Euro Fails to Launch as Greece Seals Debt Deal
Michael Smith at foreign exchange specialist Pure FX.
So last night Greece announced that its debt swap had been a roaring success.
95.7% of its private creditors had participated in the deal, which sees 70.0% of the value of their existing bonds snatched out from under them to pay down Greece’s debt. The so-called triumph means Greece remains on course to receive its €130bn bailout, and avoids the catastrophic option of defaulting and leaving the euro (catastrophic not just for Greece, but for European banks and governments, which have billions invested in Greece.)
Officials ranging from Greek finance minister Evangelos Venizelos to EU Commission head Oli Rehns have praised the deal to high heaven. So how come the euro has not gained? How come in fact it has lost more than percent against the US dollar and half one against UK sterling?
The devil it seems is in the detail. For although the debt swap means Europe has once again averted its financial apocalypse, it has done so by alienating the very markets it must have on side. In many ways after all, this deal came about only because of legal trickery.
For instance, the Greek parliament retroactively inserted clauses into its bonds (i.e. after investors had bought them) enabling them to cut their value and refuse payout. That’s a little like borrowing some money from the bank, then altering the terms of the loan after you’ve both signed it to let you pay back less. It’s bankrupt by any other name!
Furthermore a significant portion of Greek bondholders didn’t sign up this swap, but had the value of their bonds changed involuntarily. This might cause problems because it could trigger costly insurance payouts (up to €3bn.) But more importantly, it amounts to a massive violation of the trust between governments and markets.
This then is the reason the euro has not gained, but lost, following the Greek debt deal. In addition it’s possible the euro might have more losses to endure, as the consequences of the market betrayal concerning Greece come into effect. What happens, for instance, if other countries currently implementing austerity programmes need to make a debt swap?
To be sure, EU officials have repeated again and again that Greece is a one-off case, but what guarantees Ireland and Portugal not repeating what happened here? Indeed, the fact that it happened here at all makes it more likely it will happen elsewhere, because markets will factor the Greek betrayal into their borrowing costs elsewhere in Europe.
There’s also the fact that, this debt swap aside, Greece faces massive hurdles before it returns to growth. Just last quarter for instance the economy shrank more than forecast, contracting -7.5% against -7.0% predictions. Does this strike you as a nation about to bounce back from recession? It would be optimistic at best to say so, and foolish at worst.
Hence in short, I don’t see the euro strengthening in the short-term. In spite of its perceived success, I believe the Greek debt swap has exacerbated the situation, and this will be reflected in weeks to come.
Best Financial Management Tips for Family Business
Businesses are a good source of income. Venturing into the world of entrepreneurship involves planning, decision-making and risk taking therefore, it is important to carefully weigh the advantages and disadvantages of having a business. This includes effective financial management methods and here are some helpful tips that you can try and follow.
Determine the capital
It is very important to know the total amount or the capital for the business. This will help create a budget of all the things in concern which include construction, salary, utility and manufacturing expenses. Knowing the capital will help you acquire a clear vision on how the money is being used for the business and prevent unnecessary financial expenses.
Assess what type of financial sources are to be tapped
This would include the different types of financial sources to be used for the business such as banks, lending institutions as well as credit cards Choose credit cards specifically made for business and see if they offer deals that are beneficial for the business. In this way, you can prevent any untoward problems in the future.
Plan for the future
A successful business often possess a financial management plan that will extend toward a specific time into the future. Through this, the financial state of the business will be carefully monitored on the given period of time and be analyzed on how it has performed.
These are the best financial management skills to be used for family business.
Dealing with debt: which approach is best?
Dealing with debt: which approach is best?
Debt. It’s a small word, but it can have potentially big consequences. Borrowers can end up in very different situations, depending on how much they’ve borrowed, how many different lenders they have, what type of debt they’ve taken on and how healthy their overall finances are.
Some people may have a few reasonably sized debts they’re managing to repay comfortably every month – and just want a bit of help making them slightly easier to manage, or repay faster.
Others may be concerned that their debts are getting the better of them, and need some help budgeting and/or improving their debt management skills.
Still others may be in the position where they can no longer afford their agreed monthly repayments to their unsecured lenders – and need to find a way of lowering their repayments ASAP.
They’re all very different scenarios, yet they all have something in common: getting professional debt advice – from http://www.debtadvicenow.co.uk/, for example – could help you find the best way of getting on top of things.
What situation are you in?
The most suitable approach for your debts all depends on what situation you’re in.
Are you repaying your debts well every month, but want to make them simpler to keep on top of? If this is the case, a debt consolidation loan could be the best option. By combining your existing debts into the loan, you’d only have one monthly payment to make to one lender, which could be much easier to keep track of (though you’ll have to commit to regular payments until the total amount is repaid).
Alternatively, you may no longer be able to afford your unsecured debt repayments as agreed per month. Here’s where a debt management plan could help. You could agree smaller monthly repayments with your unsecured lenders over a longer period – so you should be able to repay everything you owe at a realistic rate (or at least until you can start making your original repayments again). Just bear in mind that repaying your debts over a longer period could be more expensive overall (as interest will accrue for longer), and making smaller payments will damage your credit rating for six years.
Get advice
Not sure which approach to take? In a different situation with your debts from the ones discussed here? A professional debt adviser could help you find a suitable solution.
The Case of Credit Cards Australia
The credit card industry in Australia is just as big as it is in the United States. In fact, it is considered a multi-billion dollar industry wherein banks and financial institutions are bringing in lots of profits from the use of those plastic cards. According to financial data procured in Australia, the amount of credit card debt in the country alone has totaled up to $30 billion! This is a very significant figure, indeed, which is also why it has brought into attention the concern about how consumers can deal with these debts.
Despite of the issues about debts and rising interest rates, the number of consumers applying for credit cards Australia is consistently rising per year. There are approximately 13 million credit card holders in Australia and experts predict that it will continue to go up. After all, consumers in this part of the world are depending on it for their spending habits on a regular basis.
It is therefore important for all Australian consumers, especially those who have or are planning to apply for a credit card to become aware about what their options in the market are. The qualifications for picking the right credit card for your needs or spending habits do not change in Australia.
It is beneficial to know that there are plenty of card companies in Australia to choose from. The competition amongst these companies benefit consumers in a way that they can get competitive interest rates and offers. Make sure to look into that when you are in the market for a new credit cards Australia account.
The Best Cost Reduction Tips for Modern Business
To maximize profit and increase financial health, businesses today must implement the best cost tips of modern times. The more is it today due to the instability of the world economy. Here is a list of these tips and do notice how they are about making good use of modern technologies.
Allow Virtual Offices
A virtual office is either the home of your employee or any specific location that is convenient for him or her. So instead of giving them cubicles in an office that you paid for to construct or for a lease you let them work in the comfort of their own homes or apartments. This saves you a lot of money that is meant to lease another building or construct your own building for the purpose of expansion.
Go Online
Businesses that offer service like bill payments should consider to increasing online payment processing. As the population becomes not just computer literate but also Internet literate, the days of long queues and lots of cashiers processing personal appearance payments will soon disappear. Efficiency goes up while the need to hire a lot of service representatives goes down.
Invest on Computerization
It is about time that your business stops relying on dozens of front desk clerks. This is easily accomplished by computerization which makes things more efficient with less amount of labor which means reduction of labor costs.
Contractualization
There are jobs that businesses need to be done but not all the time. A good example is quality assurance testing. This type of task is done when a product is initially completed and must require quality testing. But after a quality standard is met, the quality testing job is no longer needed. It would be more cost-effective to hire such services only within the period required for quality testing.