above.

Deutsche Bank AG, London Branch, and HSBC Bank plc have been appointed to act as Closing Agents for the invitations made outside the United States. Bondholder Communications Group LLC and Hellenic Exchanges, S.A. have been appointed to act as the joint Information, Exchange and Tabulation Agent.

Greece Headed For Hard Landing

2012-02-24T11:50:00.001Z

The "Bloodless" Greek Coup

2012-02-24T11:17:00.001Z

@RobNisbetSky has just tweeted the following:

"Source in EU Greece Task Force: growing concerns the 'prior actions' Athens has to enact to trigger bailout may be 'impossible' to meet."

Aside from the fact that people are now waking up to the fact that the austerity measures and financial targets being imposed on the Greek people are all but impossible to meet, it is also now dawning on people that, in all but name only, the Eurozone has enacted a (as yet bloodless) coup on the Greek people.

Greece has now been placed on "Special Measures" by the Eurozone and, for the next two years, irrespective of the wishes of the Greek people has now ceased to govern itself. Some Greek people now even have to pay for the privilege of working.

No one (aside from maybe those policy wonks who dwell in the bunkers of the Eurozone) seriously thinks that this stands a cat's chance in hell of working.

Why therefore go to all this trouble?

Simple, the decision has already been made to expel Greece from the Eurozone. However, those who have made the decision want Greece to pull the trigger!

European Commission Forecast Worse Than Worthless

2012-02-23T12:37:00.000Z

The European Commission, in its February 2012 forecast, has admitted that its November 2011 forecast for the Greek economy is in fact wrong.

"In 2011, economic activity was much weaker than anticipated in the autumn forecast."

Real output in Greece is expected to shrink by 4.3% compared with the November forecast of around 2.6%.

"Greece, Portugal and Spain account for 95% of the rise in unemployment in the EU since late 2010".

Unfortunately, the "success" of the Greek bailout "plan" rests on the reliability of the Commission's eight year forecast for Greece (which states that by 2014 Greece will return to growth). However, as the Commission has admitted, the forecast isn't worth the paper it is printed on.

"Greater spillovers from potential worsening conditions in Greece, due to the large exposure of the financial sector, are substantial."

Here is the Commission's February forecast, which will doubtless be out of date and worthless by mid year!

Greeks To Pay For Working

2012-02-22T15:21:00.003Z

It seems that some hapless Greek citizens will now have to pay for the privilege of working (that makes the UK government's Workfare scheme look positively generous).

Source The Press Project:

"Salary cutbacks (called "unified payroll") for contract workers at the public sector set to be finalized today. Cuts to be valid retroactively since November 2011.

Expected result: Up to 64.000 people will work without salary this month, or even be asked to return money. Amongst them 21.000 teachers, 13.000 municipal employees and 30.000 civil servants."

Boom! - Greek Bailout Consigned To The Flames

2012-02-22T14:43:00.001Z

It seems that, in the interests of their Eurozone overlords, the Greek government is going to postpone the April elections.

Apparently implementing the austerity measures required by the Eurozone is taking up so much time, that the "annoying" and time consuming matter of "democracy" has to be placed on the backburner.

Let me be perfectly clear, irrespective of whether the austerity programme had a cat's chance in hell of succeeding (which it didn't), by stifling the democratic process the unelected technocrat Prime Minister has now guaranteed that the social unrest caused by this foolish decision will consign the bailout and Greece to the flames.

Greece Will Default

2012-02-22T11:42:00.001Z

Fitch says that the Greek bond swap, if implemented, would constitute a rating default and result in downgrade to "restricted default".

For good measure they have just downgraded Greece from CCC to C.

Wheels Start To Come Off Greek Bailout

2012-02-22T11:22:00.000Z

Unsurprisingly, less than 24 hours after the announcement that the bailout had been agreed and that the Greek crisis had been "solved", the wheels are now coming off the agreement.

There will be a G20 summit in Mexico on 25-26 February, where the EU will beg the IMF to increase its contributions to prop up its firewall.

Unfortunately, the IMF regards the EFSF as a busted flush, and has no intention of throwing any more money into the doomed project. In fact, according to the Telegraph, the IMF will threaten to pull the plug on its contribution to the Euro130BN bailout unless the Eurozone creates a Euro750BN fund.

The small problem with this idea is that Germany has no intention of creating such a fund, because it would increase Germany's exposure to default.

Olli Rehn, the EU's economic and monetary affairs commissioner, wants to merge the European Financial Stability Facility (EFSF) with a new European Stability Mechanism (ESM) which has yet to be created.

The fantasy value of this yet to be created ESM is Euro500BN.

However, as with the ludicrous "values" placed on the busted flush of the EFSF, it is safe to assume that the ESM will never reach that level.

As with all matters pertaining to the Eurozone firewall and the bailout, the "leaders" of the Eurozone are building castles in the air.

The Greek Bailout Explained

2012-02-21T14:29:00.004Z

A rigorous and detailed explanation of the Greek bailout deal.

Greek Problem Sorted - LOL!

2012-02-21T10:17:00.000Z

Some of the media are happily pumping the Eurozone line that the Greek problem is sorted, and that now the second bailout of Euro130BN has been agreed (after a marathon 13 hour session of finance ministers) we can all move on.

Not quite, aside from the fact that the Greek economy is sunk and that borrowing money to pay off debt will not resolve this problem; the private bondholders (sans ECB, which protected itself by sleight of hand last week) will have to take a NPV haircut of 74%.

Institute for International Finance (IIF) crisis resolution official Jean Lemierre was only told of the size of the haircut this morning.

The "party line" is that the creditors will voluntarily accept his haircut. The reality is that there will be a few who refuse to have their "assets" further written down, as such Greece will have to enforce the Collective Action Clauses (CAC) and force the recalcitrant bondholders to accept the 74% haircut (this of course is a default event).

Aside form that, all Greece has to do is to reduce its debt from 160%to 120.5% of GDP in 2020.

"Easy"!!!!

LOL!

This is not over, by any stretch of the imagination.

Here is the Sustainability Analysis by the Troika dated 15 February (as you can see, this will not work).

Greek Sustainability Proposal

"When It Becomes Serious, You have To Lie" - Jean-Claude Juncker

2012-02-20T15:28:00.001Z

Greece Agrees To Escrow

2012-02-20T14:44:00.002Z

The media report that Greece has agreed to an escrow account, whereby bailout funds will be deposited and distributed as and when Greece honours its part of the bailout deal; the escrow account formally subordinates national funding needs to those of creditors.

Government Waive VAT on Military Wives’ Charity Single

2012-02-20T12:14:00.002Z

HMT have announced the following:

"The Chancellor of the Exchequer, George Osborne, has today announced that the Government will waive VAT on sales of the Military Wives choir’s Christmas single by making an exceptional one-off charitable donation to the Royal British Legion, and Soldiers, Sailors, Airmen and Families Association (SSAFA), the charities chosen to benefit from sales of the song. The donation will be equivalent to the sum of the VAT receipts collected on sales.

Recognising the service of the armed forces and the high levels of public support for the single, as well as the exceptional contribution both charities make through their work with members of the forces and their families, George Osborne and Defence Secretary Philip Hammond want to maximise the donation that the charity receives by adding the VAT equivalent.

George Osborne said:

“Our armed forces demonstrate incredible commitment to the nation and make sacrifices for all of us. The Military Wives choir is doing a great job of raising money for this hugely worthy cause. We will donate the tax collected on the single so that as much as possible of the money spent by the public on this fantastic song goes to charities helping our armed forces and their families this Christmas.”
Philip Hammond said:

“Christmas can be a particularly difficult time for our brave service personnel deployed on operations, but also for their families at home. I am delighted to be supporting the Military Wives choir in this initiative, who in turn are supporting our Armed Forces community.”

Notes for Editors

The fundraising song (Wherever You Are) is performed by the Military Wives choir. All net record proceeds are going to the Royal British Legion and SSAFA. For more information, visit http://www.whereveryouare.co.uk/.

The donation will be equivalent to the sum of the VAT receipts collected on sales before the 31 January 2012 and will be funded by HM Treasury.

Update - On 19 February 2012 the Government announced that the sales deadline of 31 January would be extended to 31 March 2012 in recognition of the fact that the single’s Brit award nomination is likely to result in additional sales.

D Day For Greece?

2012-02-20T09:56:00.000Z

Today, according to the media, is "D Day" (Decision Day) on the second Greek bailout.

Most in the mainstream media, egged on by spin and hype from the usual suspects in the Eurozone, are predicting that the bailout will be agreed and that the Euro130BN will be handed over to Greece without further ado.

However, scratch beneath the surface and the picture isn't quite so rosy.

In the event that the deal is agreed today, acceptance by Greece of the terms of the deal will in effect mean that it has defaulted.

For why?

The ECB has done a better deal for itself than other bondholders, and those that hold out against this subordination will be forced to take a 70% haircut (the is a default event, by any definition of the word).

Additionally, to add to Greece's woes, the Eurozone finance ministers (ever reluctant to trust Greece) are looking into setting up an escrow account which will be used to pay the bailout in tranches (if and when Greece honours its side of the deal).

Finally, in a comment not yet picked up by some in the media, Finland has said the deal will not be approved until 12 March.

Deal done?

No!

Beware The Vested Interests - All Options From Here Are Bad

2012-02-18T10:18:00.001Z

Zen Like Calm

2012-02-17T11:08:00.001Z

A mood of "Zen like calm" appears to have settled upon the Greek bailout crisis. Ahead of Monday's Eurozone vote on the second bailout, the media reports that finance ministers apparently will approve the deal.

This despite the fact that Greece's public debt will fall to 129% of GDP The target set by the Troika being 120%).

As to whether this mood of calm continues to pervade during the weekend and on Monday; we shall see, this may just be the calm before the storm.

Greece Bailout Decision Delayed - Again!

2012-02-16T10:22:00.000Z

Unsurprisingly, amid the increasingly tetchy "diplomatic" brickbats being lobbed between Greece and the Eurozone, yesterday's three-hour teleconference between Eurozone finance ministers did not resolve the issues regarding the second bailout.

The decision on whether to grant a second bailout (pre or post election, or even at all) has been postponed to at least Monday next week, pending further clarification from Greece as to how they will implement the austerity package and the timetable for doing so.

Don't hold your breath!

Playing Politics With People's Lives II

2012-02-15T15:58:00.000Z

Earlier today I wrote the following:

"Samaras, continuing to play politics for the benefit of the domestic audience, will (if his spokesman is to be believed) sign and send the commitment within 24 hours.

Playing politics may be all very well sometimes, unfortunately in this particular case he and others are playing politics with people's lives ."

Unfortunately it is not just Greek politicians who play politics, but Greece's paymasters in the Eurozone.

It appears, according to leaks emanating from the Eurozone bunker, that today's finance ministers' teleconference will discuss delaying the Greek bailout until after the results of the April election.

Although a bridging loan will probably be provided, ministers intend to withhold the full bailout until Greece votes in favour of austerity.

This of course is naked political blackmailing of a sovereign state by an unelected body, ie dictatorship by the back door.

Iran Shuts Off Greece's Oil Supply

2012-02-15T12:51:00.001Z

As I warned in January, Iran has just shut off Greece's oil supply.

Contingency Plans For Greek Exit From Eurozone

2012-02-15T10:44:00.000Z

Sir Mervyn King, Governor of the Bank of England, as just sated that there are contingency plans for a Greek exit from the Eurozone.

Olly Barratt @ollybarratt

'contingency plans' in place for #grexit says sir mervyn of BOE"

Playing Politics With People's Lives

2012-02-15T10:08:00.000Z

Unsurprisingly Eurozone finance ministers have cancelled plans for a face-to-face meeting to discuss and approve Greece's bailout today, instead they will hold a conference call.

The meeting has been cancelled because Greece has failed to say how it would fill the Euro325M black hole in its austerity programme, and because Antonis Samaras (a Greek conservative party leader) has still failed to sign the commitment to implement austerity measures after an election in April.

Samaras, continuing to play politics for the benefit of the domestic audience, will (if his spokesman is to be believed) sign and send the commitment within 24 hours.

Playing politics may be all very well sometimes, unfortunately in this particular case he and others are playing politics with people's lives.

As German finance minister Wolfgang Schäuble noted today:

"When you look at the internal political discussions in Greece and the opinion polls, then you have to ask who will really guarantee after the elections – and I find that very alarming – that Greece continues to stand by what we are now agreeing with Greece.

I am also not yet sure that all political parties in Greece are aware of their responsibility for the difficult situation their country is in."

It is clear that Greece will default and exit the Euro, the only question is when.

The EU Begging Bowl Travels To China

2012-02-14T12:51:00.001Z

The EU, in the form of EU President Herman van Rompuy, has yet again taken its begging bowl to China in a desperate attempt to avoid having to use its own funds to resolve its own self inflicted mess.

The Chinese, for their part, have been very polite and hospitable.

China's Premier Wen Jiabao said that China was ready to increase its participation in efforts to resolve Europe's debt crisis, as per AFP:

"China is ready to increase its participation in resolving the EU debt problems."

However, despite van Rompuy believing that this may mean that China will provide funds this time (China sent the last EU begging delegation back empty handed in 2011), it is clear that the Chinese quite rightly believe that it is for Europe to sort its mess out. This week the Chinese foreign ministry said that the European crisis had reached a "critical juncture", the implication being that the EU needs to recognise this and address the issues itself.

Greece Likely To Default

2012-02-14T11:58:00.000Z

Handelsblatt has quoted unnamed central bank (ECB or German central bank?) sources as saying that Greece will fail to achieve a voluntary haircut of its debt, thus leaving the only option as being a compulsory write down (ie default).

The Greek Tragedy Laid Bare!

2012-02-14T11:38:00.001Z

As Greece struggles to find the extra Euro325M to fill the black hole in its austerity "plan", here comes a timely reminder of where they could have found the money from (based on a discussion that Nina Maria Potts had with a Greek protester):

Nina-Maria Potts @NinaMariaPotts

"Greece ridiculed for not finding 325 mill to cut-the price our gvt paid to Goldman Sachs to hide size of public debt.

325 mill paid to Goldman Sachs to hide our public debt was signed by Papademos himself.Now my mother has to cut 15% of a 850 euro pension."

I am sure that if Goldman Sachs were asked nicely, they would return the fee!

Athens Burns Whilst Berlin Fiddles

2012-02-13T10:39:00.001Z

Amid scenes of chaos, disorder, petrol bombs and destruction in the streets of Athens, the Greek parliament by a vote of 199-74 passed the austerity bill that, in theory, will give Greece access to the long awaited second bailout.

However, the German finance minister Wolfgang Schaeuble added fuel to the flames by telling the Welt am Sonntag newspaper:

"The promises from Greece aren't enough for us any more.

Greece needs to do its own homework to become competitive whether that happens in conjunction with a new rescue programme or by another route that we actually don't want to take."

The German Economy Minister, Philipp Roesler, expressed a degree of scepticism about whether the vote was enough and said

"It is good that the laws were passed and with a large majority but what counts now is the implementation of structural reforms.

We have gone a step in the right direction, but we are still a long way from the goal.

We have to see the troika report. They will assess whether the measures are sufficient to assure Greece's debt sustainability.
We want to see what comes after the legislative process because the legislative process is one thing, implementation is another."

Bailout or not, most now consider that it is only a matter of time before Greece exits the Eurozone; contingency plans for a return to the Drachma have already been made (its is indeed quite possible that the printing presses are already running).