The Slog just got a press release from ratings agency S&P. This is the gist:

‘…holders of CAC-affected GGBs [Greek government bonds] will likely be effectively subordinated to the ECB in terms of payment….Standard & Poor’s Ratings Services has written that effective subordination is a credit negative for peripheral eurozone sovereigns….The ECB’s swap has established a new precedent by adding another class of superior creditor to the existing group comprised of the ESM, the IMF, and other multilateral development banks. We believe that this development could further weaken the prospects of peripheral eurozone sovereigns currently receiving official funding to regain the ability to access the capital markets and could raise borrowing rates of those sovereigns still accessing the primary markets……additional ECB bond buying will inevitably lead to further subordination of investors’ positions….We have not taken rating actions on eurozone sovereign issuers following the ECB’s debt swap. We believe that the swap has, at least in this instance, changed the ECB’s status from implicit super-senior creditor to an explicit one.

Unless I’m reading something very, very awry here, this strikes me as S&P’s convoluted way of saying that it too will call default one second after the swap takes place. And interestingly, this is the first ratings agency verdict that has called out Mario Draghi’s separate ECB bond-swap deal as an obvious case for default.

So….the Greek bailout is further derailed…or the built-to-fail bailout is on track – depending on your viewpoint.

Earlier on this topic: Further sensational details of US-run Greek default plot revealed


  1. They are a bit early compared to my post to it being after Wall St had closed

    How’s it going to hang on in all but name till Mar 10th or whenever the swap is completed?


  2. We believe that this development could further weaken the prospects of peripheral eurozone sovereigns […] to regain the ability to access the capital markets and could raise borrowing rates of those sovereigns …

    Exactly as I said several days ago.

    …this strikes me as S&P’s convoluted way of saying that it too will call default one second after the swap takes place.

    You’re probably right, although I read it as S&P choosing not to downgrade on the basis of the ECB swaps (which I find puzzling). We’ll have to wait and see I guess.


  3. Couple this with what crude oil is doing (going absolutely bat-s**t crazy) then i’m calling it a day: April will be the month where every chicken comes home to roost.

    $150 oil, default-o-Rama, ensuing


  4. Again you fail to take into account the trillions of fake derivatives that are out there, ever heard of MF GLOBAL and Corzine? what caused the collapse? EU derivatives, one company ,Both ratings agencies said they were concerned about MF Global’s capital position given its exposure to $6.3 billion in debt from Italy, Spain, Belgium, Ireland and Portugal — among the most troubled economies that use the common currency of the euro.

    S.&P., noting that the debt amount is 5.2 times the company’s total equity, said, “We consider this exposure to be very high, compared to the company’s loss absorbing capital base.” Earlier this month, MF Global disclosed that a regulator, the Financial Industry Regulatory Authority, had ordered it in August to set aside additional capital. Moody’s said the debt exposure and the need to inject capital highlighted “the firm’s increased risk appetite and raises questions about the firm’s risk governance.” They leveraged by 80-1 yea unbelievable, just imagine how much HSBC, GS, and the other top banks have leveraged, want to read an article about just how many derivatives they hold, try to find an article on how much MF GLOBAL held before their crash? THEY WILL NEVER ALLOW A HARD DEFAULT, THE BANKSTERS ARE ABSOLUTELY TERRIFIED OF A HARD GREEK DEFAULT AND DERIVATIVES DEFAULT TRIGGER, DEFAULT WILL BE SHROUDED IN MEDIA ECONOMIC DOUBLE TALK .The International Swaps and Derivatives Association (ISDA) will never allow the whole system to collapse. Yes Greece will default but you won’t hear it called a “hard” default ever by the ISDA.


  5. It’ll be interesting to see what the oil price is in the run up to the first US major holiday break – Memorial Day May 28th – which marks the start of their holiday season. At current rise rates it could well be $150…If fighting breaks out in the M/E before then, all bets are off.


  6. Well,thankyou S&P for that nice dig at ‘peripheral european sovereigns’,next week could be interesting for the EZ project.We all know that Garry,Pavlov and MarK were hell bent on wrecking the UK,on Moscow’s instructions:now we know that Osti Merkel(the leader of the Hanover 3 cell) is going to destroy whole swathes of Europe by the simple expedient of crippling the ECB,thus bringing down her’own’ Deutschebank,which is now hanging by a thread, not to mention the joke banks in France.At least ,the Yanks have an elected president.


  7. I missed this yesterday from Ambrose Evans Pritchard (D Tel.)
    “German showdown with IMF looms as Bundestag blocks rescue funds
    Germany’s ruling parties are to introduce a resolution in parliament blocking any further boost to the EU’s bail-out machinery, vastly complicating Greece’s rescue package and risking a major clash with the International Monetary Fund…)


  8. “…strikes me as S&P’s convoluted way of saying that it too will call default one second after the swap takes place.”

    That is the way it should be, but the politics are as thick as the panic in the EU so they might find other ways to hide the debt and the haircuts. They are a clever bunch.



    The Greek PSI “is out”

    PSI Timeline

    Min Fin Official Invitation to Bond Holders


    and remember my words… quoted
    ” USA will never “allow” New Greek Oil Nat Gaz drillings within euro…!, we are talking aboyt trilloions og barrels. qubic meters traded in Euro !!”

    Thank you for hosting


    – The haircuts look larger than expected, unless I got the numbers wrong.

    – I think you are likely wrong to think there’s trillions of barrels of oil in the arc south of Crete, if that is what you are saying. But I hope it is so…


  11. Anyone tried to draw cash out of abank over the counter today? Very difficult to get the money-talking over £1K. There’s apost on the Telegraph website (Lloyds considering ECB loan) where it was difficult to get £1900.

    Looks like there’s a problem somewhere-Run on a bank? Which one? Are the banks keeping cash to support whichever one it is?

    Are exchange controls imminent?

    Any clues anyone?


  12. Default or no default? Soft or hard? Things coming to a head or the can being kicked further down the road? No one knows really although it is obvious there are many camps each with their own preferred end, be it default or not.

    The problem is governments lie, either to hide how bad things are or to exaggerate the positive. Banks as we have seen routinely fiddle the books, inflating asset values here, pretending toxic assets are actually safe, hold make-believe capital reserves and so on. Central banks operate like stage magicians, one hand does one thing, the other something else and no one is quite sure which is real. Political and banker hubris leads them to the certainty that they can always spin or scam or manipulate things the way they want them to go.

    In effect no one really knows what is real or fake, unless there is indeed a Bilderberg or whatever conspiracy running it all and that is why at some point it all suddenly bursts apart, usually when least expected, and most of the players end up losers while a lucky few get rich. It really is pointless predicting anything because literally anything can happen when things are as febrile as now.


  13. hhmmm. Interesting. But remember what Osborne has said more than once since May/2010 that further banking crises will not be solved with more taxpayers money.


  14. I am told by a contact in banking it may be to do with the new “money laundering ” treaty we apparently signed up to recently.

    No, I don’t believe it either-but if it is, it is just another brick in the wall of state control of the citizen. Fascist state here we come (or are!).


  15. Red alert lights flashing on many of my favourite websites, March is shaping into a very forboding month. I think we could see the derivatives implosion very soon despite desperate attempts to hold it off.

    I hear there is a media blackout in Greece due to massive protests by the people to kick out the banksters in the same way the Icelandic people did.
    The new Greek slogan is “we are Icelanders” and they are all chanting it apparently!

    I say best wishes to the Greek people and SHAME on our MSM for their part in this Orwellian blackout manipulation.


  16. As Peter C observes above, predicting chaos is a mug’s game.

    My red alert light has stopped flashing and gone to constant, could be a faulty wire. We may be approaching critical mess. When I have trouble getting to sleep (too often) these days, I close my eyes and count dead cats bouncing. The problem is that when I open my eyes they don’t go away..

    I would also like to wish all Greek people courage and fortitude.

    No animals were harmed, or in any way inconvenienced, during the writing of this comment.


  17. @MickC:
    People in banking are often lying.
    I don’t know if banks are suffering liquidity problems and applying controls on individual or overall withdrawals (£X per day etc) or going through dry runs of stalling on paying over money, but I’ve noticed a few examples in recent months of people having temporary cash withdrawal problems or making largish online payments etc (includng myself). And there was a problem several months back when several banks’ ATMs were out of use, ostensibly due to some computer glitch (HSBC?). hhmmm.


  18. @Bankrupt Taxpayer
    have a look @ this doc.



  19. Hummty ho…off we go..
    to the shops and a big suprise..
    tiddly tum..
    less stress at M & S oh yes…
    hummty tummty tum…


  20. I’ve a feeling in my ‘water’ that these dates have been leaked to catch people off guard. You watch, the real thing will come out of the blue when no one expects it.


  21. Fascinating. As many of us have said for a long time, derivatives trading and associated credit bubble were nothing less than a ponzi scheme, which is unlawful in most Western countries. Good reason to scoop up the perps and politicians who presided over it.


  22. Has anybody actually said that a Greek rating of Default by all three major agencies would derail the bailout?
    It certainly adds another downside complication into the equation (raises the risk of CDSs being called).
    The bailout looks unlikely to fly successfully because it’s a crock and won’t solve the problem. Quite apart from some of its demands on Greece and its terms and conditions. But as we have seen over many months, the consequences of political actions are not considered when being taken. The political elites have other agendas, or are stupid, or both.
    That’s my take on it…..


  23. @rmiglobal:
    The Aegean Sea area is richer than Saudi Arabia. Why doesn’t anybody know?

    I dunno. Do you have any ideas why this might be? At the moment, Saudi’s Ghawar oil filed is accepted as being the world’s largest reservoir, although some doubts exist that it may have already peaked…


  24. @SheepMonkeys: OK. There’s a subtle difference between what JW wrote and what you wrote. Little in this Greek tragedy is black and white.


  25. If the CDS will be activated is not a decision to be made by the rating houses and their ratings. It is a decision made by ISDA .

    My personal opinion is that what the 3 companies say about the issue, is completely useless except for some headlines in the media.


  26. @SheepMonkeys:
    “If the CDS will be activated is not a decision to be made by the rating houses and their ratings. It is a decision made by ISDA .”

    True, but IMO it would be naive to think that ISDA can deny declaring a Default if the ratings agencies have already done so and the markets are already in the process of preparing for it (see several other posts with links). ISDA cannot operate in a bubble. If ISDA hold out it could trigger accusations of political influence and have ramifications regarding Greek (and pssibly other EZ members) future access to capital markets. I suspect ISDA will have little option but to take ratings agencies views on board. But I may be wrong. Nothing is black & white.


  27. BT ” ISDA cannot operate in a bubble. If ISDA hold out it could trigger accusations of political influence”

    Unfortunately BT I don’t think the ISDA give a fig. They represent the big powers in banking and have Washington and the Fed as special friends :-)


  28. If this is not a default then what is it ?

    Let’s just accept that the EU/ECB/IMF programme for Greece was an utter failure, complete misdiagnosis of the problem, they took the wrong actions, they wrecked the country and run the economy to the ground that is now impossible to pay back, let alone get back on its feet.
    This as much of a default as they get.

    It would be dangerous if CDS are not paid. It will means they are worthless and this will drive yields up for the entire periphery as investors cannot insure against future losses, they will value the danger even higher.


  29. “The political elites have other agendas, or are stupid, or both.”
    That’s the bit that puzzles me the most…..I really would like to know if they have a plan or are making it up as they go along.


  30. @will lefeurve:
    You may well be right …I’m not close enough to the action to know.

    Whatever, if ISDA do deny a Defalt for Greece, as I said (and also Jacob shares this view) it will make future access to the capital markets more difficult for Greece and other ClubMed members and drive up their yields. A home goal methinks, which might then lead to another Default!

    One possibility I have considered is for the US Govt to pass a law or Presidential Order to nullify all relevant CDSs. But even that would require lawful justification…


  31. @kfc: Me too!

    Here’s one explanation:
    The EU elites and unelected Brussels crats do have an agenda to create their glorious socialist, undemocratic, utopian superstate. But it’s all be blown off course by the financial crises. They are now desperately trying to salvage it and what we have seen for 18+ months are the results of them making it up as they go along:- an utter shambles and a worsening crises in Greece and elsewhere. They are in absolute denial about the magnitude of the crises and whether it can be salvaged, becasue to face those realities would mean admitting the defeat of their Dream. To them, that is unthinkable.


  32. Pingback: S&P Joins Fitch, Credit Suisse In Seeing Greek Bailout As Default | No Agenda Global Radio

  33. Pingback: Anonymous

  34. The ECB thinks they are going to take the collateral of Greece from the existing bondholders by bailing out Greece for a few month. Once they try to subordinate the existing bondholders, the rating agencies will call default. That will never happen. If Greece defaults our top 5 banks have to pay the insurance to the Greek bondholders that they have been collecting premiums for years, that will bankrupt the banks. That will not be allowed to happen either. What’s left? The ECB and the FED will print money to keep buying the bonds of Greece and other nations including US Bonds so these Countries don’t default, and commodities, priced in Euros and US Dollars, will continue go through the roof. Guaranteed.


  35. Pingback: Breaking: S&P Joins Fitch, Credit Suisse in Seeing Greek Bailout as Default

  36. Pingback: Breaking: S&P Joins Fitch, Credit Suisse In Seeing Greek Bailout As Default « Investment Watch Blog – 2012

  37. Maybe unrelated but I was asked by police at an airport yesterday if I was carrying more than £1000 in cash. I travel a lot an have never been asked this before. When I queried why I was told it was due to money laundering and the proceeds of crime act. I was told I might have to prove any cash was legitimate and that it could be seized if I couldn’t. On the face of it an explanation but seems to me like currency restrictions. A familiy on holiday might easily carry £1000 in cash,


  38. @marcjf:
    There are growing reports of incidents like that…
    The police (are you sure they’re police and not HMR&C?) usually position themselves somewhere around the boarding gate – often on the walkway between the boarding gate and the plane – so that if a passenger is uncooperative they can delay him and he risks missing his flight, for which they will accept no liability.
    If it happens to me, I will certainly demand to see their ID Cards and make a note of their names and upon return home will make a strong written complaint at a very high level. The idea that a person with more than £1000 in cash would have evidence of its source is ludicrous and they know it.

    It has all the hallmarks of the old scam in 2001-3 when HMC&E were pulling Brits over when returning home from Europe and challenging them over how much cigs/booze they were carrying and informing them of upper limits. In many cases, people had their goods confiscated and even their cars, at entry ports! That was a blatant violation of the Single Market Treaty being run by the Chancellor at the time (Gordon Brown). He sidestepped blame and sacked Paul Boateng who was the treasury minister for HMC&E. Sometime later HMC&E were merged into the Inland Revenue: HMR&C.


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