Deal With Creditors Not End For Greece

By: Chris Ciovacco | Mon, Jan 30, 2012
Print Email

Let's assume Greece and its private creditors reach a "deal". That deal is far from the final hurdle to preventing a Greek default. According to the Wall Street Journal:

A deal could pave the way for a second bailout package for Greece. However, there have been fresh warnings from euro-zone governments that Greece must improve the implementation of its austerity measures in order to get further assistance. Mr. Rehn has said the euro zone, the European Central Bank and International Monetary Fund may need to inject additional money for a second Greek bailout.

Once a Greek deal is done, an assessment of whether Greece's debt is sustainable will follow. After that, its official creditors--other euro-zone countries and the IMF--will decide how much money is needed to fill Greece's remaining financing needs.

The question then is how many of the €200 billion in Greek bonds will be tendered by private bondholders. If too many hold out, then the debt-sustainability sums won't add up. Greece has said it could then move to force unwilling creditors to accept the bond exchange, transforming the deal from one that could be called voluntary to a coercive default.

Germany also appears to be adding one more significant hurdle according to the BBC:

A leaked plan from the German government proposes a eurozone "budget commissioner" to take control of Greece's tax and spending, reports say. The Financial Times, which has a copy of the plan, calls it an "extraordinary extension" of EU control. Greek Education Minister Anna Diamantopoulou called the German plan "the product of a sick imagination". The European Commission said the budget "must remain the full responsibility of the Greek government". A German official told the Associated Press eurozone finance ministers were discussing the plan.



Chris Ciovacco

Author: Chris Ciovacco

Chris Ciovacco
Ciovacco Capital Management

Chris Ciovacco

Chris Ciovacco is the Chief Investment Officer for Ciovacco Capital Management, LLC. More on the web at

All material presented herein is believed to be reliable but we cannot attest to its accuracy. Investment recommendations may change and readers are urged to check with their investment counselors and tax advisors before making any investment decisions. Opinions expressed in these reports may change without prior notice. This memorandum is based on information available to the public. No representation is made that it is accurate or complete. This memorandum is not an offer to buy or sell or a solicitation of an offer to buy or sell the securities mentioned. The investments discussed or recommended in this report may be unsuitable for investors depending on their specific investment objectives and financial position. Past performance is not necessarily a guide to future performance. The price or value of the investments to which this report relates, either directly or indirectly, may fall or rise against the interest of investors. All prices and yields contained in this report are subject to change without notice. This information is based on hypothetical assumptions and is intended for illustrative purposes only. THERE ARE NO WARRANTIES, EXPRESSED OR IMPLIED, AS TO ACCURACY, COMPLETENESS, OR RESULTS OBTAINED FROM ANY INFORMATION CONTAINED IN THIS ARTICLE.

Ciovacco Capital Management, LLC is an independent money management firm based in Atlanta, Georgia. CCM helps individual investors and businesses, large & small; achieve improved investment results via research and globally diversified investment portfolios. Since we are a fee-based firm, our only objective is to help you protect and grow your assets. Our long-term, theme-oriented, buy-and-hold approach allows for portfolio rebalancing from time to time to adjust to new opportunities or changing market conditions.

Copyright © 2006-2016 Chris Ciovacco

All Images, XHTML Renderings, and Source Code Copyright ©