“The EU is figuring out how to allow Greece to extend its existing debt without triggering a major credit event. The EU may offer bondholders higher coupons, “preferred status”, or even payment in collateral. Meanwhile EU, IMF and European Central Bank officials are meeting in Vienna.” (Businessinsider.com)
Ah now it starts to get interesting and we enter the final pre crisis stage of
- fluctuating ‘we have a deal coming’ optimism
- followed by pessimism on ‘not quite’ as EU must now grapple with the thorny point about who actually has to come up with funds for loans that few seriously believe will be paid back. Last year’s EU/Greek debt crisis really got going when markets saw EU unable to quickly resolve who actually paid out the cash, undermining EU credibility and raising risks that a bailout might not come.
Same thing with this year’s second annual Greek Solvency Crisis & Contagion threat. EU/ECB/IMF leaders engage in brinksmanship to extract better deal for their side.
Expect risk appetite, and the EUR to see serious volatility on fluctuating optimism and pessimism depending on the ‘yes bailout’ or ‘no bailout & default coming’ rumor of the day. As EU, ECB, IMF, and Greek leaders must engage in brinksmanship to show their supporters that they’re fighting for the best deal, expect more downside, and a mini crisis before the final capitulation by all and another very expensive Greek aid package that, like last year’s package, at best buys about another year of delay before the third annual spring EU / Greek crisis, though there’s a real risk that credit and other asset markets, having learned from the past year, may anticipate crisis #3 earlier and EU may spend 10s of billions of Euros and not even get a year’s calm.
This ‘haggling stage’ was the direct precursor to the spring market crash of 2010 as bickering over who must pay what eroded the EU credibility and cast doubt on the stability of the EU.
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DISCLOSURE /DISCLAIMER: THE ABOVE IS FOR INFORMATIONAL PURPOSES ONLY, RESPONSIBILITY FOR ALL TRADING DECISIONS LIES SOLELY WITH THE READER. IF WE REALLY KNEW WHAT WOULD HAPPEN, WE WOULDN’T BE TELLING YOU FOR FREE, NOW WOULD WE? AUTHOR SHORT THE EUR