Greece, Portugal / Germany, France

articles, news & charts

Greece's Shadow Economy & it's Impact on Debt

from the New Yorker.  Quick, 1 page article worth reading.  Fun pullout:

... According to a remarkable presentation that a member of Greece’s central bank gave last fall, the gap between what Greek taxpayers owed last year and what they paid was about a third of total tax revenue, roughly the size of the country’s budget deficit. The “shadow economy”—business that’s legal but off the books—is larger in Greece than in almost any other European country, accounting for an estimated 27.5 per cent of its G.D.P. (In the United States, by contrast, that number is closer to nine per cent.) ...

Banks Meet Over Greek Rescue Plan

... Discussions until now had centered on a proposal by French banks aimed at encouraging investors to voluntarily roll over part of their bonds maturing over the next three years.But the debate has broadened to add a range of options, including the possibility of encouraging investors to swap their holdings of Greek government bonds for new bonds with longer maturities at lower costs, a plan supported by Germany ...

Hope that works, because here's been the trend:

Greek yields last 3 months

quick Economist post

There's a spike, followed by a decline, followed by a higher spike, followed by a decline to a higher trough, and so on. European leaders keep taking steps to avert disaster, and each time markets are less assuaged.

And here's what's on deck:
Portugal's Unbelievable Bond Crash

It's still hard to fathom: A Moody's downgrade having a huge impact on the market.And yet it seems that indeed just that has happened today: What you see below is the incredible surge in Portuguese short-term yields, from under 12% yesterday afternoon to  this morning to around 14.5% this morning to to over 16.5% right now, a really mammoth collapse in confidence for a country that's already been bailed out!

This is, essentially, the European nightmare scenario. Because Greek private bondholders will be forced to take haircuts, the bonds of every other country are now treated like the plague.