Monday, April 12, 2010

Greece "Bailout"

The supposed third, or maybe fourth, are we up to 5th??, bailout of Greece occurred over the weekend. Like I said, be careful of the headlines. Essentially, there was absolutely nothing new. The only slight surprise was the "supposed" number of money backstopping was a little bigger than thought.

Several things.

1) This was a bending by Germany. This does not solve the problem. It doesn't even come close to solving the problem for Greece or the Euro

2) This is no guarantee what is proposed will even occur. My understanding is this has to be voted on by individual legislatures of various countries. Ireland has to approve this. Umm, Ireland legislature is going to vote in favor after they have swallowed extremely bad tasting medicine (that which Greeks violently protest) to solve their own problems? Maybe. Seems like drama is coming.

3) Very quickly you had German politicians playing well politics saying this plan wasn't anything different from what was said previously. So try to convince the market of one anything and the home base it is something else.

4) The proposed interest rate is 5%. This is below market interest rates but is still pretty high.

5) Lawsuits will start soon as it isn't even clear if this constitutional.

6) Greece needs money by the end of this month. Not clear whether the mechanisms will be in place by then (probably will be).

7) The market barely reacted. Like I said, from a market perspective it was a one sided bet. A good outcome was expected, a bad outcome would have been horrific.

I am not sure how long Greece won't be an issue but it will be a major issue again in 2010. I am almost sure about that.

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