Tuesday, June 21, 2011

Greece 'Essentially Bankrupt' Even With Aid, PIMCO's Balls

I ask myself every once in a while: "What would I do if I were a policy maker in Europe right now?".

It is such a puzzling question because these are well-educated guys who have a huge networking to source point-of-views. They hear a variety of opinions from the likes of politicians, business men, academics, investors, among others and I really believe they know there is no way out of a debt restructuring for the peripherals (considering that once Greece goes the tide comes bringing the rest down to their knees).

What would I do?
Will the Greek people, through their politicians, really let austerity come in harder than it is actually already going?
The creditors didn't worry much about the solvency of the Greek people when they lent the money. Now the situation is so serious that even the Greeks have to think what will happen if they didn't pay back what they owe.
If there is a default would the new global banking + financial crisis make things even worse for stand-alone Greece?
Would the Greeks be better-off defaulting, staring at the financial-crisis-abyss that would ensue, leaving the Eurozone and the Euro currency, with the world in chaos after spending another few depressed years to get their currency back, etc?

I do not know.
But I certainly am happy not to be an european finance minister right now.
Good luck to these guys because the matter they have in their hands is, from my point of view, key to the future of our financial system as we know it.

(I know, the current system sucks).

PIMCO Andrew Balls - The Eurozone Needs a Plan B, as 'Quarantining' the Weak Is Too Costly

Greece ‘Essentially Bankrupt’ Even With Aid, Says Pimco’s Balls
2011-06-21 15:59:06.377 GMT

By Mark McCord
     June 21 (Bloomberg) -- Greece is “essentially bankrupt”
and any attempts to solve its sovereign crisis with a new bailout will be like “kicking the can down the road,” said Andrew Balls, Pacific Investment Management Co.’s head of European portfolio management.
     Even if the nation is granted fresh aid “these issues are going to come up again in the next months,” Balls told Andrea Catherwood on Bloomberg Television today. It would be “complacent if investors think this can be kicked down the road until 2013,” he said.
     Greek Prime Minister George Papandreou faces a confidence vote today as he seeks to secure parliamentary support for austerity measures required for the granting of outside aid to prevent a default.
     Balls said the only benefit of a Papandreou victory would be to buy some time to prevent contagion spreading to other economies such as Spain’s.
     “The concern we have is that if you continue to kick the can down the road, you raise the risk of a disorderly default and worse contagion impact,” he said. “If you just told the truth and said Greece looks like it will need to restructure its debt” you could then “try and have a supportive orderly framework to do that.”

Link to Company News:{1841Z SM <Equity> CN <GO>} Link to Company News:{21429Z US <Equity> CN <GO>}

*Disclaimer: charts and data are presented as I receive/see them. Sources are usually not checked for validation and my own calculations are of 'back of the envelope'-type. I am aware that some math that I do myself might be wrong and/or misleading to some extent. In financial markets the rate of change of economic data is often more important than the actual level and the perception of 'what is priced in' is more important than 'what is actually going to happen'. This is actually the way people pick entry and exit points. So... yes, sometimes you might say 'This guy is an idiot, this is way wrong!' with a high conviction, being right. Not to worry. Markets are made of expectations and the clash of conviction between its participants. Portfolio managers know that being an idiot is sometimes profitable and being smart is often a bad choice. It is all reality, sometimes good, sometimes bad. By the way: corrections to my analysis and intelligent debate is welcome. theintriguedtrader AT gmail do com

No comments:

Post a Comment