By Jack Ewing | NYT
FRANKFURT — Europe appeared to be lurching toward a moment of decision in its sovereign debt crisis Sunday, as Greece struggled to meet conditions for additional aid amid rising German impatience with the cost.
Prime Minister George A. Papandreou of Greece canceled a planned trip to Washington to meet with his cabinet Sunday, in what looked like an increasingly desperate attempt to show foreign benefactors that the government can keep the promises it made in return for aid. Without the aid, the country would certainly default on its debt, an event that economists have warned could lead to bank failures in other countries and ignite another financial crisis.
“Greece’s imminent default is assured,” Carl B. Weinberg, chief economist at High Frequency Economics in Valhalla, New York, wrote in an e-mail Sunday. “Without an injection of cash within the next weeks, the nation will run out of resources to service its debt.”
Other analysts are less pessimistic, arguing that European leaders will do what is necessary to save Greece once they are confronted with the ugly ramifications of a default. These might include having to rescue banks, particularly in France and Germany, that have large holdings of Greek bonds, as well as putting even more acute pressure on other highly indebted euro zone countries like Italy and Spain. In the worst case, the euro could come apart, setting back the cause of European unity by decades.
When political leaders do the math, they may realize it is cheaper to save Greece than engineer a bank rescue only two years after the last round of bank bailouts, analysts said.
“You can stabilize the banking system and let the sovereign go through the roof, but that is not the most efficient way to do it,” said Guntram B. Wolff, deputy director of Bruegel, a research organization in Brussels.
Still, political leaders outside the euro zone have displayed concern that the European approach to the crisis lacks urgency. Timothy F. Geithner, the U.S. Treasury secretary, attended part of a meeting of European finance ministers on Friday and Saturday in Wroclaw, Poland. It is rare for a U.S. official to attend such a meeting, known as Ecofin, and it was Mr. Geithner’s first time.
“I can’t remember the last Ecofin meeting a U.S. Treasury secretary has attended,” said Nick Matthews, an economist at Royal Bank of Scotland. “It is a clear signal of how serious the sovereign debt crisis has become and an indication that it has gone beyond Europe and is threatening on a global dimension.”
The finance ministers failed to make substantial progress toward resolving the debt crisis or to make any pledge to recapitalize Europe’s banks.
… and here’s Andy Hoffman aka Ranting Andy’s take on this crisis
Ranting Andy Special: The Central Banks Can’t Win
RANTING ANDY – It’s another one of those days where I have too many thoughts in my head, making it hard to focus on just one. The pace of GLOBAL ECONOMIC COLLAPSE is accelerating too rapidly, to the point that at ANY GIVEN MINUTE of ANY GIVEN DAY the final death knell could sound, the commencement of the PANIC that CANNOT BE AVERTED by the stroke of a keyboard (i.e. printing electronic money).
Last Friday we entered the weekend with crashing stock markets (particularly BANKS, despite the best efforts of the PPT), surging gold prices (despite the typical, MASSIVE Cartel suppression tactics), and the prospect of an imminent Greek bond default. The Bank of Japan had just announced its most blatant (and in hindsight FAILED) attempt to devalue the yen, and the Swiss National Bank had just announced the UNTHINKABLE, an all-out currency devaluation in plain sight of the entire financial world.
That night, the G7 meeting (England, France, Germany, Italy, Japan, Canada, and the U.S.) concluded with a brief, ambiguous communiqué. I excerpted the key phrases below, which essentially said ‘WE WILL DO ANYTHING, LEGAL OR ILLEGAL, MORAL OR AMORAL, PRACTICAL OR IMPRACTICAL, SO SAVE THE STATUS QUO, IN WHICH WE, THE MOST WEALTHY, POWERFUL, CONNECTED A—HOLES ON EARTH RULE EVERYHING, STEAL EVERYTHING, AND DECIDE WHO LIVES AND DIES.’
Central Banks stand ready to provide liquidity to banks as required. We will take all necessary actions to ensure the resilience of banking systems and financial markets.
In other words:
‘CENTRAL BANKERS ARE ALL-POWERFUL GENIUSES WITH THE ABILITY TO MANIPULATE ANY AND ALL MARKETS INDEFINITELY SIMPLY BY PRINTING MONEY. IT DOESN’T MATTER THAT NOTHING WE HAVE SAID OR DONE HAS EVER WORKED, THAT SEVERAL OF US ARE VISIBLY BANKRUPT, OR THAT INFIGHTING THREATENS TO DESTROY OUR TREASONOUS UNION AT ANY SECOND. WE HAVE BEEN PRINTING DOLLARS, EUROS, YEN, POUNDS, AND FRANCS AT AN EXPONENTIAL RATE SINCE THE GLOBAL FINANCIAL CRISIS COMMENCED IN 2008, AND WILL CONTINUE TO DO SO, WITHOUT ANY PRETENSE IN THE SLIGHTEST, UNTIL THE MARKETS DO WHAT WE WANT.’
At that time, interest rates on Greek one-year debt had just passed 100%, while credit default swap spreads were, and still are, predicting a 98% chance of Greek default (tables below):
GREEK ONE-YEAR DEBT INTEREST RATE
GREEK CREDIT DEFAULT SWAPS (COST OF INSURING GREEK SOVEREIGN BONDS) – NOTICE IT CONTINUED TO RISE LAST WEEK!
But these banking geniuses, who cumulatively received $16 TRILLION OF OVERT AND COVERT BAILOUTS over the past three years from the Federal Reserve (ALL WITH FRESHLY-PRINTED DOLLARS), decided they could “save the day” once again if they just PRINT MORE MONEY, coupled of course with a MASSIVE, coordinated effort to SUPPORT BANK STOCKS and ATTACK GOLD AND SILVER PRICES.
Here’s the initial market reaction in early Asian trading over the weekend’s development