Will the three stooges' timeless maxim of "one for all, all for none" ricochet throughout the Euro Zone in time to save--or abandon--Greece? Will the rescue stop Greece from further hemorrhaging? Moreover, what precedence will this leave for other soon-to-be bankrupt nations like Spain and Portugal?
My vote is that they will save it. Perception is everything and the longer they delay the day of reckoning, the better.
But think for a moment why we got into all this economic mess in the first place. Was it not the idiotic banks that were leveraged to the hilt that eventually brought home the dumbass rooster (namely the poor public) only to have its head chopped off? Now replace these friggin' banks with sovereign nations with unimaginable amounts of debt. Folks, this isn't just pathetic, it's downright suicidal.
The problem here is that Greece has no economic interest for the EU. If Greece defaults the Euro plummets... That is the "common sense", yet I have been harping time and time again that the EU nations would love for the currency to collapse. What people don't realize is that the EU zone is self-funding. This means if Germany needs money they go to the ECB. They do not need to go to the open market. Whereas countries like the US have to go to the free market, just like the UK. Greece is trying to go to the free market because they are running out of money. And the free market is saying, "wait one minute". If the ECB had not said, "Greece no more money we would not be talking about Greece." Regarding Spain, and Portugal, Germany will backstop these countries because their economic interest is quite large. They will not want these countries to fail and they will want to get a bigger piece of the economic pie in these countries. Italy is the wild card. Germany has some interest, and the EU does want Italy in the Euro because of its economic size. Will they completely backstop? No idea. I even think the ECB wants Greece to be kicked out because then they can send out a message that governments need to spend less. The reason the EU has been lackluster about Greece is that they don't care! With the Euro collapsing there are more exports. Of course the US and UK are getting screwed, but the Euro countries care very little about that. The interesting thing is that Bernanke and others in the Fed are paying close attention to Greece. They say because of the global risk. I say my a** global risk. Where was Bernanke when Iceland went down? Or how about Argentina? What about Russia? Answer they care about Greece because after Greece the CDS will begin their assault on the UK and the US... And that Bernanke cares quite a bit about... I am not a gold bug, but I am thinking in the next six months we will have a gold super spike...
What is the perception? The Euro will become weak? The EU zone will break up? That is the perception outside, but inside the EU they will not care. To get a complete understanding of what I am getting at. Go to news.google.com. Look at the US, and UK articles regarding Greece. Then shift to German, and French. Two completely different perspectives. This "perception" is an anglo-saxon thing and only the anglo-saxon's care.
The Anglo-Saxon media is playing the EUR weakness card in conjunction with fresh made "analysis" and worst case scenarios from Anglo Saxon investment banks. YAWN. Weaker EUR ? Sarkozy and Merkel say "Welcome" ! As the EUR is the most currency de jour to speculate - why not ? I need anyway some more USD for the ATP tournament in Key Biscane.
Sorry but I beg to differ. Yes, it would be better for the EU to kick Greece out than to feed and shelter the damn country. But as far as the currency is concerned, you seem to conveniently forget that the weakness of the euro will not help exporters because there's no longer any demand. But, above all, the dollar cannot possibly recover unless Helicopter Ben stops the printing press but that won't happen anytime soon. In another word, as long as USA is buried under a pile of debt, the fate of the euro remains uncertain. At some point in the future, I'm willing to wager that Uncle Sam will devalue the dollar. In that case, what might possibly happen to the euro? The ECB will probably follow suit by devaluing their own currency. Do you get my point? All currencies will become nothing but piece of trash. You're better off buying and storing gold!
How about we let Goldman Sachs bail out Greece and forgo all those bonuses for however long it takes to get Greece back on track. After all, GS is the company that wrote all that garbage currency CDS that allowed Greece to under-report their liabilities. Exactly how much crap is GS going to be allowed to get away with before they are stopped?
if I were German/French citizen, would not in any way want my govt to spend tax dollars propping up other govts. The EuroZone had rules - keep your debts below a certain %. They failed. Kick them out of the Euro and let them suffer on their own. Greece had their day, but Plato and Archimedes are dead. Next!