Therefore, this deal may have sown the seeds of a major political and economic crisis at the heart of Europe, which in the medium and long term further threatens the stability of the eurozone.
Open Europe has responded to the agreement between the Greek government and its private creditors which laid out how much and under what format the country’s massive €360bn debt burden should be written down. The deal involved private sector bondholders agreeing to a 53.5% nominal write-down, while so-called Collective Action Clauses (CACs) will be used meaning that Greece is now technically in a state of default – precisely what EU leaders have spent two years trying to avoid. While marking a small step forward, Open Europe notes that the deal is unlikely to save Greece, and that the country is still on course for a full default in three years’ time, if not sooner.
Comments on the Greek Deal. Courtesy Copper at BGC.
One of the 17 Eurozone countries has now defaulted (whatever the politicians and policymakers say)
E152bn of Greek law bonds were tendered for the debt swap, out of E177bn – a participation rate of 85.8%. Athens has triggered the Collective Action clause to force participation for the rest, therefore all the E177bn will be exchanged. Of the foreign law bonds, E20bn was tendered for the debt swap, a 69% participation rate. To try and persuade these holdouts to follow the herd and participate too, the Greek government has extended the deadline for acceptance (just for these foreign law bonds) until 23rd March. So the E177bn of Greek law bonds and the E20bn of foreign law bonds equates to a total of E197bn of bonds being swapped, or 95.7% of the total bonds outstanding. That meets the debt write down targets of the IMF and EU.
Quick recap of the Q3 performance. As we see it was a very bad quarter with much damage done to all indices. Let’s see what Index will be the first to revisit those March 09 lows, China, Nikkei or why not the CAC? By DShort;
The 3rd quarter saw wretched performances in all of the world markets in this series. The best quarterly performer, the Nikkei 225, lost 10.3% of its value, followed by the SENSEX, which was down 11%. At the other extreme the DAX, CAC 40 and Hang Seng all lost about 25% of their value. The middle ground was occupied by the Shanghai, FTSE and S&P 500, which lost 14%, 14.4% and 15.9% respectively. Let’s hope next month sees some improvement. Certainly a bounce is due. But the ongoing stresses in Euro land, the nasty bear market in China, and ECRI recession call in the U.S. suggest a cautious outlook.