Proposal to Screw European Taxpayers
You never know who's reading your blog, until you receive emails. I received
a pair of them this week from Father Joseph Fessio, S.J., Founder and Editor
of Ignatius Press.
While I am quite certain we disagree on many issues, Father Fessio is dead on
accurate in his analysis of the New York Times DealBook article A Bold Proposal to Offer Greece Some Financial Relief.
The DealBook article was written by written by Landon Thomas Jr.
Thomas trumps up a plan written by Mitu Gulati and Lee C. Buchheit, two debt
lawyers who played a central role in the restructuring of Greece’s debt in
2012.
The Proposal
A few snips from DealBook shows the master plan to be nothing but a
gift to hedge funds and vultures at the expense of eurozone taxpayers and
Greece.
European governments do not want to lend Greece any more
money, nor do they want to have their debts written down, Mr. Gulati said. So
the trick, he argued, is devising a mechanism that can persuade private
sector investors to pick up the slack.
They say, private-sector bond investors should be granted a powerful
incentive to load up on risky Greek debt by being awarded seniority over
public sector debt holders.
That means these nongovernment lenders would jump to the head of the line of
creditors in terms of who gets paid first if, in the future, Greece does not
have enough money to pay all of its lenders.
“This is not a substitute for debt relief,” Mr. Buchheit said. Nor, he added,
should it be seen as a way for Greece to escape the tough reforms it needs to
put in place to make the economy more functional and efficient.
Father Fessio Analysis
Father Fessio writes ....
Hello Mish,
Please blast these people. The same people who helped shaped the 2012 Greek
bailout now have a new proposal: that private investors loan money to Greece
in return for senior debt position!
So the private investors who unloaded all their debt (at huge profits) onto
European taxpayers are now going to offer more debt financing, but senior, so
they can make more money off the deal when Greece defaults.
Bold Ripoff
I responded to Father Fessio that I did not have to blast anyone out of the
water because he just did.
Granting hedge funds and vulture capitalists senior rights is precisely the
wrong thing to do. Moreover, the results speak for themselves.
Lars sent me his analysis a few days ago and it fits right into this article.
Lars writes ...
Hello Mish
The 2010/2012 rescue package was €240 billion of which something like €206
billion has been paid out. The key element here is that 77% of the funds went
to German/French banks in order to save them from collapse.
Simply put, the eurozone used the Greek taxpayers to save itself and the
banks.
The ECB entered the scene also in 2010 and by summer 2011 the Target2
imbalance (for Greece) was a little over €100 billion. We then got the
"whatever it takes" pronouncement by ECB president Mario Draghi in
July 2012 and deposits started to flow back into Greece. By autumn of 2014
the imbalance was down to €30 billion.
In November 2014, capital flight from Greece started again and since then the
Target2 imbalance has grown by €75 billion.
The total Eurozone/ECB exposure is now at least €326 billion. In addition,
private creditors are owed €70 billion.
Then there are guarantees by the government on short term debt and debt owed
by GSEs.
Europeans seem blind to rescue facts.
Rescue Facts
- The 2010 rescue package was not for Greece but for the
eurozone itself. Eurozone and Greek taxpayers were used to save the euro
system. This was a despicable act.
- The ECB has kept things going by providing liquidity
from the “beer drinking” part of the eurozone to the "wine drinking
part".
- Huge imbalances within the eurozone are now a fact, and
they are growing thanks to Draghi's QE.
I watched a debate on Greece on French TV yesterday. They are all clueless as
to what is really happening. I also spoke to a Dutchman yesterday and he said
he was not concerned about Greece because Dutch exposure was only €5 billion.
He almost fell over when I told him it's more like €50 billion. Dutch
exposure to the whole eurozone is €120 billion. I did not tell him that as I
did not want to provoke a heart attack.
Best regards,
Lars
Generous Terms
German chancellor Angela Merkel has stated many times recently that Greeks
got generous terms on its alleged bailout.
Merkel is either a blatant liar or dumb as a rock. I believe the former. It
is the bailed out banks in Germany and France that got generous terms.
Greece and eurozone taxpayers got the shaft and remain at risk. And now
Landon Thomas Jr., Mitu Gulati, and Lee C. Buchheit have a plan to further
screw Greece, putting eurozone taxpayers at risk in the process.
All three of them can take their "bold proposal" and shove it where
it belongs.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
