False dawn in Greece

European markets were lead by Greek equities which were up 6.8%, attempting a bounce last night on the news that:

Greece’s conservatives have regained an opinion poll lead that would allow the formation of a pro-bailout government committed to keeping the country in the euro zone, a batch of new surveys showed on Saturday.

I’m not too sure why this is such good news, Greece is in deep trouble either way and it would take a person with a serious short term memory problem to forget what has already happened to Greece under the existing programs. Either way, the campaign by New Democracy appears to be clawing back voters leading to a response from the left:

Alexis Tsipras, the head of the Coalition of the Radical Left (SYRIZA) the surprise second-place finisher in stalemated May 6 elections is swinging back. He is locked in a neck-and-neck duel to win the next elections. He accused New Democracy leader Antonis Samaras and PASOK Socialist leader Evangelos Venizelos of trying to frighten Greeks into voting for them with horror stories of a complete economic collapse and anarchy if Greeks support him and other anti-austerity parties that won 68 percent of the vote in the first elections. Tsipras accused “domestic political forces” of “blackmail, threats and lies,” and with scaremongering.

Samaras said SYRIZA’s intention to repudiate Greece’s loan agreement, or memorandum, with the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) could lead the country out of the euro. “A return to the drachma would lead to incomes, savings and assets being halved, while debt would grow,” Samaras told party members at an ND national congress in Athens. “Tsipras will bring a worse memorandum that will serve the drachma lobby, which will be able to buy up the country on the cheap.”

Although Samaras is stating that he supports the existing programs he is actually suggesting that he will re-negotiate the deal. This in itself appears to be wishful thinking,  but some his other promises appear outright delusional:

A New Democracy victory in the June would see the party halt the rise in unemployment by the of 2012 and reduce jobless levels to the same rate as in 2009 within two years by creating “hundreds of thousands of new jobs,” Samaras said.

The party’s recovery program for the Greek economy would be to absorb European funds and emphasize liquidity for small and medium-sized companies, he said. Samaras repeated a pledge for no further cuts in wages and pensions, and not to introduce new taxes.

Call it campaigning if you like, but these undeliverable promises highlight to me that Greece is in deep trouble either way and there is little to celebrate even if the centre wins the next election.  In the meantime Greek banks received a proportion of the re-capitalisation funds promised under the latest bailout in the form of EFSF bonds that they can “cash in” with the ECB:

Greece’s bank support fund on Monday disbursed 18 billion euros to the country’s four biggest banks as a part of a long-planned recapitalisation effort, a fund official said.

“The funds have been disbursed,” the official at the Hellenic Financial Stability Facility, who declined to be named, told Reuters.

The injection – via bonds from the European Financial Stability Facility rescue fund – will boost the capital base of National Bank, Alpha, Eurobank and Piraeus Bank, allowing them to regain access to European Central Bank funding.

Greek banks already have  €125 billion euros in loans from the ECB including €54 from the Emergency liquidity program ( ELA ) via the Greek national bank.  Given recent trends the €18 billion is likely to make its way out of Greece towards to core over the next few months meaning the Greek banks will be back asking for more funds. Please see this post for more on that point.

Moving on from Greece we also saw a press conference by the Spanish PM, Mariano Rajoy, in which he gave a very confused report on the state of Spain’s current crisis:

“There are major doubts over the euro zone and that makes the risk premium for some countries very high. That’s why it would be a very good idea to deliver a clear message there’s no going back for the euro,” Rajoy told a news conference.

“There will not be any (European) rescue for the Spanish banking system.”

Rajoy went on to say that Spain must continue to bring down its deficit, but is struggling to finance itself at sustainable levels because of the high risk premiums involved. He also stated that there must be clear and decisive action and Europe needs to move forward with monetary and fiscal integration which would clear up the doubts about the future of the Eurozone. He once again repeated that although his country was struggling it wouldn’t need a bailout, but also stated that he he wanted the the European Stability Mechanism to be allowed to lend directly to banks.

The trouble is that the Spanish government’s fund to support bank restructuring only has €5.3bn, and Bankia, which already requires nearly €24bn, is not the only bank that will need support. The most notable are CatalunyaCaixa and NovaGalicia which were nationalised by the Spanish government in September who have recently stated that they want addition capital. The Spanish government has ordered an audit of the banking system which will be delivered in June, but the some of the bad news is already being reported:

BFA, the parent group of nationalized Spanish bank Bankia, said on Monday it had restated its 2011 results to reflect a 3.3 billion euro loss, rather than a 41 million euro profit, following a bailout from the state.

In a statement to the stock exchange regulator, BFA said the restated loss reflected a review of its loan portfolios and capital needs after a new audit and as part of the clean-up plan implemented by the government.

Although Mr Rajoy claims there is no requirement for a bailout he has been very vocal with calls for the ECB to do more to support Spanish debt. That appears to have fallen on deaf ears, as the latest stats from the ECB show that the SMP lies dormant.

Spanish yields were up again after the press conference and are now approaching the highs of last November. Against Mr Rajoy’s insistence it would appear that a bailout is coming.

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Comments

  1. Diogenes the CynicMEMBER

    Why can’t the pollies let the banks fail?

    Iceland provides a shining example of what happens when you do…your country recovers relatively quickly. Obviously they had a currency that could depreciate but so could Spain if they left the Euro.

    Why go down the path of Greece and Ireland when Iceland shows the way?

  2. GB if you can’t be constructive with your criticism, then don’t bother replying at all.

    As I said last night, if you don’t like that policy, don’t comment.

    • TP the criticism of the media’s (including MB) reporting of the “immanent” grexit is valid. the comment that i have posted twice in 2 days and has been removed twice was factual. unlike the grexit reporting which is amongst the worst case of baseless hysterical scaremongering i have ever seen. I know it suits certain peoples narratives but thats not an excuse for reporting baseless speculation as news. I see its ok for LVO to pull Terry Ryder up for his baseless story and good on him. ryders story was rubbish. the fact is the only place a grexit was occuring was in the media and they should be pulled up on it becuase it to was a load of rubbish.

      no wonder the stock market bouncing back so sharply. everyone has now had time to look at the facts rather than reading media stories written by fantasising bears dressed up as news and are just realising they have been played for fools for listening to them.

      • I agree with you GB that much of the reporting on the situation has been baseless, but that doesn’t really set it apart from much of what it written about many other topics.

        In regards to MB I’m not sure where your “imminent exit” thing comes from. I think I have made it fairly clear what my opinion is.

        http://www.macrobusiness.com.au/2012/05/forget-the-greek-drama-spain-and-italy-the-real-show/

        “I’ve stated previously that there really isn’t much point trying to predict what will happen before the June election, it could be that New Democracy and PASOK come back with even more strength and continue to implement the Troika program. However, even if that doesn’t occur, I am still doubtful that Greece will be going anywhere because in the game of chicken they hold many of the cards. A Greek exit would obviously be a huge upfront hit to the rest of Europe, but it also opens the door of uncertainty that Greece is just the beginning of the exits. Such an exit would come at an economic cost, but more significantly a massive political one, and given the fact that most Greeks want to stay in the Euro, even if they don’t fully comprehend what that means, I struggle to see the majority of Europe accepting this outcome.”

        • im not having a crack at you DE your coverage is far better than most and has been throughout.

          here are the facts regarding a grexit not for you but for other readers.

          a. the vast majority of greeks want to remain in the Euro, about 80% i think.
          b. The EU dose not want Greece to leave and has proved they are prepared to do pretty much anything to keep them afloat.
          c. not a single major party including syriza was or is campaining on a leaving the Euro platform.

          So where on earth did the immanent grexit come from that the media has been ramming down peoples throats for weeks?

          it was made up. im not saying you made it up. but its pretty clear now that it was a totally fabricated and baseless story designed for maximum panic and headline grabing by the media.

          • But GB, your deleted comment was (originally) the first one on this post, so it looked very much like your comment was aimed at the blogger and not your fellow commenters!

          • All true. But Greece will exit sooner or later – permanent depression for them lies with the Euro.

          • greece had problems way before the euro lefty. people like to blame the euro for greeces problems and think if they can just get out they will be fine. but anyone with a memory span longer than a goldfish will remeber it was greece cooking the books that got them into this mess. a country full of liars, cheaters, tax avoiders, corruption and sense of entitlement for doing little or no work. oh yeah, but its all the euro’s fault.

          • “greece had problems way before the euro lefty……….”

            True – but how will that serve to prevent it leaving the Euro sooner or later?

            The country is in a depression and isn’t likely to get out as long as it remains in the Euro. Unemployment in Greece has long been high compared to Australia but it is dreadful at present – twice the longer term average – and not getting better.

            The pro-bailouts will probably win the election and further harsh austerity will be imposed, further entrenching the hopelessness.

            How long will a nation tollerate conditions equivalent to the great depression being imposed from the outside? I don’t know – a long time it would seem.

            But I’ll bet it won’t be forever.

  3. Commentators will speculate about whether Greece will remain in the Euro or not. Right now, this is all just conjecture.

    What is not a matter of conjecture, however, is that Greece is insolvent. It’s government and its banks rely on emergency funding made available by distinctly unwilling lenders on terms with which Greece can scarcely comply. As a result of its insolvency, Greece has already defaulted on its private sector loans and cannot be far away from defaulting on its public sector loans either.

    Spain is also facing the risk of insolvency. This is hardly a matter of conjecture but of arithmetic and the calendar.

    This situation has been and continues to create instability in European credit markets – instability that interacts with Euro-wide fiscal imbalances and together are driving real-economy contraction.

    None of this is “totally fabricated and baseless”. On the contrary, these relate to processes of economic destruction that are all too real – especially for those people who have lost their businesses, their jobs, their savings and their homes.

    This would be bad enough, but of course the effects of the European debt crisis are not confined to Europe alone, as is well known. If anything is being contrived here, it is the absurd belief that these matters are inconsequential, and that if only they were not reported then all would be well again.

  4. I apologise in advance, but this could be long…

    95% of all the “reporting” on Greece and Greece’s situation within Europe is unmitigated garbage. For a start let’s call a spade a shovel & say Greece is in a Depression, not a long recession. Since when is ~20% GDP contraction & 23% Unemployment a recession!?!?!

    I’ve been living in Athens for the last 7 years and work in Investment Banking for my sins. I was lucky enough to arrive before the massive credit & stockmarket boom took off & I’ve been lucky (or unlucky depending on your view i guess) to trade/advise on the crisis.

    It’s the nature of modern journalism that reporters are allocated a story & told to file copy in 3 or 5 days on a subject they know sweet FA about. I’ve done numerous interviews & held numerous presentations for journalist friends for their staff (one runs a large daily paper here) & the level of understanding in the ranks is less than most high school economics students. But these people write the stories & inform the public here.

    Therefore the public are literally clueless as to what a Grexit actually means or what the Bailouts are set to achieve. Asking them to make the 17 June elections a referendum on the Euro is a waste of time & pure fear tactics. They simply don’t understand the implications. Secondly the foreign press have no understanding whatsoever as to the nature of Greek politics. Political parties here are like football teams & their voters are like fans who just vote the colours not the policies. The core of New Democracy & Pasok wouldn’t know a party policy if it tried to strangle them to death.

    Syriza is the first party to break the stranglehold of ND & PASOk since the fall of the Colonels in 1974 & almost everyone under 40 years of age will vote for them. A large proportion of Greeks will vote Syriza because they feel that “once you’ve hit bottom, then you’ve got nothing left to lose”. A lot of young under-40’s don’t fear the Drachma & see it as an escape from the banker’s cabal. And let’s not forget the latest polls (which are ridiculously biased by party allegiance) showing ND ahead were taken BEFORE Lagarde’s diplomatic comments. She’s just sent an extra 5-10% of the voters to Syriza.

    I’m convinced that only 2 election outcomes:
    1) Syriza win & tells Merkel to renegotiate. Syriza leaders believe Sthn Europe will support them. Merkel won’t and the ELA & TARGET2 stresses (perceived or real)will unwind the Euro
    2) ND & Pasok will form a fragile coalition & try to beg Merkel for some cosmetic changes which she may agree to. BUT once the non-negotiable €12bn in budget cuts are passed in Parliament the voters will ALL feel betrayed & the country will see mass strikes, protests, “Don’t Pay” movements etc & the Gov’t will fall within 3 months.

    Either way Greece’s road to default & Euro exit is now just a question of speed.

    I think MB have done a very good job recently i think, but i urge you to see the issue now as a when & not an if. The political realities of Greece will guarantee a default.

    The cultural stresses in Greece are being replayed throughout Southern Europe. All the professional contacts i’ve spoken to in this region over the last 18 months have frankly convinced me the Euro will be consigned to history in its current form.

    Again apologies for the wind-bag essay format….

    • Thank you Dim view, for taking the time to write this thorough analysis from ground zero. There are always people who would rather be hit in the head with a metaphorical hammer than be warned in advance and be prepared for potential disasters/turmoils. Others appreciate being pre-warned and prepared.

    • Alex Heyworth

      Thanks for the on the ground perspective from someone both economically and politically literate. The question your summary raises for me is how does the inevitability of a Grexit match up with polls showing 80% of Greeks want to stay in the Euro. Do Greek voters think they can stay in but not have austerity? This seems to be the line Tsipras is promoting. I can see how a Syriza government might win a few concessions, but surely it is not possible for austerity to be abandoned while remaining in the Euro?

      • I agree, this is the great imponderable from the outsider’s perspective.

        The Euro brought a massive credit fuelled boom to the Greek people that was impossible under the Drachma. The people don’t really understand why they got the boom, just that they got one. Returning to the Drachma is seen as a return to the living standards of 30+ years ago. This is the dichotomy that splits most Greeks minds. For e.g. there’s €8bn in outstanding car loan debt in Greece. The entire population is only 11 million! That’s a massive number of Porsche Cayennes & BMW M3’s! It was only attainable via the Euro.

        The Greek people just see the deveastation to their incomes & living standards that the Bailouts have brought. They just do not understand why the Bailouts cannot be renegotiated. They know they’ve perpetuated a corrupt & bankrupt system but they feel it’s been imposed on them. (Up to a point they’re right, the Constitution is so rigged to the ruling parties, that if it was proposed for a brand new country, it would laughed at as a crap joke. Syriza have stated they want to amend the Constitution & make it fairer, hence part of the reason people want to vote for them. This CANNOT be underestimated btw).

        The people want an easing of austerity. Tsipras is overplaying his hand a bit. He knows how the Euro works, ELA, TARGET2 the whole shebang. He’s playing chicken that Merkel etc will blink & make changes. If not, then he’ll go back to the people and say “see, i tried but they are determined to destroy us”. And make no mistake, the Pyrrhic victory of a ND/Pasok coalition & the budget cuts will bring protests & trouble like nothing yet seen. People will feel betrayed, that their chance of being heard was ignored. The gov’t will fall & Tsipras will say “i told you so”, and win in a landslide.

        It’s the Greek mentality. It’s set up to fail. It’s why Gov’t revenues are down over 30% in May. People won’t pay because they’re expecting the Drachma, but won’t pay in Euros if the Bailout is approved because they don’t like austerity.

        Go figure…

        • here we go, as per my reply to lefty above….its all the euro’s fault they cry. bull$hit.

          greece had problems way before the euro lefty. people like to blame the euro for greeces problems and think if they can just get out they will be fine. but anyone with a memory span longer than a goldfish will remeber it was greece cooking the books that got them into this mess. a country full of liars, cheaters, tax avoiders, corruption and sense of entitlement for doing little or no work. oh yeah, but its all the euro’s fault.

        • The “Greek mentality?”

          It’s a dangerous game you and GB play, even though you’re much more subtle and sophisticated at it than GB.

          It’s remarkable the ease with which one of Enlightenment’s linchpins can be obliterated with a simple turn of phrase like “the Greek mentality.”

          Of course primitive tribalism and racism existed as ruling devices in society long before imperialism exploited it as a major political idea, or the Pan-Slavism of the Bolsheviks and the Pan-Germanism of the Nazis elevated them to the status of transnational religion. Totemism on steriods could we say?

          But instead of attacking the morality of your arguments, let’s take a look at their factuality.

          Here’s a good example of the type of distortions and half-truths that you employ:

          “This is the dichotomy that
          splits most Greeks minds.
          For e.g. there’s €8bn in
          outstanding car loan debt
          in Greece.The entire population
          is only 11 million! That’s a
          massive number of Porsche
          Cayennes & BMW M3′s!”

          Wow! €8bn! That’s a heck of a lot of money! Imagine all the Porches and BMWs that will buy!

          Your verbiage is all very graphic. It’s designed to conjure up certain specific images in the human mind.

          However, on a per capita basis, Greek auto indebtedness is only $909USD per capita. How does that compare to other countries?

          In the United States, the per capita owed on car debt in 2009 (the latest year I could find the figures) was $1007.
          http://www.cnbc.com/id/30438711/America_s_Biggest_Types_of_Personal_Debt?slide=5

          Of course on top of that Americans owe another $7151 per capita on a plethora of other types of consumer debt: payday advances, student loans, revolving home equity, and revolving consumer debt.

          http://www.federalreserve.gov/releases/g19/Current/

          And that of course doesn’t include another $46,983 per capita in residential mortgage debt.

          All that adds up to $142,815 per household. No one has been able to explain to me how the median household, with an income of $27,334, is supposed to service, much less repay, all that debt.

          You could do similar comparisons to other countries. My guess is that you will find that Greeks, instead of being the flamboyant wastrels you make them out to be–driven as they are of course by their “Greek mentality”–are going to be pretty normal.

          I much prefer Charles Dickens’ Enlightenment outlook to your primitive tribalism. Speaking of another era when “evil laissez faire capitalism” (George Orwell, “Charles Dickens”) was allowed to run amok, Dickens wrote “Crush humanity out of shape once more, under similar circumstances, and it will twist itself into the same tortured forms.”

          • Glen google “Greek credit expansion 2001-2008” and you’ll get all the factuality you like mate. Piraeus Bank (ever heard of them?), had this to say for example:

            Household Credit
            A well known characteristic of the Greek economy is the acceleration of households’ credit expansion since the beginning of the ’00’s, following the steep decline of lending rates and final deregulation of household lending. As a result, total lending to households grew on average by 25.4% during 2003-
            2008, significantly above Euroarea’s average of 8%. Mortgage lending in particular received a further boost at end-2005, due to the then anticipated changes in the real estate taxation code. The impact of all these positive factors in the recent past, in conjunction with the unfolding turmoil in the international financial markets and negative base effects, have contributed
            to the recent slowdown in the rate of mortgage credit growth to 18.9% in March 2008 (6.2% in Euroarea) and consumer credit growth to 21.8% (3.4% in Euroarea).

            The €8bn is in that expansion. Your vapidity of comparing Greek car loans per capita vs the US just a poor attempt at a strawman argument. Honestly, you might as well Angolan corporate debt per capita will Taiwan.

            If there’s any verbiage in the arguments is from your good self. “Flamboyant wastrels” though pretty language doesn’t appear in any of my posts. If your arguing that different cultures don’t have differing attitudes to life then i’m afraid we’ll have to disagree. Or are you saying the Chinese economic model is a natural fit to Australia’s national character?

            The rest of your post is just garbled ramblings. You basing everying on “your guess”. Really!?! And maybe lots of 2 week holidays in the summer taking sounding from GB’s taxi driving compatriots between the airports & hotels?

            I base mine on many years experience of living and working with Greeks, within Greece and in Europe these last 18 years.

          • A Dim View said…

            “I base mine on many
            years experience of
            living and working
            with Greeks, within
            Greece and in Europe
            these last 18 years.”

            That’s what I thought. You base your conclusions and opinions on your own personal anecdotal experiences, but precious little else. The end product is some nice rhetoric and a versimilar narrative designed to appeal to “us” versus “them” thinking.

            The World Bank has a very nice graphic that you can scoot around the world and see the private debt to GDP ratios of various countries. It can be found on their web page here:

            http://data.worldbank.org/topic/private-sector?display=graph

            If you move your mouse around the world you can see that Greece has a private debt to GDP ratio of 115.9%. For Australia the figure is 131.1%. The UK 202.9%. The US 200.7%. Germany 107.8%.

            So there just isn’t any empirical or factual basis to your claims.

            Granted, Greece has quite a problem with inordinate public debt. You can get a sense of that from the “Eurostat Yearbook 2011,” which can be found here:

            http://epp.eurostat.ec.europa.eu/cache/ITY_OFFPUB/CH_01_2011/EN/CH_01_2011-EN.PDF

    • “I think MB have done a very good job recently i think, but i urge you to see the issue now as a when & not an if. The political realities of Greece will guarantee a default.”

      I wholly agree, ADV.

      In addition to the political realities in Greece, we should add the political and economic realities in the rest of Europe too.

      Martin Feldstein observed in his brief article posted at Project Syndicate (see below) that Germany was always opposed to the adoption of the Euro and only agreed to it in order to obtain French consent to reunification. Quite obviously, German monetary policy in relation to the Euro is the linear descendant of the policies it applied in relation to the D-Mark, and they have effectively made the common currency into an E-Mark.

      The Greeks could never have hoped to maintain a stable real exchange rate with the D-Mark, and they cannot hope to do the same in relation to the Euro either.

      Everything is against Greece now. As you suggest, it is just a matter of time.

      • Yep. I mentioned this about 6 months ago i think. Economic structures are human constructs. I’ve lived and worked in the UK & Germany as well as in Australia and Greece. The cultural outlook of these places is vast & reflect the societies that develop these economic constructs.

        The southern europeans societies just don’t value collective effort for example in the same way as northern european. Efficiency is a helpful tool for example but not a goal in itself. For example, a friend of mine runs a large foreign retail operation. When sales started to fall quickly in late 2010 (-30%) he called his suppliers to reduce his orders. The suppliers responded by RAISING their prices. When he asked “why?!?!”, they said they needed to maintain their profits. The suppliers just could not understand why he was angry!

        It’s 2012 & Greece still doesn’t have a Land Registry. The new “Prperty Tax” is paid via the electricity bill. If you’re a tenant you legally ask for it back from your landlord.

        I could go on but you get the picture i hope…

      • The political realities of Greece will guarantee a default.”

        OMG! hello! is there anyone home? they already defaulted earlier this year? did you guys miss that one?

        • Cheers mate thanks for the heads up. God knows what we’d have done without you..

          Are you facetious or deliberately melodramtic?

          I’ll spell it out for you. When i say default i mean to the official creditors. You know the ones with Greek debt up the ying-yang. Maybe you can discuss the mechanics of default on that debt with your cab driver.

          Repeating “no they won’t, no they won’t, no they won’t, there’s no place like home” Dorothy, won’t change the underlying fundamental fault of the Euro.

          All you’ve said so far is “they’re all liars, cheats blah blah blah”. That may pass for serious discourse with your driver but in real markets that’ll get you carried out in a pine box. Try & cut the stereotyping out as well.

          If you’ve got a coherent argument as to why it won’t fail, then let’s hear it.

    • All the professional contacts i’ve spoken to in this region over the last 18 months have frankly convinced me the Euro will be consigned to history in its current form.

      no one thinks the euro is working in its current form, this is common knowledge. you dont need to be a professional contact to know this. the illiterate taxi driver 3rd world imigigrant that drove me home the other night told me the euro isnt working in its current form. thats not the point. the point is do they amend it to make it workable or dont they. you guys think they will throw it away and they wont.

    • +1 Never too long. Good stuff

      This is the kind of comment we love to hear at MB. Constructive, informative, and inside the actual facts on the ground. Always welcome, particularly when it challenges our views!

      If you’d like write a weekend musing piece to expand on those thoughts, please contact us through the menu at top of page.

  5. It looks like Samaras may have been taking notes from Juncker a la “when times get tough you have to lie”…

    Jens Weidmann appears to be speaking out:
    http://www.zerohedge.com/contributed/2012-05-28/president-bundesbank-lashes-out
    “Being in favor of growth is like being in favor of peace in the world,” Weidmann said about the raging debate of growth vs. austerity. “The real debate is which path leads to sustainable growth,” he said. And the answer was clear: “structural reforms.” Debt-fueled spending would just create an “economic straw fire.” And then he added, “In fact, I’m asking myself what these discussions are hiding.”

    Then he shot down European Project Bonds that Hollande has been pushing with all his might to fund infrastructure projects as part of his “growth” policies. “This debate irritates me a bit,” Weidmann said. “Every month, ingenious ideas to counteract the crisis surge out of nowhere before they disappear a month later. Now it’s project bonds…. It’s not a lack of infrastructure that is slowing down growth in these countries.”

    While he was at it, he whacked at Hollande’s most cherished panacea for the debt crisis: “The belief that Eurobonds could solve the current crisis is an illusion,” he said, reflecting the opinion of his compatriots, an astounding 79% of whom were dead set against them, grasping how insidious these bonds would be for German taxpayers. Read…. Germany Walks Away From Greece.

    Eurobonds, which would spread liability for one country’s sovereign debt across all Eurozone countries, could only happen, if at all, “after a long process that would among other things have to include changing the constitution of several countries, modifying treaties, and having more of a budgetary union,” he said. “You don’t entrust someone with your credit card if you cannot control how much he spends.”

      • If you are referring to Jens Weidmann, I strongly disagree. He appears to be someone who thinks far ahead, like a lot of us crave people in his position to do.

        • And yet, somehow, the fact that a currency union is unworkable without a fiscal union seems to evade him.

          Germany also benefited immensely from the weak currency and “exports” to Greece. Guess where the Porsche Cayennes & BMW M3′s that ADV above talks about, are built? Guess which company recently had to apologize to the Greek people?

          http://www.smh.com.au/business/world-business/siemens-greece-settle-decadelong-bribery-scandal-20120309-1uo23.html

          There is no point looking at just one side of the ledger and blaming the borrowers. Were the markets/Eurostats sleeping when the Greeks fudged budget deficit figures with the help of bankers like Goldman Sachs? Of course not, they just turned a blind eye and kept dancing until the music stopped, because they were benefitting from the debt binge too.

          • Guess who were quite good at exporting before the euro? Germany had a functional, stable economy before and during the euro. I am not saying they want the currency to fail, but for many countries it really is a dilemma of how far are they willing to go in the game of saving the currency that no longer works in its current form.
            One can only wonder what his (Weidmann’s) thoughts are regarding the future of the eurozone.
            If you are one of those betting the farm on QE ad infinity, you might want to rethink your timing.

          • Then maybe they can go back to DM?

            Fact is here are only 2 non-muddle through routes out – a. Sharing of the debt burden ( I.e fiscal union) or b. a default on the debt and subsequent destruction of the Euro.

            Tell me which German leader recognizes a. or b.? All this stuff about credit cards from Weidman is just utter nonsensical diversion – the credit card has ALREADY been charged for the last 10 years.

  6. look at all the above links. zerohedge, economonitor, baseline scenario, project syndicate.

    dont you guys realise these blogs by anonymous bloggers are all about driving traffic to their website? and to do that they come up with the most imaginitive way to capture peoples attention. if these guys are so right about everything why arent they just trading the markets making a killing? becuase they are $hit at markets and would rather try to make money telling stories to gullible illinformed people that are too stupid to think for themselves who would rather grab some blogger’s idea that they can relate to and then use it as their own becuase the issues they are trying to grasp are complicated and its easier to think you understand something than it is to actually understand something.

    these people are journalists FFS.

    • GB, The blog “baseline scenario” with the article linked by 3d1k presents the following info regarding the authors:
      Peter Boone is chair of Effective Intervention, a UK-based charity, an associate at the Centre for Economic Performance, London School of Economics, and a principal in Salute Capital Management Limited.

      Simon Johnson, former chief economist of the International Monetary Fund, is a professor at the MIT Sloan School of Management, a senior fellow at the Peterson Institute for International Economics, and a member of the CBO’s Panel of Economic Advisers. He is a co-founder of The Baseline Scenario.

      Zerohedge provided a summary of an interview given by Bundesbank president Jens Weidmann to Le Monde.
      French link here.
      http://www.lemonde.fr/economie/article/2012/05/25/jens-weidmann-croire-que-les-eurobonds-resoudront-la-crise-est-une-illusion_1707264_3234.html

      • and yes by connotation he puts MB in that list to deride too. Many of these “traffic driving” blogs are set up by investment PROFESSIONALS sick of how the MSM portrays things…

        I’m not going to try to change your belligerent and demeaning attitude GB, it’s clearly not working.

        FYI, this blog has hundreds of financial and economic professionals as subscribers (not going to name anyone, for privacy reasons, including yours GB, but the email addresses are revealing) and not one of these PROFESSIONALS carry on the way you do, even when they vehemently disagree with our analysis or opinions.

        Continue to drag yourself down on these threads GB, I won’t delete or moderate you any further, but you’re no longer welcome at my Trading Day/Week blogs or any future posts so don’t bother to post there.

        • Many of us sheeple are eternally thankful for blogs such as MB and others.
          I believe many professionals and sheeple alike follow these events not only from trading or investing point of view, but due to a genuine attempt to understand the forces at play around the globe. This is an era of change, to put it mildly.

          I was directed to read zerohedge by an investment professional. MB was found while googling information on global economics, and what a breeze of fresh air it was to find this site.
          Thank you very much for everything you do at MB, and sorry for being one of the worst gloomsters of this site. Not proud of it but can’t help it either.

      • GB, what then, are you doing on this blog FFS? Trying to save us ‘gullible’ people from bloggers?

        You cannot be serious!! /McEnro

    • And who exactly are you referring to, GB, when you describe people as “gullible… ill-informed [and] too stupid to think for themselves”?

      I wonder who you have in mind when you say they “… grab some blogger’s idea that they can relate to and then use it as their own becuase the issues they are trying to grasp are complicated and its easier to think you understand something than it is to actually understand something….”?

      Frankly, this outburst does not apply to the MB-conversant.

      You may have a genuine argument to put on the economics and/or the politics of Greece’s situation and the choices available to them, but we have yet to see it.

    • Just to complete the list:

      Ivo Arnold is Professor of Economics at Nyenrode Business Universiteit (Holland) and Program Director at Erasmus School of Economics.