Thread: EUR Surging On "Marshall Plan" For Greece

EUR Surging On Draft EU Proposal Which Sees "Marshall Plan" For Greece

Submitted by Tyler Durden
07/21/2011 08:18 -0400
118 comments

Headlines out of Reuters:

• Draft EU summit conclusions call for "Marshall plan" of investment, growth stimulation for Greek economy

• Collateral will be part of new Greek aid deal according to Eurozone draft

• Draft EU summit conclusions says three options for private sector role in second Greek bailout remain on the table; debt buyback, rollover and swap

• Draft EU summit conclusions says EFSF will be able to recapitalise financial institutions through loans to governments,including non-programme nations

• Cost of recapitalising Greek banks estimated to be total of EUR 25bln according to Eurozone document

• Draft EU summit conclusions see rate of around 3.5% on new EFSF loan for Greece

• Draft EU summit conclusions says EFSF will be able to intervene in a precautionary basis

• Draft EU summit conclusions see extension of EFSF loans from 7.5 years to at least 15 years, according to a Eurozone document

The Rubicon has now been crossed: Europe goes all or nothing on Greece. When this latest bluff fails it is all over.

http://www.zerohedge.com/article/eur-su ... lan-greece

A Quick Take On The European "Marshall Plan"

Submitted by Tyler Durden
07/21/2011 09:01 -0400
63 comments

From Peter Tchir of TF Market Advisors

So far all the news out of Europe is based on changes to EFSF. Greece will be able to borrow for 15 years at 3.5%. French bonds with a 15 year maturity trade at 3.8%. So the EFSF will have to pay more on its debt than it receives? Interesting. Have the rating agencies signed up to rate the new EFSF as AAA? From deals I've worked on, things that always hurt ratings were i) extending maturity, ii) including banks in addition to sovereigns, iii) allowing trading, iv) vague rules as opposed to written rules. The headlines all indicate the new EFSF has all of these components. I am sure the agencies have been involved in these discussions, but I remain dubious how happy the market will be to finance the EFSF at rates that are remotely in line with the rates the EFSF plans to provide financing at. Lots more details likely to come out during the day, but watch for the details. The headlines sound great, but can they be executed. I also noticed somewhere that new lending would be collateralized. If that is true, has anyone asked the borrowers if that makes sense for them?

http://www.zerohedge.com/article/quick- ... shall-plan

Goldman's Take On Europe's "Marshall Plan" Newsflow

Submitted by Tyler Durden
07/21/2011 09:21 -0400
51 comments

As news comes fast and furious out of Europe, here is Goldman's take on the so far unconfirmed details of the latest Marshall Plan in Europe, which unlike last time comes before the war. Incidentally, Europe just approved debt monetization, only unlike in the US, it will do it off balance sheet, via the EFSF "CDO" SPV.

From Goldman's Franceso Garzarelli

On Greece: A 'Managed (and Generous) Deleveraging' Package

•The second package for Greece will be funded by the EFSF. Total committed issuance by this vehicle just for the program countries could exceed EUR100bn, out of a current lending capacity of EUR440bn (of which AAA-countries support EUR255bn). AS EXPECTED, BUT THE SIZE OF THE EFSF COULD BE INCREASED FURTHER
•EFSF loans to Greece will be modified and extended from 7.5-yrs to 15-yrs. This would represent the second extension of maturities. AS EXPECTED
•Rate on NEW conditional loans to Greece (EUR70bn) could be as low as 3.5%. Currently swap +300bp on 15-yr loan would mean reduction from 6.5% to 3.5%. Probably similar terms also for Ireland and Portugal. BETTER THAN EXPECTED
•‘Marshall plan’ for Greece to spur investment; no details; but big emphasis on growth, key variable for debt sustainability, Note that co-financing on EU funds had already been lowered to 15%. BETTER THAN EXPECTED, PENDING DETAILS
•No details on private sector PSI: debt buyback, rollover, swap; all should be voluntary; probably will trigger 'selective default', but ECB will probably compromise. STILL UNCLEAR, BUT BROADLY IN LINE
On the systemic stability: Both items on our ‘wish list’

EFSF empowered to buy in secondary markets with input from ECB; BETTER THAN EXPECTED, PENDING clarification on SIZE and ACCOUNTABILITY
EFSF able to recapitalize banks in non-program countries through loans to governments; BETTER THAN EXPECTED, ditto.

IF ALL OF THIS IS CONFIRMED, VERY positive relative to expectations. Particularly the systemic stuff is a big step forward to unconditional mutual help. If sovereign cross-correlation of default is low, ex ante risk sharing helps everyone participating

http://www.zerohedge.com/article/goldma ... n-newsflow