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Private sector banks losses up to 27%? - I say no way!

One leading investment strategist described the new deal as "less sticking plaster and more of a proper bandage", but warned that, the underlying problems in the Greek economy had not been addressed. Another said the voluntary 21% "haircut" agreed by the banks was less than a third of what was required. A rally on European stock markets fizzled on Friday night as investors began to voice concerns about whether the euro zone rescue plan for Greece would be enough to stem the currency bloc's debt crisis. Fitch, the credit ratings agency added to worries over the deal after it declared Greece would be in temporary default as the result of the 109bn bailout. The move is likely to be matched by rival ratings agencies. The numbers though are allover the map , wich goes to prove that in fact, this agreement and consensus is nothing else than dust thrown on our faces. FTSE 100 ended the day up just 35 points at 5935, adding to small gains on the main French and German exchanges following a volatile day that saw most shares sink before a moderate recovery. Markets had initially cheered the deal and pushed up US stock prices overnight. Of coarse, the brokers benefited mostly. U.K. and German government bonds, considered a safe haven in general, ended higher as investors started to have doubts about the agreement scheme, which involves offering Greece, Ireland and Portugal a longer period to pay off their loans and a cut in interest payments. Greece was also offered a relatively small one-off reduction in the value of its outstanding loans that will reduce its debt-to-GDP ratio from the 160% it was expected to reach before 2015. French prime minister Franois Fillon said the deal guaranteed there would be no default by member states in the 17-nation bloc. However, comments by German banking bosses that the deal would need to be examined added to the air of uncertainty. Well, Germany's BdB association of private banks said that while an agreement was "an important step," the industry needed more information on its involvement. Taking a loss is out of the question!

The Institute of International Finance, which led talks for private investors, said 90% of creditors will sign up. I, on the other hand failed in understanding why a private entity would take a voluntary loss of about 30% wouldnt that be an issue to be determined by the shareholders? Well once moreperhaps Carla Bruni decided to take a loss as far as Im concerned , as a stockholder through my pension fund , I will not agree to take any loss! Dixit ! It has been said that Deutsche Bank, HSBC, BNP Paribas, Allianz and Axa are among the firms ready to support itI say no way ! Holders of Greek debt who are not on the institute's list of supportive firms include Royal Bank of Scotland, Italy's Unicredit and the French Crdit Agricole banking group. The offer is voluntary, raising the possibility that some investors, such as hedge funds, will not participate and wait to be repaid at the full price. Standard Life said the deal was a positive move but it would continue to shun European shares and sovereign bonds, leaving it underweight in both. Richard Batty, the fund manager's global investment strategist, said the bailout package still failed to tackle the economic situation in Greece and other debt-laden countries: "This programme is less sticking plaster and more of a proper bandage but that still doesn't deal with the underlying issues. You have to make these ex-growth economies like Greece and Italy more productive and able to compete in global markets. Without higher productivity and growth it will prove difficult to pay down debts, even with the improved deal." Gary Jenkins, head of fixed income research at Evolution, argued the compromise to limit private sector bank losses to 21% was not enough to save Greece from years of austerity: "We have long thought that the most likely outcome for Greek bondholders would be that they would take a small haircut first followed by a larger one at a later date. "To give Greece a fighting chance they probably need a write-down close to 65%," he said. Analysts also warned that the need to put the package to a vote in the parliaments of each euro zone member state meant the deal could yet be derailed. "Some of the euphoria that was in the market as the result of [Thursday's] events has eased off a little bit," said Eric Wand, strategist at Lloyds Corporate Markets. "Some of the measures that were announced have still got to be passed by national parliaments particularly with regard to the EFSF [European Financial Stability Facility]. And there may be some concerns about the sustainability of the debt situation given the easing growth backdrop," Wand added.

Germany's Angela Merkel said she was confident the Bundestag would vote through the package after she secured private sector involvement against French fears it would trigger a mass withdrawal of private funds across the euro zone. France's BNP Paribas is set to take the biggest hit of around 950m, as the largest holder of Greek government debt outside the country. Fillon said France's debt would increase by 15bn by 2014 taking into account the cost of providing a guarantee. The increase in debt raises the risk that France may overshoot the government's debt targets, which foresee a peak at 87% of GDP in 2012. Ireland said the reduction in interest rates and extension on much of its lending could save 1bn a year in costs. Prime minister Enda Kenny thanked UK chancellor of the exchequer George Osborne for matching the euro zone plan with a reduction to 3.5% on the interest payments of a separate loan Britain offered last year. Quotes are from another article but pertinent here: "From everybodys perspective, the best of them would be what is known as a voluntary rollover....This is, at the moment, the best-case scenario and the current plan A." This is not everybody's perspective nor the best-case scenario: the banks should take their hit now and Greece should leave the Euro. In fact, Germany does not want Greece and the others in trouble to leave the Euro since that would either send the Euro higher or force Germany to return to the Deutsch Mark (DM), crushing Germany's exports and employment. The Euro's value is not determined by Greece, but by the ECB who prints and creates it. Greece is smaller than some banking institutions and corporations. Their bankruptcy does not affect the Euro. "The deal on offer is: lend us more money, or lose most of the money youve already lent." That is sending good money after bad; you lose both. The banks are not brain dead. That is why the governments of Germany and France are putting up their citizen's money, not the banks: another bailout for the banks, not Greece: "This arrangement is in place because of the second thing the powers to be know well the fact that the outstanding Greek debt is mainly owned by French and German banks" "It reflects the failure of the original plan A, which involved lending the government of George Papandreou 110 billion in May last year in return for a promise to cut government spending and increase tax revenue, both by unprecedented amounts." That idea was absurd financially: cutting spending and raising taxes deflates an economy, leaving no chance to pay back the loans through taxes since taxes shrink along with the economy. "The cheap credit had now dried up, and Greece was faced by the simplest and worst economic predicament of any government: it couldnt pay its debts." Not true, as the article later points out: "Argentina defaulted in 2002, froze the banks, declared its foreign debts void, and cut itself off from IMF funding and since then, its been the fastest-growing economy in fast-growing South America."

"Economists have varying theories about the practical effects of austerity, meaning sharp cuts in public spending." No they don't! Only economists who prostitute themselves to banks support cutting spending in a depression. "The second problem was that those richer Greeks who had never fancied paying their taxes showed no increased desire to do so, and, much worse, the state showed no new ability or desire to make them." Well DUH! The rich control the press, give the money to the politicians to pay for the press that which controls the masses to get elected. Just look at the US budget "deal", no new taxes on the rich (which pay less tax than ever before); just cuts in deductions for the middle and lower classes. "Without the ability to raise more tax, the old plan A was invalid." Yes, but plan A was invalid for the spending cuts as well and they could have raised more taxes and employed more people, not less, if they had spent money on infrastructure. "Does that sound plausible? It shouldnt.... These short-sighted and grasping interest rates, motivated by the need to provide political cover for other governments, make an already critical problem significantly worse." They are indeed a bailout, but not for Greece, but their banks. You can cut government waste in areas that need it while increasing spending in areas like mass transit (which Greece needs badly). Here, capitalist, libertarians and the banks lump all government spending as a problem, a common ruse by capitalists and the Tea Partiers. The first great depression lasted until after a world war, in Europe until the Marshall plan. They claim they are planning a Marshall for Greece. Why haven't they already? "Buying time" with the first "bailout" has not improved anything, just made it worse so will this new so called agreement without substance or chance of success! As I said : , I will not agree to take any loss! Dixit ! 7/24/2011

Mircea Halaciuga, Esq. 0040724581078