Amid rising speculation he will have to resign his post, Mr. Papandreou’s overture to the center-right New Democracy party [to drop referendum plans if they can secure broad support for a new loan agreement and austerity measures] was a clear sign the prime minister and his Pasok socialist party no longer had the political clout to impose increasing financial hardships on its people to comply with aid conditions. Political insiders now predict a coalition as caretaker government to complete aid talks, followed by snap elections early next year.
World Leaders Rebuke Greece on Vote – WSJ.com
“Does Greece want to remain part of the euro zone or not,” German Chancellor Angela Merkel said. “That is the question the Greek people must now answer.”
…. if voters spurn the bailout deal, Greece could face national bankruptcy and exit from the euro, while leaving Europe confronting an almighty financial panic and an economic slump.
Revenge of the Sovereign Nation – Ambrose Evans-Pritchard
The spokesman of French president Nicolas Sarkozy…. said the [Greek] move was “irrational and dangerous”. Rainer Brüderle, Bundestag leader of the Free Democrats, said the Greeks appear to be “wriggling out” of a solemn commitment. They face outright bankruptcy, he blustered.
Well yes, but at least the Greeks are stripping away the self-serving claims of the creditor states that their “rescue” loan packages are to “save Greece”. They are nothing of the sort. Greece has been subjected to the greatest fiscal squeeze ever attempted in a modern industrial state, without any offsetting monetary stimulus or devaluation.
Papandreou’s Hold on Power Weakens – WSJ.com
ATHENS—-Embattled Greek Prime Minister George Papandreou has called an emergency cabinet meeting later Tuesday amid an open revolt in his Socialist party that could topple his government.
“Papandreou is trying to control a growing revolt in the party after the defections and calls for him to resign. The future of the government may be decided at the cabinet meeting,” a senior party official told Dow Jones Newswires…….
The referendum is seen as a high-stakes gamble aimed at quelling a public backlash against controversial austerity policies but at the risk of derailing plans aimed at solving the euro zone’s debt crisis.
Europe falls on Greek referendum
Dow Jones Europe Index has fallen hard since Greece announced it will hold a referendum on the austerity measures it has to take in return for the EU/IMF bailout proposal. Bearish divergence on 21-day Twiggs Money Flow indicates medium-term selling pressure. Breach of medium-term support at 230 would signal another test of primary support at 210. And failure of 210 would signal a decline to the 2009 low of 150*.
* Target calculation: 210 – ( 270 – 210 ) = 150
Europe’s rescue euphoria threatened as Portugal enters ‘Grecian vortex’ – Telegraph
Monetary contraction in Portugal has intensified at an alarming pace and is mimicking the pattern seen in Greece before its economy spiralled out of control, raising concerns that the EU summit deal may soon [be] washed over by fast-moving events.
via Europe’s rescue euphoria threatened as Portugal enters ‘Grecian vortex’ – Telegraph.
Barclays Explains Why A 50% Greek Haircut “Would Be Considered A Credit Event, Consequently Triggering CDS Contracts” | ZeroHedge
Finally someone dares to go ahead and say what is on everyone’s mind, namely that proclaiming a 60% “haircut” as voluntary is about the dumbest thing to ever come out of ISDA. As is well known, the ECB and the entire Eurozone are terrified of what may happen should Greek CDS be activated, and “contagion waterfall” ensue. The fear is not so much on what happens with Greece, where daily CDS variation margin has long since been satisfied so the only catalyst from a cash flow market perspective would be a formality. Where it won’t be a formality, however, is for the ECB which has been avoiding reality, and which will have to remark its entire array of Greek bonds from par to 40 cents on the dollar, which as Alex Gloy indicated earlier, will render the central bank immediately insolvent all else equal.
EU Forges Greek Bond Deal – WSJ.com
French President Nicolas Sarkozy said after the marathon negotiating session that the leaders had reached agreement with private banks on a “voluntary” 50% reduction of Greece’s debt in the hands of private investors.
He also said they had agreed to expand the firepower of the European Financial Stability Facility, the euro zone’s bailout vehicle, four- or five-fold—suggesting it could provide guarantees for €800 billion to €1.3 trillion of bonds issued by countries such as Spain and Italy.
The leaders also agreed on a plan that would boost the capital buffers of the stragglers among the Continent’s 70 biggest banks by €106 billion—though they didn’t say where the money would come from.
Euro-Zone Talks Hit Roadblocks – WSJ.com
BRUSSELS—Deep divisions between euro-zone governments and private banks over how much to cut Greece’s private debts threatened to undermine efforts by European leaders to agree to a broad package at a Brussels summit Wednesday night aimed at stemming the Continent’s intensifying debt crisis.
….Governments, led by Germany, have been seeking a real cut in the value of Greek government bonds held by private investors of as much as 60%. The banks, led in negotiations by Charles Dallara of the Institute of International Finance, a Washington-based international bank lobby group, offered a new proposal Tuesday night that officials said had fallen far short of that.
German Lawmakers Set to Back EFSF – WSJ.com
Ms. Merkel, speaking in Germany’s lower house of parliament ahead of a vote on the European Financial Stability Facility, said Germany can’t prosper without Europe.
“We must solve the current crisis and correct mistakes from the past,” Ms. Merkel said, adding that she wants to push for sustainable decisions to be made at a summit of European Union government leaders later Wednesday in Brussels where leaders are expected to announce a package of measures to contain the sovereign-debt crisis.
A broad majority in the house is virtually certain to support a resolution backing a package of options to boost the firepower of the €440 billion ($611.91 billion) fund to more than €1 trillion without increasing contributing countries’ guarantees for the fund. All major parties approved the resolution in their parliamentary groups on Tuesday, making the resolution’s passing highly likely.