Greece: Going to go bust or not?

[craigr]

So what's the prediction? Will they be bailed out or not?

[fnord123]

I voted yes, assuming "bust" means either debt restructuring or leaving the EU.  My wag is that the austerity measures being proposed will negatively hit their GDP, reducing tax revenues and causing their deficits to worsen, not improve.  That means eventually they must get relief from their debt.

[Pres]

The International Monetary Fund is looking at raising its share of Greece’s financial rescue package (...) Investors and policy specialists said that expectations of the size of the three-year package in Washington policy circles had increased to at least €70bn. The EU has so far proposed to provide €30bn and the IMF €15bn. “The fund’s current ceiling for Greece is €25bn and the release of the extra amount is under discussion,”? the analyst said. The IMF declined to comment on the size of the package. Source: FT via Zerohedge

They're working hard on a bailout, but all kinds of surprises are possible.

I still haven't created my PP. Currently about 10% gold, 90% euro's. Kinda stressed today, I wonder why...

[craigr]

90% Euros? I thought you were in the UK. No pounds?

[Pres]

90% Euros? I thought you were in the UK. No pounds?

I'm in Belgium. Don't know if I would sleep much better if my money was tied up in Pounds, it may become ugly in the UK after the elections.

[craigr]

FWIW I voted No. I think something will get worked out just as Iceland was bailed out in 2008. Question then is what are the after-effects?

[6 Iron]

I vote no, I think we have at least one more round of kicking the "economic can" down the road.

[MediumTex]

The Greek economy generates insufficient surpluses to permit the repayment of their debt under any set of circumstances.

Since Greece has no printing press, the debt must be restructured or liquidated.  It's just a question of how it's going to happen and whether it will happen sooner or later.  With full blown capital flight in process, I suspect it will happen sooner.

The people of Greece are not going to like what's coming--austerity measures, plus oversight by entities outside of Greece.  Normally this process creates additional unintended consequences as the obvious remedy of outright default for some reason is never seriously discussed.

How does an economy grow when austerity measures make everyone feel poorer and the currency union prevents devaluation which would assist in the retirement of existing debt?  That's a good question.  Unfortunately, if there is too much civil unrest in the wake of austerity measures it will also spook the tourist crowd as well, which will make a bad situation worse.

[pplooker]

I have no idea.  The situation is complex and I am terrible at sociogeopoliticialeconomicfinancial analysis unlike the wise sages who frequent most of the internet.

I do predict this though: it will stink for Greece and whoever is left holding the bag, whatever happens.

I will also speculate that Iceland and Greece may be followed by some other countries, perhaps Portugal.  I believe sincerely that we have this conceit that only the U.S. financial systems are deeply flawed in some way we can't quite all agree on, but in reality it's pandemic world wide.

But again, I am terrible at sociogeopoliticialeconomicfinancial analysis.

[craigr]

Now Spain downgraded (but not to junk):

http://finance.yahoo.com/news/Spain-deb ... ?x=0&.v=27

It's interesting to me because I never thought the Euro would make it as a currency when it came about. The countries are just so radically different in how they conduct themselves that it seemed inevitable problems like these would happen.

[craigr]

Bailed out:

http://www.bloomberg.com/apps/news?pid= ... UKEXajkSzk

[fnord123]

The can has been kicked down the road, but the structural problems remain, and the austerity programs are unlikely to succeed. Check back in a year and see if Greece is still paying all bonds at 100%.

[Pres]

EU to Set Up Fund to Prevent Spread of Greek Crisis
http://www.bloomberg.com/apps/news?pid= ... E7uc&pos=1

(Monday they're supposed to announce everything they're going to do, before the markets open)

[MediumTex]

EU to Set Up Fund to Prevent Spread of Greek Crisis
http://www.bloomberg.com/apps/news?pid= ... E7uc&pos=1

(Monday they're supposed to announce everything they're going to do, before the markets open)

They ought to find "Baghdad Bob" and hire him to be the EU spokeperson.

Remember in Superman II when Superman lost his powers?  That's what these politicians remind me of when they talk about what they are going to do to "fix" markets.

It's ironic to hear politicians talk about "restoring confidence" when it is their own bone-headed policies which destroyed confidence in the first place. 

All of this turmoil also reminds me of the saying that "crisis is the friend of the state."

[6 Iron]

I never cease to be amazed at the market. A nearly 1 trillion dollar bailout package to shore up the Euro, and the PIIGS, with money that does not exist beyond the creation of debt obligations, is greeted by Wall Street with a 400 point, nearly 4% increase in the Dow. This is why I have a permanent portfolio. Where does this confidence come from, and who can dream of being able to predict it?

http://online.wsj.com/article/SB1000142 ... NewsBucket

[craigr]

Yep. What we think will happen and what does happen are two different things.

[Plurimus]

I voted yes, because of recent bloomberg article

Greek credit swaps imply the country has a 47 percent probability of default within the next five years and that the European Union’s $1 trillion aid package has done little to ease investor concerns.
The contracts now cost 46 percent more since the day of the bailout.