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  1. #1
    Senior Member AirborneSapper7's Avatar
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    Funds flee Greece as Germany warns of "fatal" euro

    Funds flee Greece as Germany warns of "fatal" eurozone crisis

    Germany has triggered a near-panic flight from southern European debt markets by warning that there will be no EU bail-outs, even though it fears the region's economic crisis has turned dangerous and could prove "fatal" for the entire eurozone.

    By Ambrose Evans-Pritchard
    Published: 8:14PM GMT 28 Jan 2010
    Comments 85

    The yield on 10-year Greek bonds blasted upwards by over 40 basis points to 7.15pc in a day of wild trading. Spreads over German Bunds reached almost four percentage points, by far the highest since Greece joined the euro, and close to levels that risk a self-feeding spiral. Contagion hit Portuguese, Spanish, Irish, and Italian bonds.

    George Papandreou, the Greek premier, said in Davos that his country had been singled out as the weak link in a "attack on the eurozone" by speculators and political foes. "We are being targeted, particularly by those with an ulterior motive."

    Marc Ostwald, from Monument Securities, said the botched bond issue of €8bn (£6.9bn) of Greek debt earlier this week has made matters worse. Many of the investors were "hot money" funds that bought on rumours that China was emerging as a buyer, offering them a chance for quick profit. When the China story was denied by Beijing and Athens, these funds rushed for the exit.

    However, a key trigger yesterday was testimony in Germany's parliament by economy minister Rainer Brüderle, who said there would be "no bail-outs" for struggling debtors and no move to a "European economic government".

    "A few European nations are exhibiting dangerous weaknesses. That could have fatal consequences for all countries in the eurozone," he said. Despite the warning, he said each country must solve its own problems.

    "Germany is not in a mood to be the deep pocket for what they consider profligate, southern neighbours," said hedge fund doyen George Soros.

    Mr Brüderle's hard line contradicts a report in Le Monde that Franco-German officials are discussing a rescue for Greece in order to keep the International Monetary Fund at bay.

    The paper cited a source saying that EMU partners were ready to "help" Greece. "It is a question of credibility for the eurozone. The IMF might want to impose monetary conditions."

    Le Monde's story was shot down by Berlin and Paris, but there is little doubt that certain officials have been trying to build momentum for a rescue. It is clear that the EU family is split on the issue. Jean-Claude Juncker, head of the Eurogroup of finance ministers, backs "assistance", with support of EU integrationists hoping to nudge the EU towards full fiscal union.

    This is fiercely opposed by Berlin, and the German-led bloc at the European Central Bank. There are reports that Berlin is deliberately bringing the crisis to a head, hoping to lance the boil early and force the Club Med states to reform before it is too late. If so, this is a risky strategy. German banks have huge exposure to Greek, Spanish, and Portuguese debt.

    Hans Redeker, currency chief at BNP Paribas, said Greece will face "great trouble" if it has to pay 7pc rates for long. Athens must raise €53bn this year, mostly in the first half. It has a been relying on cheap short-term debt to fund the budget deficit of 13pc of GDP, but this raises "roll-over risk".

    Tim Congdon, from International Monetary Research, said the danger is that wealthy Greeks may shift money to bank accounts abroad if they lose confidence (akin to Mexico's Tequila Crisis in 1994-1995). This would set off a banking crisis and become self-fulfilling.

    Greece has been financing current account deficits – 15pc of GDP in 2008 – through its banks, which have built up €110bn foreign liabilities. "If foreign creditors want their money back, defaults and/or a macroeconomic catastrophe appear inevitable," Mr Congdon said.

    Adding to worries, Moody's has issued an alert on Portugal's "adverse debt dynamics", saying Lisbon needs a "credible plan" to reduce a structural deficit stuck at 7pc of GDP rather than "one-off measures".

    The deeper concern is Spain, where youth unemployment has reached 44pc and the housing bust has a long way to run. Nouriel Roubini – the economist known as 'Dr Doom' – said Spain is too big to contain. "If Greece goes under that's a problem for the eurozone. If Spain goes under it's a disaster," he said.

    Jose Luis Zapatero, Spain's premier, replied wearily: "Spanish public debt (52pc of GDP) is 20pc lower than Europe's average; our treasury spends 5pc of revenues on debt costs, less than France and Germany. Nobody is going to leave the euro," he said.

    http://www.telegraph.co.uk/finance/comm ... risis.html
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    Senior Member AirborneSapper7's Avatar
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    Greece denies bailout deal as Darling promises to 'provide whatever assistance' is appropriate

    By Sam Fleming
    Last updated at 11:46 PM on 29th January 2010
    * Comments 185

    Greece and the European Union were last night scrambling to quash fears that the crisis-struck country will need a financial bailout.

    Prime minister George Papandreou and EU officials denied reports that European governments were preparing a rescue operation, stressing Greece will take draconian steps needed to cut its budget deficit.

    But privately, officials admitted informal talks have been held over a possible bailout.

    Yesterday the euro tumbled to a six-month low against the dollar amid fears that the currency union could be damaged by Greece’s deficit woes.

    Adding fuel to the fire, Tory leader David Cameron said Britain could be in similarly grave trouble.

    He said: ‘The people of Greece are already suffering the cost of a loss of confidence in their economy, with an extra three per cent on the interest rates they pay to borrow.

    David Cameron is backtracking on his initial promises

    David Cameron says Britain could be following Greece in their financial problems

    ‘If Britain follows them, the interest bill on a £150,000 mortgage could go up by more than £200 a month. This is not some wild dystopian vision. The warnings are already being sounded.’

    The market turmoil over Greece’s vast public debt has intensified over the course of the week, prompting suggestions that euro zone countries led by Germany and France will have to bail the country out.

    Attending meetings in the Swiss resort of Davos yesterday, Chancellor Alistair Darling said it is in the interests of countries sharing the euro to 'provide whatever assistance' is appropriate.

    He declined to say what this could entail, but said: 'We will of course keep the position under review, as you would expect.’

    He added: 'Greece is in a completely different position to most other EU countries.

    'They clearly have problems they need to resolve, and there’s a determination on the part of the Greek government to do that.’

    The International Monetary Fund has also pledged its support.

    Some analysts fear Greece's problems could begin to spill over into other euro zone member states if they are not sorted out. This would trigger a regional crisis and threaten the integrity of the currency union.

    The states cited as looking most vulnerable are Portugal, Italy, Spain and Ireland.

    http://www.dailymail.co.uk/news/worldne ... warns.html
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    Senior Member AirborneSapper7's Avatar
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    Greece, EU and markets in big game of chicken

    Never mind the denials and semantics: the European Union will help Greece cope with its financial problems because it has no choice.

    Published: 1:11PM GMT 29 Jan 2010

    That is the political reality. Whether aid comes in the form of bilateral loans from euro zone member countries, or via special facilities that are possible under the existing treaties, it has become clear that Athens will not be left out in the cold.

    Yet jittery markets do not seem to be convinced, and have sent Greek sovereign spreads to record highs in the last two days.

    Investors seem to be taking at face value the official protestations that Greece must -- and indeed will -- deal with its problems by itself.

    A feverish poker game is likely to intensify in the coming days - and perhaps until mid-February, when EU leaders will scrutinise the Greek government's plan to drastically cut down its deficits.

    Around the smoky table sit Greece and the rest of the European leaders who want to make sure that maximum - but not fatal - pressure is applied to Greece so that both its government and its people understand how radical its turnaround plan must be.

    Then there are the markets, not sure who is bluffing, and frantically biting their nails the as stakes rise.

    Investors are testing the limits of euro zone solidarity, and are challenging EU member countries to tackle the problem of their ballooning deficits.

    Greece, in this respect, is mostly seen as the first and weakest link that could be followed by, say, Spain or Portugal. But the EU, Greece included, is keen to send the message that the fort will hold - and that it doesn't mind some weakening of the euro, which would help boost exports.

    Greek sovereign debt is likely to be prone to wild swings in the weeks leading to the EU finance ministers meeting next month. With its fraudulent statistics, corruption and massive tax evasion, Greece surely has serious local problems.

    But markets want credible reassurance that European governments will do what it takes to deal with their deficits and long-term debt challenges. In that respect, the intensifying Greek drama is about more than Greece.

    http://www.telegraph.co.uk/finance/fina ... icken.html
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    Senior Member AirborneSapper7's Avatar
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    Greece is the word that should strike fear into all those who love the euro

    The debt crisis engulfing Greece has dominated financial markets all week. Alistair Osborne gives his take.

    By Alistair Osborne
    Published: 8:53PM GMT 29 Jan 2010
    Comments 6

    Time for another sequel, surely. You remember. John Travolta and all that. "I got chills, they're multiplyin', and I'm losin' control."

    Amazingly prescient, that song – even if some muppet spelt the film title wrong. Luckily, there would be no chance of that with Greece 3, with the country's prime minister George Papandreou in the Travolta role. He knows his nation had "better shape up" PDQ. Or risk bringing down the euro.

    That much has been clear from the markets this week. The power they're "supplyin', it's electrifyin", is how Papandreou almost put it on Thursday, as the yield on 10-year Greek bonds shot to 7.15pc – with the spreads over German bunds topping 4 percentage points, the highest since Greece joined the euro. Papandreou actually said: "We are being targeted, particularly by those with an ulterior motive." But you get the picture.

    Frankly, you don't need any ulterior motive to spot why market traders have identified ouzoland as the weak link in the chain tying 16 European countries to a single currency. The eurozone looked a heroic enough proposition anyway – before the financial crisis drove home the nonsense of having so many countries locked together through thick and thin, unable to devalue or set their own interest rates. Not least for the PIGS – Portugal, Italy, Greece and Spain – which need a different curative to Germany.

    So now the real fun begins. Traders scent blood. Greece must raise €54bn (£47bn) this year, half of it in the second quarter, or face defaulting on its debts. The sum alone brings more tears to your eyes than the national tipple – and that's before you consider Papandreou's weak hand.

    Greece is reeling from a runaway budget deficit, estimated at a Herculean 12.7pc of GDP. To attract the foreign capital he needs, Greece's PM has pledged to cut the deficit by 4 percentage points this year alone. Traders are betting that he can't, potentially leaving the eurozone with the nasty choice of bailing out its weakest member – or seeing its beloved single currency implode.

    It may just be the markets having a punt, but Britain knows better than most how tough it is to take them on. Just recall Black Wednesday in 1992, when John Major's government was forced out of the European Exchange Rate Mechanism – an event that had the salutary lesson of keeping us out of the euro.

    Like Major before him, Papandreou hid behind all sorts of theories for the markets' behaviour – not least that "hot money" bought into Greece's €8bn debt-raising this week on rumours it had been backed by China, only to rush for the exit when the story was denied.

    Whatever the truth of these Chinese whispers, Papandreou can hardly rule out chasing the dragon. Chinese premier Wen Jiabao is no Olivia Newton-John, but let's face it, we've been here before. How did the song put it? "You're the yuan that I want, ooh ooh ooh, honey." Just remember, euroland: Greece is the word.

    http://www.telegraph.co.uk/finance/comm ... -euro.html
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  5. #5
    Senior Member AirborneSapper7's Avatar
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    Asian stock markets fall on Greek debt fears

    Asian stock markets dropped as disappointing company forecasts and growing concerns about debt-laden European nations shook investor hopes for a quicker global recovery.

    AP
    Published: 6:55AM GMT 29 Jan 2010

    The downward trade across most of Asia, following strong gains the day before, marked a return to heavy selling that's pulled markets worldwide lower over in the past week.

    Lacklustre outlooks from major US technology companies Qualcomm and Motorola exacerbated worries that global demand and corporate earnings, after improving in 2009, could prove weaker than expected this year.

    Investors were also unnerved by rising debt levels in European countries like Greece and Portugal. Moody's ratings agency added to fears that have dragged the euro to multi-month lows by warning Portugal's credit rating could suffer unless its deficit was reduced.

    In Japan, the Nikkei 225 stock average tumbled 216.25 points, or 2.1pc, to 10,198.04. Hong Kong's Hang Seng index slid 363.06, or 1.8pc, to 19,993.31, and South Korea's Kospi fell 40 points, or 2.4pc, to 1,602.43.

    India's market shed 1.6pc and Shanghai was down 0.3pc. Australia's benchmark tumbled 2.2pc, its resource-heavy market dragged lower by falling commodity prices as the dollar strengthened on buying from investors looking for safe havens.

    Another bout of selling in the US further weakened sentiment.

    The Dow fell 115.70, or 1.1pc, to 10,120.46. The Standard & Poor's 500 index fell 12.97, or 1.2pc, to 1,084.53, while the Nasdaq fell 42.41, or 1.9pc, to 2,179.00.

    http://www.telegraph.co.uk/finance/mark ... fears.html
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