Greece calls a referendum collapsing the eurozone sovereign debt deal
Posted on 01 November 2011 with 6 comments from readers
Financial markets will now have to price in a 100 per cent default by Greece after the announcement of a referendum on the debt deal agreed last week that its government is almost certain to lose. The eurozone sovereign debt deal is dead at the first hurdle.
Greece has always been the weakest link and its government no longer thinks it can lead the nation. A referendum puts the issue back with the people who completely inconsistently still want the euro but not the austerity of the sovereign debt deal agreed to save it.
Referendum politics
Such direct democracy highlights the weakness of letting the people decide on matters of high economic policy about which very few have any knowledge. There can now be a battle between the two sides of a referendum to explain their case but the verdict of the masses will prevail.
A vote against the debt deal will result in a return to the drachma currency and a 100 per cent default for European banks. It will not be the first such default in the history of Greece. Indeed, Greece has a history as a serial defaulter, something the banks overlooked.
That leaves the European banking system in one huge mess, and completely insolvent without massive recapitalization. That can only come through a widespread nationalization of these institutions as happened in the global financial crisis of three years ago. There will be a big credit squeeze and damage to trade and industry.
Eurobonds
Europe can only achieve this recapitalization by the creation of new money through the issuing of eurobonds. The panic of the crisis will force the hand of the Germans and give power back to the French elite who can pull the eurozone through this crisis.
So the shaky bag of tricks concocted last week in the committee rooms of Brussels comes apart at the seams. The weakest link has broken.
The more frightening thing is that it has hard to know where the fall-out will be most damaging. The bankruptcy of US brokerage MF Global yesterday shows just how rapid any contagion from Europe can be as it was this firm’s $6.3 billion bets on eurozone sovereign debt that wiped it out.
What happens now in Portugal and Eire, the next weakest links. Will they go for a referendum on austerity too?
Standby for a series of financial earthquakes!
6 Comments posted by readers:
This could be fantastic news…the weakness was letting the dopes who believe they have some sort of higher economic knowledge sort out the problem in the first place! They are the victims of an expensive higher education. They have learnt so much about modern economic theory, that there is no room left in their brains for good, old common sense! Their stimulus programs don’t work, they couldn’t work! All they could do was to disguise the facts and delay the necessary adjustments….Extend & pretend!! Extend credit & cash to those who don’t deserve it and pretend that everything is ok. Let the defaults & games begin!
The Greek government will say it passed no matter what the real vote total. They had better, or they will find out what it is like to be hungry, quite soon. They will miss electricity too.
I vote to tax everyone in the USA making over $300,000 a year, at an 80% marginal rate. WOW! this referendum thing is fun. I vote to eliminate the income tax for residents of any State with an income below the National average.
I wonder why one of the founding fathers of the USA warned that letting the people directly control the county’s finances would soon bankrupt it?
I forgot the free electricity and satellite TV. I vote ‘YES’ on that too. Wait, we own GM. I want a new Chevy Suburban.
A No vote will trigger the CDS insurance contracts, which will add further widespread banking chaos.
Coming off the gold standard in 1913 has taken many decades of gambling and political overspending to show that it was a wicked thing to do. Now the world of human pleasure is beginning to die along with democracy.
I don’t believe that there is growth in the system in any country. It’s just an increase in currency giving the illusion of growth. What does growth mean when productivity is hand in hand with the robbery of individual’s savings through inflation?
I see in today’s Daily Telegraph that the UK GDP figure of 0.5% “growth” is identical to the 0.5% growth in activity generated by government spending for the same quarter.
http://blogs.telegraph.co.uk/finance/philipaldrick/100012943/britains-growth-figures-hide-the-real-problems-in-manufacturing-and-in-europe/
So, the statistic “GDP” is deluding us all into believing a country is growing or receding when it is only the expansion of credit by government.
We are in Depression now and have been for many years because the GDP is not measuring productivity.
Socialism never has and never will work…the Russians spent more than 40 years proving it! Let proper capitalism do it’s work….those who deserve losses should be hit hard and even if Greece becomes the India of Europe, we should stop meddling and let the dice lay where they fall. Heavier taxes for the rich never works…The job creaters, the product producers and the service providers should be given a break not taxed even more! The western world needs a giant correction that hopefully will result in those who do….can… and those who don’t…just can’t.
Not a single drachma should be given to the bankers.
Not a single drachma should be taken from the bankers.
The money were stolen, banks were robbed by the bankers. This is not a “Greek debt”. The figures of “debt” cannot be trusted. Bankers stole between 20 and 100 trillion dollars worldwide. They must refund the money and go to prison.
Don’t sell Greece, don’t sell your property. There was the same fraud in 1930’s: bankers made the “crisis”, next – the property went down, the bankers bought it for nothing and became the owners of the world. Don’t allow this to happen again.
Live your own life. Trade with your neighbours, and the “crisis” will be over. The banks will fail, and you will prosper.
No drachma to the bankers. No drachma from the bankers.
Michael Pyshnov