Some conjecture as we await word from on high.
There was (is?) a Greek deal! You’ve read that a few dozen times over the past few years: this one concerns the second bailout / “settlement” with Greece’s creditors. Like any good not-bankrupt nation, Greece is entering into an agreement with its primary creditors to re-structure the maturity profile, interest rates, and outstanding principal on its sovereign debt. This not-default will be a major breakthrough if the majority of creditors (read: other EU nations, the IMF, private bondholders) agree to a certain percentage, at which point the agreement becomes binding.
Some onerous things:
The Troika (loudly Germany, meekly France) will demand assurances that the debts will be repaid in exchange for more funding commitments that will allow the Greek government to pay its bills beyond March 20th - the current date Greece is slated to run out of money completely. This will include some union-busting enforced not by Greece’s government, but by the European Union’s top governing bodies. It is unprecedented and it will infuriate the Greek citizens, who will burn buildings in fury at their loss of sovereignty.
Private bondholders will likely hold things up a bit because they don’t get any of the knock-on benefits that Greece’s sovereign creditors in the EU receive if Greece is saved. They care not for the sake of the Euro; they bought those bonds to receive coupon + principal and any alteration of that agreement better have a decent vig. Hint: it won’t. Much as was the case with the GM, these guys are going to wind up fucked out of a lot of money because of broader systemic concerns.
First and foremost: remember this is a chess match of a negotiation if there ever was one. My bet would be on some “snags” and the like dragging this one out to the brink of disaster, much as was the case with the infamous American debt-ceiling manufactured crisis of 2011. Also keep in mind that many of the key players - Merkel, Sarkozy, to a lesser extent Obama - are all relying on this deal to save Europe quickly. After all: Sarkozy is all but dead in French polls and Merkel isn’t faring much better. The obvious Greek move is to press on those weak electorate hands to get a more favorable deal done.
But finally: remember that it only starts with Greece. Portugal, Spain, Italy, and Ireland are all on tap with gigantic fiscal problems of their own. The previous Euro bailout doesn’t appear to have solved much economically in any of those nations, which implies they’ll all be back at the trough soon enough. And why not ask for the Greek terms? After all, it’s the only nation to have gotten a break on how much of this toxic waste has to get repaid.
At the end of the day, we’re waiting for the next Marshall Plan / Bretton Woods type agreement. Every step we take until then is foreplay. I’d expect volatility until this agreement is finalized sometime in March after all the parlor games are over and then the occasional market-rocking belch out of the remaining PIIGS on quarterly data events until more systemic cures are implemented.
