Greece: MLNÁ
Greek
Government has fiscal
deficit
⇒ needs money
⇒ sells bonds
Greek
Banks buy (high yield) Greek
sovereigns
⇒need money to buy bonds
⇒ borrow
money (low interest) from ECB
⇒ need collateral for these loans
⇒ J
use Greek sovereigns
Greek
Prime Minister Papandreou (and nearly everyone else)
⇒ blames speculators
and investors
⇒ CDS market shrinks
⇒ borrowing cost ⇧ goes up
http://online.wsj.com/article/BT-CO-20100420-709271.html?mod=WSJ_World_MIDDLEHeadlinesAsia:
"Speculation in sovereign credit debt swaps,
which Greek Prime Minister George Papandreou has blamed for helping push the
country deeper into crisis, may sometimes exaggerate public debt strains, said Vinals."
"Credit default swaps, a form of insurance against the risk of a country failing to make interest payments on sovereign debt, suggest that confidence in Athens meeting those payments has been falling. Spreads on Greek five-year CDS reached an all-time high of 495 basis points, though they later retreated."
German and
other EU Banksðbuy (high yield)Greek
sovereigns J
Greek
Government
⇒ fiscal
deficit
⇒ needs money
⇒ investors worry
⇒ investors sell
bonds
⇒ interest rate goes up K
PIIGS
endangered!!! MLNÁ
http://seekingalpha.com/article/201080-banks-may-need-to-take-a-haircut-on-greek-debt-merkel
http://www.nytimes.com/2010/04/28/business/global/28drachma.html?src=busln
http://online.wsj.com/article/BT-CO-20100427-716548.html?mod=WSJ_World_MIDDLEHeadlinesAsia
http://www.reuters.com/article/idUSLDE63P0LU20100427?type=usDollarRpt
http://online.wsj.com/article/BT-CO-20100427-715241.html?mod=rss_Global_Stocks
http://online.wsj.com/article/BT-CO-20100427-715375.html?mod=rss_Bonds
http://www.sueddeutsche.de/finanzen/480/509609/text/
http://www.tagesschau.de/wirtschaft/griechenland556.html
http://www.dowjones.de/site/2010/04/deutsche-bank-selbst-von-griechenland-krise-wenig-betroffen.html
http://www.focus.de/finanzen/news/abwertung-panik-in-griechenland_aid_502814.html