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Tuesday, 28 June 2011

Greece defaults, but let's just call it something else

FT's Martin Wolf this time made me spit my coffee by explaining that Greece is not "technically" defaulting, but needs substantial help now, especially with paying for real goods and services. He seemed to suggest that buying time was the only option other than letting Greece go straight into depression. As for what to do after the (very expensive) time bought runs out? Nothing. Just the usual tripe about improving the internal economy and setting up themselves for growth. Which everyone knows it's not going to happen. 80% of the Greek people want to default now. Let them have it.

The reality is that no one is really interested in the Greek people. That much is clear. After all, the public sector workers there are enjoying pharaonic salaries, early retirement, perks and very little work to do. Why would they want to change? Economic illiteracy is rife in Wall Street, so no surprise it's the same in Athens.

The finger is on the pulse of the banks - German and French for that matter - which are the holders of the gigantic Greek debt and are not able to sell it to anyone, let alone willing to roll it over without guarantees from the EU-IMF.

Martin Wolf is right on one thing. No one will buy new Greek bonds. Their interest is higher than a very expensive credit card. So the only choice is to perform some "Burden Sharing", which means that the entire circus - that is private banks, pension funds, governments and some private holders - are (forgive my graphic description) having each other by the balls, in circle. In that case, no one can really squeeze.

This means that, de-facto, the debt will be rolled over with the hope that Mr. Papandreu and his team can modernise Greece and align its public sector with the best-run in Europe. This means, for Greek people, to accept German ways of running the public thing and a seismic cultural shift. It looks like the Greek PM has only days  to achieve that.

Will he succeed? The markets think otherwise.

Cheers

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