http://hat4uk.wordpress.com/2012/05/23/greek-tragedy-a-timely-reminder-16-2/
http://www.guardian.co.uk/world/2012/may/23/greece-debt-creating-healthcare-crisis
http://www.zerohedge.com/news/new-greek-bonds-crash-all-time-lows-negative-pledge-fears-emerge-portugal-case
http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_20854_23/05/2012_443476
Greece’s caretaker Prime Minister Panayiotis Pikrammenos has met European Commission President Jose Manuel Barroso ahead of an EU leaders’ summit in Brussels, during which they are expected to discuss growth, the fiscal pact and the euro crisis.
For the first time in more than two years of debt-crisis meetings, the leaders of France and Germany have not held their own mini-summit beforehand to agree positions, marking a significant shift in the traditional Franco-German axis.
Francois Hollande's election victory has significantly changed the terms of the debate in Europe, with his call for greater emphasis on growth now a rallying cry for other leaders.
That has set up a showdown with German Chancellor Angela Merkel, who supports growth but whose primary objective is budget austerity and structural reform. While she and former French president Nicolas Sarkozy did not always see eye-to-eye, in Hollande she is faced by someone with a different vision.
In his first EU summit, Hollande has also chosen to make a stand on euro bonds - the idea of mutualising euro zone debt - despite consistent German opposition to an idea that has been hotly debated for more than two years.
He will have support from Italian Prime Minister Mario Monti and European Commission President Jose Manuel Barroso, among other leaders. But Merkel shows no sign of dropping her objections to the proposal, which she has said can only be discussed once there is much closer fiscal union in Europe.
The Netherlands, Finland and some smaller euro zone member states support her in that position, setting the stage for what could be a divisive discussion. Austria's chancellor supports Hollande's line, but the finance minister backs Merkel's.
European Union leaders should discuss using the bloc's structural funds to shore up Greece's struggling economy when the meet later in the day to explore ways of lifting growth, French Prime Minister Jean-Marc Ayrault said on Wednesday.
He called for new measures to revive the Greek economy and help the debt-laden country avoid a «catastrophic» exit from the euro currency zone, which he said would have a negative impact on the rest of the bloc.
Greek Tragedy: A timely reminder
As largely circular and aimless talks continued at the EU summit, I received this from a Greek contact:
‘Behind the scenes there are aspects of life in Greece that, put
together, highlight just how dire the situation is. We hear that doctors
in the health service are now forbidden to issue more than a certain
number of prescriptions a week. Queues at surgeries have grown as those
who previously paid for medicines try to obtain them on the reduced
payment prescription system. Many are unable to obtain one and cannot
afford the full price…if the pharmacy has the item in stock.Given that there is no money to pay the state pensions
for July (paid on the 22nd June five days after the next elections),
coupled with fading healthcare through the state, another huge social
problem arises.’
together, highlight just how dire the situation is. We hear that doctors
in the health service are now forbidden to issue more than a certain
number of prescriptions a week. Queues at surgeries have grown as those
who previously paid for medicines try to obtain them on the reduced
payment prescription system. Many are unable to obtain one and cannot
afford the full price…if the pharmacy has the item in stock.Given that there is no money to pay the state pensions
for July (paid on the 22nd June five days after the next elections),
coupled with fading healthcare through the state, another huge social
problem arises.’
Pretty hard to argue with that. So it’s a little disconcerting to see the sledgehammer subtlety on famous blogsite MarketWatch, where a suggestion is proposed that if the “Grexit” takes place, Turkey should replace Greece in the Eurozone. The post says,
“If Greece ends up leaving the Eurozone, as the nonstop flow of ‘Grexit’ rumors suggest might just happen, Turkey should take its place. Now, there are all sorts of historical reasons—wars and outright hatred and whatnot—for why the Aegean neighborhood would not take kindly to such musical chairs.”
Yes, it’s all a bit of a jolly jape as the writer evaluates his own recommendation as ‘an attractive idea’, adding that ‘Europe needs more than that hardline fiscal austerity stuff, but Greece ‘doesn’t have much of the growth factor.’
If that makes you wonder about moral compasses and elephant-hide sensitivity, try this for size from another part of the MarketWatch site:
‘UK banknote printer De La Rue UK:DLAR +0.65% is bucking recent market trends and has been moving higher, points out Richard Gilhooly, U.S. director of interest rate strategy at TD Securities. The gains have come, in part, amid speculation that a Greek exit from the euro could spur printing orders for new drachmas and that the government might need to outsource some of the work.’
No doubt during 1943, somewhere on this bizarre planet we share, somebody was assessing the effect on the gold price of extracted Jewish teeth. I doubt, however, if they’d have dared to air such a thought.
Then and now, you see. It’s all about then and now.
http://www.guardian.co.uk/world/2012/may/23/greece-debt-creating-healthcare-crisis
Greece debt creating healthcare crisis, warn chemists
Greek public insurers' inability to pay bills combined with worsening shortage of prescription drugs is causing panic
Greece is on the brink of a severe healthcare crisis as shortages of medicines are exacerbated by panic among patients unable to get cancer or cardiac drugs, pharmacists have warned.
The insolvent country's worsening liquidity has led to public insurers being unable to pay bills and prescription drugs running dangerously low, say chemists. On Wednesday, the sector staged a one-day strike to highlight the "emergency situation".
"I give it 15 days. If the European Union doesn't release the loans it has promised by then, there will be scenes of utter chaos here," said Dimitris Karageorgiou, secretary general of the Panhellenic Pharmaceutical Association.
"The situation will become dramatic. Already we have cancer sufferers going from hospital to hospital to try and find drugs because no one can afford to stock them," he said. "If the shortages get worse, God knows what we will see."
The effects of the twice bailed-out nation's internationally mandated scramble to rein in runaway public debts have been felt across the board in the last month as concerns have grown over Athens' ability to remain in the eurozone.
"In that time 120 pharmacies have closed in Athens alone because of pressures from delays in payments for prescriptions from social security funds," said Karageorgiou. "Whatever you read about shortages is little. There are about 300 medicines that are no longer readily available. It's tragic."
Seated in her pharmacy in Plaka, the ancient district beneath the Acropolis, Mary Papazoglou said shortages ranged from antibiotic creams to thyroid and heart drugs.
"The situation with anti-cancer drugs is out of control but what can we do?" she said. "Because we're not being reimbursed we can't pay suppliers who can't pay the companies. It's a chain effect."
Under pressure from its "troika" of international creditors at the EU, European Central Bank and International Monetary Fund, Athens amalgamated 13 social security funds into one body – the National Organisation for Healthcare Provision (EOPYY) – after being first propped up with rescue loans in May 2010.
But the pharmaceutical association, with 12,000 members, says the funds were unified "so violently" in the space of a year, with donations either not forthcoming or drying up completely, that NOPF quickly collapsed.
A fifth straight year of recession, which will have seen the Greek economy contract by around 27% by the end of 2012, had also had a devastating effect, said Karageorgiou.
"Record unemployment and mass emigration has meant that there is very little money coming into the funds," he said. "There is also a lot of confusion. In 2011 a total of 17 insurance laws were passed in parliament and they were often contradictory. The result has been no money in the till."
Pharmacists are owed about €1bn (£800m) by health insurers, say sector officials. As a result of the failure of state funds to cover prescription payments, chemists had, they said, been forced to no longer dispense drugs on credit. Instead, as of this week, patients will have to pay up front before being reimbursed from the state. Karageorgiou said: "You tell me. How can a pensioner surviving on little more than €400 a month afford cancer medications that cost €380?""This is the mess that lack of foresight has got us in."
Greece's cashflow problem has been exacerbated by the inconclusive elections on 6 May. As the country heads to polls again on 17 June, it does so under the threat of further rescue funds being withheld until a new government, ready to commit to unpopular reforms in return for aid, is in place in Athens.
Amid growing alarm, global drug companies have begun drawing up contingency plans to keep medicines flowing into the country in the event of it exiting the eurozone. Most of Greece's drug supplies are imported from abroad. Greek officials say part of the "nightmare" scenario that would ensue if Athens were to return to the drachma would involve the nation being unable to afford drug and medicine imports after any huge devaluation of the newly minted currency
and.....
http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_32249_23/05/2012_443594
EU leaders leave Greece with few options
FinMin denies reports that eurozone members have been asked to draw up Greek exit contingency plans Caretaker Prime Minister Panayiotis Pikrammenos represented Greece at the summit in Brussels, where the Greek crisis was one of many topics to be discussed. A draft of the statement the leaders were due to release after dinner last night called for the new Greek government to take “ownership” of the fiscal adjustment program after the June 17 elections. “We look forward to the swift formation of a new government that will take ownership of the adjustment program and have a sufficient parliamentary majority to implement with determination the fiscal and structural reforms needed,” the draft said. “This is the best guarantee for a more prosperous future of Greece in the euro area.” Earlier, the Finance Ministry issued a statement to deny reports that the Euro Working Group had agreed that each eurozone member should draw up contingency plans for a possible Greek euro exit. “The Finance Ministry categorically denies reports that... member states were asked to draw up plans to deal with a possible Greek exit from the euro,” said the statement. “Such reports do not reflect reality but also damage the effort the country is making to confront its problems.” Pikrammenos held talks with German Chancellor Angela Merkel, French President Francois Hollande, European Commission President Jose Manuel Barroso and European Council chief Herman Van Rompuy. “The Greek people have made huge sacrifices,” said Barroso. “I wish there were an easier way out of the crisis Greece is facing. The fact is that the least difficult way is the full implementation of the second program agreed by Greece and its international partners.” Speaking before the Brussels meeting, Hollande expressed his support for Greece. “I will do everything I can in my position to convince the Greeks to choose to stay in the zone and everything to convince Europeans who might doubt of the necessity of keeping Greece in the eurozone.”
and.....
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http://www.zerohedge.com/news/new-greek-bonds-crash-all-time-lows-negative-pledge-fears-emerge-portugal-case
New Greek Bonds Crash To All Time Lows As "Negative Pledge" Fears Emerge; The Portugal Case?
Submitted by Tyler Durden on 05/23/2012 07:18 -0400
and.....
- Across the Curve
- Bloomberg News
- Bond
- CDS
- Cramdown
- Credit Suisse
- Creditors
- default
- Finland
- fixed
- Germany
- Greece
- International Monetary Fund
- Portugal
- recovery
- Reuters
- Sovereign Debt
A quick look at the Fresh-Start Greek Government Bond (GGB2) complex shows that as of this morning it has tumbled to fresh all time lows across the curve, and now trades at a more than 50% loss to the March PSI conversion price (remember the "no brainer...trade of the year"... good times).
The reason for this dump is not so much on fear of a Greek exit, but once again a reflection of precisely what we expected would happen, and as explained in our January Subordination 101 post. Last week, the fact that a PSI hold out, holding English-law bonds managed to get par recovery while all the other lemmings have so far eaten a nearly 90% loss, has sparked a realization among all the other hold outs that since they have covenant protection, they should all demand the same treatment. And indeed, another one has stepped up, only this time not a holder demanding par maturity paydown, but one who has read their bond indenture and was delighted to find the words "negative pledge." As Bloomberg reports "a holder of Greek bonds that weren’t settled in the biggest-ever debt restructuring said he’ll demand immediate payment unless the government posts collateral against his investment. Rolf Koch, a private investor who says he holds 500,000 Swiss francs ($528,000) of the notes due in July 2013, argued that he’s entitled to equal treatment with Finland,which made getting collateral a condition of contributing to Greece’s second bailout. He wrote to the paying agent, Credit Suisse Group AG, invoking the bonds’ so-called negative-pledge clause, according to the text of a letter seen by Bloomberg News."
What does negative pledge mean? Simply that there is collateral protection in case of a cram down, such as what happened to Greece. And what's worst is that there are many more such bonds: this will merely be the precedent:
Greece issued the Swiss-franc bonds in 2005 under international rather than domestic law, which allowed holders to sidestep the more than 50 percent losses suffered by other investors in last month’s debt restructuring. If Koch is successful, other investors may follow his lead by claiming that the concession gained by Finland breaches the requirement that fresh debt doesn’t win priority over existing bonds.“They broke the negative pledge when they gave collateral to Finland,” Koch said in a phone interview yesterday from Muehltal, Germany. “Now they should offer the same to me or pay me back.”
Finland’s insistence on getting collateral last August threatened to derail the Greek bailout as other euro members sought similar terms. In the end, Finland had to abandon a bilateral deal with Greece that granted it cash security and accept an arrangement unattractive enough to deter imitators.The deal involves the Nordic country speeding up its payments to Europe’s rescue fund. The collateral it receives is in the form of triple-A rated bonds due in 15 years to 30 years, paid for by a trustee selling Greek government notes transferred to it from domestic banks. This arrangement also allows Greece’s government to deny involvement.
Greece, of course, is quick to try to claim there is no foundation for the legal claim (hint - there is):
“There is no involvement of the Hellenic Republic,” Petros Christodoulou, the head of the Public Debt Management Agency in Athens, said in an e-mail yesterday. Adam Bradbery, a London-based spokesman at Credit Suisse, said he was unable to comment.Finland’s agreement, full details of which weren’t made public, won’t trigger negative-pledge clauses on Greek government bonds, the Finnish Finance Ministry said on Oct. 3.
Uhm, right there is a great example of why one should have hired better lawyers. Because the "sorry, the dog ate the invisible contract" excuse just doesn't fly in international bond law circles. And since this is merely this is the beginning, here is what's next:
There are 7 billion euros ($8.9 billion) of international bonds issued or guaranteed by Greece still outstanding after the sovereign restructuring, according to data compiled by Bloomberg.
Only now, months after the PSI, do the PSI non-hold outs realize the folly of their ways.
As for the "negative pledge", now may be a good time to remind readers where this suddenly hot topic will be a big issue in the future.
From January 24:
Portugal Reenters Bailout Radar As Traders Realize Greek "Rescue" Model Is Not Feasible Here
Remember when Europe was fixed, if only for a few weeks? Those were the times, too bad they are now officially over. EURUSD is back under 1.30 in thin volume because even as we "shockingly" find that, no, Greece did not have the "upper hand" since Greek bondholder negotiations just broke down (and that over the matter of a cash coupon delta between 3.5% and 4.0%, which implicitly means that from a bondholder IRR perspective, when taking a 15 cent EFSF Bill into consideration, the hedge fund community fully expects the country to be in default even post reorg in at about two years). But it is that "other" European country which was recently junked by S&P (causing the 10 year to soar to new records), that is now the focus point of (re)bailout concerns. Reuters reports: "The euro nudges down some 20 pips to $1.2995 in thin, illiquid trade with Tokyo dealers citing renwed fears Portugal may need a second bailout. Undermining the glow of Lisbon's achievements in reforming the country's labour market is the rapidly rising market concern that it is the next potential candidate to default in the euro zone after Greece -- a point that is fast becoming clear as Athens approaches the end of its debt restructuring talks." And here is the paradox: if Greece succeeds in persuading the ad hoc creditors to accept a 3.5% coupon, which it won't absent cramdown and CDS trigger, Portugal will immediately if not sooner proceed with the same steps. There is however, a problem. Unlike Greece, where the bulk, or over 90%, of the bonds are under Local Law, and thus have no bondholder protections (a fact about to be used by Greece to test the legal skills of asset managers who can retain the smartest lawyers in the world and generate par recoveries on their bonds in due course), in a generic Portuguese Euro Medium Term note Programme prospectus we find the following:
Oops: negative pledge (a simple one at that, not that garbled monstrosity of verbiage that some Greek bonds have) and UK-law. Looks like the Greek Modus Operandi of dealing with its uber-leverage problems will be quite hindered (read impossible) when its comes to Portugal, where a substantial portion of its sovereign debt actually does have significant creditor protections. It also means good luck not only trying to enforce a coercive cram down, but also attempting to layer on a primed piece of debt with liens on top of the EMTNs (i.e. IMF bailout capital), without every asset manager in possession of these bonds suing the country into oblivion at a London court of law.
Finally look for creditors to flock to these bonds at the expense of any other bonds (Interbolsa, older issues) that do not, as we predicted over the weekend.
So much for the Greek deleveraging case study applied to other European countries: think fast Troika.
http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_20854_23/05/2012_443476
Greece hopes for boost from EU leaders' summit
For the first time in more than two years of debt-crisis meetings, the leaders of France and Germany have not held their own mini-summit beforehand to agree positions, marking a significant shift in the traditional Franco-German axis.
Francois Hollande's election victory has significantly changed the terms of the debate in Europe, with his call for greater emphasis on growth now a rallying cry for other leaders.
That has set up a showdown with German Chancellor Angela Merkel, who supports growth but whose primary objective is budget austerity and structural reform. While she and former French president Nicolas Sarkozy did not always see eye-to-eye, in Hollande she is faced by someone with a different vision.
In his first EU summit, Hollande has also chosen to make a stand on euro bonds - the idea of mutualising euro zone debt - despite consistent German opposition to an idea that has been hotly debated for more than two years.
He will have support from Italian Prime Minister Mario Monti and European Commission President Jose Manuel Barroso, among other leaders. But Merkel shows no sign of dropping her objections to the proposal, which she has said can only be discussed once there is much closer fiscal union in Europe.
The Netherlands, Finland and some smaller euro zone member states support her in that position, setting the stage for what could be a divisive discussion. Austria's chancellor supports Hollande's line, but the finance minister backs Merkel's.
European Union leaders should discuss using the bloc's structural funds to shore up Greece's struggling economy when the meet later in the day to explore ways of lifting growth, French Prime Minister Jean-Marc Ayrault said on Wednesday.
He called for new measures to revive the Greek economy and help the debt-laden country avoid a «catastrophic» exit from the euro currency zone, which he said would have a negative impact on the rest of the bloc.
"So there is a possibility, for example, of using (EU) structural funds in a targeted way to help restart the (Greek) economy because we need to give the Greeks some form of perspective,» he told RTL radio.
New Democracy leader Antonis Samaras is also in Brussels to speak to fellow conservative chiefs. He also hopes to meet Barroso and European Council President Herman Van Rompuy.
Samaras described Tsipras as ‘‘naive and dangerous’’ for warning the new French president not to follow the footsteps of former Greek Prime Minister George Papandreou and become “Holland-reou” but to honor anti-austerity pledges made before his election.
‘‘At a time that Greece is seeking foreign alliances, Mr Tsipras, with unbelievable arrogance, is destroying them and leading our country to the isolation that he and SYRIZA’s constituent parts are dreaming of,’’ Samaras said.
PASOK leader Evangelos Venizelos secured a meeting with Hollande in Paris on Tuesday and said the French president was “genuinely interested” in helping Greece overcome its problems.
[Kathimerini English Edition & Reuters]
and....
http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_23/05/2012_443457
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Why would Greece think about leaving the Euro Zone? They will face many problems, like business bankruptcies, market turmoil, political backlash, Greek meltdown, and sovereign debt crisis when this happens.
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