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Greece is assumed to default in a matter of days

>> September 9, 2011 – 


It appears the end game for Greece is approaching fast and Italy appears to be next in line.

Bloomberg reports Germany Said to Ready Plan to Help Banks If Greece Defaults

Angela Merkel’s government is preparing plans to shore up German banks
in the event that Greece fails to meet the terms of its aid package and
defaults, three coalition officials said.

The emergency plan
involves measures to help banks and insurers that face a possible 50
percent loss on their Greek bonds if the next tranche of Greece’s
bailout is withheld, said the people, who spoke on condition of
anonymity because the deliberations are being held in private. The
successor to the German government’s bank-rescue fund introduced in 2008
might be enrolled to help recapitalize the banks, one of the people

The existence of a “Plan B” underscores German concerns
that Greece’s failure to stick to budget-cutting targets threatens
European efforts to tame the debt crisis rattling the euro. German
lawmakers stepped up their criticism of Greece this week, threatening to
withhold aid unless it meets the terms of its austerity package, after
an international mission to Athens suspended its report on the country’s

Greece is “on a knife’s edge,” German Finance Minister
Wolfgang Schaeuble told lawmakers at a closed-door meeting in Berlin on
Sept. 7, a report in parliament’s bulletin showed yesterday. If the
government can’t meet the aid terms, “it’s up to Greece to figure out
how to get financing without the euro zone’s help,” he later said in a
speech to parliament.

Longer term, euro countries will “only
preserve the common currency if there is more integration” in the
European Union, Merkel said in a speech in Berlin today. The EU “won’t
be able to avoid treaty change.” While intensive discussions lie ahead
and the path won’t be easy, policy makers “shouldn’t be afraid” of
tackling the challenge, she said.

And this email is making the rounds and catching most traders’ attention:

From colleague: trader friend just hit me with the following:
There is “Chatter” in the market of a Greek Default this Weekend – and
their CDS is over 400 wider…  Soc Gen is off 7% on exposure – German CDS
more expensive than UK;s – despite the ballooning in the CDS prices for
Lloyds and RBS.

Read more at www.thepeakeffect.com



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