Deposits of Greece’s citizens are used to finance Greece’s fiscal deficit. Greek depositors may believe their guaranteed investment certificates are liquid instruments, but in fact, they are being directed to buy sovereign debt nobody else wants to buy…
Please, click here to read this article in pdf format: january-7-2009
Yesterday, I attended the Economic Club of Canada’s 2010 Economic Outlook event, presented by the chief economists of Canada’s largest banks (W. Jestin, Bank of Nova Scotia; Craig Wright, Royal Bank of Canada; Don Drummond, TD Bank Financial Group; Sherry Cooper, BMO Capital Markets and Avery Shenfeld, CIBC World Markets). In one sentence, the collective outlook was of cautious optimism, favoring emerging markets, the Canadian dollar, equities (not bonds), subject to no escalation in sovereign risk. I was comforted to hear that some of the speakers shared my view that relevant volatility was still to be expected in 2010 (refer: www.sibileau.com/martin/2009/12/15 “Confusion wanes”)
However, I see the picture for sovereign risk looking uglier by the day. Below, I have attached a chart (source: Bloomberg) with the credit default swap spreads (5-yr tenor) for the National Bank of Greece SA (NBG) and Greece (sovereign). As you can see, the spread of NBG has closely followed that of Greece. NBG is one of the banks (together with Alpha, Piraeus, EFG and Imi) that participated in Greece’s EUR2BN private placement, on Dec 15th. Since then and given Greece’s fiscal outlook, it has become more evident that the government can only access the private debt market. Furthermore, on January 5th, Mr. Spyros Papaconstantinou, managing director of Greece’s Public Debt Management Agency confirmed the intention of the government to find financial support in that market.
What does this mean? It means that the deposits of Greece’s citizens are used to finance Greece’s fiscal deficit. Greek depositors may believe their guaranteed investment certificates are liquid instruments, but in fact, they are being directed to buy sovereign debt nobody else wants to buy…
Should this be of concern? When this same situation unfolded in Argentina, in 1999-2000, it ended with the collapse of the financial system in December 2001. However, Argentina’s banks could not be bailed out, because the Peso was convertible in US dollars. Argentina’s Central Bank could not do “quantitative easing”. Can Greece carry out quantitative easing? No, because the funds lent to the government are in Euros. Therefore, the final solvency of Greece’s banks rests on the willingness of the European Central Bank to act as lender of last resort, if needed. This is exactly what is weakening the Euro lately.
The chart below also shows that since the statements made by Mr. Papaconstantinou, the correlation between NBG and Greece’s spreads has broken, with a wider NBG risk and tighter sovereign risk. This clearly shows the transfer of sovereign risk to Greece’s financial system. Perhaps, rather that “transfer”, “infection” is the better word here. In my view, if the European Central Bank validates this situation, both spreads should converge to a lower level. If it doesn’t, they should converge to a higher level. The contagion is undoubtedly a fact, and under any scenario, this situation will continue to weight heavily on the Euro. There is a lot of moral hazard at stake here as well, as other countries potentially embarked on the same path attentively watch things unfold. Nothing good can or will come of this. Trade accordingly.
Martin Sibileau
February 10th, 2012 at 2:20 PM
Websites you should visit…
[...]below you’ll find the link to some sites that we think you should visit[...]……
February 10th, 2012 at 2:41 PM
Recommeneded websites…
[...]Here are some of the sites we recommend for our visitors[...]……
February 10th, 2012 at 3:08 PM
Recent Blogroll Additions……
[...]usually posts some very interesting stuff like this. If you’re new to this site[...]……
February 10th, 2012 at 3:23 PM
Check this out…
[...] that is the end of this article. Here you’ll find some sites that we think you’ll appreciate, just click the links over[...]……
February 10th, 2012 at 4:22 PM
Recommeneded websites…
[...]Here are some of the sites we recommend for our visitors[...]……
February 10th, 2012 at 6:23 PM
Blogs ou should be reading…
[...]Here is a Great Blog You Might Find Interesting that we Encourage You[...]……
February 10th, 2012 at 7:12 PM
Related……
[...]just beneath, are numerous totally not related sites to ours, however, they are surely worth going over[...]……
February 10th, 2012 at 9:00 PM
Superb website…
[...]always a big fan of linking to bloggers that I love but don’t get a lot of link love from[...]……
February 11th, 2012 at 11:35 AM
Great website…
[...]we like to honor many other internet sites on the web, even if they aren’t linked to us, by linking to them. Under are some webpages worth checking out[...]……
February 11th, 2012 at 1:15 PM
Online Article……
[...]The information mentioned in the article are some of the best available [...]……
February 11th, 2012 at 1:59 PM
Recent Blogroll Additions……
[...]usually posts some very interesting stuff like this. If you’re new to this site[...]……
February 11th, 2012 at 2:47 PM
Great website…
[...]we like to honor many other internet sites on the web, even if they aren’t linked to us, by linking to them. Under are some webpages worth checking out[...]……
February 11th, 2012 at 3:52 PM
Recommeneded websites…
[...]Here are some of the sites we recommend for our visitors[...]……
February 11th, 2012 at 4:24 PM
Websites you should visit…
[...]below you’ll find the link to some sites that we think you should visit[...]……
February 11th, 2012 at 5:48 PM
Visitor recommendations…
[...]one of our visitors recently recommended the following website[...]……
February 11th, 2012 at 6:51 PM
Read was interesting, stay in touch……
[...]please visit the sites we follow, including this one, as it represents our picks from the web[...]……
February 11th, 2012 at 7:57 PM
Websites we think you should visit…
[...]although websites we backlink to below are considerably not related to ours, we feel they are actually worth a go through, so have a look[...]……
February 11th, 2012 at 9:14 PM
Sites we Like……
[...] Every once in a while we choose blogs that we read. Listed below are the latest sites that we choose [...]……
February 11th, 2012 at 10:02 PM
Read was interesting, stay in touch……
[...]please visit the sites we follow, including this one, as it represents our picks from the web[...]……
February 11th, 2012 at 10:21 PM
Check this out…
[...] that is the end of this article. Here you’ll find some sites that we think you’ll appreciate, just click the links over[...]……
February 11th, 2012 at 11:09 PM
Sites we Like……
[...] Every once in a while we choose blogs that we read. Listed below are the latest sites that we choose [...]……
February 12th, 2012 at 7:10 AM
Check this out…
[...] that is the end of this article. Here you’ll find some sites that we think you’ll appreciate, just click the links over[...]……
February 12th, 2012 at 11:02 AM
Gems form the internet…
[...]very few websites that happen to be detailed below, from our point of view are undoubtedly well worth checking out[...]……
February 12th, 2012 at 11:28 AM
Read was interesting, stay in touch……
[...]please visit the sites we follow, including this one, as it represents our picks from the web[...]……
February 12th, 2012 at 1:05 PM
Websites we think you should visit…
[...]although websites we backlink to below are considerably not related to ours, we feel they are actually worth a go through, so have a look[...]……
February 12th, 2012 at 1:25 PM
Visitor recommendations…
[...]one of our visitors recently recommended the following website[...]……
February 12th, 2012 at 2:03 PM
Gems form the internet…
[...]very few websites that happen to be detailed below, from our point of view are undoubtedly well worth checking out[...]……
February 12th, 2012 at 4:07 PM
Websites worth visiting…
[...]here are some links to sites that we link to because we think they are worth visiting[...]……
February 12th, 2012 at 4:57 PM
Superb website…
[...]always a big fan of linking to bloggers that I love but don’t get a lot of link love from[...]……
February 12th, 2012 at 5:04 PM
You should check this out…
[...] Wonderful story, reckoned we could combine a few unrelated data, nevertheless really worth taking a look, whoa did one learn about Mid East has got more problerms as well [...]……
February 12th, 2012 at 6:02 PM
Online Article……
[...]The information mentioned in the article are some of the best available [...]……
February 12th, 2012 at 6:46 PM
You should check this out…
[...] Wonderful story, reckoned we could combine a few unrelated data, nevertheless really worth taking a look, whoa did one learn about Mid East has got more problerms as well [...]……
February 12th, 2012 at 7:20 PM
Websites worth visiting…
[...]here are some links to sites that we link to because we think they are worth visiting[...]……
February 12th, 2012 at 8:03 PM
Links…
[...]Sites of interest we have a link to[...]……
February 12th, 2012 at 8:16 PM
Read was interesting, stay in touch……
[...]please visit the sites we follow, including this one, as it represents our picks from the web[...]……
February 12th, 2012 at 8:37 PM
Links…
[...]Sites of interest we have a link to[...]……
February 12th, 2012 at 8:50 PM
Read was interesting, stay in touch……
[...]please visit the sites we follow, including this one, as it represents our picks from the web[...]……
February 13th, 2012 at 3:17 AM
Recommeneded websites…
[...]Here are some of the sites we recommend for our visitors[...]……
February 13th, 2012 at 4:21 AM
Online Article……
[...]The information mentioned in the article are some of the best available [...]……
February 13th, 2012 at 7:00 AM
Recent Blogroll Additions……
[...]usually posts some very interesting stuff like this. If you’re new to this site[...]……
February 13th, 2012 at 7:08 AM
Blogs ou should be reading…
[...]Here is a Great Blog You Might Find Interesting that we Encourage You[...]……
February 13th, 2012 at 9:09 AM
Visitor recommendations…
[...]one of our visitors recently recommended the following website[...]……
February 13th, 2012 at 9:33 AM
Websites we think you should visit…
[...]although websites we backlink to below are considerably not related to ours, we feel they are actually worth a go through, so have a look[...]……
February 13th, 2012 at 10:29 AM
Cool sites…
[...]we came across a cool site that you might enjoy. Take a look if you want[...]……
February 13th, 2012 at 11:03 AM
Gems form the internet…
[...]very few websites that happen to be detailed below, from our point of view are undoubtedly well worth checking out[...]……
February 13th, 2012 at 11:09 AM
Superb website…
[...]always a big fan of linking to bloggers that I love but don’t get a lot of link love from[...]……
February 13th, 2012 at 5:31 PM
Awesome website…
[...]the time to read or visit the content or sites we have linked to below the[...]……
February 13th, 2012 at 6:21 PM
Check this out…
[...] that is the end of this article. Here you’ll find some sites that we think you’ll appreciate, just click the links over[...]……
February 13th, 2012 at 6:34 PM
Sites we Like……
[...] Every once in a while we choose blogs that we read. Listed below are the latest sites that we choose [...]……
February 13th, 2012 at 6:43 PM
Visitor recommendations…
[...]one of our visitors recently recommended the following website[...]……
February 13th, 2012 at 7:07 PM
You should check this out…
[...] Wonderful story, reckoned we could combine a few unrelated data, nevertheless really worth taking a look, whoa did one learn about Mid East has got more problerms as well [...]……
February 13th, 2012 at 7:31 PM
Sites we Like……
[...] Every once in a while we choose blogs that we read. Listed below are the latest sites that we choose [...]……
February 13th, 2012 at 7:42 PM
Recent Blogroll Additions……
[...]usually posts some very interesting stuff like this. If you’re new to this site[...]……
February 13th, 2012 at 8:02 PM
Superb website…
[...]always a big fan of linking to bloggers that I love but don’t get a lot of link love from[...]……
February 14th, 2012 at 5:54 AM
Sites we Like……
[...] Every once in a while we choose blogs that we read. Listed below are the latest sites that we choose [...]……
February 14th, 2012 at 6:17 AM
Sources…
[...]check below, are some totally unrelated websites to ours, however, they are most trustworthy sources that we use[...]……
February 14th, 2012 at 6:21 AM
Superb website…
[...]always a big fan of linking to bloggers that I love but don’t get a lot of link love from[...]……
February 14th, 2012 at 6:41 AM
You should check this out…
[...] Wonderful story, reckoned we could combine a few unrelated data, nevertheless really worth taking a look, whoa did one learn about Mid East has got more problerms as well [...]……
February 14th, 2012 at 10:34 AM
Read was interesting, stay in touch……
[...]please visit the sites we follow, including this one, as it represents our picks from the web[...]……
February 14th, 2012 at 1:18 PM
Check this out…
[...] that is the end of this article. Here you’ll find some sites that we think you’ll appreciate, just click the links over[...]……
February 14th, 2012 at 5:32 PM
Recent Blogroll Additions……
[...]usually posts some very interesting stuff like this. If you’re new to this site[...]……
February 14th, 2012 at 5:47 PM
Blogs ou should be reading…
[...]Here is a Great Blog You Might Find Interesting that we Encourage You[...]……
February 14th, 2012 at 6:54 PM
You should check this out…
[...] Wonderful story, reckoned we could combine a few unrelated data, nevertheless really worth taking a look, whoa did one learn about Mid East has got more problerms as well [...]……
February 14th, 2012 at 7:06 PM
Great website…
[...]we like to honor many other internet sites on the web, even if they aren’t linked to us, by linking to them. Under are some webpages worth checking out[...]……
February 14th, 2012 at 8:39 PM
Sources…
[...]check below, are some totally unrelated websites to ours, however, they are most trustworthy sources that we use[...]……
February 15th, 2012 at 3:34 AM
Websites we think you should visit…
[...]although websites we backlink to below are considerably not related to ours, we feel they are actually worth a go through, so have a look[...]……
February 15th, 2012 at 7:33 AM
Links…
[...]Sites of interest we have a link to[...]……
February 15th, 2012 at 8:25 AM
Awesome website…
[...]the time to read or visit the content or sites we have linked to below the[...]……
February 15th, 2012 at 8:29 AM
Sources…
[...]check below, are some totally unrelated websites to ours, however, they are most trustworthy sources that we use[...]……
February 15th, 2012 at 8:32 AM
Links…
[...]Sites of interest we have a link to[...]……
February 15th, 2012 at 8:35 AM
Cool sites…
[...]we came across a cool site that you might enjoy. Take a look if you want[...]……
February 15th, 2012 at 9:48 AM
Check this out…
[...] that is the end of this article. Here you’ll find some sites that we think you’ll appreciate, just click the links over[...]……
February 15th, 2012 at 11:00 AM
Websites you should visit…
[...]below you’ll find the link to some sites that we think you should visit[...]……
February 15th, 2012 at 4:59 PM
Blogs ou should be reading…
[...]Here is a Great Blog You Might Find Interesting that we Encourage You[...]……
February 15th, 2012 at 5:08 PM
Recent Blogroll Additions……
[...]usually posts some very interesting stuff like this. If you’re new to this site[...]……
February 15th, 2012 at 5:29 PM
Blogs ou should be reading…
[...]Here is a Great Blog You Might Find Interesting that we Encourage You[...]……
February 15th, 2012 at 5:43 PM
Recent Blogroll Additions……
[...]usually posts some very interesting stuff like this. If you’re new to this site[...]……
February 15th, 2012 at 5:52 PM
Read was interesting, stay in touch……
[...]please visit the sites we follow, including this one, as it represents our picks from the web[...]……
February 15th, 2012 at 6:42 PM
Visitor recommendations…
[...]one of our visitors recently recommended the following website[...]……
February 15th, 2012 at 7:05 PM
Websites worth visiting…
[...]here are some links to sites that we link to because we think they are worth visiting[...]……
February 15th, 2012 at 7:09 PM
Blogs ou should be reading…
[...]Here is a Great Blog You Might Find Interesting that we encourage you[...]…
February 15th, 2012 at 7:12 PM
Websites you should visit…
[...]below you’ll find the link to some sites that we think you should visit[...]……
February 15th, 2012 at 7:30 PM
Check this out…
[...] that is the end of this article. Here you’ll find some sites that we think you’ll appreciate, just click the links over[...]……
February 15th, 2012 at 7:37 PM
Check this out…
[...] that is the end of this article. Here you’ll find some sites that we think you’ll appreciate, just click the links over[...]……
February 15th, 2012 at 7:42 PM
You should check this out…
[...] Wonderful story, reckoned we could combine a few unrelated data, nevertheless really worth taking a look, whoa did one learn about Mid East has got more problerms as well [...]……
February 15th, 2012 at 7:51 PM
Links…
[...]Sites of interest we have a link to[...]……
February 15th, 2012 at 8:01 PM
You should check this out…
[...] Wonderful story, reckoned we could combine a few unrelated data, nevertheless really worth taking a look, whoa did one learn about Mid East has got more problerms as well [...]……
February 15th, 2012 at 8:06 PM
Blogs ou should be reading…
[...]Here is a Great Blog You Might Find Interesting that we Encourage You[...]……
February 15th, 2012 at 8:07 PM
Websites we think you should visit…
[...]although websites we backlink to below are considerably not related to ours, we feel they are actually worth a go through, so have a look[...]……
February 16th, 2012 at 2:01 AM
Sources…
[...]check below, are some totally unrelated websites to ours, however, they are most trustworthy sources that we use[...]……
February 16th, 2012 at 4:03 AM
Cool sites…
[...]we came across a cool site that you might enjoy. Take a look if you want[...]……
February 16th, 2012 at 4:21 AM
Check this out…
[...] that is the end of this article. Here you’ll find some sites that we think you’ll appreciate, just click the links over[...]……
February 16th, 2012 at 7:29 AM
Gems form the internet…
[...]very few websites that happen to be detailed below, from our point of view are undoubtedly well worth checking out[...]……
February 16th, 2012 at 8:19 AM
You should check this out…
[...] Wonderful story, reckoned we could combine a few unrelated data, nevertheless really worth taking a look, whoa did one learn about Mid East has got more problerms as well [...]……
February 16th, 2012 at 10:42 AM
Websites worth visiting…
[...]here are some links to sites that we link to because we think they are worth visiting[...]……
February 16th, 2012 at 11:16 AM
Superb website…
[...]always a big fan of linking to bloggers that I love but don’t get a lot of link love from[...]……
February 16th, 2012 at 11:17 AM
Websites worth visiting…
[...]here are some links to sites that we link to because we think they are worth visiting[...]……
February 16th, 2012 at 4:28 PM
Links…
[...]Sites of interest we have a link to[...]……
February 16th, 2012 at 4:59 PM
Online Article……
[...]The information mentioned in the article are some of the best available [...]……
February 16th, 2012 at 5:49 PM
Great website…
[...]we like to honor many other internet sites on the web, even if they aren’t linked to us, by linking to them. Under are some webpages worth checking out[...]……
February 16th, 2012 at 6:38 PM
Websites you should visit…
[...]below you’ll find the link to some sites that we think you should visit[...]……
February 16th, 2012 at 6:39 PM
Cool sites…
[...]we came across a cool site that you might enjoy. Take a look if you want[...]……
February 16th, 2012 at 6:44 PM
Online Article……
[...]The information mentioned in the article are some of the best available [...]……
February 16th, 2012 at 7:09 PM
Superb website…
[...]always a big fan of linking to bloggers that I love but don’t get a lot of link love from[...]……
February 16th, 2012 at 7:16 PM
Websites we think you should visit…
[...]although websites we backlink to below are considerably not related to ours, we feel they are actually worth a go through, so have a look[...]……
February 16th, 2012 at 7:39 PM
Recent Blogroll Additions……
[...]usually posts some very interesting stuff like this. If you’re new to this site[...]……
February 16th, 2012 at 8:14 PM
Websites we think you should visit…
[...]although websites we backlink to below are considerably not related to ours, we feel they are actually worth a go through, so have a look[...]……
February 16th, 2012 at 8:26 PM
Websites worth visiting…
[...]here are some links to sites that we link to because we think they are worth visiting[...]……
February 17th, 2012 at 3:08 AM
Visitor recommendations…
[...]one of our visitors recently recommended the following website[...]……
February 17th, 2012 at 3:10 AM
Websites you should visit…
[...]below you’ll find the link to some sites that we think you should visit[...]……
February 17th, 2012 at 3:41 AM
Sources…
[...]check below, are some totally unrelated websites to ours, however, they are most trustworthy sources that we use[...]……
February 17th, 2012 at 3:44 AM
Websites you should visit…
[...]below you’ll find the link to some sites that we think you should visit[...]……
February 17th, 2012 at 4:36 AM
Sources…
[...]check below, are some totally unrelated websites to ours, however, they are most trustworthy sources that we use[...]……
February 17th, 2012 at 5:21 AM
Awesome website…
[...]the time to read or visit the content or sites we have linked to below the[...]……
February 17th, 2012 at 10:13 AM
Related……
[...]just beneath, are numerous totally not related sites to ours, however, they are surely worth going over[...]……
February 17th, 2012 at 11:17 AM
You should check this out…
[...] Wonderful story, reckoned we could combine a few unrelated data, nevertheless really worth taking a look, whoa did one learn about Mid East has got more problerms as well [...]……
February 17th, 2012 at 11:52 AM
Superb website…
[...]always a big fan of linking to bloggers that I love but don’t get a lot of link love from[...]……
February 17th, 2012 at 12:17 PM
Links…
[...]Sites of interest we have a link to[...]……
February 17th, 2012 at 1:37 PM
Online Article……
[...]The information mentioned in the article are some of the best available [...]……
February 17th, 2012 at 1:54 PM
Recent Blogroll Additions……
[...]usually posts some very interesting stuff like this. If you’re new to this site[...]……
February 17th, 2012 at 2:00 PM
You should check this out…
[...] Wonderful story, reckoned we could combine a few unrelated data, nevertheless really worth taking a look, whoa did one learn about Mid East has got more problerms as well [...]……
February 17th, 2012 at 2:32 PM
Recent Blogroll Additions……
[...]usually posts some very interesting stuff like this. If you’re new to this site[...]……