I watched George Papandreou last night on PBS being interviewed by Judy Woodruff. He lied the whole time. She did a pretty good job of trying to get him to admit that the Greek economic system is screwed and the Papandreous in particular had the most to do with it. Instead he just kept up with his rant against “speculators” who are conspiring against Greece.
This is nothing but a crock. Yesterday at Zero Hedge where I am a contributor, my co-blogger, “Tyler Durden” pointed out an article from Dow Jones yesterday that said:
German market regulator BaFin said Monday that so far, it doesn’t see any sign of massive speculation in credit default swaps against Greek government bonds, despite some recent press reports suggesting this.
A significant reason behind widening CDS spreads is the increasing demand for insurance against Greek risk, BaFin said in a statement, adding that it closely watches the government bond and credit derivatives markets for selected euro-zone countries.
In other words, the Greeks are fiscally incompetent and the markets are responding to this in a rational way. So George wants his fellow sovereigns to regulate these speculators so they can’t drive up the cost of the debt that Greece must sell to try to stave off default. In other words, the Greeks shouldn’t be punished for their fiscal stupidity.
Tyler Durden in an accompanying piece summed up Papandreou’s speech on this perfectly, and hilariously:
To paraphrase the 20-page speech: it is still just the speculators’ fault, who are now “threatening not only Greece, but the entire global economy” so burn them all post haste before they can read all the declassified [Goldman Sachs] prospectuses, and scour the footnotes thus uncovering the truly deplorable state of all European budgets, also please ignore this huge corruption problem we have, it’s under control, oh, and it is time our globalization “partners” realize that we are critical in the future of the free world, and bail us out, even though we have repeatedly said we need no steenkin’ bail out, or else global financial crisis v.2.0 – here we come. Now show me where Ben Bernanke’s office is.
Interestingly, last week’s bond sale by Greece went well for them. They sold €5 billion ($6.85 billion) of 10 year notes at 6.3%. There were €14.5 billion in bids, or three to one coverage which seems to me to be rather too good under the circumstances. My guess is that Greece’s fellow sovereigns were bidding heavily to make sure the sale went off well. From Bloomberg:
The final decision to sell Greece’s latest bond, announced in the early hours of trading in Athens and London, followed several days of behind-the-scenes European diplomacy and improved performance by Greek government-debt securities.
Will Germany and France continue to support Greece’s bond sales?
Overall, Greece must borrow €54 billion this year to cover maturing debt and interest payments. That demand will crowd a euro-bond market that is scheduled to raise nearly €1 trillion this year, according to Citigroup Inc. …
In the next three months alone, European countries are on track to raise €287 billion, which will test the appetite of bond investors. On top of that, European banks face about €560 billion in maturing debt this year, including a substantial chunk that will have to be refinanced, according to Morgan Stanley. …
Many investors are worried that Greece, despite its promises, will be unable to escape its long history of overspending.
“We think there is still a good deal of execution risk in terms of how the Greek government is able to implement these measures,” said Kristin Ceva, who directs the global fixed-income group at Payden & Rygel, a Los Angeles asset-management firm that bought Greek debt in February. “We can buy other [emerging-market] sovereigns with similar credit spreads to Greece where we think the story is a lot clearer and the fundamentals stronger.”
Apropos to the above “execution risk” comment, I heard this morning where the cops broke into the government printing office to prevent the publication of the new austerity laws passed by the legislature. Apparently, until the new laws are published in the official government newspaper, they don’t go into effect.