You Can’t Spell Tooth Faeries Without EFSF5 November 2011, by Peter Tchir of TF Market (Zero Hedge)
http://www.zerohedge.com/news/you-can%E2%80%99t-spell-tooth-faeries-without-efsfExcerpt:
Well, actually you can, but I guess that is my point. We have been reacting so much to headlines there has been no focus on details.
Even the political farce in Greece drew attention away from the real problems.
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Lost in the shuffle this week is the fact that there still is no IIF plan.
No definition of what an NPV haircut is, or how much EFSF support is going to the banks as part of this “haircut” and which prong of EFSF money this will come from.
Merkozy can complain about Papandreou backing out of “the plan” but honestly, don’t you think he should have been given a plan?
A vague promise by bankers of a 50% NPV haircut so that Greece can achieve 120% debt to GDP in 9 years, doesn’t sound that great.
I don’t believe Greece was on board with any plan, and probably haven’t even seen what it will look like.
Once the IIF comes up with their plan, I suspect some people will be disappointed – Greeks and the taxpayers of countries that see more money going to banks, rank right up there as candidates to be disappointed.
What I have finally seen, is some actual discussion of what default would mean. For all the talk about “Greek Default” very little serious work has been done on it.
The instant reaction is “horrible for Greece”, “stone ages”, “togas and sandals”, “hyperinflation”, etc., yet as some analysis starts to come out,
more and more is showing that Greece could have a much better debt burden while retaining core state assets if they head down the path of default or repudiation.
After the initial nasty comments that came out of European leaders forced Greece back on the “path”, more reasoned voices are coming out – slowly, but at least starting to come out.
If Greece defaults, would they even have to give up the Euro?
Important leaders have said they would, yet there is no mechanism to force them, and would be a great way for Greece to wipe out its debt and not experience hyperinflation.
If Greece left the Euro, could it remain in the EU?
There are 17 countries that use the Euro, but 27 in the EU, so it would seem possible that they could leave the Euro but remain in the EU. That too is only starting to be discussed.
The initial headlines were all about – don’t pay and get kicked out and starve, but the reality is likely much different and probably much better for Greece.
The EU leaders may be able to stop this line of thinking, but as people get over the initial “shock and awe” of the word “default” they are realizing it is not the end of the world for Greece and may in fact be the fresh beginning they need – Argentina and Russia might be better examples than Zimbabwe.
I am not sure what exactly has happened to the Greek government. So far, it is being interpreted as positive because they will go along with the plan.
I guess that is the case, but I find it hard to believe that the people will be pleased that the referendum was taken away.
I think as they also start seeing proper and reasoned arguments against accepting the terms being forced on them, the level of dissent will grow.
There were no tanks rolling into town squares to send the people back to their homes in fear, but enough has potentially been done to turn the tide of the people against the politicians.
I don’t think we have seen the end of dissent in Greece, and if anything, I would expect it to become more vocal, and supported by more facts about what Greece could do, rather than just fear mongering of default and fewer summit invitations.