Euro Crisis Summit Day: War, Pigeon, Haircut And Leveraging EFSF26 October, 2011, 21:18. Posted by Zarathustra
Tags: Economy, Euro Crisis, Europe
So today is the summit day which are supposedly for solving the Euro mess. Of course, we should have very little expectation, if at all. Yesterday, we have already known that the Finance Ministers meeting was cancelled, and the later spinning machine said the meeting was not necessary in the first place.
Whatever, here we go, the fun and irrelevant bit.
German Chancellor Angela Merkel spoke in the German parliament. The parliament will be voting on European Financial Stability Facility EFSF leveraging. This line is from Dow Jones, as German Chancellor Angela Merkel speaks in the German Parliament. “No one should take another 50 years of peace in Europe for granted”.
So, World War III?
History actually tells us the story of Germany, after losing the World War I, was required to pay reparation per the Treaty of Versailles. As noted before, Germany defaulted (sort of) in 1932 during the Great Depression. That day marked the bottom of Dow Jones Industrial Average for the 1929-1932 bear market. But other than that, we know the story in Europe there after, that is another world war.
Meanwhile, Italy is supposed to submit the letter to Merkel, Sarkozy and ECB. But it seems that no one has any idea where the letter is. Rumours have it that the carrier pigeon which is carrying the letter was probably dead.
In the other news, just as expected, when European leaders start to agree on 50-60% haircut on Greek debt, someone is going to tell everyone that 60% is not enough. The latest is from IMF (via Dow Jones), which says that 60% isn’t enough, and it should be 65% or more. Via WSJ European Debt-crisis summit live blog:
The International Monetary Fund believes that a writedown of 60% on private sector’s holdings of Greek debt won’t be sufficient and a larger haircut will be necessary as part of a new Greek debt bailout, a senior European Union official familiar with the negotiations said Wednesday.
"The IMF thinks that 60% haircut is not enough—they want more," the official told Dow Jones Newswires. "It should be 65% or more."
He didn’t rule out a haircut of as much as 70% to 75% in the value of private sector creditor’s holdings. The IMF couldn’t immediately be reached for comment.
We can be sure that later someone will ask for 90%.
Update: German Bundestag approves leveraging of EFSF
The German Parliament has approved leveraging the EFSF, via Dow Jones. Euro spiked after the news hit the wire. But according to Reuters (via @FGoria), the motion says that the EFSFS leveraging can’t be done by the European Central Bank.
Curiously though, although Euro and stocks are higher after the vote, EFSF bonds are selling off.