#AceGuestNews BERLIN German Chancellor Angela Merkel said on…

#AceGuestNews – BERLIN – German Chancellor Angela Merkel said on Monday that Europe had shown great unity on the Ukraine crisis but it had not been an easy decision to impose sanctions on Russia for a referendum in occupied Crimea and its refusal to talk to the government in Kiev.

“It was a decision that nobody took lightly,” she told a joint news conference with Italian Prime Minister Matteo Renzi.

(Reporting by Stephen Brown and Alexandra Hudson; Editing by Noah Barkin)


“It wasn’t our aim. We wanted talks and a diplomatic solution but the clear violation of international law yesterday with the so-called referendum meant we had to take this step and I am glad that Europe showed such unity,” Merkel said.

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` Argentina Bankruptcy of 2001 Can Prove That Theories it Cannot Happen Again Wrong ‘

#AceGuestNews and Views by Anna Mikhailova 

National bankruptcy skeptics like to claim that while countries went bankrupt hundreds of years ago, such a catastrophe is out of the question in the modern world.

Argentina Bankruptcy 2001The story of Argentina’s bankruptcy in 2001 proves them wrong.

Most crises follow a common logic which is characterized by sudden onset, rapid growth, and the transition to a new quality and normalcy.

The difference between the Argentinean scenario from the usual canons laid in the absence of the normalization phase – crisis at the time were simply “preserved”, then to break out with renewed vigor.

The decline in GDP of 15%, unemployment at 24%, a default on its foreign liabilities of $ 141 billion, a decline in business activity, the removal of the hard peg to the US dollar and the subsequent devaluation of the Argentine peso by more than 70%. 13% cut in state pensions and civil servants’ salaries.

There was a run on banks following the collapse of the country’s national currency. Argentina’s citizens were so desperate and panicked that many spent nights sleeping in front of the ATMs. The systematic impoverishment of the population led to mass discontent and riots all over the country. Eventually, the situation became so chaotic that President Fernando de la Rúa fled from an enraged mob by helicopter. Despite all the protests and bank runs, the nation simply could not repay its $145 billion in foreign debts.

The country had a population of 35 million, of whom 19 million were classified poor as of this June, with earnings of less than $190 a month; 8.4 million were destitute, with monthly incomes below $83.

Left bankrupt by their government, their bankers and the International Monetary Fund, Argentines have lost faith in their political leadership. Five presidents passed through the Buenos Aires in the span of two weeks, until Nestor Kirchner, a provincial governor until then, assumed the presidency in 2003. Over the next few years he managed to pull the country out of the economic chaos, but evidently the bankruptcy never passes without a trace. Just last month Argentina announced its biggest currency devaluation in a decade, with the peso’s plunge rattling financial markets worldwide. With inflation running at about 30 percent, it seems the country is on the verge of yet another devastating collapse.

Anna Mikhailova

Audio: to Download  

These are not the opinions of the `Ace News Group ‘ and are the news and views of the writer.  

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` Bond Holder’s will have to `Pay’ for `Ukraine’s’ Unrest’

#AceGuestNews says this from `REUTERS BREAKING VIEWS’ Bondholders will have to pay for Ukraine’s reset

Wed, Mar 05 09:51 AM EST

By Neil Unmack

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Ukraine bondholders haven’t seen the end of their suffering. The country’s bonds have sunk in spite of talks of an imminent bailout by the International Monetary Fund. The country’s creditors may face either a soft debt rescheduling or more radical haircuts. The risks of austerity, devaluation and continued political uncertainty all point to the latter.

The recent political turmoil has already cost bondholders. Ukraine’s 2016 dollar-denominated bonds traded as low as 85 percent of par on March 3, with a yield of 15 percent. With such borrowing costs, Ukraine needs support from the IMF and the European Union to fund its deficit, repay debt and bolster its melting foreign currency reserves. The country has asked for at least $15 billion.

As nearly 60 percent of Ukraine’s bonds mature by the end of 2017, according to Thomson Reuters’ data, official lenders should insist that local and international creditors accept a maturity extension, or roll over their debt. The question is whether a more severe restructuring is needed.

Ukraine’s total public debt stood at 40 percent of GDP in 2013. That looks low, but more than half is denominated in dollars. The depreciating hryvnia is increasing the burden. Nomura estimates the recent currency fall increased debt to 47 percent of GDP. That may get even worse. Ukraine previously set a 60 percent legal ceiling to its debt – the exact level of a covenant in the country’s recent $3 billion Russian bond.

Political uncertainty does not help. If Ukraine embraces reform to make its economy more efficient, trade with Europe should pick up, the weaker currency will help exports. But that will take time, while Russian tensions may hurt trade. Support for the bailout may wane as the 7 percent budget deficit is hacked back, fuel subsidies cut, and inflation sets in.

The market isn’t yet pricing in the worst. Assume the June 2016 bond is extended to seven years, with other terms untouched. Discounted at 9 percent, it would be worth 86 cents on the dollar, just below current prices. That would be a lucky escape:  Ukraine’s previous restructuring saw losses on par value of 28 to 34 percent in 2000, and even 57 percent in 1998.

The lesson of the euro zone crisis has been that austerity should be moderate, and bondholders not spared. Ukraine’s case is unique. The lessons remain the same.


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