Wednesday, May 05, 2010

Greece: I thought it was too good to last

Riots and a general strike are the order of the day as the Greeks don't want to face the reality of their financial situation.

Deadly riots as it turns out. Three dead after fire-bomb hits bank during Greek riots |
A FIRE-BOMB attack on a bank in Athens left at least three people dead as police fought pitched battles with striking protesters furious at brutal spending cuts designed to avoid national bankruptcy.

Hooded youths hurled petrol bombs at stores and businesses in the Greek capital, setting the bank and two government buildings ablaze.
So even if Germany agrees to loan the money, will Greece agree to the terms, will it live up to the terms?
"Given the scale of the public opposition to the austerity measures, it is still unclear whether Greece will ultimately be willing to take years of fiscal punishment and recession to get its fiscal house in order," economist Ben May at Capital Economics said.
If they don't take the medicine, then all the arm twisting with Germany was for naught, and the country will eventually default on its loans.

And as tragic as these deaths are, the impact this violence will have on Greece may last a damn long time. Greek Violence Threatens to Scare Away Tourists Key to Economy -

Tourism accounts for 16 percent of the Greek economy, and about 20 percent of all jobs in that country. How many people want to get caught in the middle of violent riot? Will people change their plans? Or will people making plans just make different plans? Both could happen. (The Bloomberg article has a few anecdotes, but no data on travel plans. But thi kind of thing has impacts on people.)

Meanwhile, the EU is telling people to ignore the other problems. 3 die in Athens riot over cutbacks, debt crisis - Yahoo! News
In Brussels, EU officials desperately tried to calm market fears that Greece's debt crisis was spreading, insisting it was a "unique case" combining profligacy and tampered accounts. EU President Herman Van Rompuy insisted the growing debt problems in Spain and Portugal had "absolutely nothing to do with the situation in Greece."

"Greece is a unique and particular case in the EU" because of its "precarious debt dynamics" and because it "has cheated with its statistics for years and years," EU Commissioner Olli Rehn said.
So what is to keep them from cheating in the future?

But while everyone is saying "Greece is unique," other forces are moving.
Fear that the bailout won't stop the debt crisis from spreading to other financially troubled EU countries like Portugal and Spain intensified amid the violence Wednesday, as credit ratings agency Moody's put Portugal on watch for a possible downgrade.

The euro sank, dipping below $1.29 for the first time in over a year, on fears of crisis contagion.
Not only contagion. And not really contagion. Portugal, Spain, Italy and Ireland (though less-so in Ireland) are in trouble all on their own, and not due to anything going on in Greece.

So will the EU get their bailout? Maybe. (Though if they actually had to put it to a vote in Germany, and not just in the parliament, they would lose.) Will it make any difference in the long run? Not if the people of Greece don't live up to their end of the bargain. And they don't seem to want to believe that the gravy train has derailed.

1 comment:

Rich said...

So if I was Germany and watching this would I still bail them out? If they do there is going to be line of others with their hands out.