Thursday, February 9, 2017

Meanwhile in the Eurozone

The mounting debt crisis in Greece has sparked fears the euro is on the verge of collapse.


[Yanis Varoufakis, the Greek ex-finance minister, who was against a "bailout" that Greece obviously could not repay] said: “You must come to terms with reality. The tragedy was in 2010 a bankrupt country was given a huge loan not to save it but in order to transfer, cynically, huge banking losses from the books of the Franco-German banks onto the shoulders of the weakest taxpayers in Europe.

Which, in itself makes no sense other than the short term. Once Greece cannot cover those losses and is destroyed financially, they can't be bled any more.  But then, humans always seem to be about the short term.
The International Monetary Fund has called on Europe to provide “significant debt relief” to Greece – despite EU creditors ruling out any further assistance before the current programme expires in 2018.
Jesus, even the IMF says this won't work. In the past, they've been the biggest pusher of austerity measures on the planet.
The organisation added progress to date in turning the crisis around has been “significant” but acknowledged that deep cuts to public services and pensions had come “at a high cost to society, reflected in declining incomes and exceptionally high unemployment”.


The crisis could boil over as soon as July, with Greece due to repay some £6 billion (€7 billion) to its creditors – money it cannot repay without foreign intervention.
And in turn, that could spark another go at Grexit.

And then Italy.
In Italy [...] some hedge funds are making direct bets that the prices of Italian bonds will collapse.


Mario Draghi, the European Central Bank’s president, promised in summer 2012 to do whatever it took to save the euro, but the debt burdens of Italy and Greece have become progressively worse amid the stagnation of their economies.

Italy’s debt as a share of its economic output has risen to 133 percent from 123 percent during that period. In Greece, debt has increased to an expected 183 percent of the country’s total economy from 159 percent.

These figures highlight a harsh economic reality: Just as an individual will struggle to pay off a punishing credit card bill if her salary stays flat or falls, a country cannot reduce its debt pile without expanding its economy.

For investors interested in making specific bets against Italy, two studies that conclude the country is unlikely to be able to repay its debts in full have attracted the most attention.
And that should not be legal. Betting on the market. This is how global finance crashed in the first place, and partially responsible for Greece and Italy being in the trouble they're in.
[T]he Mediobanca report highlights just how little Italy has benefited from being in the euro: Growth has been literally zero, and the economy’s competitiveness as an exporter has deteriorated.
Too bad Italy's name doesn't lend itself as well to exiting the EU as Britain and Greece.

...but hey, do what you will anyway.

No comments: