If tax receipts are less than outgoings, then you need to borrow more to fill the gap. This bailout will not change this fundamental position, so Greece will go bust again.
My prediction is at the end of the year, why then? Because the German elections in November will then safely be out of the way.
This is important as part of the deal in no default on bonds held by the ECB, when this does happen then the losses will have to be paid by the taxpayer in proportion to the percentage they guarantee. Germany is the biggest with about 43%. Why is this important? Because it would wreck Merkels reelection changes, her popularity would sink faster than Euros going down the ECB drain.
Everybody will see Greece have missed their targets by the end of the year and the EU will insist that they are met before releasing further money or it will have run out anyway by early 2013. The figures to show that Greece can survive with this bailout are pure fantasy with 2.3% growth next year and 2.9% in 2014
and around that through to 2020, when they are saying debt to GDP will have fallen to 120%. This really is one PIIG that ain't going to fly.
http://www.mindfulmoney.co.uk/wp/shaun-richards/the-latest-greek-bailout-has-euro-zone-leaders-acting-like-the-march-hare-from-alice-in-wonderland/http://www.mindfulmoney.co.uk/10274/investing-strategy/a-mindful-solution-to-the-greek-tragedy.htmlThe bailout has been done for political expediency, to bailout the banks in Germany and France, to show what is in store for the other PIIGS if they don't get their house in order (but that won't stop Portugal being next for another bailout) and most importantly of all to save the EU project with its gravy train.
The trouble is it won't, the can has just been kicked down the road and when the next crisis hits, Europe and the Euroland will be that much weaker as a result of all this skin saving lunacy.
Another very interesting article today is will the forced haircut on Greek debt held by banks be classed as a credit default swap (CDS) event. If yes, then the insurers will have to stump up the money for the haircut. Nobody knows where the IOU will end up when the music stops, but much is thought to be with US banks and will they be able to pay. If this is not a CDS event what is the point of having insurance to cover such a situation and it not paying out?
In this scenario, any banks with any uncommon sense would avoid buying bonds from indebted and / or risky countries completely or will require considerably higher interest rates at best. This would polarize the world into countries that can (the haves) and those that can't (the have nots). Where do you think this will leave the UK with our annual £100bn+ borrowing habit?
http://www.businessinsider.com/art-cashin-greece-traders-cds-middle-ages-2012-2?nr_email_referer=1&utm_source=Triggermail&utm_medium=email&utm_term=Business%20Insider%20Select&utm_campaign=BI%20Select%20Recurring%202012-02-16The Eurozone crisis and fallout has still got a long way to run and it's going get much, much worse before it gets better.
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Topic: That Greek bailout (Read 1157 times)