Greece

The prospect of a hefty Greek government debt restructuring and writeoff has sent the bonds into a twilight zone that's attracting specialist distressed-debt traders more used to dealing with defaulted emerging sovereigns like Argentina. Greece was ditched last year from developed country government bond indices that are typically tracked by the big, often conservative, global institutional funds.

Losses for private investors on Greek debt in the second financing package for Athens are likely to be between 30 and 50 percent, rather than the earlier agreed 21 percent, euro zone officials said on Wednesday, Reuters reported. The euro zone is reviewing the terms of its second financing package for Greece, including the private sector contribution, because Greece is in a deeper than expected recession and market interest rates have changed since then.

Greece is likely to receive an €8 billion aid tranche it needs to stave off bankruptcy in early November, EU, IMF and ECB inspectors said in a joint statement today, the Irish Times reported. The statement came after the troika concluded its week-long review of the country's finances. In the statement, the troika said the Greek recession will be deeper than was anticipated in June and a recovery is now expected only from 2013 onwards.

Greece would be in much better shape now if it had never joined the euro zone, or if it had been kicked out in 2004 when it admitted that it had lied about its finances to join the club. So would the rest of Europe, the International Herald Tribune reported. One answer is the same one that was given when Greece’s cheating was revealed: Legally, there is no way out. The euro was designed to be the Roach Motel of currencies. Once you enter, you can never leave. There is no provision for departure. But, of course, there is a way out. It would be messy, and perhaps disastrous.

French Finance Minister François Baroin Wednesday said the extent of private-sector involvement in bailing out Greece may need to be reexamined after the volatility on financial markets over the summer, The Wall Street Journal reported. The comments mark a public acknowledgment from France—which up until now has argued that an agreement by euro-zone heads of state on July 21 should be applied in full—that further participation from private-sector creditors may be required as Greece's financial crisis deepens.

The admission by top European officials that Greece's fiscal distress is deepening has increased the chance that a July deal to give Athens more cash could be revised to exact a greater toll on its private-sector creditors, The Wall Street Journal reported. At a two-day closed-door meeting here that ended Tuesday, European finance ministers debated what to do with their sickest patient. No decisions were made, but the notion of bigger losses for creditors was broached, people familiar with the matter said.

The Greek government submitted a 2012 budget Monday that includes sharp increases in taxes and spending cuts in an attempt to bring its deficit back on track. But the country's disclosure Sunday that it would miss budget targets for this year prompted further fears the country would be forced to reschedule its debts, The Wall Street Journal reported. The 2012 deficit is now seen at 8.5% of gross domestic product, or about €18.69 billion ($25 billion)—well above a previous target of €17.1 billion, or 7.8% of GDP.

Greece will miss a deficit target set just months ago in a massive bailout package, according to government draft budget figures released on Sunday, showing that drastic steps taken to avert bankruptcy may not be enough, Reuters reported. The dire forecasts came while inspectors from the International Monetary Fund, EU and European Central Bank, known as the troika, were in Athens scouring the country's books to decide whether to approve a loan tranche. Without that installment, Greece would run out of cash as soon as this month.

A new front in the euro crisis is opening up: what to do if Greece's second bailout package, worth €109 billion ($147.8 billion) and agreed to in July, isn't enough, The Wall Street Journal reported. That risk is real. But with Greece reaching the limits of austerity, at least in the near-term, there are only two options for filling any shortfall. Either euro-zone governments and the International Monetary Fund must dig deeper into their pockets, or Greece has to unpick its deal with bondholders to secure more debt relief.

Greek lawmakers approved a controversial new property tax Tuesday that aims to boost revenue as the country struggles to obtain a critical installment of international bailout loans that will prevent it from default, The Associated Press reported. The new tax passed 154 votes to 143 against in the 300-member parliament. It was announced earlier this month after international debt inspectors suspended their review of Greek reforms amid talk of missed revenue targets and delayed implementation of austerity measures. The inspectors are expected to return to Athens this week.