Greek Bailout Concerns
“Some countries have been able to work down heavy public debt burdens. Those that were successful did it through sustained high growth. But in Greece’s case, it had become clear that high growth—let alone sustained high growth—was not going to come soon enough. Debt had to be restructured.”
-Olivier Blanchard from iMFdirect.
Second Bailout Better Spread Some Of The Losses
I couldn’t agree more. Ireland austerity adversely affected youth and non-investors… though austerity measures were accepted with a smile and a grin by its populace. Greek has been the squeaky wheel. Protesting and fighting to express indignation for government cuts. Then the second Greek bailout made investors suffer a partial loss.
A case could be made that the investor ought to take a full loss for bad investments in Greece and Ireland. Workers laid off in Greece from austerity cuts didn’t receive a ‘partial job loss’. A stronger case could be made that Greece is terribly uncompetitive in the labor market of the Eurozone and either needs to cut wages (they have the highest paid government employees of the region) or lay off overpaid workers to prevent further Greek debt crisis.
German Push Back “Third Greek Bailout”
Tough decisions will be made soon in Greek bailout negotiations. Judging by the news, Angela Merkel maybe open to a third Greek bailout package… though now she is back pedaling fast from these comments made by a Greek/IMF official. Germany’s leader realizes that a ‘Grexit’ will upset the German turnip cart. Greek debt contagion will likely spread across Europe and eventually land at the feet of the Germans. Merkel needs a strong re-election push and the economic downturn could cost her voter confidence.
So few words started such a strong fire…
Wall Street Journal originally posted Thanos Catsambas comment, “Greece will need another bail-out”.
Catsambas is an IMF alternate executive director and while he may not be the ‘official’ IMF spokesperson, he is involved with day-to-day discussions between the ‘troika’ and Greek finance minister. Unless this remark gets him kicked out…
Catsambas reportedly said that earlier Greek PM, Papademos, only put in place 22% of its original austerity agreements. Translation: ‘There are a whole lotta austerity driven cuts about to happen!’
September 26th is the day Greek unions plan on protesting current austerity cuts via strike. Greek’s economic growth outlook seems bleak as ever!
‘Spain would be crazy’
German Finance Minister, hinted that a Spanish requested bailout would be ‘daft’. Why? The market would punish Spain. Wolfgang Schaeuble seems to be ‘daft’ almost begging investors to drive up the cost of Spanish bond yields. As if the Eurozone can afford another Greece. And more frightening, another Greece whose economy is many times larger. But whatever happened to German discipline?