Greece has sold some more debt, huzzah!!!
Ah, but only 6-month debt, apparently it’s too early to go beyond 2012, when the EU/IMF rescue package supposedly ends.
Meanwhile, Greece itself will face at least a decade of crippling deflation, mass unemployment and social upheaval, all in the name of keeping the Germans happy.
To paraphrase Krugman, it’s just great living in a one size fits one fiscal and monetary regime!!!
Gorilla says: “Greece can wag the dog, but it can’t buy a Frankfurter!”
Greeks are finding out what it means to be bust…
No more easily injectable insulin for Greek diabetics, Danish Big Pharma won’t accept price cuts until the old bills are paid!
Gorilla says: “Austerity comes upon Athens like a sugar rush!”
The Tories win in Britain, but not by enough to avoid a coalition government! So the pound falls (actually good news for the UK, as it tries to cope with a large national debt), and the scrambling for power begins.
Meanwhile, back in Euroland, parliaments are having no difficulty passing various austerity/loan plans, but the markets remain unconvinced. The EU appears woefully unable to cope with the contagion. It appears very likely that Greece will default on some of its debts, and that Portugal and Spain will be the next countries to come under sustained market attack.
Gorilla says: “A spoonful of euros makes the markets go down!”
Britain: better get your fiscal house in order, says Brussels!!!
When the laughing stops, the British might remind Euroland that it has a big advantage over Greece, Ireland, Spain, Italy, and Portugal: a currency it can call its own…
And that currency can be devalued quite easily, because London isn’t running a monetary policy based on pleasing Germany and bailing out her bankers!
Greece and the others caught in Eurocontagionville would be better off deciding, if the decision hasn’t already been made for them, that the Euro is best left behind.
Default is always an easy choice when the alternative is 10 years of no growth and a total breakdown in social cohesion.
Gorilla says: “Let’s see who wins the race to break the buck!”
Yearning for liquidity!
The European Central Bank springs into action, suspending its own rules to allow the Greeks to borrow against their vast store of junk-level debt!
It’s an embarrassing climbdown, made more embarrassing because it enables the markets to go after the debt of Spain, Portugal, Ireland, and Italy. The contagion that began with Greece will not end in anything but tears and more bailouts (upwards of $1 trillion may be needed).
Gorilla says: “M. Trichet’s bluff has been called by his own banks!”
The rescue package is mostly about rescuing German and French banks, who are big holders of Greek debt. Greeks may not be popular in Berlin, but collapsing banks would not be more popular!
The difficulty is that Greece is small potatoes, it’s Spain, Italy, and the UK that are the juicy targets. The UK has the easiest position, because it can devalue the pound.
Sooner or later, Euroland will have to decide either to pitch out countries like Greece, Portugal and Ireland or to pony up at least $1 trillion to rescue Euroland banks.
Gorilla says: “Austerity is never having your banks say sorry!”
The tidetime folklorist wonders when Germany will come to its neighbors without hat in hand.
The Platter: Gildo Hat Euch Lieb by Gildo Horn (Unification Is Hard To Swallow)
The Bait: The Real Image HDS Grave Digger (Nana Mouskouri Is Now Full European)
The IMF’s tripled the size of the Greek rescue package, a necessary first step on the road to recognizing reality…
Of course, it’s still not enough money, as Portugal will require at least $100 billion, and Spain is waiting in the wings if the markets remain unconvinced.
Further contagion of this sort might end up costing $1 trillion. The lack of coherent political leadership in Euroland, most especially from the Germans, is making the problem worse.
Another unanswered question is who’ll be responsible for replenishing IMF coffers if the bill escalates further.
Answer: the US taxpayer will bear a very large burden. That’s not getting any discussion on this side of the pond, but it’s inevitable.
Gorilla says: “The Germans won’t go and the Greeks can’t leave!”
The test of Euroland begins in earnest…
The bond market for Greece, Portugal, and Spain, and possibly Ireland and Italy, is nearing collapse.
There’s not much belief in:
*The ability of the Greeks to undertake serious fiscal and monetary reform.
*The ability of the Portuguese to refinance an external debt that’s larger than Greece’s.
*The willingness of Germany and other Euroland countries to finance a large scale rescue package on the order of $200-250/billion over the next 3 years.
*The capacity of the European Central Bank to do anything other than fight non-existent inflation.
Will there be haircuts? Inevitably, on the order of 20-30%, which may then risk the solvency of several European banks.
Will Euroland survive? Not likely in its present form, the question is who will leave and who will be pitched out.
What about America? Time to ask the wizards of Wall Street just how much they stand to lose in this debacle.
Gorilla says: “The free drinks are gone, you’ll have to pay up for and with more than peanuts!”
But that’s where the Germans are these days: firmly stuck in the land of denial…
The bottom line for Berlin: several hundred billion Euros will be needed to bail out Greece and Portugal, the alternative is the end of Euroland as a serious player with America and China, and a collapse of the Euro (something which Germany would not find too terrible, given its beggar thy neighbor trade policy) and possibly several major European banks.
So, the talk of tougher conditions is window dressing, fundamentally German politicians will have to come clean with their voters on the size and scope of the rescue effort needed.
Gorilla says: “You can pay Greece now and you can pay Greece later!”
