All Greek To You?

It’s All Greek To The Greeks Too

This business of the Greek debt crisis is a bit disturbing. Markets are all lining up to kick Greece’s rear should it default on its debt. The markets around the world slid today as people anticipated that the Euro Bailout would not be enough. Here’s an article that just adds fuel to the fire.

A nationwide general strike has gripped Greece in the first major test of the socialist government’s resolve to push through unprecedented austerity cuts needed to avert fiscal meltdown.

Protest fever swept the country with public transport paralysed, ferries not leaving the docks and air traffic grounded as unions went on the warpath against the latest wave of spending cuts and tax hikes.

Hundreds of thousands of civil servants kicked off the protests on Tuesday and a group of about 200 communists also stormed Athens Acropolis, unfurling banners reading “Peoples of Europe, Rise Up.”

Wednesday’s walkout, the third general strike in as many months, comes as the government races to push the austerity drive through parliament, looking to its comfortable majority there to pass the package on Thursday.

Greece’s main unions were to mass in central Athens at 11am (1800 AEST) before moving through the streets of the capital in protest marches.

They’re really angry in Greece because of the austerity measures to come and there’s nothing that can cause demonstrations than taking away perks and entitlements; especially if some Socialist Government is going to do that, then you’re sure to see much anger.

The fury of the Greek protests are quite intense. Just reading the description above, it reminded me of the passage in Thucydides covering the aftermath of the failure of the Sicilian campaign. At least that event had more drastic consequences for the city of Athens. The Spartans would eventually go on to press their advantage an defeat Athens in the Peloponnesian War.

So who are thr Spartans this time? I think it might be the Germans. Yes, the Germans who have to shoulder the most of the bail out costs and they’re watching these demonstrations on the streets in Athens thinking, “hang a minute, these Greeks want our money AND keep pulling down those perks and entitlements that we don’t get, that they couldn’t afford in the first place?” You can imagine Angela Merkel is getting an earful on that.

The Economist had this take:

Although the move to ban short-selling steadied Greece’s stockmarket somewhat on Wednesday, the chances of the country defaulting on its debts were still perceived by the bond markets as high. Spreads on Greek government bonds (the risk premium compared with German bonds) reached a 13-year high as investors worried that the proposed rescue plan for Greece could stall. Talks between Greece, the European Union and the IMF got under way last week.

Greece was initially seeking up to €45 billion ($60 billion) in emergency loans from euro-zone governments and the IMF this year, the first chunk of which will be needed by May 19th, when the Greek government must refinance a €8.5 billion bond. But as the crisis has worsened it has become clear that Greece could need much more. On Wednesday it was reported that the EU and IMF were preparing a package worth up to €120 billion over three years—if so, the biggest sovereign rescue yet attempted. Nevertheless, even aid on this scale might only postpone an eventual default, if Greece’s economy fails to grow faster than its debt pile.

Investors do not seem convinced that euro-zone governments will be able to muster the political will to hammer out an agreement. Germany, as the largest euro member, is vital to any effort to save Greece, but it is wavering. German public opinion is firmly set against dipping into the public purse to help the profligate Greeks. Angela Merkel, Germany’s chancellor, is in a tight spot. If she agrees to extend aid quickly to Greece a voters’ backlash back home may send her party crashing to defeat in regional elections set for May 9th. But if she sits back and watches Greece slide towards default, the contagion is sure to spread rapidly to other, bigger EU countries with debt problems—Mrs Merkel could then end up being blamed for triggering a far worse conflagration across Europe, including a fresh banking crisis.

A fresh banking crisis? Oh great. Here we go again

1 Comment

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One response to “All Greek To You?

  1. The Destructionist

    Protests are raging in Greece today; due to the government’s reform measures to drastically cut wages, retirement benefits and pensions, while raising taxes on goods and services; all in an effort to save the country from economic collapse. Government buildings, schools and hospitals were shut down as people flooded the streets in anger. Sadly, that anger turned violent today as three people died in a bank that was set ablaze by protestors.

    Stocks lost value in most of the major global indexes yesterday on fears that Greece’s economic instability could spread to other countries throughout Europe and around the world. If the Greek economy does happen to fail, the financial repercussions felt all across the globe could be catastrophic. Could this be the beginning of a worldwide chain reaction?

    What if your wages, benefits or pensions were cut in half? How would you react to the loss in income? How would it affect your life?

    If this problem is not dealt with swiftly, I portend a very dark road ahead…for all of us.

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