60% Haircut for Greek Bond Holders! Euroland Banks to Blow up!

Reuters is reporting that private holders of Greek debt are going to have to take losses up to 60% on their investment if they can hope to keep Greece from going bankrupt! They are trying to get the Greek debt down to 110% of GDP and to do that, private bond holders will have to take a huge loss. Greek debt down to 110% of GDP?!?! Are they crazy? Who can last with that debt load unless they borrow their way into insolvency? Is there a responsible government left in the world who isn't insane? These debt levels CAN NOT BE SUSTAINED! They all headed for insolvency.

In the Reuters article they noted....

A footnote explained that the ECB disagreed with including the scenarios in the report, concerned that private sector lenders would refuse to agree to such a steep writedown voluntarily, effectively leading to a fullscale Greek default.


Well Duh! No one wants to take a loss, however, the banks who made the mess should have to eat it and not foist it upon the tax paying public.

"The report also said Greece's debt pile could peak at 186 percent of GDP, from around 160 percent currently."

You read that right, 186% of GDP. That's living large on the credit card. Until you can't make the payments, so you might as well max it out because you know you aren't going to pay for it. Can Greece move back in with Mom & Dad? Doesn't look like they are going to have a lot of options, except to default.

With this announcement, the ECB is stating that they are rejecting an American style QE to help their banks who are on the hook with Greek debt and are looking for other solutions besides leveraging more debt. But they have agreed to pay Greek a 6th bailout installment of 110 billion euros so they can get through the rest of the year. Kick that can down the road far enough and hopefully you won't get spattered when Greece does blow up!

So, if the ECB doesn't backstop the Euroland banks with huge amounts of leveraged paper, what will happen to the Euroland banks who have gigantic exposure to Greek debt?

They go boom and are insolvent. 

Then that insolvency immediately spreads to the USA where we have huge money market exposure to the big Euroland banks and We go boom!

Oh God!   Hold on to your hat, it is going to get very scary real fast!