Nations within the European Unions 27 members that participate in the single currency (17 members) have access to a rescue fund in the event of financial reversals. This fund, established in 2010, is called the European Financial Stability Facility (EFSF). The EFSF is composed of Euro Zone members who maintain a triple-A bond rating (AAA) as sovereign nations. EFSF loans have already been made to Ireland and Portugal. If Greece needs more liquidity, EFSF would be a prime candidate for providing such assistance.
Last week, Standard and Poors (S&P) downgraded French and Austrian debt from AAA to AA+, a move which booted France and Austria out of membership in the EFSF. The present AAA members of EFSF are Germany, Luxembourg, Finland and the Netherlands. Today, the EFSF itself was downgraded by S&P from AAA to AA+, because there were so few remaining members capable of financing a large assistance package. Luke Baker of Reuters has reported on these events as well as on their impact to the on-going Greek financial crisis.
"We consider that credit enhancements that would offset what we view as the now-reduced creditworthiness of the EFSF's guarantors and securities backing the EFSF's issues are currently not in place. We have therefore lowered to AA+ the issuer credit rating of the EFSF, as well as the issue ratings on its long-term debt securities."
Reuters further reports that a number of officials, including one at S&P, are warning of an upcoming Greek default following a breakdown in talks between Greece and creditors on Friday. Greece was under pressure to attain last-minute agreements with its private creditors in which those creditors would accept voluntary losses ("haircuts") on their Greek bond holdings. Greece could face bankruptcy when 14.5 billion Euros in loans come due late in March. A private sector bond swap involving writedowns is needed for additional loans.
A new bailout agency, the European Stability Mechanism or ESM, is being hurried into existence by the middle of 2012. French and German officials express confidence in the EFSF since this follow-on agency is about to come on line with an effective capacity of 500 billion Euros.
Summarized from:
http://news.yahoo.com/p-greek-standoff-pressure-euro-zone-boost-defenses-065458766.html;_ylt=Asx5y2nb85QZUkqY7emn_gms0NUE;_ylu=X3oDMTQ4aWFrMmVxBG1pdANTZWN0aW9uTGlzdCBGUCBCdXNpbmVzcwRwa2cDZjljM2VhZjAtMzQ4ZS0zMjgyLTg5N2UtN2U3MjAxN2RiZmM0BHBvcwMxBHNlYwNNZWRpYVNlY3Rpb25MaXN0BHZlcgNmMTk2MDc1MC00MDlkLTExZTEtOGJmZi1jNjNjN2ZkOWUwOTI-;_ylg=X3oDMTFvdnRqYzJoBGludGwDdXMEbGFuZwNlbi11cwRwc3RhaWQDBHBzdGNhdANob21lBHB0A3NlY3Rpb25zBHRlc3QD;_ylv=3
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For weeks, the Economist has been running a poll on whether the Euro will survive 2012. Polltakers can then make comments. Here is one such comment:
None of us mere mortals can begin to do anything more than guess at how strong the Euro, or any other key component of the global economy, really is. If we've learned one thing during the 2011 phase of the every-shifting "financial crisis", it's that everything the money-men in government and banking are doing is basically just polishing a turd. This is why each new problem is allegedly an unexpected surprise. The crisis began with a long-running and successful (until then) conspiracy to make bad private debt (mortgages) look like good private debt (highly-rated bonds). After that gig was up, we come to find out that there was lots of other bad debt out there as well.
Now we have Greece doing the big-money equivalent of getting a payday loan to pay its mortgage, only unlike the destitute homeowner, it's the mortgage-holder that's arranging for the payday loan so as to enable him to pretend for a while longer that the mortgage will still be repaid.
Until we can answer some basic questions like "What debt is really bad?" and "Who owns the bad debt?" there is no way we can speculate about how all that bad debt, distributed via an inscrutable web of derivatives, could impact the viability of the Euro.
-- http://www.economist.com/economist-asks/will-euro-survive-2012-intact
Last week, Standard and Poors (S&P) downgraded French and Austrian debt from AAA to AA+, a move which booted France and Austria out of membership in the EFSF. The present AAA members of EFSF are Germany, Luxembourg, Finland and the Netherlands. Today, the EFSF itself was downgraded by S&P from AAA to AA+, because there were so few remaining members capable of financing a large assistance package. Luke Baker of Reuters has reported on these events as well as on their impact to the on-going Greek financial crisis.
Reuters further reports that a number of officials, including one at S&P, are warning of an upcoming Greek default following a breakdown in talks between Greece and creditors on Friday. Greece was under pressure to attain last-minute agreements with its private creditors in which those creditors would accept voluntary losses ("haircuts") on their Greek bond holdings. Greece could face bankruptcy when 14.5 billion Euros in loans come due late in March. A private sector bond swap involving writedowns is needed for additional loans.
A new bailout agency, the European Stability Mechanism or ESM, is being hurried into existence by the middle of 2012. French and German officials express confidence in the EFSF since this follow-on agency is about to come on line with an effective capacity of 500 billion Euros.
Summarized from:
http://news.yahoo.com/p-greek-standoff-pressure-euro-zone-boost-defenses-065458766.html;_ylt=Asx5y2nb85QZUkqY7emn_gms0NUE;_ylu=X3oDMTQ4aWFrMmVxBG1pdANTZWN0aW9uTGlzdCBGUCBCdXNpbmVzcwRwa2cDZjljM2VhZjAtMzQ4ZS0zMjgyLTg5N2UtN2U3MjAxN2RiZmM0BHBvcwMxBHNlYwNNZWRpYVNlY3Rpb25MaXN0BHZlcgNmMTk2MDc1MC00MDlkLTExZTEtOGJmZi1jNjNjN2ZkOWUwOTI-;_ylg=X3oDMTFvdnRqYzJoBGludGwDdXMEbGFuZwNlbi11cwRwc3RhaWQDBHBzdGNhdANob21lBHB0A3NlY3Rpb25zBHRlc3QD;_ylv=3
= = = = = = = = = = = = = = = = = = = = = = = = = = =
For weeks, the Economist has been running a poll on whether the Euro will survive 2012. Polltakers can then make comments. Here is one such comment:
None of us mere mortals can begin to do anything more than guess at how strong the Euro, or any other key component of the global economy, really is. If we've learned one thing during the 2011 phase of the every-shifting "financial crisis", it's that everything the money-men in government and banking are doing is basically just polishing a turd. This is why each new problem is allegedly an unexpected surprise. The crisis began with a long-running and successful (until then) conspiracy to make bad private debt (mortgages) look like good private debt (highly-rated bonds). After that gig was up, we come to find out that there was lots of other bad debt out there as well.
Now we have Greece doing the big-money equivalent of getting a payday loan to pay its mortgage, only unlike the destitute homeowner, it's the mortgage-holder that's arranging for the payday loan so as to enable him to pretend for a while longer that the mortgage will still be repaid.
Until we can answer some basic questions like "What debt is really bad?" and "Who owns the bad debt?" there is no way we can speculate about how all that bad debt, distributed via an inscrutable web of derivatives, could impact the viability of the Euro.
-- http://www.economist.com/economist-asks/will-euro-survive-2012-intact
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