Monday, September 12, 2011

Greece Monetary Crisis...Doesn't This Sound A Bit Familiar?!

Greece Monetary Crisis...Doesn't This Sound A Bit Familiar?!

European Pressphoto Agency
Updated: July 22, 2011

Over the last decade, Greece went on a debt binge that came crashing to an end in late 2009, provoking an economic crisis that threatened both Europe's recovery and the future of the euro.

Over the next two years, Greece relied on bailout money from its richer neighbors and implemented austerity measures meant to cut its bloated deficit and restore investor confidence. It cut the pay of its public workers — a quarter of the work force —  by 10 percent but continued to miss deficit targets as its economy sank. Investors continued to demand ever higher interest rates for Greek borrowing.

Prime Minister George A. Papandreou, who had discovered the full extent of the deficit only after taking office in November 2009, saw his popularity and that of his Socialist Party plummet. In June, he offered to step aside for a government of national unity, an offer that center-right New Democracy party rejected. The Socialists grew increasingly divided.

Greece barely avoided bankruptcy in June, as European leaders threatened to withhold a 12 billion euro installment of the bailout funds until another austerity package of cuts, tax increases and sales of public companies was adopted.

Even as Greece's government struggled to force the bill through in the face of days of massive street protests, the leaders of France and Germany and the European Central Bank clashed over a larger, longer-term second bailout package. German Chancellor Angela Merkel pushed to have bondholders take some losses on their investments; President Nicolas Sarkozy of France organized an ostensibly voluntary plan for French banks to roll over their bonds into longer-term debt; and the E.C.B. fought against both approaches while credit ratings agencies warned that even a "voluntary'' plan could be considered a selective default, potentially triggering writedowns across Europe. The stakes grew even higher as investors began driving up the interest rates charged on the debt of Italy and Spain, economic giants compared to Greece or Portugal.

But in late July, European leaders clinched a $157 billion rescue plan for Greece that could push the country into default on some of its debt for a short period but would also give Europe’s bailout fund sweeping new powers to shore up struggling economies. The outlines of the pact seemed particularly bold, dealing with the economic problems of bailed-out Ireland and Portugal as well as Greece, and calling for nothing short of a “European Marshall Plan” to get Greece itself on a road to recovery. The underlying economies of those countries — and others — remain remarkably frail, however, and the plan itself had many hurdles to overcome.

Mr. Papandreou shocked investors and politicians across Europe when he announced in December 2009 that his predecessor had disguised the size of the country's ballooning deficit. After rounds of deep budget cuts and months of vague pledges of support from the rest of Europe failed to stop the steady rise of the interest rates, Mr. Papandreou in April 2010 formally requested a promised $60 billion aid package, calling his country's economy "a sinking ship.''

Europe woes weigh heavily on U.S. stock markets

For U.S. investors, the worsening European financial crisis is going from an Old Worldsideshow to the main event.

Recent news, including the resignation of the European Central Bank's chief economist late last week and fresh rumors about a possible Greek default, are feeding investors' imaginations on how precarious the situation there is.
U.S. investors, already worried about domestic problems, wonder if a European spillover will make things worse for a fragile U.S. economy. If Greece defaults, it could imperil European banks that hold its bonds and tip Europe into recession. U.S. companies would feel the shock waves because they get substantial revenue from Europe.

Europe is the biggest overhang on U.S. stocks, trumping even concerns about anemic job growth in the U.S., says Liz Ann Sonders, chief investment strategist at Charles Schwab. The reason: There is a "real possibility" that Greece will default on its debt.
"It's front and center now, and a default could come sooner rather than later," Sonders says. "The bottom line is no one has the full ability to calculate the implications of a Greek default."
read more ...
Greek Debt Crisis Timeline of Policy Summits, Bond Maturities
Following is a list of the key events facing Greece before the end of the year. Greece has not said how much money it has in cash reserves. For full details on Greece’s funding commitments see {1004Z GA <Equity> DDIS <GO>}
Sept. 16       Euro-region finance ministers meet in Poland

Sept. 23-25    International Monetary Fund/World Bank meeting in

Sept. 23       2 billion-euro ($2.7 billion) Treasury bill

End September  Bailout tranche due, the sixth from the April
               2010 bailout agreement. European and IMF
               officials return to Athens in week of Sept. 12
               for talks with Greek policy makers on disbursing
               8 billion euros in aid. German Finance Minister
               Wolfgang Schaeuble said Sept. 9 that no funds
               will be given unless Greece fulfils the
               conditions agreed in its adjustment program.

End September  Informal deadline for ratification of new powers
               for the European Financial Stability Facility.
               Expanding the fund’s remit is part of the bailout
               package agreed on July 21.

Oct. 3         Euro-region finance ministers meet in Luxembourg

Oct. 6         European Central Bank rate decision in Berlin

Oct. 14        2 billion-euro Treasury bill matures

Oct. 14-15     Group of 20 finance ministers meeting in Paris

Oct. 17-18     European Union leaders summit in Brussels

Oct. 21        1.63 billion-euro Treasury bill matures

Nov. 1         Mario Draghi replaces Jean-Claude Trichet as
               president of the ECB

Nov. 3         ECB rate decision in Frankfurt

Nov. 3-4       G-20 leaders’ summit in Cannes

Nov. 7         Euro-region finance ministers meet in Brussels

Nov. 11        2 billion-euro Treasury bill matures

Nov. 18        1.3 billion-euro Treasury bill matures

Nov. 29        Euro-region finance ministers meet in Brussels

Dec. 8         ECB rate decision in Frankfurt

Dec. 9-10      EU leaders summit in Brussels

Dec. 16        2 billion-euro Treasury bill matures

Dec. 19        1.17 billion-euro government bond matures

Dec. 22        0.98 billion-euro government bond matures

Dec. 29        5.23 billion-euro government bond matures

Dec. 30        0.71 billion-euro government bond matures

End December   Seventh aid tranche may be due

How is this affecting the global markets? Here yah go...

DJIA Chart (us!dji)
NASDAQ Chart (us!comp)
S&P 500 Chart (us!spx)

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