Europe's Lehman?

By Kevin Freeman
June 16, 2011Jun 16, 2011

The price of Credit Default Swaps on Greek Debt have reached all-time high levels according to a Bloomberg report today:

Greece Credit-Default Swaps Surge to Record 2,189 Basis Points

By Abigail Moses – Jun 16, 2011

The cost of insuring against default on Greek, Irish and Portuguese government debt surged to records, driving a gauge of sovereign bond risk to an all-time high, on concern Europe's deficit crisis is worsening.

Credit-default swaps on Greece soared 435 basis points to 2,189, while Ireland rose 37 to 799 and Portugal climbed 21 to 806, according to CMA prices at 5 p.m. in London. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments jumped 9 basis points to 235. An increase signals deteriorating perceptions of credit quality.

Investors are betting Greece will default if it's unable to pass the austerity measures needed to qualify for the next installment of international aid. Greek Prime Minister George Papandreou was set to shuffle his Cabinet and seek to win a confidence vote today as protests over budget cuts fueled speculation the measures will be put in jeopardy.

"A failure to reach a political agreement in Greece risks the next tranche of funds, due to be paid at the end of this month, to be withheld," said Gary Jenkins, co-head of fixed income at Evolution Securities in London. "If unresolved then this could potentially result in a default by the middle of July."


"Greece could become another Lehman Brothers. An Armageddon for the European financial system. This would not be healthy for the Euro, the health of the European economy, the stability of the European banks or the share markets in European capitals."

So, the question to ask is, Who might benefit from all of this instability? Certainly speculators looking for profit. But, we must also consider the possibility that there also may be those who benefit from destroying the Euro, dividing Europe, and weakening the global financial system. It is very naive to ignore the possibility.

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