[P2P-F] meltdown 2 (GFC2) : how far away?

Fri Jun 24 08:09:23 CEST 2011

gloomsday speak here, stuff like this is circulating in financial
newsletters:

(
http://blog.alexanderhiggins.com/2011/06/17/economists-msm-warn-global-armageddon-scenarios-masses-riot-europe-calls-revolution-spread-28611/
)

Financial experts are warning of a ‘Lehman Moment’ as the European markets
are beginning to show signs of unraveling in the wake of the Greek crisis.

“The markets have moved from simply pricing in a high probability of a Greek
debt default to looking at a scenario of it becoming disorderly and of
contagion spreading to other economies like Portugal, like Ireland, and
maybe Spain, Italy and Belgium.” a former UK Treasury official told *Bloomberg
news*<http://www.bloomberg.com/news/2011-06-16/europe-s-lehman-moment-looms-as-greek-debt-unravels-markets-euro-credit.html>
.

Many European countries and banks currently hold billions in Greek debt,
meaning that a Greek default will act like a virus throughout Europe.

According to the *Bank for International
Settlements<http://www.bis.org/publ/qtrpdf/r_qt1103.htm>
*, Spanish banks currently hold $600 million in Greek debt, Italian banks
hold $2.6 billion, UK banks hold $3.2 billion, French banks hold $19.8
billion, German banks hold $26.3 billion and other Eurozone countries hold a
combined total of around $15.7 billion in Greek debt.

US banks also hold $1.8 billion in Greek debt and Japanese banks hold $500
million in Greek debt.

The euro has declined by more than 2 percent against the already vastly
devalued dollar within the past two days. Equities declined around the
world, while corporate bond protection costs soared to their highest level
since January. There is now an estimated 78 percent chance that Greece will
not pay its debts.

Four of Greece’s largest banks have been* downgraded by Standard &
Poor’s*<http://www.financialmirror.com/News/Business_and_Finance/23724>,
while Moody’s Investors Service *said it may
downgrade*<http://www.moodys.com/research/Moodys-places-SocGen-CASA-BNPP-on-review-for-possible-downgrade?lang=en&cy=global&docid=PR_220876>BNP
Paribas SA and two other big French banks owing to the amount of Greek
debt they hold.

A worldwide market freeze on the scale of that seen in 2008 following the
collapse of Lehman is looking increasingly likely. Such a scenario would
send shockwaves through currencies, money markets, equities and derivatives
globally.

The Greek Prime Minister, George Papandreou, is seeking a parliamentary vote
on a 78 billion-euro ($110 billion) program of austerity cuts and asset
sales. The *EU and the IMF have announced
*<http://www.ft.com/intl/cms/s/0/d2702e02-980d-11e0-85e9-00144feab49a.html#axzz1PRfFOdz7>that
the program must be passed by the end of the month in order that the country
can receive “funds disbursement”.

Should such a motion not pass, “Armageddon scenarios come into play, which
include default and potentially the whole contagion scenario plays out.”
Charles Diebel, head of market strategy at Lloyds Bank Corporate Markets in
London, wrote in a note to clients yesterday.

The Greek people, who are now facing either total collapse of their
country’s economy or the fire sale of everything of any value that the
country owns, have taken forcefully to the streets in protest.

Central Athens has descended into a war zone with ski masked protesters
violently provoking police into firing tear gas into crowds of otherwise
peaceful protesters.

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