Greece: if austerity doesn't work... Try more austerity! | 287 comments (287 topical, editorial, 0 hidden)

Re: Old debt (4.00 / 2)

Eurointelligence: Economic and political situation in Greece deteriorates - and it looks that Wolfgang Schäuble's proposal will not be accepted (9 June, 2011)

German banks reduce their exposure in Greece
According to Financial Times Deutschland German banks have reduced their exposure in Greece significantly in recent months. Citing Bundesbank statistics the paper claims German financial institutions held €10 bn at the beginning of this year down from € 16 bn in April 2010. German banks reduced their exposure by €4bn, €2bn of Hypo Real Estate are no longer accounted for in these statistics because they are now in a specifically designated bad bank. The paper points out that the banks reduced their exposure despite an informal standstill agreement in which they pledged to keep their exposure constant. According to those statistics the French banks are still the most exposed on Greece with government bonds worth €11.2 bn.

Economics is politics by other means

by Carrie (migeru at eurotrib dot com) on Mon Jun 13th, 2011 at 10:54:28 AM EST
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Re: Old debt (4.00 / 2)

So private banks reduced their exposure by €4 billion despite the promise, making public banks (KfV, HRE bad bank, WestLB bad bank) the dominant debt holders from Germany.

Meanwhile, the boss of the Bundesbank spoke out against Schäuble's idea (in an op-ed which echoes the diary title in its main thesis):

In der aktuellen Debatte geht es allerdings darum, bereits etablierte Beziehungen zwischen Schuldnern und Gläubigern zu verändern. Hier gilt: Gegen eine freiwillige Laufzeitverlängerung ist nichts einzuwenden. Allerdings ist offen, wie hoch die Bereitschaft der privaten Anleger hierzu tatsächlich ist. Bei einer den Gläubigern aufgezwungenen Laufzeitverlängerung sind hingegen die Risiken wesentlich größer als die Chancen. So würde wohl ein Kreditereignis ausgelöst, was mit erheblichen Risiken für die Finanzmarktstabilität verbunden wäre. Die notleidend gewordenen Staatsanleihen entsprächen nicht mehr den Sicherheitenanforderungen der Notenbank. Zudem steht zu befürchten, dass die Anleger dann auch die Risiken der Anleihen anderer Länder höher einschätzen würden - was wiederum Finanzierungsschwierigkeiten dieser Länder und in der Folge erhebliche Turbulenzen auslösen könnte. Diesen Risiken, die unvermeidbar wären, wenn Griechenland von sich aus beschließen würde, seinen Verpflichtungen nicht mehr nachzukommen, stehen nur begrenzte positive Effekte gegenüber. Denn weil schon umfangreiche staatliche Hilfen geleistet wurden, sind die Bestände an griechischen Staatsanleihen im privaten Besitz - mit Ausnahme der griechischen Banken - längst nicht mehr so hoch wie oft vermutet. Daher wäre die faktische Kostenbeteiligung des privaten Sektors wohl begrenzt. Zudem würde die Solvenz Griechenlands, der Dreh- und Angelpunkt für den Erfolg der Hilfsmaßnahmen, durch eine erzwungene Laufzeitverlängerung kaum verbessert.

The current debate is about changing already established relationships between debtors and creditors. Regarding this, we have nothing against voluntary duration extensions. However, the actual level of willingness of private investors to do this is an open question. In contrast, with a duration extension forced on the creditors, risks are significvantly greater than the chances. That way, a credit event would be induced, which would be connected to major risks for the financial market stability. The sovereign bonds turned ailing would no more fulfil the safety requirements of the reserve bank. In addition, it would have to be feared that investors would judge the risks of bonds of other countries to be higher, too - which culd again trigger financing difficulties for these countries and in consequence major turbulences. These risks, which would be unavoidable would Greece decide on its own to not follow up on its duties, are matched only by limited positive effects. Because, given that extensive state bailouts have already been given, the inventory of Greek sovereign bonds in private ownership - with the exception of Greek banks - is long since not as high as often assumed. For that reason, the factual cost participation of the private sector would likely be limited. In addition, the solvency of Greece, the focal point of the success of the rescue measures, would barely be improved by a forced duration extension.

_{*Lunatic*, n.

One whose delusions are out of fashion.}

by DoDo on Tue Jun 14th, 2011 at 05:12:15 AM EST
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Greece: if austerity doesn't work... Try more austerity! | 287 comments (287 topical, 0 editorial, 0 hidden)

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