EU Balks as Greece crisis tends to upset the Euro

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The EU offer to debt finance Greece at 5 % interest ( below market rates ) is belated but welcome. The world has too many worries, as it recovers slowly from the 2008 credit crisis . The weakening of the Euro and the unfolding of the Euro debt crisis following the off balance sheet spendings in Greece, Spain, Portugal and UK, was quite un-nerving, and could set off a market crash once again. The early stabilization of Greece was important,for the global investor, just like the Dubai overspend affair where Abu Dhabi had stabilized talks of a default by a quick and timely aid.

The in-ordinately long time that the EU took towards coming up with a Euro 45 Billion ( $60 Billion ) back up package for Greece has already taken its toll. During the interim period the Euro slipped by over 5.7 percentage points to $1.35 and the precarious conditions of finances of other EU nations were discussed threadbare.

Though Angela Merkel cannot be faulted for taking a tough stand against bailouts, it must be understood that the precarious condition of Greece was due to the omissions and comissions of a previous Government which was ousted at the recent polls. Surely Greek Prime Minister George Papandreou’s socialist government which will be swamped by its bills from debtors, was in no way responsible for the current situation in Greece.

No wonder prime Minister Papandreou, understandbly cheezed off with EU sermonising and delay in assistance is going ahead with his plans to get long term investors from the US, with a road show to mop up money against long term 10 year bonds .
Welcoming EU's IMF backed package the Prime Minister went ahead in a business like manner trying to build investor confidence by saying that the long term bond deal was definately on and he was looking for long term investors on board.

With Billionaire investor's like George Soros,stating the the Greek debt is worth a buy in early January, there was hardly any doubt of investor interest in the Greek Bonds. Wall streets market makers like Goldman Sachs were however keen to earn a double bonanza by first shorting the issue and then picking up the shreds in a credit default swap.

Initially an advisor and underwriter to Greece's debt, including the out of balance sheet entries, Goldman remained true to its hedging insticts trying to make a extra buck. Like shorting of California municipal bonds which it had under-written, Goldman began shorting Greece debt with inside information on the precarious financial situation of Greece.

This prompted Soros to comeout with a forthright interview with Bloomberg in support of Greece, two days ago, which possibly swayed the EU to action on the 11th April.
“They have to be given some help from Europe or the IMF at concessional rates,” Soros said in an interview on Bloomberg Radio in Cambridge, England. “It is a make or break time for the euro and it’s a question whether the political will to hold Europe together is there or not.”