A Postcard From Greece

Yet another instalment in the eurozone crisis discussion, and the iniquity of Barclays. And one Fool's suffering in a good cause.

Over the past few months, there has inevitably been a lot of debate on the Fool's Discussion Boards about the now long-running eurozone crisis -- how it might be sorted out, and the effect it's having -- and will continue to have -- on investment opportunities.

One poster in particular has regularly offered some thoughtful analysis, and this week sees another of avidya's contributions, on a thread discussing the renegotiation of the Greek bailout by the new government:

"Am just back from a couple of weeks in Greece, and I thought it might be worth posting a few thoughts on what's been happening in the Eurozone. In sum, I fear equity markets are too sanguine, and near term the risks seem to me to be to the downside. ...

"It seems complete fantasy to think that with a few adjustments to the bail out program Greece can be put back on the right track. Quit simply, it shouldn't share a currency with Germany, it needs it's own currency, major EU structural development funding, a write off of much of its officially held external debt, and a gradual economic and structural development over many years."

So if Greece can't be rescued -- not in the way other eurozone countries might wish, anyway -- what might have to happen? avidya offers a way out:

"Looking at the big picture, personally I think that (absent large scale money printing) the only way out of this may now be for the losses, whether they be in banks' bonds or sovereign debt, to be allowed to crystalize, investors and creditor countries take the losses, and then we all move on. Very painful short term, for sure, but to me it's looking increasingly possible that this is how the Eurozone crisis may resolve. If so, the question for investors is how that happens, and on what timescale. "

But, of course, not everyone agreed with this suggested end-game. BertEEE certainly didn't:

"If the Europeans were to start imposing losses on sovereign debt across Europe would be an utter utter disaster. Far from allowing Europe to 'move on' it would plunge Europe into depression. It also ignores critical issues. For example you can't simply default - your debtor has a legal claim against you. So you have to have a valid reason to default and things have to be pretty dire to reach that point. Europe would be racked by legal claims for decades creating a vast mess. You also have to consider who you are defaulting on, and in Europe's case it would be defaulting on itself, its own citizens and pension funds."

It's a long thread, but if you're interested in how the whole eurozone situation might pan out, then you may well want to read it.

The LIEBOR rate

Closer to home, Barclays has been fined a whopping £290 million, because its traders tried to manipulate inter-bank lending rates, including the 'London InterBank Offered Rate', known to its friends as LIBOR (and something of a gift for writers fond of punning headlines).

Given the seriousness of the offence, and the size of the fine, CasperCCC was moved to post on the Banking Sector board:

"I'm very surprised that this hasn't attracted more attention... The level of corruption is - to me, at least - absolutely astonishing...

"Is this not attracting much comment on the banking board because it's not seen as material or important to investors, or just because it's not surprising? I work with the retail banks, not investment banks. Am I naive to be surprised by the extent of the corruption? And if so, does this mean that we're going to see exactly the same apparently routine manipulation of market data across other banks?

Handlewitty seemed equally shocked:

"I have been close to the finance industry throughout crisis and have to say that IMO this is the most serious/shocking episode to date.

The misconduct is historic and spans the excess and crisis period 2005-2009, but it's the language and brazenness of the published e-mails which distils everything that was wrong in those reckless and irresponsible days. It's hard not to see more regulation coming on this point."

But some people seemed more sanguine, some might even say cynical, about Barclays' having been "found out" -- swanmore1, for example:

"Libor fixings have been "fixed" for decades (when certain uk clearers posted lower fixings than the rest it was oft taken as a sign of a nod from BOE that base rate was coming down) and large amounts of money have been won and lost amongst traders but the damage to the business world and the general public has been, imho, minimal and has been far outweighed in recent years by the unrealistically low nature of fixes.

"The traders were doing their job within a commonly accepted, if abusive, framework."

And lotaloaf:

"Must say I'm gobsmacked at the level of surprise / indignation / rage being exhibited on this thread. To anyone who has been reading e.g. Karl Denninger or Zero Hedge these past few years none of this comes as a surprise. Indeed, it's just business as usual for the banks, and they will regard any fines as a 'cost of doing business'."

So what do you think? Why not read the rest of the thread and then share your views.

Credit where it's due

While they may have gone out unexpectedly to Italy, as zoomydo noted, Germany did a notch up at least one win.

(And can zoomydo make it a hat-trick of mentions, and get one in next week's round-up?)

Last week's round-up: The Illusion Of Wealth