Thread: EU Sovereign Debt Garbage Anger in Greece, Ireland; Germany

Friday, March 11, 2011 3:41 AM

ECB Stuck in Sovereign Debt Garbage, Seeks German Help to Unload It; Anger in Greece, Ireland; Germany Sets High Price for Bailout Changes

Leaders of 17 eurozone countries meet on Friday in Brussels to discuss the sovereign debt crisis and the stabilization pact, but don't expect much of anything to come from it. Instead, expect to see a lot of bickering interspersed with agreements to agree on non-critical issues.

Please consider Germany Sets Steep Price to Shore Up Euro Zone http://www.nytimes.com/2011/03/11/world ... ss&emc=rss

Faced with financial turmoil that has resisted every emergency fix the European Union has adopted, European leaders are considering a radical step: giving up some of their independence to set domestic economic policies and cutting back many of the wage and welfare benefits that have defined the region’s politics for decades. In return, the European Union would provide funds to shore up the weakest member states, including Portugal, Greece and Spain.

The proposals, originally pressed by the newly assertive German chancellor, will be debated Friday in what is expected to be a contentious session of the leaders of the 17 countries that use the euro.

Germany is calling for several measures: raising retirement ages to reduce the burden on pension funds, ending the linking of wages to increases in the cost of living, committing to debt reduction and submitting to a level of budget scrutiny that was until recently considered anathema — and is still viewed by many as a step too far.

But a comprehensive deal will be difficult to reach. The proposals under debate now have already been watered down from a more robust program of integration and monitoring first put forward by Germany, and will be subject to further negotiation before a full European Union summit meeting on March 24-25, two days before an important German state election.

Among the measures it is pressing is an agreement to raise retirement ages closer to Germany’s, where access to government pensions begins at age 67, well above the European average. Germany would also like others to stop pegging wage increases automatically to inflation. That is a necessary step if wages are to shrink in absolute terms, which some economists argue is necessary if bitter medicine to inject some competitiveness into the economies of Europe’s southern tier.

The Germans would also force private bondholders who bought the high-yielding debt of the most troubled euro-zone countries to bear part of the burden if countries defaulted or needed to restructure their debt — and not be protected by taxpayers.

The most important is a “permanent regimeâ€

Thursday, March 10, 2011 7:51 PM

Bond Market Anticipates Greek Default; New Highs in Greek, Irish, Portuguese Bond Yields; Spain Downgraded on $21 Billion Bank Capitalization Concern

I sit dazzled at the idea the ECB is going to hike three times smack in the face of a renewed sovereign debt crisis in Europe.

Greek, Portuguese, and Irish government bond yields are at fresh highs and Spanish government yields are flirting with new highs. Topping off recent action, Moody's downgraded Spanish government debt on bank capitalization concerns and the market once again anticipates a Greek default in spite of a $153 billion bailout.

Let's take a look at some of the stories making those headlines.

Bond Market Anticipates Greek Default

Bloomberg reports Bond Market Anticipates Greece Defaulting as EU Leaders Meet http://www.bloomberg.com/news/2011-03-1 ... redit.html

Greek 10-year bond yields rose to a record this week and it costs more than ever to insure against a default, even though the nation received a 110 billion euro ($153 billion) bailout from the EU and the International Monetary Fund last year. Two- year yields exceed 10-year levels, suggesting a restructuring may come before the three-year aid program expires.

“The onus is on EU officials to dissuade the market from the notion that a debt restructuring is inevitable,â€