Europe is falling apart

It feels as if Europe has rolled the clocks back to 2011 as the effects of the ECB’s LTRO have now well and truly warn off and the markets appear to have reconnected with idea that the fundamental issues of the Eurozone have never been addressed.

Spain is 55% through its debt schedule for the year but, as the shadow of emergency operations passes over, yields are rising quickly:

Spain sold 372 million euros of a bond maturing January 31, 2015 at an average yield of 4.375 percent, after paying 2.89 percent April 4, with a bid-to-cover ratio of 4.45 after 2.4 in April.

The bond maturing July 30, 2015 sold 1.0 billion euros, had a yield of 4.876 percent compared to 4.037 percent May 3 and was 3 times subscribed following a bid-to-cover ratio of 2.9 percent at the last auction.

The bond maturing April 30, 2016 sold 1.1 billion euros with an average yield of 5.106 percent, higher than 3.374 percent March 15. Demand was lower than previously, with the bond 2.4 times subscribed after 4.1 times at the March auction.

But that wasn’t Spain’s only problem overnight:

The Spanish government moved Thursday to quell fears of massive deposit withdrawals in Bankia SA (BKIA.MC) as its shares were pummeled by an unconfirmed local media report that depositors were withdrawing savings after the government rescued the ailing lender last week.

“It is not true that there’s a deposit flight,” Deputy Finance Minister Fernando Jimenez Latorre told a news conference to discuss the country’s economic outlook. “Depositors are safer now than they were a couple of weeks ago.” He also dismissed the notion that Spanish banking sector could face massive deposit withdrawals.

Bankia’s stock fell as much as 29% early in the session, before recovering some of the ground and ending down 14% on the day.

And then this morning Moody’s took a blowtorch to the rest of the banking system:

Moody’s Investors Service has today downgraded by one to three notches the long-term debt and deposit ratings for 16 Spanish banks and Santander UK PLC, a UK-domiciled subsidiary of Banco Santander (Spain) SA. The rating downgrades primarily reflect the concurrent downgrades of most of these banks’ standalone credit assessments, and in five cases also Moody’s assessment that the Spanish government’s ability to provide support to the banks has reduced.

The debt and deposit ratings declined by one notch for five banks, by two notches for three banks and by three notches for nine banks. The short-term ratings for 13 banks have also been downgraded between one and two notches, triggered by the long-term ratings changes.

The outlooks on the debt and deposit ratings for ten of the 17 banks downgraded today are now negative. For the remaining seven banks affected by today’s actions, their ratings remain on review for further downgrade, for reasons specific to each bank

It is now quite apparent that the sovereign and banking system in Spain are so intertwined that they are coming to be seen a one thing by the CRAs. The problem is this looks like a downwards spiral for both with no apparent solution to addressing the country’s underlying economic problems. Spain’s broader equities market was down another 1.1% overnight and 35% for the year, while yields continue to rise back towards their November 2011 peaks.

But it isn’t just Spain having trouble with banking deposits, and banking stability more generally. Greece is most certainly struggling from the same, but with the added issue that the ECB is refusing to work directly with a number of Greek banks:

Depending on who you talk to, anything from €700m ($892m; £560m) to €1.2bn was taken out of banks in the days after the election, out of total deposits of around €160bn. That total, in turn, is about a third lower than it was at the end of 2009.

At the same time, the ECB has apparently now said that it won’t directly lend to some Greek banks that it judges to be technically “insolvent”. These are banks that have holes in their balance sheets, because, thanks to the restructuring of Greek sovereign debt, they can’t now expect to get back all of the money that they lent to the government.

That sounds bad, but the banks that have lost access to direct ECB funding can almost certainly still get money from the Greek central bank, which, of course, is ultimately, getting its cash from the ECB (though unlike the more direct form of ECB liquidity support, all the risk implicit in this so-called ELA lending is, formally at least, borne by the Greeks alone).

Please see this post for some further discussion of ECB/NCB interactions.

Just like Spain, Greece also managed a downgrade overnight with Fitch ratings downgrading the sovereign, sighting the outcome of country’s election as the major reason for the cut:

Fitch downgraded Greece’s credit a notch Thursday, to CCC from B-, citing political uncertainty over the country’s commitment to a crucial bailout and possible exit of the eurozone.

“The downgrade of Greece’s sovereign ratings reflects the heightened risk that Greece may not be able to sustain its membership of Economic and Monetary Union (EMU),” Fitch Ratings said in a statement.

Fitch said that a strong showing by Greek “anti-austerity” parties in May 6 parliamentary elections and the subsequent failure to form a government “underscores the lack of public and political support for the EU-IMF 173-billion-euro ($220 billion) program.”

In the meantime, as an interim procedure, Greece has installed a temporary cabinet in the lead up to elections:

Amid deepening economic and political upheaval and under the watchful eye of foreign creditors, Greece’s caretaker prime minister, Panagiotis Pikrammenos, on Thursday appointed a temporary cabinet that will be in place until June 17 when the second general election in a little more than a month is expected to determine the future of the troubled country in the euro zone and the broader stability of the bloc.

According to the polls Syriza’s leader Alexis Tsipras could be the next Greek Prime Minister, and he has kicked off his new campaign in much the same way he left the last one:

“There is no memorandum,” the Syriza leader, Alexis Tsipras, 37, told state channel Net. “The memorandum is finished politically because it has not produced results,” said Mr. Tsipras, referring to a deepening recession in the debt-wracked country.

“Mrs. Merkel is becoming increasingly isolated in Europe,” he said, referring to the German chancellor, Angela Merkel, whose country has taken the toughest line on Greek economic reforms. “Austerity has failed across Europe,” he added and he insisted that his party’s line does not expose the country to a possible euro zone exit even though European leaders have stressed that nonenforcement of the bailout provisions would achieve just that.

We’ll have to wait for the results of the June election before we can determine what happens next, but Mr Tsiparas isn’t alone in Europe calling for a serious re-think of the “fiscal compact”:

France’s new finance minister has reiterated that the country’s new socialist government will not ratify the European Union’s (EU) fiscal pact. Pierre Moscovici said the pact would have to include provisions for growth before France signed up.

The fiscal pact aims to ensure governments keep a tighter control of spending to reduce debt levels. French President Francois Hollande is campaigning for a greater focus on growth alongside austerity.

Austerity alone, he says, will not solve the eurozone debt crisis.

“What has been said quite clearly is that the treaty will not be ratified as is and that it must be completed with a chapter on growth, with a growth strategy,” said Mr Moscovici in a television interview, his first public comments since his appointment.

As I said at the start of the post it feels like 2011 again. A worrying mix of political squabbling on top of the fact that there is no credible plan to address the problems of the countries at risk.

Surely it’s time for another summit, or at least talk of LTRO 2.5.

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  1. Loads of meetings in Brussels this week… and you’re right, there is a shift going on, internally as well. Hollande is a perfect excuse for Merkel to change her approach a bit without loosing face.

    I expect an adjusted approach including growth measures before the Greek elections…

    • My expectations are for the same, at least in word anyway, but its all coming very late for the likes of Spain.

      As you know swift decisive action isn’t exactly Europe’s thing, But here’s hoping.

      • its all coming very late for the likes of Spain.

        Bank runs are very contagious. These are dangerous days for Europe. There is a Lehman-like whiff in the air.

  2. I think we’re close to seeing another FED to ECB swap, and probably of significant size. The EU is trying to hold it together, but by stumbling through the issues it might already have failed.

    If you look at the TARGET 2 capital flight EU states are being weakened, but it goes deeper, as where is the basis of re-building economies?

    They talk about growth, but banks are not lending as they are distressed, as are the member states.

    I’s like to be optimistic, but all the macro data I see tells me this is going to get worse.

    DE have a read of this; nothing you don’t already know, but makes a few good points.

  3. “A worrying mix of political squabbling on top of the fact that there is no credible plan to address the problems of the countries at risk.”

    motto used by the U.S. Army Corps of Engineers (“Seabees”) during World War II:

    “The difficult we do immediately. The impossible takes a little longer.”

    • DrBob127MEMBER

      It was the US Army Corps of Engineers who built the levies around New Orleans that failed so spectacularly.

  4. There is a total unwillingness to do the ‘difficult’.
    The ‘impossible’ here would take generations. The whole culture and education systems have to be changed.

    You’ve got to love the ‘we don’t like austerity so we’ll have growth’ mantra.

    The biggest worry for the world is the very fact that both politicians and people, including most economists, believe such tripe.
    This is all going to end in not just tears.

    • BubbleyMEMBER

      It seems as though most of the media and financial instituitions have had their hands over their ears and been shouting “La, la, la, la, la,la!” ever since the GFC.

      Sadly, that doesnt make the problem go away.

    • Alex Heyworth

      “You’ve got to love the ‘we don’t like austerity so we’ll have growth’ mantra.”

      Exactly, as if growth was a policy rather than an outcome.

      • The kernel of the problem for the deficit-struck European States is that fiscal instability is generating twin financial and economic crises. If a there were a system of cross-border fiscal transfers guaranteed by an All-Europe Treasury and a Central Bank empowered to act as lender-of-last-resort, there would be no financial crisis in Europe and there would be no economic paralysis in the deficit economies.

        Since there is no structure for cross-border fiscal equalization, the debtor states have to seek fiscal stability with their own separate means. However, these states face an inescapable but compelling economic paradox – they can neither grow nor shrink their way to balance within their respective national jurisdictions. This means that whatever they try, fiscal imbalance will become (or is already) chronic. Since by definition imbalances are ultimately unsustainable, these states face ever-worsening decay in their public finances. Ultimately, national banking will become impossible and economic implosion will follow.

        So from the standpoint of the debtor states, there is only one remaining path to solvency – and that is to reflate/devalue vis-a-vis one another and especially vis-a-vis their creditor neighbours. A precondition for this, of course, is their departure from the common currency. The first result of such currency reform would also be up-front collapse – the closure of capital markets and economic seizure – but with the prospect that this would be temporary and that economic revival would surely return.

        And yet, while individual nations have defaulted and undergone devaluation/reflation in the past (and lived to tell the tale), there has never been system-wide dissolution of a currency bloc, let alone one as large and organically-central as the Euro. So while it is possible to conceive of a different, more complete, form of union in Europe, or of a Europe with a narrower monetary union, it is not possible to see how Europe can actually achieve either.

        And yet even if they do not recognize it, Europeans must eventually move in one direction or the other. The status quo is untenable because it is causing ever-deeper, wider and more prolonged hardship and is therefore becoming steadily more self-undermining.

        In this context, on the subject of hardship, one other thing has to be really clearly understood. There is a tendency to dismiss the economic distress of ordinary Europeans as something they have brought upon themselves and therefore in some sense deserve to endure. Such contemptuous disdain is absolutely misplaced. The distress of the people of Europe is above all a consequence of institutional dysfunction. Fiscal imbalance is not and was not caused by the unemployed, the dispossessed, the ill, the aged or the youthful.

        Beyond this, it is equally clear that reducing the ordinary people of Europe to destitution will not bring about either fiscal order or a return to prosperity. On the contrary, these things can be achieved only if there is meaningful institutional reform in Europe.

        Deplorably, the Euro-political structures lack both the popular legitimacy and the formal authority to initiate any reforms, which means that even if they can be conceived, effective reforms cannot be brought into reality. It follows that social and political division, civil upheaval, ethnic and religious bigotry, economic dislocation and deep personal hardship will become entrenched, staple facts of life. This is already occurring in Greece, Spain, Ireland and Portugal, is taking hold in Italy and Slovenia and threatens the whole European economic zone.

        Considering European capital markets lie at the heart of global finance and are therefore critical to the healthy functioning of the global economy, we all have a stake in the progress of events in Europe. While this means we should all be persuading the Europeans to see reason and achieve reform, alas we have simply arrived together at yet another wholly avoidable and essentially insoluble European impasse.

  5. Isn’t the fundamental issue of the Eurozone that the Europeans have been squabbling and fighting wars with each other forever? That is the natural order of things, which seems to be now re-asserting itself, completely predictably now that the over-confidence reflected in a huge bull market is now itself history.

    • True. It just wasn’t going to work for long. 1000 years of warfare and perverse alliances is burned into the European psyche. The bull market only kept it alive until now……

    • True AC. However it is exactly what civilised people were trying to avoid for the future.
      Unfortunatley good things also require effort and sacrifice. However nealt all western societies have been on an debt-fuelled over-consumption easy life binge for at least two generations.
      The Germans didn’t indulge themselves in the same way and were more disciplined. Now everyone is returning to their old ways and blaming the Germans for all their own ills

      This is reflected in the fundamental economics.

      • Perhaps the German people didn’t indulge themselves in quite the same way. But their bankers are in this up to their necks! Or maybe over their heads?

        Germany’s (relative) economic strength is largely built on the borrowings of other Europeans. It takes two to tango. You can’t have lenders without borrowers, and vice-versa. It’s impossible for me to assign blame, and fruitless to do so.

        • German banks were also the biggest sacrificial lambs for the likes of Goldman Sachs when they wanted to offload their “shitty” sub-prime mortgage securities.

          “WHO’S on the other side, who’s the idiot?” is the question posed by one of the characters in “The Big Short”, Michael Lewis’s new book on those few investors who bet against the subprime-mortgage market. “Düsseldorf. Stupid Germans,” is the answer they keep getting. “They take rating agencies seriously. They play by the rules.”

      • rob barrattMEMBER

        You bet the Germans didn’t indulge themselves. I worked for Bertelsmann Industries in Gutersloh for a year. They didn’t take prisoners, if a man took a sickie on a shift the others were expected to finish his work too. Result? Absenteeism a fraction of the UK or Australia, and no-one whinged. Compare German or Dutch (farmers excepted) work ethic to here before talking about how competitive we are.

        • Cultural aspect aside, one thing that worked really well in The Netherlands was making the employer responsible for helping the employee back to work asap through rehabilitation etc.

          No such thing as Sick Leave in The Netherlands. If you are genuinely sick you can stay home with pay for as long as it takes. You will be checked up on by the company doctor and dedicated companies hired by the employers though.

          • Great system. I wonder why they haven’t introduced it here…

            Business in Australia doesn’t like to actually do work, just collect the highest margins and rents.

        • I had a different experience when I worked in Germany. The Germans hired foreigners to do the work, while they smoked and drank coffee. So might depend who you worked for.

          • MontagueCapulet

            Let’s not forget that Germany’s debt to GDP ratio is only a few percentage points better than France. A few significant bank bailouts and it will be over 100%. In the end Germany will be forced to agree to money printing if they want to save the Euro, and the stability pact, which Germany repeatedly violated in the past, will be relaxed to the 6-7% range. Inflation will become a matter of policy, to save the Euro.

            If Germany opts to leave the Euro, they’ll have to bail out their banks which will lose big time when the New Mark rises and their cross-border Euro assets decline in value. Either way they’ll have debt over 100% of GDP, with lousy demographics. Print or default are the only choices, even for Germany.

      • the germans certainly benefited from the low exchange rate that resulted from sharing a currency with economically weaker nations. german export strength combined with low euro exchange meant their export boom coninued way longer that it would have if their currency had appreciated to balance things out. so yes, they do have a better work ethic, but their economic strength is just as depndant on the “laziness” and inefficiency of the southern countries.

  6. what exactly will another LTRO accomplish? Surely its clear by now that such concepts simply paper over cracks and kick the can, building up even greater pressure for a larger pop down the road.

    Until the underlying issue, debt, is resolved then nothing has improved.

    • ‘ GREECE: Alexis Tsipras, head of Greece’s radical left party, said in an interview that there is little chance Europe will cut off funding to the country and if it does, Greece will repudiate its debts. (WSJ)’

      Debt that can’t be paid won’t be paid.

    • Silly person poid! You stated what good it will do…paper over the cracks and kick the can down the road…that’s precisely why it will be done…along with LTRO4 to 23.

      There will be LTRO’s aplenty as serious inflation strikes.

    • That story is bull. Support for Syriza has only increased since the election.

      No one ever voted for austerity.

          • ONe heck of a lot. Austerity is about trying to share the load around. It’s about trying to fix all the past ills that are causing the current problems. It’s about recognising that what has been going on cannot continue forever and trying to do something about it.
            Inflation about not addressing problems; kicking the can down the
            road. Inflation is about offloading all the problems onto a few while the rest of us try to live our outrageous lifestyles.

          • I disagree flawse. Deflation would be the way of sharing the pain. Inflation and austerity both favour the bankers.

            Note that I am not saying that deflation would be fun! But less fun than what is already happening in Greece, Spain et al?? I wonder.

          • I think we just disagree on how we define it AC. My ‘austerity’ involves deflation shared by everybody…Bankers, public servants, lawyers and all!

            If we are all just playing with numbes none of it will work. The problems are structural and cultural. Any attempt to get out of this without reform at such a basic level will fail and lead to total misery.

            There is going to be terrible dislocation before this is through. It’s a question of how to minimise and share the pain

          • Thanks flawse for clarifying.

            I am certainly not prescribing deflation, it’s not anyone’s preferred medicine, but I think it is in the early stages of manifesting.

            And whichever way things go, as DFM has been saying, tin-hat on!

          • “ONe heck of a lot. Austerity is about trying to share the load around”

            Looks very obvious to me that it merely increases the load in an agonising fashion while failing to achive much in the way of anything positive.

            That’s Euro-style of course, your approach might be better.

          • Yes sorry Lef-tee. I’m often a bit short of complete explanation or clarification!
            My only possible defence is that proper explanation would involve major treatises on everything from my ideas of macro to concepts of individual responsibility.
            Even if I wrote if nobody would read it! 🙂

            Lef-tee also remember that it has taken us generations of western profligacy to get to this point. Implementation of saving type policies can hardly be expected to reverse all that in 6 months. That sems to be the current demand.

    • That article refers to “a poll”. What poll? What was the sample? There are polls and there are polls.

      Ok, went to Bloomberg and looked it up.

      New Democracy got 23.1 percent while Syriza, which is opposed to implementing Greece’s international rescue, had 21 percent, the survey of 1,027 Greeks by Marc for Alpha TV showed… The margin of error for the poll, which was conducted May 15 to May 17, ranged between 2.7 percentage points and 2.6 percentage points.

      So, tiny sample size, no-name-brand surveyors and results within margin of error. Fail.

    • LOL! The usual Reuters bunkum! I wouldn’t believe anything Reuters says! The European Union is falling apart, you can run with your nonsense articles all you like!

      • It’s very likely that Greece will revert to its own currency, and maybe Spain will blow up as well, but the EU has 27 member states and the Eurozone has 17 member states, so “falling apart” or “failing” is just hyperbole. Most of Europe is traveling quite well, considering.

        A far likelier outcome, over the next 5 to 10 years, is a slightly smaller EU with more centralisation and less scope for member states to behave the way they have in the past.

        • Is Ireland travelling well? Italy? Portugal? France? You must be living on another planet.

        • Please back up your statements; “the rest of Europe is travelling quite well” and your inference that the current situation is “hyperbole”, with some facts?

          • Let’s not start being selective with the quotes, eh? What I wrote was “Most of Europe is traveling quite well, considering.” Important qualification.

            The EU is not solely comprised of the PIIGS. It consists of 27 member states, and as far as I’m aware, the *majority* are not on the brink of collapse, or anywhere close. Almost all increased their GDP over the past year and most don’t have excessive government debts. (In fact, half of them have government debt under 50% of GDP.)

            In any case, since you’re the one claiming that Europe is all over, maybe you should provide a list of all EU countries, with a short statement as to why a majority are facing catastrophe.

            It should be easy – there’s a website called Eurostat that lists everything you’ll need.

          • PhilH, how many of those with less than 50% debt to GDP have banks which would be exposed to default by the PIIGS (and subsequently require government bailout)?

            Spain is an example of just how quickly debt to GDP can blow out once things turn south… it’s roughly doubled over the past 4 years.

          • BubbleyMEMBER

            Hmm, I seem to recall Belguim was on the brink of collapse and Slovakia was in trouble too.

            Please correct me if I’m wrong.

        • It’s like living in a duplex, watching your neighbour next door being burned down, yet still believe your house will be spared.
          No it won’t…

  7. Thanks DE. Bank runs.. surreal..
    In your opinion, what is the risk for the global banking system? Is it tinfoil hat time?

  8. DrBob127MEMBER

    I was looking through this article on Sovereign defaults

    for some history of countries defaulting on their debts. One think that struck me with the dates is that many times they are associated with significant conflict.

    The current situation has a whiff of war to it.

    • Aristophrenia


      It should be pretty obvious, economic downturns tend to violence.

      People will almost never react to political oppression, or anything else really so long as they can eat, drink and be merry. As soon as the survival instincts kick in things get dammed serious.

      I have several books on my shelves I have ordered and not read yet regarding revolutions and poverty.

      The German national uprisings were spurred by hardship, even things like the American civil war were based on unfair taxation and financial burdens, Indias rejection of the Raj, its always the case. Rarely is it political or even religious as many would have us think.

      Its resources and wealth, or rather lack of resources and lack of wealth.

      I would hate to see what happens to China if there is a serious, serious economic downturn there….agh.

      • American civil war based on unfair taxation?

        I can’t say I’ve come across that in my readings.

        Any leads you can offer in this respect?

        • State rights,Economic disparity including taxation at a federal and state level as well as the peculiar instituion were all causes of the civil war.
          In 1836 the South Carolina state threatened secession over custom duties re charleston Harbour as well as resentment on other issues.

          Its a bit like WA re unfair GST splits etc

          • I know staes rights was the issue.

            But I was under the impression the differences betwen states had more to do with the Missouri compromise that anything fiscal.

            The federal regime at the time had virtually no tax raising power other than tariffs.

            This may have impacted the South as they were export focused, industrialists seeking protection.

            But I’ve never heard of tax being a major element in the civil war

        • Aristophrenia

          I meant to write Independence, sorry, however it goes to show the truth of the matter, as even in my haste the reality is the same – its always about wealth destruction and poverty.

          Consider the slave issue during the civil war, this was entirely about wealth, however as Jack points out there were more direct issues at stake.

  9. @PhilH May 18, 2012 at 11:03 am

    I never made any claims that Europe was collapsing. You are putting words in my mouth. Knee-jerk posturing and resorting to a higher authority may have worked before to downplay the situation as mere “hyperbole”, but clearly that can has been kicked about as far it goes. Otherwise the markets, in the absence of further QE, would be agreeing with your rosy analysis. Wouldn’t they?

  10. The strength of MacroBusiness in my view is that it tries to balance the debate surrounding the role of Economics. Whereas some simply believe all that matters is Economics, MB tries to show that there are political and social considerations which take precedent.

    Some of you will have realised that I have posted a few comments regarding Greece and I have one more which I think needs to be shared (credit to a recent article for jogging my memory).

    For those with legal experience, especially in international business transaction law, the question of a Greek default and retrospective CACs are a massive issue. In particular, CACs are a recent invention and the only form of contract law protection available to check the forms of sovereign immunity which are so well established in Anglo-Saxon culture. The catch 22 is this, Greece can default and it will fundamentally fracture the legal strengths of CAC’s as means of protection or, it can suffer the terrible costs of austerity.

    Notwithstanding the lock out effect from financial markets if Greece does default, many here question why the Greek people are so defiant in support of anti-memorandum doctrines, and in particular, why there is increasing support for Tsipras.

    Greeks more so than any other Western country, by their very core identify with and are shaped in their thinking by the legacies of both ancient and modern Greece. It will be suprising for many given the rich history of Greece, to know that ‘Oxi Day’ – the day that Greece gave a defiant NO to the Italian request for servitude, is the most popular and strongest symbol that Greeks today identify with.

    Greece said NO, was attacked by the stronger Italian forces and beat the Italians – only for their show of strength to lead Germany to treat Greece and the Greeks far harsher than any other Western country in the War.

    It is important for people to realise that this self-sacrificing attitude, the ability to gamble everything for the moral high-ground is being replicated today by the increased support for Tsipras.

    The more they realise they have no option, the more they will press for that 1% – the 1% that Europe will blink first and give in.

    I don’t think many people here or in the Western media understand this. Greeks by their nature have shown repeatedly that they are willing to gamble everything for their beliefs. The Civil War, WW2, WW1, Cyprus Conflict – these are all perfect examples.

    I make a note of this because many here believe SYRIZA is some radical hard-left organisation which is so unbelievably anti-capitalist that they will nationalise all banks – i.e. follow the slippery slope fallacy that Westerners have long applied to different ways of thinking.

    This is a zero-sum game for Greece, SYRIZA is not playing with a loaded revolver because it is hard-left. It is doing it because they are Greeks who have been groomed to believe in the nobility of self-sacrifice – a concept whose significance is only amplified by the form of the Greek Orthodox religion.

    The only upside is that knowing this, and knowing the weakness of the EU, Tsipras may just lead Greece into that 1% and overhaul the memorandum.

    • I don’t think many people here or in the Western media understand this. Greeks by their nature have shown repeatedly that they are willing to gamble everything for their beliefs. The Civil War, WW2, WW1, Cyprus Conflict – these are all perfect examples.

      Then what are their beliefs in this aspect?

      If the German’s offer to front up money, them pilfer all you can?

    • I’m Greek, but let’s not wrap this up in some veil of ethno-religious exceptionalism, please? Most people and that includes Greeks, take unkindly to having a gun put to their heads, which is what debt enslavement and creeping poverty without prospect of end is. This is why Greece will default and others too will follow.

    • I am thinking that it goes like this, change the memorandum otherwise we leave.

      Too bad if you leave you still owe us the money in Euro.

      Too bad we cant pay you.

      Too bad you can no longer be a member of NATO.

      Turkey wants to renogiate the ocean borders in the Aegean.

      Or you know there are thousands or Syrian Refugees heading for Crete.

      I admire the self sacrifice by the way.

  11. Having seen the sea of shoddily built unsold apartment blocks stretching along the various Costa’s back in 2008, I am very comfortable in my belief that Spain and her banks are utter toast. This has a very long way to go yet for Spain and Europe. And it will be a very ugly thing.

    As the dominoes fall ( Greece, Spain, then Italy and eventually France’ banks will take their very big hit) pressure will increase on Germany’s taxpayers to stump up to prevent the sinking others.

    Remembering that a lot of the new Germany is old “east” , somehow I don’t think their collective patience with the Latins will be too benevolent if this turns into the rout I suspect it soon enough will be.

    I’m looking for Germany to eventually cut the rest loose. Triage.

  12. I am seeing media reports along the lines of “pfft, Greece is ONLY 2% of Eurozone GDP”

    Hmmm..what was Lehman’s share of US GDP?

  13. And the answer is…!

    There is no answer, no easy way out.

    The world misunderstood (or chose to misunderstand) debt.

    Now with the help of Prof Keen et al, debt comes into focus for what it really is.

    History should have warned ‘finance’ by sharing the stories of the 10 year jublee.

    Why did these jublees occur? They had a purpose.

    Did these jublees coincide with political and military events?

    I am thinking of the DVD ‘Fog of War’ the Vietnam war had been raging for a generation and B 52 razing Hanoi, Cho En Lai at the Paris Peace Talks, leans over to Robert McNamara (US Sec of Defence) and says ….. Have you ever read the history of Vietnam?