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Et tu: bondtrader? Spyns former clients have long lamented the punishing Euro-Dollar exchange rate. A change is coming and that should put more wine on tables during our 2010 Tour de France trips. While the media bleats "Greek Crisis", that country isn't large enough to affect the world economy but everyone is now paying attention to sovereign debt. In fact, the entire planet save prudent Germany can't afford to borrow at higher rates.
Greece's Prime Minister has deftly shifted media attention from the wrecked Greek economy to those nasty hedge funds. His whistle-stop tour through Berlin, Paris and recently Washington smacked of a bond selling road show rather than serious debates about Greece's future. The only consensus seems to be that Greece must rollover between 15-20% of its current 300 billion euro debt in the next 3-6 months. It all comes down to interest rates.
The only reason Greece's recent bond issue was oversubscribed is because they paid a heavy premium. Most government bonds these days pay between 1-4% and you only get 4% on 30-year bonds. Thus when Greece issued a 10-year bond at a mouth-watering 6.4%, of course they were snapped up. The Greek's hailed this as a success but that's a bit like listing your house for $100,000 and then calling it a success when you fire-sell it at $40,000. Unfortunately, Greece will apparently have to sell more bonds in the coming weeks but cannot afford such high interest rates.
Greece is trying desperately to calm market fears before issuing more bonds but time isn't on their side. Greek unions continue to protest and nationwide strikes are planned for tomorrow - none of which reassure the markets. Hence the Greek PM's attempts to blame everything on the "speculators" which sounds a bit like my crazy uncle blaming things on "the man."
Greece received reassuring words from France, ever eager to spearhead some large new intiative like the "European Superfund", but offered no hard cash. And while Germany's Angela Merkel, ever the politician, speaks of help via a nebulous European fund, she knows full well her voters and fellow coalition members won't lend a cent to the Greeks. Thanks to Merkel's well-timed bomb that a European fund would require an amendment to the Lisbon treaty, Greece can count on support in about a decade.
The European Commission may be able to lend Greece money unilaterally but that's a bit like asking any big, bureaucratic organisation to act quickly. It just won't happen. To illustrate, the EC has 3 acting presidents, represents more than a dozen countries, and splits sessions between different assembly halls in Strasbourg (France) and Brussels. The whole structure is a study in mismanagement. To assume the EC will simply cut a cheque in the next 90 days without German support is ludicrous.
And so Greece will languish and finally default. Yes the Greeks will sell a few more bonds but the IMF will eventually have to rescue them. France will continue talking, and talking, and talking but this is one situation where the Germans simply won't budge. And without Germany footing the bill, the European Commission will prove it's just a toothless tiger. But alas this will lead to a Spyns-friendly correction in the Euro/Dollar exchange rate and lots of wine at the Eiffel Tower to fete the end of our 2010 Tour de France trips. Merci Greece!
Spyns is an active travel company based in Whister, BC (Canada) and Beaujolais France. Spyns offers active holidays to Europe including trips to the 2010 Tour de France. For more information about Spyns 2010 Tour de France tours, please visit http://www.tdf-tours.com/, http://www.spyns.com/, or call 1.888.825.4720.
