Greek Bonds

I just read something about this and how it was unlikely Greece was going to get the debt restructuring deal they sought after lying a mere 6 months after their bailout and trying to cover up the fact that they would need new terms on the bailout. I've written pretty extensively about the ECB alternative or expanded bailout mechanism and my pessimistic view that they'd be able to get that done, especially as Angela Merkel's party is losing election after election with the German populace sending a resounding message to any would be party or leader, "NO MORE BAILOUTS"

A member just told me about an article on ZH and said I should read it, I did. Here's the Full Story...

The bottom line is Greek bonds are in a situation in which they simply can't afford, the ECB has stepped in before and baled them out on the bond issue, but this time, the ECB is nowhere to be found. The bottom line seems to be that the ECB may have settled on letting Greece fail.

And then there's that nasty word, "Contagion" which has been used to describe the faltering governments in the Euro periphery, those being what are affectionately known as the "PIIGS" (Portugal, Ireland, Italy, Greece and Spain). These are the countries in which crushing debt is making it very difficult if not literally impossible for them to raise money through debt offerings (bonds) as the interest rate demanded is simply not sustainable, the countries would default. Ireland sought a bailout as well and Portugal is there now. The problem is Spain and Italy. More or less, after Portugal, the current bailout mechanism in the EU is bankrupt, that's why there's been talk of expanding the facility, which seems unlikely to happen.

So there seems to be a message being sent via Greece who dug their own hole after being bailed out last year. The effect of all of this is quite profound, literally we could be watching the EU fall apart a few decades after many economists warned that this experiment in Europe was bound to fail.

There's a little sarcasm at the end of the article, but don't underestimate how linked these economies are and how potent the domino effect is. Other then the possible dissolution of the EU as we know it now, the bigger picture is a second and way more dangerous world-wide recession.