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Greece Default Has Damaged Market Confidence In Euro

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Although Greece’s default restructuring of its bonds has temporarily relieved the pressure and paved the way for a new rescue package, it has also damaged the markets confidence in investing in PIIG bonds even further. On the one hand the euro authorities have broken some many promises that its hard to believe anything they say. Norway’s sovereign wealth fund has decided on investing in the PIIGS because after all the ECB was exempt from taking a hit during Greece’s restructuring.

The fund, under Norway’s finance ministry, voted against the Greek debt deal on the grounds that European institutions were exempted from losses and given “special” treatment. “It’s very important to create trust in the markets. To create trust you have to stick to the rules,” said director Yngve Slyngstad.

What happens if the same deal was extended to Portugal. Pimco’s Mohamed El-Erian is not so confident in private investors doing well out of a Portuguese restructuring  and said

Portugal will need a second rescue as the original package of €78bn (£65bn) falls short, setting off a political storm over EU rescue costs.

“Unfortunately, that is how it will be. It will make the financial markets nervous because they are worried about a participation of the private sector,” he told Der Spiegel over the weekend.

To put it in context

If the Greek haircut formula is ultimately extended to Portugal, private creditors can expect to lose everything. The EU and the International Monetary Fund already own most of the debt, reducing everybody else to cannon fodder status. Mr El-Erian said EU leaders are deluding themselves if they think they have solved Greece’s problems. “The Greek package is going to fall apart quickly. Bridges built to go nowhere can collapse at any time,” he said.

The IMF said in its latest report that Greece remains “accident prone” and may need further help and more debt haircuts if the economy “fails to respond rapidly enough to reforms”.

It warned that a “disorderly euro exit would be unavoidable” if the EU cuts off support. Such an outcome would threaten the IMF itself with unprecedented losses.

Source: Telegraph (Ambrose Evans-Pritchard)

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US Readies Navy In The Gulf

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BusinessInsider has reported that the US is getting its final pieces in place in the Straits of Hormuz. With threats from Iran that it will close the Straits with mines etc if attacked, the US is now moving in minesweepers.

The global signs of a coming military conflict with Iran continue to build, and today the U.S. Navy made clear its intentions by announcing it’s sending four additional mine countermeasure shipsto the Strait of Hormuz.

Stars and Stripes reports the Chief of Naval Operations Adm. Jonathan Greenert told the Senate Armed Services Committee that he’s sending the mine ships in addition to four airborne mine countermeasure helicopters.

Iran has already warned that one of its first steps in closing the Strait of Hormuz, and choking off 40 percent of the world’s oil supply, will be to mine the strait and deploy its fleet of small electronic submarines.

To get “ready” Greenert is also bringing upgrades to mine neutralization vehicles, submarine torpedoes, optics, and weapons to counter the swarm maneuvers employed by the Iranian navy.

This move will double the number of minesweepers in the Persian Gulf, but Greenert declined to call the deployments a surge, as when forces are built up for a planned operation, instead telling reporters: “I’m not going to define it as a surge. You called it a deployment, how’s that”

The four ships, the Sentry, Devastator, Pioneer, and Warrior will join the Navy’s Fifth Fleet in Bahrain from San Diego. Their departure date has not yet been announced, as part of operational security.

They will likely be transported by the Navy’s heavy-lift ships which travel at about 16 mph.

Zerohedge has reported that the USS Enterprise has departed this weekend and will be in the Gulf in a few days.

After the Enterprise leaves Sunday, three Norfolk-based guided-missile destroyers will head out Monday — the USS Porter, USS Nitze and USS James E. Williams.

The strike group is commanded by Rear Adm. Ted Carter Jr.

Carrier Air Wing 1, based at Naval Air Station Oceana in Virginia Beach, will be embarked aboard the Enterprise.

The Enterprise was launched September 24, 1960, by Newport News Shipbuilding and Drydock Co. and commissioned November 25, 1961.

Its record of high-profile service began with the Cuban Missile Crisis in 1962. Since then, it has served in countless missions around the world.

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