Sovereign debt bubble thread

[Admiral Yi]

Soon Spain will be below Poland's rating. 

This is taking a heavy toll on Polish currency. This may be good for international competitiveness, but may cause our publc debt to balloon over 55-60% of GDP when the constitutional brakes kick in.

Is Poland's debt foreign currency denominated?  And what is this constitutional brake?

[Iormlund]

Some may remember my post a few weeks ago about the state of things over here and how Merkel might be killing the future of German industry.

I just found out that my employer, after 2 decades of monogamous relationship with certain German giant is about to become a partner of a Frog competitor. We live in interesting times.

[Zanza]

Because he dislikes Merkel's policy?

[Iormlund]

Because the factors that kept our usual partner as main supplier in the region (ample local talent pool, brand recognition, amount of already installed hardware) are now second to things like cost. We cannot win enough contracts with their products anymore.

It says a lot that one of, if not their main local integrator is looking for new pastures. If we are doing this you can bet most integrators are diversifying their expertise as well. When this is all over there will be dozens of integrators and big clients adept in rival technologies and their main advantage will be forever gone.

[Martinus]

Soon Spain will be below Poland's rating. 

This is taking a heavy toll on Polish currency. This may be good for international competitiveness, but may cause our publc debt to balloon over 55-60% of GDP when the constitutional brakes kick in.

Is Poland's debt foreign currency denominated?  And what is this constitutional brake?

Yes. And the break prevents the government from taking on more credit once 60% of GDP is reached.

[Neil]

German cars have an advantage over French ones:  People would actually buy them.

[Iormlund]

Good thing the biggest employer in the region is the Opel factory then.

[Neil]

Good thing the biggest employer in the region is the Opel factory then.

I guess you can always count on governments to subsidize the auto manufacturing sector, no matter what country you're in.

[Iormlund]

Ours certainly does.

[Neil]

Ours certainly does.

Yeah.  It just provides too many jobs in every sector of the economy to just ignore it.

Does Spain have any surviving domestic auto companies?

[Iormlund]

No. SEAT was bought by the Volkswagen group some time ago.

[Sheilbh]

Just read the head of the IIF about the Greek-bondholder negotiations.  He said the Greeks are proceeding in good faith, other Eurozone negotiators aren't.  He said that all of them agreed to a 50% haircut at a government level but some of the negotiators don't seem to be trying to achieve that.

The story mentioned that the latest German proposal would effectively mean bondholders' losses would increase from 60% to 80% which is why some bondholders think they'd be better dealing with a default than a 'voluntary' restructuring.

[Richard Hakluyt]

Well................100% + additional unknown consequences is even worse 

[Sheilbh]

Well................100% + additional unknown consequences is even worse 

If there's no voluntary restructuring and the Greeks default then there's been a 'credit event' and the bondholders could see how their CDSs work.  I think the suggestion is that could be a better bet for them than an 80% loss.

[Richard Hakluyt]

I'm not at all sure that I would enjoy seeing how the CDS work out 

Things are getting pretty grim in Greece, even the Albanians are packing up and going home