7 Signs That Endgame Nears in Greece

May.25.11 | About: CurrencyShares Euro (FXE)

The euro is still defying gravity and staying above 1.40. But there are heavy doubts that this will last. Here are seven fresh signs that Greece is about to default sooner than later, that it won't be good, and when this crisis can come to a climax.

  1. Europe is getting tough: Politicians from rich European countries begin feeling where the wind is blowing and finally threaten not to throw more good money after bad money. Putting it simply: Greece didn't fulfill its obligations, so it will not get the next tranche of the bailout.
  2. Moody's is blowing up the jargon: All the creative semantics provided Jean-Claude Juncker and his friends regarding soft restructuring / re-profiling / re-scheduling were very interesting. Moody's clarifies that almost any such move would be a default.
  3. ECB is playing down exposure: ECB Italian member Bini Smaghi said that the exposure of the ECB to Greece isn't too big. Of course, he opposed restructuring and thinks that it will be a disaster. But playing down the ECB exposure shows that the ECB, the last bastion against restructuring, is acknowledging the inevitable.
  4. Greek bank faces the truth: In a presentation to investors, the Greek Alpha Bank published its Q1 results, which contains very worrying signs of the exposure to government debt, and the high dependency in the ECB. A rare moment of truth.
  5. Greek scramble: In a last moment effort, the Greek government provided a hasty and ambitious privatization plan in order to pay its debt. Is this serious? The opposition doesn't think so and prefers to distant itself from the sinking ship.
  6. The market says so: Yet again, Greek CDS spreads rise to new records. The chance of a default is now 71% according to these spreads.
  7. No time left: The results of the EU / IMF checkup for Greece have been delayed over and over again, while we all know the results: Greece missed again. Juncker said it will be next week. Some kind of solution will better appear next week, before Greece goes on a general strike on June 4. Given the unrest in Spain and recent violent protests in Greece, this is quite worrying.

Merkel already understands that she has no better options, especially as the public turned against her in regional elections in Bremen. All the warnings about the consequences could materialize; we already see warnings for Italy and Belgium, as well as rising Spanish yields. Protests in Spain continue also after the elections.

The euro already got a blow a few weeks ago and lost its highs at almost 1.50. But it is still holding well. Will we see a collapse in the next 10 days?

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.