Collateral spat sparks new Greek default fears

[marmar]

By William L. Watts, MarketWatch


FRANKFURT (MarketWatch) — Little more than a month after euro-zone leaders presented a united front on a second rescue package for Greece, a spat over collateral and other issues is renewing fears of a potential default.

Finland last week reached a deal with Greece that would see Athens provide cash guarantees in return for Helsinki’s participation in the 109 billion euros ($157 billion) rescue plan. That caused an uproar in capitals across Europe, with Austria on Wednesday saying it would ask the collateral terms to be applied to all countries participating in the plan.

Germany has said it can’t back a plan that favors Finland over other countries.

Subsequent talk has centered on the possibility of coming up with a plan that would see Greece offer collateral to all bailout participants. European officials will discuss the issue later Friday, Greek Finance Minister Evangelos Venizelos told the country’s parliament, Dow Jones Newswires reported. ..............(more)

The complete piece is at: http://www.marketwatch.com/story/collateral-spat-sparks-new-greek-default-fears-2011-08-26?dist=beforebell

[Poll_Blind]

1. I don't know all the backstory on this but I'd heard the second bailout was....

...achieved only after heavily sweetening the deal for investors from a certain country- which I assume must have been Finland. The article I'd read gave the name of the country, I just forgot. Anyway, what you're seeing is greed from other investors who want to get as big a chunk of Greece as the Finnish investors are.

And they're all betting that Greece will default again which would mean they could wind up owning the whole country. I haven't followed this closely, so someone feel free to spank me if I'm wrong, but from all I've read and recollect, this is a massive takeover bid for a modern country by private investors. We talk about the IMF going into a developing country and offering big loans with natural resources on the table as collateral. When the countries can't pay, those natural resources (including water) all of a sudden "belong" to someone else. This would seem to be an extension of that sort of tactic.

It's pretty brutal. I think the Greek government is making a dangerous decision with resources it can't give up. Greeks are not going to cotton to living in such a culturally-rich country which also happens to be owned by someone else. In situations like this, and in situations like with the US having so much of its infrastructure owned by foreign countries, there's a sort of tipping point where the country finally loses the ability to pay off their creditors and the logical, historical "way out" is to declare war on their creditors. That doesn't have to be a shooting war, it can be legislatively waged. Remember, these sorts of deals are only as good as the willingness of the participants to earnestly deal. If at some point the Greek people pack their legislative bodies who are hostile to these investors, it could get really ugly. I'm kind of waiting for a military arm of the world financial institutions to arise in these matters.

Banks with armies! That's so 300 years ago, or is it?

PB