WRAPUP 2-Cyprus faces imminent bailout threat, biggest bank says

Reuters

Adds statements by finance ministry, European Commission)

* Cyprus would be fourth euro zone state to seek bailout

* Bond yields soar in secondary market, CDS hit record

* European Commission says bailout not being discussed

* Government says no significant funding needs til December

* Looking at local, international funding options after that

By Michele Kambas

ECB eyed for signs of growing rate hike caution

(Reuters) - Financial markets will be watching the European Central Bank on Thursday for any hints that recent signs of an economic slowdown and the unrelenting debt crisis have lowered the chances of another rate hike this year.

Germans Abetted Greek ‘Kleptocrats’ as Odious Sovereign Debt Grew: Books

Bloomberg

If you’re still wondering how an Aegean wonderland of sun, sea and sand slid into a money pit and began dragging the euro with it, pick up Jason Manolopoulos’s “Greece’s ‘Odious’ Debt.”

How much closer a union?

The Economist

01-08-2011

The euro zone is moving closer towards an uncertain fiscal union

AT THE emergency meeting of euro-zone leaders on July 21st Jean-Claude Trichet, president of the European Central Bank, circulated a set of charts showing how bond spreads had blown out after every summit over the past year. He also handed out a ranking of countries deemed by markets most likely to default: Greece, Portugal and Ireland were at the top, riskier than Venezuela and Pakistan;

Answers to the 7 big “what-ifs” of debt default

The debt negotiations are getting down to the wire. Republican and Democratic lawmakers are scrambling to broker a deal to raise the country’s $14.3 trillion debt ceiling before Tuesday, when the Treasury will no longer be able to borrow funds to meet all of its obligations. That’s why major credit rating agencies are considering a downgrade of U.S. debt.

What does that mean for consumers? Here are some answers we compiled from Reuters Moneyexperts:

Should I be worried that I won’t receive my Social Security benefit in August?

Lawmakers to vote on last-minute debt deal

01-08-2011

(Reuters) - After months of vitriolic discord, Republican and Democratic lawmakers were expected to vote on Monday on a White House-backed deal to raise the U.S. borrowing limit and avert an unprecedented default.

The Democratic-led Senate is expected to pass the deal which raises the debt ceiling and cuts about $2.4 trillion from the deficit over the next decade.

German finance minister: Greek deal no transfer union

(Reuters) - German Finance Minister Wolfgang Schaeuble denied on Saturday that this month's Greek bailout deal paves the way for a future 'transfer union' in which euro zone countries are liable for each others' debts.

Schaueble's remarks in a newspaper interview to be published on Sunday follow his attempt earlier this week to reassure conservative political colleagues that a new euro zone rescue fund would not have 'carte blanche' to buy bonds of states in difficulty.

The euro crisis

The Economist

Bazooka or peashooter?

Greece’s new bail-out helps, but should have gone further

WHEN Henry Paulson, America’s then treasury secretary, readied a plan to prop up Fannie Mae and Freddie Mac, two teetering housing agencies, in the summer of 2008, he spoke of having a “bazooka” in his pocket. In their response to the sovereign-debt crisis, Europe’s policymakers have tended to favour the peashooter. Their latest salvo in defence of Greece on July 21st produced some favourable initial reports, but the bang has faded. In a strange inversion of the crisis to date, the new bail-out plan seems to have helped the weaker peripherals and hurt the stronger ones.

Moody's warns it may downgrade its Spanish bond rating

BBC 29-7-11

Moody's has warned it may downgrade the credit rating of Spanish government bonds, saying last week's second rescue package for Greece had done little to ease debt concerns in the eurozone.

The rating agency said it was reviewing Spain's current Aa2 grade, adding that if it was downgraded, it would probably be by just one level, to Aa3.

UPDATE 2-China may help fund Greek bond buybacks-finmin source

There are signs that China interested in buybacks - source

* Greek finmin met China's IMF representative in Washington

* Analyst says may be wishful thinking

By George Georgiopoulos and Lefteris Papadimas

ATHENS, July 29 (Reuters) - China could provide loans to Greece to fund government bond buybacks in the secondary market to help cut the country's debt burden, a Greek finance ministry official said on Friday, but analysts were sceptical.

Greece to get September bailout from bilateral loans

(Reuters) - Greece will get its next 8 billion euro tranche of emergency loans from the euro zone and the International Monetary Fund in September as planned, provided it meets agreed criteria, the spokesman for the Eurogroup President said on Friday.

"There is no problem at all. The troika will only be in Athens from mid-August onwards and deliver their report at the beginning of September and that is when the decision (on the next disbursement) will be taken," Guy Schuller said.

Greek Deal Facilitates Worsening Relations

The Wall Street Journal

Frau "nein" becomes Frau "ja," and the euro zone is saved. So we are told by the 17 Heads of State after a meeting that even the tough-minded analysts at Jefferies International concede "exceeded expectations."

Of course, past meetings helped set the expectations bar quite low. Still, let's not quibble: Because German Chancellor Angela Merkel and French President Nicolas Sarkozy decided that some progress had to be made lest Greece bring down Italy, Spain, and perhaps the euro, the Heads put their heads together and staved off—deferred would be a better word—a crisis that was about to burst on the euro zone, primarily because Ms. Merkel won her battle to have private-sector investors share the pain.

Greece Gets New Bailout as U.S. Nears Brink

The Wall Street Journal

Plan to Contain Crisis Likely Means First Euro-Zone Default

By CHARLES FORELLE, PATRICIA KOWSMANN and COSTAS PARIS

BRUSSELS—Euro-zone leaders agreed Thursday on a new €109 billion ($157 billion) bailout for Greece and new steps to prevent its debt crisis from metastasizing across the Continent—in a plan expected to trigger the first debt default by a nation using the common currency.

The meeting also produced a stark and open-ended declaration: The wider euro zone is committed to financing countries that take bailouts—thus far, Greece, Ireland and Portugal—for as along as it takes them to regain access to private lenders.

What Constitutes a Greek Default? And Who Decides?

The wall street journal

By ART PATNAUDE

The euro-zone crisis is bringing ratings agencies once again into sharp focus, with euro-zone governments eager to avoid anything that could be considered a default as they try to restructure Greece's debt. After several failed attempts, euro-zone officials are now saying the plan could be to allow a default.

But how do the credit ratings agencies decide whether a Greek restructuring plan constitutes a default? Who are the decision makers? And what criteria do they use to make such a decision?

A Guide to the New Deal in Athens: How a 'Selective Default' Works

Q:Thursday's deal by euro-zone leaders means Greece is likely to be declared in "selective default" by credit-rating firms. What does this mean?

A: It's a technical assessment that means investors in some Greek bonds will be worse off as a result of the deal. It implies holders of other bonds are still being repaid in full and on time.

Q:How significant is it?

Is the Big Greek Deal Really Big?

•           JULY 22, 2011, 7:24 AM ET

By Stephen Fidler

Winston Churchill said Americans will always do the right thing, but only after exhausting all the alternatives. So, perhaps, the leaders of the euro zone, who gathered for yet another emergency summit in Brussels on Thursday, finally did the right thing—or at least recognized the gravity of their predicament.

Their problem is that the time they have taken in the process of exhausting all the alternatives has extracted a heavy cost.

Fitch Default Warning Pares Back Market Rally

The wall street journal

LONDON—Europe's financial markets modestly welcomed the latest euro-zone agreement Friday on a new financing package for Greece and measures to prevent contagion from spreading.

However, a warning from Fitch Ratings Inc. later Friday that the role of the private sector in the Greek bailout plan would constitute a "restrictive default" dented enthusiasm.

EU Leaders Offer $229 Billion in New Greek Aid

“We doubt that this package alone will bring an end to recent contagion effects…”

Jonathan Loynes, chief European economist at Capital Economics Ltd

By Simon Kennedy and Jonathan Stearns - Jul 22, 2011 7:53 AM GMT+0300

Euro-area leaders redoubled efforts to end the 21-month sovereign bond crisis as they erected a firewall around Spain and Italy and risked temporary default to lighten Greece’s debt burden.

Euro Bonds May Be the Best Bet to Resolve the European Debt Crisis: View

Bloomberg

The bond markets are sending Europe’s leaders an unmistakable message: The opportunity to contain the euro area’s debt crisis is slipping away. If they want to save the union and its currency, the leaders will have to consider something far more ambitious than what’s been spelled out so far. Perhaps the unspecified agreement French President Nicolas Sarkozy and German Chancellor Angela Merkelreportedly reached last night on Greek debt marks the beginning of a wider -- and bolder -- effort.

Toward a Greek default

The economist

Jul 21st 2011, 14:38 by R.A. | WASHINGTON

AS EUROPEAN leaders gather in Brussels to settle on a new plan to address Greece's debts and—they hope—the broader issue of market confidence in the euro zone, details of a potential deal are emerging. It appears that German Chancellor Angela Merkel and French President Nicolas Sarkozy met last night with European Central Bank head Jean-Claude Trichet in an attempt to iron out their differences. A framework for an agreement was reportedly reached and will be presented at today's summit. No specifics are available, but a few key issues appear to have been settled.

First, it looks as though a haircut for Greek creditors is now likely.