Greek contagion to spread to the UK

[Jim Hardie]

Time to bring back the drachma.........and the colonels?

[Longcol]

LINK

 

Oh dear!

 

Them dominoes keep a tumblin'

 

Bit slower than your predictions I think - according to you Portugal was tumbling a year ago.

 

http://www.sheffieldforum.co.uk/showpost.php?p=6464062&postcount=7

[andyofborg]

Time to bring back the drachma.........and the colonels?

 

how many elgin marbles can you buy for a colonel?

[Vague_Boy]

Nearly there, Credit Crunch II ahoy!

 

Greece Default Risk Jumps to 98%

 

End of the line: What a Greek default means

 

A default would mean a complete lockup of the Greek economy. The Greek banking system could collapse as it holds billions of euros of Greek government debt. Other banks would refuse to lend to the Greek banks and the ECB could cut off its cash lifeline. Liquidity would dry up and suddenly there would be no money in Greece.

 

The ensuing chaos would spiral far beyond Greece's borders, though. It would first trigger around $5 billion worth of credit default swaps that investors in Greek bonds took out to protect themselves from a default. Financial institutions that issued the CDS would need to pay the face value of the bonds immediately, putting a dent in their bottom line. Furthermore, foreign banks holding Greek government debt would need to write down or even write off the value of that debt given the default.

 

Sound familiar? It is similar to what happened in 2008 when the banks were forced to write down billions of dollars in mortgage-backed securities. Fortunately, the amount that needs to be written down this time would be somewhat manageable. Foreign banks hold $54.2 billion in Greek government bonds, with 96% of that owned by European banks. German lenders were the largest foreign owners of Greek government bonds at the end of a last year totaling $22.7 billion. French lenders came in second with $15 billion of exposure.

 

But that is just the government debt. A collapse of the Greek economy would also put Greek private debt in trouble, forcing even more write downs in the European banking sector.

 

This prompted Moody's this week to issue credit warnings for three large French banks, BNP Paribas, Societe Generale and Credit Agricole, which hold a combined $65 billion in public and private Greek debt. Write-downs that large would begin to rock the world financial system.

 

Domino effect

 

The biggest fear of a Greek default, though, isn't the default itself, but the message that it would send to other countries struggling to pay off their debts. Already Ireland has started to renege on some of its bond payouts, triggering CDS claims. That could accelerate if Greece defaults as the populations of those countries facing harsh austerity measures push their leaders to "pull a Greece" and simply stop paying off the debt. Cascading defaults in Irish and Portuguese government bonds would again ripple through the European banking sector.

 

But again, while the amount of government debt held by these two countries is large, it pales in comparison to the amount of public debt taken out by its citizens currently owned by foreign banks. And if the euro collapses as a result of all these defaults, those debts would probably all have to be written off, which could bring massive pain to the banks. The cycle could continue with Spain and Italy tearing up their debts.

LINK

 

Dig deep guys, it's time to bail out those banks again.

 

In other (unrelated) news, gold hits an all time high against the Euro.

[Vague_Boy]

Eurozone debt crisis is a 'real danger' to Britain

 

The European debt crisis poses a "real danger" to Britain, Chancellor George Osborne has warned as he arrived for negotiations on tackling the financial problems facing the Eurozone.

 

The talks come after previous attempts to agree on a further bail-out for Greece ended in indecision and confusion, leading to fears that unless something is done quickly the situation will spiral out of control.

LINK

 

Well, well, well, who'da thunk it?

 

(Well, apart from me of course.)

 

But I'm reliably informed on another thread by Wednesday1 that such crisis cannot be predicted.

 

So I must be a really, really good guesser.

[Vague_Boy]

Risk of UK default set to soar if Italy defaults

 

The risk of a British default has soared alongside the fears that Italy may not be able to service its debt, analysts have warned.

 

At the moment the price of insuring Britain's debt - through credit default swaps - implies a 9pc chance of default. But Fathom said: "If Italy were to default, the probability of a UK default would rise to 22pc."

 

The cost of government borrowing would also go up by around 2.5 percentage points.

LINK

 

"The cost of government borrowing would also go up by around 2.5 percentage points."

 

Italy's cost of borrowing pushed through the 7pc level yesterday raising fears that it will not be able to service its €1.9 trillion (£1.6 trillion) debt pile.

 

Good job we're not mired in debt then isn't it?

 

Oh, wait....

 

A French default would be even more serious - the risks and the cost of UK government borrowing "would roughly double", according to Fathom.

 

 

This story focuses mainly on the risk incurred by just Italy on its own, but this is a systemic crisis.

 

Greece, Italy, Spain, Portugal, Ireland, France, even lowly Belgium, are ALL in trouble.

 

Can Germany bail them all out?

[Vague_Boy]

Well, way back in 2010 I started this thread and look what's happened since.

 

Moody's: UK risks 'Greek contagion'

 

Credit rating agency Moody's has warned today that the UK economy is vulnerable to "Greek contagion" due to its dependancy on the banking system and its links with Greece.

LINK

 

Eurozone's banks are 'in tatters', says Ken Clarke

 

Former chancellor Ken Clarke has said Europe's banking system is "in tatters", warning the UK is "heavily exposed" to potential problems.

LINK

 

Greek contagion fears sink stocks again

 

UK warned of credit downgrade

 

 

Elsewhere in the EU

 

Spain hit by downgrades amid Greek contagion fears

 

Greek euro exit 'would cost France EUR 50 bn'

 

Greek Contagion: Run on Banks Accelerating

 

 

And globally

 

Greek political crisis fuels global finance fears (BBC News)

 

Asia Markets Fall on Greece Worries

 

GLOBAL MARKETS-Greek contagion fears send euro, shares lower

 

 

And all this with a relatively small economy like Greece. Just imagine the fallout when Spain goes.

 

Spain’s Default Risk Is Rising

 

After Greek Default, Spain And Portugal Pose Major Risk

 

Flowers Says Spain, Italy Defaults Would Be ‘Catastrophic’

 

 

Whoa, so Italy and Portugal are in trouble as well?

 

But don't worry, according to Gordon Brown:

 

Britain is well placed to weather the "first financial crisis of the new global age" thanks to Labour's handling of the economy

 

(Yes, I had to get my mandatory dig in at this egregious oaf.)

 

Nothing to do with the fact that we can print money to pay our bills and the EuroZone nations can't.

 

If only someone had seen this all coming.