1.24 AEP: EU ratchets up pressure with Greek default threat

by John Galt
January 24, 2012 19:45 ET

Tonight's story from Ambrose Evans-Pritchard in the U.K. Telegraph should send a chill down everyone's spine:

EU ratchets up pressure with Greek default threat

(Click on the title above to read the story in full)

The excerpt that should disturb the average soul:

“We're sending a direct message to Greece that the community expects more. We're not pleased and only when there's a written message on the table in front of us, can further assistance be discussed,” she said.

The head of the European Commission's economics team Mario Buti said Brussels is prepared to allow credit default swaps (CDS) on Greek bonds to come into play if talks fail to reach a deal that gives Greece enough debt relief to claw its way back to viability. “Triggering CDS may have to be considered,” he said.

The comment is a clear warning to private creditors holding €206bn (£172bn) of Greek debt that the EU will not step in with fresh money to prevent a default on March 20, when Greece must make a €14.5bn debt payment.

The EU authorities are demanding that banks, insurers, and pension funds accept a cut in the interest rate on new bonds to 3.5pc – on top of the 50pc haircut agreed – to reflect the drastic deterioration in Greece. The creditors are holding out for 4pc. EU officials would leave Greece's debt at 125pc of GDP by 2020, above the 120pc level deemed the maximum tolerable burden.

Just remember what Nancy Pelosi and Charles Rangel had planned for fixed, guaranteed rates of return once the U.S. government seized all retirement accounts in their original plan from 2007-2008.

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