April 22nd, 2011
04:40 PM GMT
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It does not take much to get the market in Athens agitated these days. Not a trading session goes by without rumors of a pending restructuring of Greek debt.

But what seemed on the surface to be a straightforward exchange of internal thoughts at Citigroup created a storm matching the famously dry Meltemi winds that are a trademark of Mediterranean summers.

An email from London-based bond trader for Citigroup Paul Moss, the contents of which were shared from a government source, raised concerns Wednesday about “increased noise over Gr [Greek] debt restructuring as early as this Easter weekend.”

A close examination of the email shows Moss was not suggesting that the restructuring was happening, but that market interest rates and general discussion in the trading pits were suggesting this may transpire.

According to a Greek government spokesman, the email was widely circulated among the Athenian trading community and – worse yet – the domestic media, on the afternoon of April 20. That day, the Greek stock market tumbled 2.6 percent to a 2011 low, and Greek 10 year bonds hit a record high of 14.95 percent as a result.

For its part, Citigroup immediately said it will collaborate with authorities but added that the company “do not consider there to have been any wrongdoing by Citi or its employees”.

So what was intended to be “internal” went “external-global” in a hurry, and what was a local Greek investigation quickly got bumped up to Interpol, the Europe-wide police force.

The timing of the Citigroup email also sounded alarms in Greece, where conspiracy theories abound. The storm came during the Easter Holy Week, the most important holiday of the year for Greeks and when most start to escape to the islands for a break.

Nearly a month ago, a local car mechanic took matters into his own hands. On Greek Independence Day, he turned to the local blogosphere to spread rumours about a bank default. Even an erroneous source can wreak havoc in an atmosphere of distrust and dire economic circumstances.

The reality is that the debt mountain is large and despite all efforts by the government of George Papandreou to put forth additional cuts, finance minister George Papaconstantinou has admitted the debt to GDP ratio may soar to 160 percent before coming back down again. The economy is contracting by 3 percent this year, with a hope of turning positive in 2011.

The debt mountain is nearly a half trillion dollars for an economy which has a GDP of $321 billion. As a result, talk of debt restructuring in Athens will persist regardless of the outcome of the police investigation surrounding Citigroup and the wayward attempts of a Greek mechanic.



soundoff (8 Responses)
  1. priposte

    The Meltemi winds occur in the Aegean Sea, not in the Mediterranean at large.

    April 23, 2011 at 2:39 am |
  2. Tallgrid

    Cheaper to give every Greek 1 million euro's, there are only 11 million, and tell them to emigrate. Sell the assets, the whole of Greece, and forget about it. They will never be able to pay the money back.

    April 23, 2011 at 1:32 pm |
  3. David E.

    So, what's the big deal? If it's truth, face it, if it's not, well just a rumor.

    April 23, 2011 at 3:48 pm |
  4. Ange T Kenos, Australia

    It is certain bankers who have a lot to answer about the manufactured Greek debt, bankers who sought to bring down the Hellenic national economy for their own gains just as some have done elsewhere. bankrupt the economy then fly in and buy up whatever you want, cheap. To hell with the nation. To hell with the people. The Hellenic Government is trying its level best, outside of seriously downsizing the gross number of politicians – local councillors and MPs – who bleed the coffers dry and who yet do little that is productive. And reports such as this only help the fanatics who want to see the nation down and replaced by their communist madness.

    April 23, 2011 at 10:25 pm |
  5. Gadalf Heinrich

    What about the reparations that the Germans legally owe the Hellenic people? Reparations due to theft and destruction caused by Germany in W W 2? These reparations were legally set by a lawful international tribunal but 7 decades on the Germans continue to refuse to pay Hellas even though they have paid off everyone else and even Spain and Portugal whom they were not required to compensate. This money could seriously assist the development of new jobs through infrastructure creation. It could do much for the economy but Germany refuses to pay and the international courts are too gutless to force them to do so.

    April 23, 2011 at 10:48 pm |
  6. yusuf dursun

    Turkey is looking forwars to buy Greek islands if Greece is rdy to sell

    April 24, 2011 at 11:27 am |
  7. Mark Liebherman

    @Tallgrid ... it's obvious that your math skills are equal to the size of your brain ... how much is 1 million x 11 million you moron ... probably the GDP of the entire planet cannot cover that !!!

    April 25, 2011 at 1:53 am |
  8. James West

    The USA has been left holding the baby due to the use of Credit Default Swaps it holds against Greece and things are going to get dirty.

    http://members.beforeitsnews.com/story/794/766/USA_Greek_Credit_Default_Swaps_going_bang_Include_video.html

    Bottom line is the Greek debt is nothing on it’s own but these Credit Default Swaps means that the potential cost to the US economy may run into the hundreds of billon dollars so get ready to duck and cover.

    July 8, 2011 at 1:30 pm |

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