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Greek Credit Risk Spikes, Default Probability Tops 70%

Greek default risk has surged in recent days and today as it becomes clear what Syriza expects from Europe, short-term CDS are at post-crisis highs with 5Y CDS implying a 76% probability of default (based on standard recovery assumptions - which may be a little high in this case). Given the domestic bank dominance in the buying of domestic government debt, Greek banks are getting hammered as everyone's favorite hedge fund trade is an utter bloodbath. Greek stocks overall are down and GGBs are tumbling once again - back at 16 month lows (given back all the ECBQE hope bounce). Perhaps not surprising moves, given new Greek Finance Minister Yanis Varoufakis reality-exposing comments yesterday, "the problem with the bailout is that it wasn’t really a bailout... it was an extend and pretend, it was a vicious cycle, a debt-deflationary trap, which destroyed our social economy."

 

Greek Default Risk is spiking...

 

And Greek bonds are tracking that risk...

 

Greek stocks are collapsing...

 

led by an almost halving in banks...

 

We leave it to new Greek Finance Minister Yanis Varoufakis to conclude:

“The problem with the bailout is that it wasn’t really a bailout,” Varoufakis, 53, said in a Bloomberg Television interview on Jan 26.

 

“It was an extend and pretend, it was a vicious cycle, a debt-deflationary trap, which not only destroyed our social economy but also showed that the cost of our so-called bailout for the average German, the average Italian, the average Slovak was maximized.”

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