Best of the Week
Most Popular
1. Crude Oil Price Trend Forecast - Saudi's Want $100 for ARAMCO Stock IPO - Nadeem_Walayat
2.Gold Price Focusing on May Cycle Bottom - Jim_Curry
3.Silver, silver, and silver! There’s More Than Silver, People! - P_Radomski_CFA
4.Is the Malaysian Economy a Potemkin Village - Sam_Chee_Kong
5.Stock Market Study Shows Why You Shouldn’t “Sell in May and Go Away” - Troy_Bombardia
6.A Big Stock Market Shock is About to Start - Martin C
7.A Long Term Gold Very Unpopular View - Rambus_Chartology
8.Stock Market “Sell in May and go away” Study When Stocks Are Down YTD - Troy_Bombardia
9.Global Currency RESET Challenge: Ultimate Twist - Jim_Willie_CB
10.The Coming Silver Supply Crunch Is Worse Than You Know - Jeff Clark
Last 7 days
US Majors Flush Out A Major Pivot Low and What’s Next - 18th Jun 18
Cocoa Commodities Trading Analysis - 18th Jun 18
Stock Market Consolidating in an Uptrend - 18th Jun 18
Russell Has Gone Up 7 Weeks in a Row. EXTREMELY Bullish for Stocks - 18th Jun 18
What Happens Next to Stocks when Tech Massively Outperforms Utilities and Consumer Staples - 18th Jun 18
The Trillion Dollar Market You’ve Never Heard Of - 18th Jun 18
The Corruption of Capitalism - 17th Jun 18
North Korea, Trade Wars, Precious Metals and Bitcoin - 17th Jun 18
Climate Change and Fish Stocks – Burning Oxygen! - 17th Jun 18
A $1,180 Ticket to NEW Trading Opportunities, FREE! - 16th Jun 18
Gold Bullish on Fed Interest Rate Hike - 16th Jun 18
Respite for Bitcoin Traders Might Be Deceptive - 16th Jun 18
The Euro Crashed Yesterday. Bearish for Euro and Bullish for USD - 15th Jun 18
Inflation Trade, in Progress Since Gold Kicked it Off - 15th Jun 18
Can Saudi Arabia Prevent The Next Oil Shock? - 15th Jun 18
The Biggest Online Gambling Companies - 15th Jun 18
Powell's Excess Reserve Change and Gold - 15th Jun 18
Is This a Big Sign of a Big Stock Market Turn? - 15th Jun 18
Will Italy Sink the EU and Boost Gold? - 15th Jun 18
Bumper Crash! Land Rover Discovery Sport vs Audi - 15th Jun 18
Stock Market Topping Pattern or Just Pause Before Going Higher? - 14th Jun 18
Is the ECB Ending QE a Good Thing? Markets Think So - 14th Jun 18
Yield Curve Continues to Flatten. A Bullish Sign for the Stock Market - 14th Jun 18
How Online Gambling has Impacted the Economy - 14th Jun 18
Crude Oil Price Targeting $58 ppb Before Finding Support - 14th Jun 18
Stock Market Near Another Top? - 14th Jun 18
Thorpe Park REAL Walking Dead Living Nightmare Zombie Car Park Ride Experience! - 14th Jun 18
More on that Gold and Silver Ratio 'Deviant Conundrum' - 13th Jun 18
Silver Shares? Nobody Cares - 13th Jun 18
What Happens to Stocks, Forex, Commodities, and Bonds When the Fed Hikes Rates - 13th Jun 18
Gold and Silver Price Setting Up for A Sleeper Breakout - 13th Jun 18
Tesla Stock Analysis - 12th Jun 18
What Happens Next to Stocks when Russell Goes up 6 Weeks in a Row - 12th Jun 18
Gold vs. Stocks: Ratios Do Not Imply Correlation - 12th Jun 18
Silver’s Not-so-subtle Outperformance - 12th Jun 18
Why You Should Brace Yourself for Big Financial Changes - 11th Jun 18
Inflation to Skyrocket When Fed Reverts to New QE & Interest Rate Cuts - 11th Jun 18
Stock Market Topping Pattern or Just Consolidation? - 11th Jun 18
Study: What Happens Next to Stocks When the Put/Call Ratio is Very Low - 11th Jun 18
G7 Chaos, Central Banks and US Fed Will Drive Stock Prices This Week - 11th Jun 18
SPX Unshackled - 11th Jun 18
When Trump Met Fibonacci And Won - 11th Jun 18
FREE Theme Park Entry with Cadbury's Choc's! Legoland, Alton Towers, Chessington.... - 11th Jun 18
Stock Market Could Pullback for 1-2 weeks, But Medium Term Bullish - 10th Jun 18
End of the World Stock Market Chart! - 10th Jun 18
All US Homes Are Overvalued - 10th Jun 18
Thorpe Theme Park London Car Park Exit Nightmare - Drivers Beware! - 10th Jun 18
Gold Price Summer Doldrums - 9th Jun 18
How to Prepare for Economic Uncertainty with Gold and Silver - 9th Jun 18
5 "Tells" that the Stock Markets Are About to Reverse - 9th Jun 18
Billionaire Schools Teacher in NAFTA Trade Talks - 9th Jun 18
Land Rover Discovery Sport ECO Mode Real World Driving MPG Fuel Economy - 9th Jun 18
Crude Oil Bullish Weekly Reversal vs. Bearish Monthly Reversal - 8th Jun 18
Fed’s Interest Rate Hike is Short term Bearish for Stocks - 8th Jun 18
The Deviant Conundrum Called Silver - 8th Jun 18
Pleasure Island Theme Park Cleethorpes, Last Day Trip Before it Closed Down - 8th Jun 18
America’s One-sided Domestic Financial War - 8th Jun 18
Debt Consolidation Advice: When and Why to Consolidate - 8th Jun 18
Get Out Of Crypto Cannabis Bubble Before It Pops and Move Into Bargain Basement Miners - 8th Jun 18

Market Oracle FREE Newsletter

5 "Tells" that the Stock Markets Are About to Reverse

Dodging Default, French Banks Scramble to Prevent Another Global Collapse

Interest-Rates / Credit Crisis 2011 Jun 29, 2011 - 06:03 AM GMT

By: Money_Morning

Interest-Rates

Best Financial Markets Analysis ArticleKerri Shannon writes: The threat of a Greek default has become so real that French banks, which constitute some of the top Greek debt holders, have intensified their efforts to ease the country's floundering finances.

French lenders, along with their government, have suggested a debt rollover program, the first private-sector proposal to help save Greece.


The proposal suggests reinvesting 50% of maturing Greek debt into 30-year Greek government bonds between now and 2014. The new securities would pay a coupon close to current loans' interest rates, and offer a bonus for additional Greek gross domestic product (GDP) growth.

Another 20% of maturing Greek debt would be put into AAA-rated securities, like French Treasury bonds, as a "guarantee fund" for repayment on the 30-year debt holdings. This would take some of the Greek debt holdings off of banks' balance sheets.

French President Nicolas Sarkozy introduced the plan at a Paris news conference yesterday (Monday), saying French banks and insurance companies were committed to making it a reality.

The plan is a stark illustration of how dire the situation has become.

It's well understood that the European Union could be debilitated by a Greek default, but the United States has just as much at stake.

"The largely untold 'rest of the story' is this: If the European banking sector implodes, the U.S. financial system could take an unqualified beating," said Money Morning Contributing Editor Shah Gilani. "Big U.S. banks have been lending generously to banks across Europe. Close to 29% of their lending books during the past two years have gone to their heavyweight European counterparts. While they have pulled back considerably as a result of recent turmoil, U.S. banks are widely believed to have $41 billion of direct exposure to Greece."

This link between U.S. and European banks could lead to the next global credit crisis, according to Gilani.

But will the French plan work?

Dodging Default
Many analysts said it's too early to tell if the plan would be a good move for the top Greek debt holders.

"The mechanics of the French plan are so daunting that I don't see how any bank can evaluate them," Carl Weinberg, chief economist of High Frequency Economics Ltd. told Bloomberg News. "Half the debt maturing over the next three years includes paper at 98 cents on the dollar and other paper at 54 cents. Do banks have a choice? If so, they would fork over the 2013s or the 2014s and hold on to the 2012s."

About $91.3 billion (64 billion euros) of Greek government bonds will come due for repayment over the next three years. Greece needs to pass proposed austerity measures this week to receive another $17.1 billion (12 billion euros) of additional bailout funds next month and meet its bond repayment obligations.

The proposal was discussed Monday at a meeting of the International Institute of Finance, where many representatives from the French and German banking and insurance industry attended. The plan will need support from fellow Eurozone governments to move forward.

Some European governments have already demanded private investors take a bigger role in resolving the Greek debt crisis, calling for them to roll over as much as $42.8 billion (30 billion euros) in Greek debt.

Germany had pushed for private-sector involvement earlier this year, but was met with strong opposition from France and the European Central Bank. The country said it will likely discuss its own plan at a Eurozone finance ministers meeting July 3 in Brussels.

"We could see more or less a French solution," one senior German banker told The Financial Times. "But 30 years is very, very long. Whether it will be 15 years or 10 years or five will be decided by the talks which have to follow."

French banks are among the most eager to avoid a Greek collapse because they have $53 billion (37.1 billion euros) in overall net exposure to Greek private and public debt, according to the Bank for International Settlements. German banks hold more sovereign debt than the French, but two of France's biggest lending institutions, Societe Generale SA (PINK: SCGLY) and Credit Agricole SA (PINK: CRARF), also have controlling stakes in Greek banks.

Moody's Investors Service earlier this month said the three largest French banks by market value, Societe Generale, Credit Agricole SA and BNP Paribas SA will be reviewed for a downgrade because of their exposure to Greek debt.

Before any bailout proposal can be seriously considered, Greek Prime Minister George Papandreou needs approval for his $111 billion (78 billion euro) of budget cuts and asset sales. The next Greek Parliament vote will be held today (Tuesday) and then followed up Thursday with a vote on how to implement the reforms. If passed, the European Union will announce the details of a new Greek bailout package at the finance ministers' meeting July 3, likely giving Greece new funds by mid-July.

The Eurozone's future still remains unclear, even though President Sarkozy said the French proposal should unite countries in the fight to save the currency.

"Each country could find it interesting and it shows we won't let Greece go and that we will defend the euro," said President Sarkozy. "It's in all our interest."

President Sarkozy said it would be "folly" for any country to exit the euro, but billionaire investor George Soros said in Vienna Monday that the Eurozone should prepare for countries to leave the group.

"There's no arrangement for any countries leaving the euro, which in current circumstances is probably inevitable," said Soros. "We are on the verge of an economic collapse which starts, let's say, in Greece, but it could easily spread. The financial system remains extremely vulnerable."

Source :http://moneymorning.com/2011/06/28/french-banks-scramble-to-prevent-another-global-collapse/

Money Morning/The Money Map Report

©2011 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules