All The Plan Bs In The World Won’t Save Us From Post-Grexit Nuclear Winter

A Grexit would be very not good.
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Plan C: Purge.

It almost goes without saying anymore, but here it is: Things in Greece? Not good. Talks between the plucky cradle of democracy and the countries it owes in excess of €300 million to are going nowhere, unlike what little money remains in Greece, which is going all over the place and fast. Even with the Hellenic FDR taking a short time out, nothing. On the bright side, with the free time they’ve had not negotiating, Berlin and its satellite regimes finally got around to cobbling together the Plan B they rather emphatically did not have last week, in between chats with the press.

"(Is) the eurozone prepared for eventualities, the answer to that is: 'yes'," Dijsselbloem said….

"I wish that less time would be given to interviews, and more on extraordinarily conscientiously working on keeping Greece from the threatening abyss," he said.

So, hooray for contingency plans and extraordinarily conscientious working. But don’t be lulled into a false sense of security, warneth Moody’s.

In a report published Thursday, the rating company warned that “the impact of a Greek exit should not be underestimated.”

“The direct impact might be limited because of Greece’s limited trade links and lower financial market exposure to Greece in other euro area countries. But its exit could nevertheless cause a confidence shock and disrupt government debt markets,” Alastair Wilson, a managing director at Moody’s and one of the authors of the report said….

“That would inevitably influence the course of future reform and fiscal consolidation programmes. It would raise, even if only a little, the likelihood that they too could end in default and exit.”

Eurogroup’s Dijsselbloem says Europe prepared for any Greek outcome [Reuters]
Grexit Risk? Don’t Underestimate It! [WSJ MoneyBeat blog]

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One Last Greek CDS Post Before It All Goes Poof

One of the side benefits of Greece taking whatever somewhat irreversible steps it is now taking is that something will happen to CDS written on existing Greek debt and that will mean that we can stop talking about what will happen to CDS written on existing Greek debt and start talking about more interesting things like quasi-CDS written by the EFSF on shaky Eurozone government debt. For now, though, we've got at least a few more weeks of surprisingly and unsurprisingly ill-informed fretting that triggering the $4bn of Greek CDS will Bring Down The Entire Global Financial System. That seems sort of silly because notionals aren't that big, mark-to-market collateral is mostly being posted, and at this point the marks are pretty close to what you'll get from Greece so it doesn't look like there's tons of unknown unrecognized losses lurking out there. On the other hand, we're mostly through with the speculation that not triggering Greek CDS will Prove That CDS Is Worthless and thereby Bring Down The Entire Global Financial System, so that's nice. The reason that's mostly over is that it sure looks like Greek CDS will in fact trigger, as Athens has moved to adopt a collective action clause that will flip the Greek restructuring from "voluntary, heh heh heh" to "involuntary" and thus trigger the ISDA restructuring event definition. You can argue that the mechanics of the cash settlement auction will mildly screw CDS holders but I'm not so sure, and in any case this is pretty solidly in the category of derivatives nerdery rather than Bring Down The etc.