http://blog.alexanderhiggins.com/2012/03/09/moodys-declares-greece-default-updated-92982/
Greece Officially Defaults, UK Prepares For Euro Collapse
Posted by Alexander Higgins - March 9, 2012 at 8:05 pm - Permalink - Source via Alexander Higgins Blog
UK Government prepares for Euro collapse and nuclear financial fallout of Moody’s officially declaring a Greece default on their sovereign debt.
Greece has now become the first developed western nation to default on its sovereign debt and, while the media is downplaying the consequences, no amount of propaganda and deception will be able hide the debris that will be scattered across Europe once the the financial shit-storm is done blowing over.
The consequences will be severe indeed as the spotlight focuses on the rest of the PIIGS nations while investors are forced to consider the situation in Greece, which does not bode well for the economic future of these nations nor is it a good omen for the future of the Euro.
While this can easily be written off as the speculation of some blogger, you’ll see below that the BBC reported that even the UK government issued a red alert warning just yesterday running the headline “UK must prepare for the collapse of the Euro” predicting that the events that unfolded today would soon come to fruition.
For those not following what just happened, earlier the IDSA declaration of a “credit event” that triggers credit default swaps and Fitch downgraded Greek debt to “restricted default” following a debt swap deal to keep the Greek government alive by securing an EU bailout.
Reports have now just hit the wire that Moody’s has declared Greece in default, which will have dire consequences on Greece and the entire Euro-zone area.
For those wondering which EU nation is next, the answer is of course Portugal.
recent days have seen a mass exodus of investors money as the Troika gave their first indications that Portugal will be forced to restructured their debt in the same manner as Greece.
Of course we now know that means a default on the nation’s sovereign debt, which then runs the risk of the contagion spreading all across Europe and finishing in a crescendo whose tidal wave may finally land on the shores of the United States.
First reports we’ll look at reports from RT and Press TV on the Greece default, then a report from Zero Hedge on the immediate ramifications the default will have, followed by the BBC article warning of the collapse of the Euro and the political unrest such an event will have.
RT reports:
Moody’s: Greece has defaulted
Moody’s Investors Service considers Greece to have defaulted per its default definitions. The announcement comes despite Athens reaching a deal with private creditors for a bond exchange that will shave €107 billion from its €350 billion debt.
[...]
Eventually, the overall cost to bondholders, based on the present net value of the debt, will be at least 70 per cent of the investment, Moody’s explained.
“According to Moody’s definitions, this exchange represents a ‘distressed exchange,’ and therefore a debt default,” the US rating firm said. “This is because (i) the exchange amounts to a diminished financial obligation relative to the original obligation, and (ii) the exchange has the effect of allowing Greece to avoid payment default in the future.”
[...]
On Friday, Athens announced that it had carved out a crucial bond swap deal with private investors designed to write off more than €100 million of Greek debt. The bondholders agreed to take huge losses, giving up some 74 per cent of the value of their investment.
The agreement with private investors was a crucial part of a new bailout from the EU and the IMF aimed at averting a catastrophic default which could plunge the entire eurozone into a deep crisis potentially harming the global economy.
Greece is experiencing its worst economic crisis since World War II and has been on the brink of a default with debt equal to 160 per cent of its GDP.
Source: RT
Press TV reports:
The US-based credit rating agency issued a statement on Friday, saying that “even as 85.8 percent” of the holders of Greek government bonds had agreed to the plan, the “exercise of collective action clauses that Athens is applying to its bonds will force the remaining bondholders to participate.”
“According to Moody’s definitions, this exchange represents a ‘distressed exchange’ and therefore a debt default.
“The exchange amounts to a diminished financial obligation relative to the original obligation,” the statement added.
Moody’s also said the debt swap deal “has the effect of allowing Greece to avoid payment default in the future.”
On Friday, the Greek government announced that a large majority of private creditors had signed on to a debt exchange plan expected to cancel about 107 billion euros (143 billion dollars) in Greek government bonds.
On February 24, Greece had formally offered private creditors the deal, which is expected to reduce the country’s debt of about 350 billion euros (469 billion dollars). The deal is part of the second bailout package for Greece approved by eurozone finance ministers during a meeting in Brussels on February 20.
According to the second bailout package, Greece will get loans of more than 130 billion euros (174 billion dollars). The first bailout, which was approved by Eurozone finance ministers on May 2, 2010, was worth 110 billion euros (147 billion dollars).
On March 2, Moody’s downgraded the credit rating of Greece to C from Ca and said the country’s debt exchange plan may “constitute a default.”
Meanwhile, in a statement issued on Friday, International Monetary Fund Managing Director Christine Lagarde said the IMF plans to offer Greece a loan worth about 28 billion euros (36.7 billion dollars).
Lagarde’s statement added, “Today I have consulted with the IMF’s Executive Board and on that basis, as discussed with the Greek government, I intend to recommend a 28-billion-euro arrangement under the Fund’s Extended Fund Facility (EFF) to support Greece’s ambitious economic program over the next four years.
[...]
Source: Press TV
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