Socio-Economics History Blog

Socio-Economics & History Commentary

Greek Rescue Leaves Europe Default Risk Alive!

  • It remains to be seen how long this ‘bailout’ will last. Even if it achieves its objective of bringing the debt to GDP down to 120% by 2020, this level of debt is unsustainable. At 4% interest rates, it means interest payments alone will contract the economy by 4% x 1.20 x GDP ie. 4.8% x GDP of money for interest payments will be withdrawn from economy. Simply put, the economy will contract (at least) by 4.8% annually just on interest payments! You call this a plan? Greece is better off defaulting and telling the banksters and their politician puppets to go jump into the Mediterranean sea. Iceland refused to pay off the Illuminist banksters’ debts and they are doing just fine!
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    Greek Rescue Leaves Europe Default Risk Alive! 
    By Simon Kennedy and James G. Neuger, http://www.bloomberg.com/ 
    Europe is still struggling to avoid the threat of default as investors warned Greece will soon risk violating the terms of its second bailout in three years.
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    Seven months of negotiations ended in the pre-dawn hours in Brussels with Greece winning 130 billion euros ($172 billion) in aid it needs to avoid a March bankruptcy. Any respite may prove temporary after it signed up to a program of austerity and economic reform aimed at slashing debt to 120.5 percent of gross domestic product by 2020 from about 160 percent last year.
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    Even with investors and central bankers chipping in to relieve the debt burden, economists from Citigroup Inc. to Commerzbank AG concluded Greece may again fail to deliver amid a fifth year of recession, looming elections and social unrest. The upshot could be the removal of aid and renewed debate over the merits of fresh assistance before year-end as policy makers shift toward doing more to inoculate the rest of Europe.
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    “The bailout bandage is on, but it won’t take much to unravel,” said David Miller, partner at Cheviot Asset Management in London. “The euro zone has done its best to ensure that Greece will deliver on promises, but there is considerable scope for backtracking on deficit reduction.”
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    Financial markets signaled doubt the accord will fix Greece’s travails permanently or spell an end to the two-year debt crisis. The euro surrendered initial gains against the dollar and European stocks fell from a six-month high.
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    Bankruptcy Risks
    By supporting Greece, Europe’s high command chose the financial and political cost of awarding fresh money over the risk of a bankruptcy that could splinter the 13-year-old euro area. At least 386 billion euros has now been committed to save Greece, Ireland and Portugal with investors predicting the government in Lisbon at least will need more support.
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    … for more click here!

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February 22, 2012 - Posted by | Economics | , , , , , , , , , , ,

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