Posted on 12/08/2009 8:24:29 AM PST by TigerLikesRooster
12/08/2009
Timebomb for the Euro
Greek Debt Poses a Danger to Common Currency
By Wolfgang Reuter
As economic indicators have improved, concern about the financial crisis has abated. But the next big problem could be approaching. Greece's public deficit is skyrocketing and the country may become insolvent. The effect on Europe's common currency could be dire.
Josef Ackermann, the CEO of Deutsche Bank, has given the all-clear signal many times in the past. He has repeatedly said that the worst was over, only to see the financial crisis strengthen its grip on the world economy.
Last week, however, Ackermann was singing a completely different tune. Although many indicators are once again pointing skyward, he said at a Berlin summit on the economy, Chancellor Angela Merkel, the assembled cabinet ministers, corporate CEOs and union leaders should not to be deluded. He warned emphatically that the financial situation could deteriorate once again. "A few time bombs" are still ticking, Ackermann told his audience, noting that the growing problems of highly leveraged small countries could lead to new tremors. And then, almost casually, Ackermann mentioned the problem child of the European financial world by name: Greece.
Ackermann isn't alone in his opinion. Practically unnoticed by the public, an issue has returned to the forefront in recent weeks -- one that was a cause for great concern at the height of the financial crisis but then, as optimism about the economy began to grow, was eventually forgotten: the fear of a national bankruptcy in the euro zone. And the question as to whether such a bankruptcy, should it come about, could destroy the common European currency.
Greece was always at the very top of the list of countries at risk. But now the danger appears to be more acute than ever.
(Excerpt) Read more at spiegel.de ...
Ping!
Ok, why is Greek debt a problem for the Euro itself? Is the Greek government doing what we do here, i.e., printing Euros to pay its bills, or what?
The government has borrowed more than 110 percent of the country's economic output over the years, and if investors lose confidence in the bonds, a meltdown could happen as early as next year.
In short, they cannot pay their debt, and it appears that it would remain so in the future.
They also did TWO illegal alien amnesties. (the second because the first one was botched)
You also have the massive arson fires cause by political enemines and THEN many of the insiders “procured” the charity donations. (on top of other corruption like the red cross only sending 5-10% at most of the goods and monies but were there for the photo-op looking busy)
You also have Greek businessmen who are ruthless in understanding human ecconomics and know exactly how screwed the EU is in this situation.
Remember Greece is smaller than most states and has only about 11 million people. (95% christian orthodox) Outside banks have already bought up most of Greece. So who knows if Greece is going to be the first nation taken over by the EU.
their bonds are already junk status.
They no longer can issue new currency like in the past.
Presumably Greece borrowed Euros from the ECB. If they can’y pay the ECB debt, the ECB or whoever loaned them will have a bad loan on the books.
In such a scenario the ECB may have to rescue Greece by lowering interest rates, and that means a hit to the Euro.
Whatever happens, it means risk is up and flight from Euros takes place.
We have a Mediterranean cruise set up for the month of May out of Athens and the airfare to get back and forth to Greece from New York is literally almost TWICE the amount it was in May of last year, going from under $690 to the $1237 that it was this morning. Combining that with the value of the dollar being at an all-time low against the Euro, and the term “once in a lifetime” takes on a much more serious meaning then it did when we first used it to describe this trip.
Yep, it appears nothing has been done to re-instate any sense of moral hazard, so the nonsense will continue unabated.
The dollar is starting to look pretty good...
The law of pancaking:
Shockwave originates in U.S. U.S. is shaking hard first, then other countries start to shake harder, and small ones at the periphery would fall down and crash. Panicked money will all run to U.S., still shaking and visibly wobbly but did not fall down yet. All are happy like clams under the roof of U.S.. As bad as it is, it is better than no roof. Then the huge mega roof of U.S. finally falls and flatten everybody below. They all got pancaked in good ole U.S.A.
The dollar is starting to look pretty good... “
Add Ukraine to that list. When the dislocation occurs and the dominoes start to fall its most likely to occur with the Eur/GBP. There will be a flight to safety and Bucky will benefit. We not be that well off financially but the Euro will be raped. Cash will be king.
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