Sunday, May 22, 2011

The Jam Greece Is In

Greece's prime minister, George Papandreou, has now admitted for the first time that his country might not be able to raise money in the financial markets for its borrowing needs next year.
Papandreou said in an interview with the daily Ethnos that "it does not appear at present that Greece will be able to cover its borrowing requirements in 2012 normally, from the markets."

As part of its euro110 billion bailout deal with the European Union and the International Monetary Fund, Greece was expected to raise euro27 billion to help pay its bills in 2012. Not likely.

And this leads to an even more immediate problem that could lead to default.

It is edgy as to whether Greece gets the fifth installment of its euro110 billion loan package. A decision on the installment of euro12 billion is due after a June progress review by the EU, the IMF and the ECB.

This progress report is not going to be a positive. Will some EU members push to throw in the towel, knowing that current bailout money is just throwing good money after bad and that the Greeks will be back begging again next year?

No more bailout money would mean default. Even Papandreou now admits this.
The banksters are the only ones pushing for the installment to be made. EU leaders must weigh the pressure from these banksters against the pressure from local voters who, in many of the countries, may boot these leaders out for PIIGS bailouts.
 The only other option is for the EU to print the money for PIIGS bailouts. This is ultimatley very inflationary.
Stay tuned. The story of these five little PIIGS is far from over.


  1. 6 month Greek bonds are at +25%, and I suspect this news will drive that usurious sum higher. Actually, I don't know if usury is the appropriate word- it applies more to a credit worthy person charged a very high rate arbitrarially. People investing in Greek bonds are just intelligently hedging their bets.

    I'm beginning to believe that the euro, and possibly the EU, will go the way of the dodo far sooner than many suspect.

  2. The end of the world did not happen this weekend.

    But, the end of the Euro sure did make progress, between the German elections and the threat of withholding the fifth loan installment from Greece.

    Good enough for me.