How far down the road has the can been kicked for Greece and the eurozone?
Posted on 23 February 2012 with 5 comments from readers
Immediately after the Greek debt negotiations were hailed as a success earlier this week doubts surfaced about what this agreement meant in practice. How would it be implemented? Was it still technically a default? Would Greece actually recover under these conditions?
There are so many parties involved – political and economic – that it is impossible to come to a solid conclusion. It is also an immensely complicated agreement that even the finest technocratic minds will struggle to understand.
Rating default
Ratings agency Fitch said yesterday the Greek debt write-off will constitute a ‘rating default’. Will that trigger CDS credit insurance? We don’t know yet. We do know private sector banks are going to lose 75 per cent of the money they have lent to Greece.
If that is not the biggest sovereign debt default in history then what is? And at the same time it is impossible to find a single economist who believes that this $170 billion bailout will actually save Greece from a default again in the near future because its economy is contracting and its debts will keep on growing.
So this is not the final good-bye to the Greek debt saga, merely another chapter in this now rather boring and long story. It slows the decay but does nothing to solve it. That is why the stock market reaction to the Greek deal has been so muted.
Then there is the myth that somehow the Greek deal draws a line under the eurozone debt crisis and sets no precedent for other indebted nations. Of course it does!
Spanish debt
Spain’s finance minister Luis de Guindos told reporters yesterday that his country’s new request to lift its debt targets would not stand out as unusual because there would be a ‘general reconsideration of targets across the whole of the EU’.
Oh yes, so much for containing the crisis in Greece. And that is the real issue that investors now need to focus on, not the fine print from Athens.
For the eurozone itself is still spiralling into an existential crisis for the euro. It will be muddle and fudge until markets can take it no longer. The can has been kicked down the road again but there will be an end to this road.
Gold and silver have gone up this week, the real currency crisis is just beginning.
5 Comments posted by readers:
You think Portugal might be next in line for more cash?
How about Iceland getting a rating UPGRADE ! Didn’t they tell the banks to go take a hike? The taxpayers aren’t paying your debts? Didn’t all the experts say that they were all going to be starving and bankrupt by now up there in Iceland?
Platinum took off. The same fellow who started Ivanhoe found a big rich deposit of the metal a few months ago.
One in four dollars spent so far during the Republican primary race has come from 5 millionaires or billionaires.
Yep!
“The real currency crisis is just beginning.” Finally, after all the CDS sales, fraud, cover-ups, and can-kicking, by western banks to postpone the inevitable, coupled with gross incompetence by the Troika and by Euro politicians, etc. The sooner the world goes through this fire, the quicker it will end.
@ Bill, on Clearwood, in Slidell:
Didn’t know that Slidell had a famous junior high school on Clearwood Dr.
i still say germany wants them out no matter what they officially say.
before that 14bil greek payment is due in march, the germans will come up with a ‘yeah, but….’ soon a greek will be elected by ‘out of the EU!’…….n germany will say ’see, you left on your own’
which will sober the remaining piigs up.
would be a PM ‘buy-the-f’ng-dip’ there……before they can print n recapitalize banks.
@ obewon
It sure does. The St. Tammany Parish school system runs it like a military school. The bus deliveries & pick ups are on a tight schedule. It is nice being able to look out of my front door and see the trees in front of the school instead of just houses. I’m just north of the schools northernmost driveway. The white pick-up truck in my driveway #2 and the white car parked across the street in the Google Street View image, are both gone now. That is one ugly mid-winter image with cars parked all over the place from people living around here displaced by Hurricane Katrina. It never got cold enough this winter to kill the grass.
The kids here don’t even throw trash, although drivers do like to get rid of their cigarette butts after they turn off Brownswitch before they get home. The magnolia tree on the front lawn of the school across the street is the only problem. I got a laugh one day after I decided to find out how its’ dead leaves got across the street and onto my front lawn. I looked out of one of the unused front bedroom windows while the prevailing breeze was blowing from the southeast, and watched one work its way down the school driveway, across the street, up my southern driveway, across the sidewalk, and onto my front lawn. Their final resting place. It made the trip in a couple of minutes, climbing the curb with no problem. I considered taking the little tree out one night, but went out to pick up the mail one day, and saw some kid in a wheelchair with some adults standing around a tree on the opposite side of the green space in front of the school. That was the end of that idea! Anyway, I need the exercise of picking them up.
The best thing about the school is that it is 21 feet above sea level and an evacuation shelter, out of all flood zones. They are widening the I-12 just to the south to 6 lanes as I write. It is supposed to be one of the first freeways converted to be able to fuel trucks with cryogenic natural gas from stations along it. I’m glad to be 1,000 feet away because a punctured truck fuel tank might leak the liquid, which would instantly boil off into a potentially explosive vapor cloud. Unlikely, but you know how Murphy’s law works. Diesel can’t do that. At least the railroad is a mile west if they start towing LNG tanks to fuel the engines. Those big pits you might notice north of me are for water storage during 500 year rainfall events. The I-12 prevent the rain from flowing south fast enough, if we get a couple of feet of rain in 24 hours, like in 1995.
Friday, on CNBC, they announced that the USGS now estimates that the North Slope off Alaska may hold an unimaginable amount of natural gas in shale. They said it MIGHT hold 80 TRILLION cubic feet of shale gas. Royal Dutch Shell is scheduled to start drilling there soon. They will need to add that to the already huge amount of conventional gas that Exxon & Conoco have stuck up there. I bet the Japanese are glad, since they are shutting down their nukes. We Southerners are building 2 more in Georgia, and maybe 2 more in Carolina.
@ Bill, the Slidell Guru:
Tnks for the local geography lesson and the waypoints. I’ll try to pin-point your house!