Kissing A Greek
Is the euro set for the knacker's yard? Certainly everybody seems to think so, according to the FT, traders and hedge fund managers have built up more than GBP5 billion in short bets that the single currency will continue to go down the pan.
Of course, that leaves a heavily oversold euro possibly overdue for a sharp rebound at some point. If only we could figure out when that will be.
It is unlikely to come whilst all the current uncertainty is around, that's for sure.
Personally I don't think that ultimately Euro Zone finance ministers resisting a bailout and allowing a Greek default will happen, because the financial and political repercussions for the rest of Europe are simply too great.
A Greek default immediately devalues an estimated 250-300 billion euros of Greek debt held by banks, and bond and pension funds. Mostly already under capitalised European and international banks. It would be another subprime domino effect all around the world (and particularly in Europe) all over again.
So whilst the rest of Europe, and the world, paces the floor hoping that the Greek patient will take it's bitter medicine and slowly get better, surely Trichet and the rest of his crew are secretly prepared to administer a mouth to mouth bailout if absolutely necessary?
If a bailout does happen, then there will need to be some very serious "riders" indeed, as mounting one would be futile without clear and tangible deficit reductions by the Greek government. Whilst that might make them unpopular at home, they're hardly flavour of the month right now anyway.
If they defaulted instead, that would ultimately bring about the same Greek recession as the one brought about by what the media are calling the current "austerity measures" - PLUS they'd never be able to borrow money at anything other than crippling rates ever again.
Media reports today are saying that Trichet is to leave a meeting in Sydney unexpectedly early and fly back to Europe for an EU leaders' summit on Thursday. I wonder if he's bringing some heavy duty mouthwash with him?
Of course, that leaves a heavily oversold euro possibly overdue for a sharp rebound at some point. If only we could figure out when that will be.
It is unlikely to come whilst all the current uncertainty is around, that's for sure.
Personally I don't think that ultimately Euro Zone finance ministers resisting a bailout and allowing a Greek default will happen, because the financial and political repercussions for the rest of Europe are simply too great.
A Greek default immediately devalues an estimated 250-300 billion euros of Greek debt held by banks, and bond and pension funds. Mostly already under capitalised European and international banks. It would be another subprime domino effect all around the world (and particularly in Europe) all over again.
So whilst the rest of Europe, and the world, paces the floor hoping that the Greek patient will take it's bitter medicine and slowly get better, surely Trichet and the rest of his crew are secretly prepared to administer a mouth to mouth bailout if absolutely necessary?
If a bailout does happen, then there will need to be some very serious "riders" indeed, as mounting one would be futile without clear and tangible deficit reductions by the Greek government. Whilst that might make them unpopular at home, they're hardly flavour of the month right now anyway.
If they defaulted instead, that would ultimately bring about the same Greek recession as the one brought about by what the media are calling the current "austerity measures" - PLUS they'd never be able to borrow money at anything other than crippling rates ever again.
Media reports today are saying that Trichet is to leave a meeting in Sydney unexpectedly early and fly back to Europe for an EU leaders' summit on Thursday. I wonder if he's bringing some heavy duty mouthwash with him?