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Greece approves austerity bill on first reading
The situation in Greece has reached a breaking point. It reminds me of December 2001 in Argentina. The indicators are several and experience shows us that all combined are a recipe for disaster: The nationwide strikes, the protests, riots, most of all, people being genuinely fed up and certainly no longer being afraid of taking the streets and making themselves heard. It’s clear that they’ve gone beyond the point of no return in their crisis. If the austerity plans continue and the irritation grows its very likely that you’ll see people taking the streets one last time and bringing down the current administration.This happening in Greece alone would be a complication for the Eurozone, but it could be much worse if it brings other PIGS down along with it in a domino effect.
Join the forum discussion on this postFerFAL
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Speaking of the domino effect of the Greek debt problem, this week Bank of America managed to move a bunch of their Greek credit default swaps (a.k.a toxic waste) into FDIC insured accounts, so if Greece goes down, Bank of America won't take the direct hit, the American taxpayer will.
It was a pleasure meeting you in SLC by the way. I really enjoyed your presentations! Best of luck to you
The Greek government has just announced that it will hold a referendum in an attempt to obtain a democratic mandate to impose further austerity on its own people in exchange for support from European Union. This is tantamount to asking people if they are willing to have their limbs hacked off, and Greeks are likely to say no. This may have all kinds of awful economic, social and political consequences in Greece, but more importantly to the rest of us this means that the EU may be forced to withhold its support to Greece in order to maintain any form of credibility, meaning that Greek banks (and possibly the Greek state, not just the government) may collapse, foreign boldholders such as many French banks may follow and the risk on Spanish and Italian debt may rocket to a level which may bankrupt them too. Then the Euro - the second most important world currency after the US dollar - will either be inflated to oblivon by the European Central Bank in attempt to keep Euro loans affordable, or the geographical extent of the Euro will reduce (to Germany, possibly France and a few others) reducing the currency's utility and worth. This will pitch the whole of Europe - not just the Eurozone - into a deep, deep recession, or, depending on the country, extend and deepen the current recession. This will in turn have hilarious effects on any country - such as China - who are funding their current growth in part by exporting to Europe.
And that's not even considering the dismal history of European nations' political response to deep and prolonged economic misery.
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