Euro News: Greece Can Not Survive
Euro News: Greece Can Not Survive
As the bail out billions roll in they are still not enough to save Greece.
Greece’s debt is expected to top out above 190% of GDP and can’t be cut to the IMF target without Europe taking losses on the Greek debt it holds. After Athens committed to another tough round of austerity measures last week, the IMF outlined a number of debt-reduction scenarios for its European partners in the Greek loan program.
Terminal debt is the point at which the payments on the interest of a debt surpass the revenues of the debtor (i.e. the debt becomes fiscally unstable.)
Hyper-inflation is the terminal stage of any fiat currency. In hyper-inflation, money looses most of its value practically overnight. Hyper-inflation is often the result of increasing regular inflation to the point where all confidence in money is lost. In a fiat monetary system, the value of money is based on confidence, and once that confidence is gone, money irreversibly becomes worthless, regardless of its scarcity. Gold has replaced every fiat currency for the past 3000 years.
Greece said it drew offers worth 31.9 billion euros under a debt buy-back scheme tied to the release of EU-IMF bailout funds needed to avert bankruptcy.
But the debt management agency said that to complete the procedure, it would need 11.29 billion euros in funds from the European Union’s EFSF rescue fund overall, 1.29 billion euros more than was originally allocated for the operation.
“The aggregate principal amount of EFSF notes expected to be delivered is 11.29 billion euros,’’ the agency said in a statement, adding that Greece had “advised its official sector creditors’’ over the issue.
“Approximately 31.9 billion euros…will be exchanged and transferred to [Greece] pursuant to the invitation,’’ the agency said, adding that it had offered a weighted average price of 33.8 cents per euro to debt-holders, or 33.8 percent.
Private holders of Greek sovereign bonds originally had to submit by Friday their offers to participate in the buyback, which offered them 32.2 to 40.1 percent of the face value of the securities. But the operation was extended to Tuesday, reportedly to achieve higher offers from Greek banks.
The buy-back aims to cut Greece’s debt by about 20 billion euros and is vital to unblock pending loans from the European Union and International Monetary Fund, which were frozen earlier this year owing to reform delays.
The IMF and the euro zone have agreed to release 43.7 billion euros in rescue loans in four instalments to enable Greece to avoid bankruptcy provided Athens carries out the bond buyback. Part of that money, an amount of 34 billion euros, is urgently needed to recapitalize Greek banks which took part in a previous operation to write-down another part of the country’s debt in the spring.
The success of the buy-back is a condition for the IMF to release its part of the loan funds.
The Euro Crisis continues and several possible outcomes have emerged according to Economist Shayne Heffernan.
1. Europe finds the money for a real bail out of Greece, Spain, Italy, Portugal, for now this seems unlikely.
2. Greece leads the mass exit of the Euro and will be followed by Spain, Italy, Portugal and possibly others, this is now a real possibility and would allow for these countries to devalue their own currency and manage an exit from recession.
3. The Euro gets devalued, either by the Banks or by the ECB, a real value on the Euro post Greek default is around 80c according to estimates from LTN www.livetradingnews.com Asia’s leading economic research house.
Regardless of which outcome results from the muddled mess the Euro Politicians created the only real interest the rest of the world has is the deleveraging of Euro Banks.
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Shayne Heffernan Ph.D.
Economist/Hedge Fund Manager
Shayne Heffernan oversees the management of funds for institutions and high net worth individuals. He is also an active consultant working with Corporations around the World.
He is recognized as one of the leading Economists in South East Asia, as well as the preeminent authority on ASEAN. His opinions and forecasts are widely read by decision makers in the region and Internationally.
Shayne Heffernan holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reached a peak of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.
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