Feb 26th 2012, 12:30 by A.P.
WHAT to read into the following? At an Economist Conferences event for CFOs and finance directors in London this week, I asked the audience whether Greece would end up leaving the euro zone. Every single hand went up. Asked whether more countries than Greece would leave, roughly two-thirds of the audience agreed they would.
Coming a week after an agreement on a second international bail-out for Greece, such certainty that the country would have to exit the euro was striking. It may be that an audience in London, albeit a cosmopolitan one, is prone to misjudge the willingness of the euro-zone creditors to keep lending money to Greece even if the country's programme goes off-track again. But I still think their judgment is right, for three reasons.
First, the demands being made of Greece will be almost impossible to meet: they will eventually need more money or some kind of forbearance. Wolfgang Schäuble, Germany's finance minister, and Jean-Claude Juncker, Luxembourg's prime minister, have both suggested in recent days that a third bail-out may well be needed.
Second, there is a finite amount of times that creditor nations can justify bail-outs to their taxpayers, and the poisonous manner in which the latest package was agreed suggests this point may already have been reached. There is a good chance that approving extra money is becoming politically impossible. The Greeks themselves may well give up on the whole process, too.
To be clear, a Greek default is not the worry. It is already happening, after all: a 70%-plus fall in the net present value of private-sector bonds counts as a pretty severe pasting for investors. The worry is the unpredictable impact of a euro-zone exit, not just for Greece but for the rest of the euro zone. The Economist has argued for a Greek default for a year, but always on the presumption that default need not mean exit. But it is ever harder to envisage a situation in which official creditors take a loss on their Greek bond holdings, which is needed to put Greek debt on a sustainable footing, but also agree to keep funding the country until it starts running a primary surplus. Default and exit are becoming inseparable.
Which brings us to the third reason why exit is likely. The prospect of euro-zone departures (even multiple ones) doesn't scare people as much as it should. The overall mood of the delegates at the conference was relatively sanguine about the effects of an exit. Contingency plans were in place at their firms to deal with it; this wouldn't be another 2008.
Yet 2008 is what the current situation ominously resembles. Sticking plasters have been applied (for Greek bail-outs, read the rescues of Bear Stearns, Fannie Mae and Freddie Mac) but more rescues are needed. Politicians are reaching the point where they believe that injecting more public money into failing entities is untenable. And there is an assumption that people have had enough time to prepare for the consequences of a shock that it would be absorbable. That strongly echoes the mood when policymakers let Lehman fail. Sometimes it's good to be afraid.
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Please please please... can socialist California with largely poor households who owe an average $40,000 (including healthcare cost) for government bureaucrat expensive retirement debt join in this European bankruptcy party?
Refer: http://www.mercurynews.com/opinion/ci_20039259
A default doesn't mean exiting the euro zone. Greece can default, but it can remain into the euro zone as well.
The bailout was more for the German and France banks probably than for the greek people. After all, the money printed on thin air in Europe will come back as inflation soon...
I think the author is referring to contrarianism; or opposite-land where fear creates a floor and complacency creates further declines.
Its not often that you have creditors nice enough to sort out your tax system, give you second and third chances and then try to negotiate low interest payments in addition to significant haircuts, as well as worry about Greek competitiveness if and when the mess is over.
True, its a lot of pain my dear Greece but you are fighting the wrong enemy. It looks like everyone, including the press are missing the point. It's not Ms Merkel that is the Nazi. It is your politicians and your elites that don't pay taxes, while covering up the rot with nice pay packages and early retirements, while nicely picking statistics out of a darts board.
The rot is still concealed flawlessly. Short of cash and packages to hand out and the Statistics Agency's darts board being confiscated, we can cheaply blame Ms. Merkel for this disaster.
If two thirds of a sample of economists belive that another country will leave the euro zone than that means that the general fealing is, after greece goes, either Ireland, Portugal, or both will also sucumb, and be pushed out, but if they go, or even if just greece leaves, suerly the event will be enough to push Italian yeilds back above 7%, even 6.5% will be enough. If that happens Italy which has been rolling over its debt at these high yields for three months and has already used up all the austerity measures and reforms It could realisticly muster, will have no recorse and sucamb. If this is the scenario then I wouldn't feel so secure owning Italian bonds.
@ A.P. (author)
What do you make of the comments so far? It seems to me like the majority of the sentiment is mirroring those expressed at the Conference. "Greece is going away, but, whatever. We've planned it. It's old news."
For what it's worth, I think the IMF and ECB and creditor nations would sooner bankrupt the entire Eurozone than see Greece exit, so I'm not convinced Greece is leaving. They've already imposed a 'voluntary' haircut on foreign bondholders and somehow avoided triggering a credit event... I don't see how Greece will be allowed to exit.
If I understand correct during the last three-four years the ECB has "borrowed" money from Germany and given "loans" to the PIIGSS-countries within the Target 2-payment-system.
The payment-accounts at ECB this year (I hope these figures are correct): Germany: + 500 bn â?¬ a solid surplus
The PIIGS have all deficits: Portugal: - 60 bn â?¬ Italy. - 180 bn â?¬ Ireland: - 120 bn â?¬ Greece: - 108 bn â?¬ Spain: - 175 bn â?¬
Germany puts in a nice sum of 100 bn â?¬ every year to ECB, and ECB actually (and happily) takes the German-money and give "loans to underachievers" i.e. the PIIGS-countries.
The German government does not inform the Germans about these 100 bn â?¬ that Germany "de facto" borrows to the PIIGS-countries every year on top of the Greece-Bail-outs no. 1 and no. 2. (And to Irland, Portugal).
Germany is today voting for paying the German-share of the 2:nd Greece-bail-out.
Greek newspapers picture Chancellor Mrs. Merkel in Nazi-uniform.
The German Home Secretary Mr. Friedrich and the German Minister of Finance Mr. Schaeuble have spoken very clear that Greece (and other PIIGS) should leave the EURO-zone, because the PIIGS-countries are not economical good and strong enough.
In Greek-opinions "this truth" which the German ministers said is "humiliating for Greece" and high-ranking Greek ministers protest and "reprimand" the Germans in an "arrogant-noose-in-the-air-way".
The Greeks are burning the German flag.
In German newspaper it is more and more written about the "hate of Germans" you find today in the PIIGS-countries.
Does anyone here have an advice for the Germans how they shall react, what Germany should do to avoid the "hate" from the PIIGS.
Pierrot.
@PIERROT.Sure you know that Italy imports more or less 25% of the car production of the german auto industry,and that we are the THIRD WORLD MARKET for that industry.We owe them 180 billions?They owe us the survival of their industry the way it is now.In the last 5 years no less than 3 millions german cars were sold in Italy.We are not begging money,we are circulating in Mercedes,Bmw,etc bought with our work.This is the reason why those automakers silenced the Bank of Germany refusing to accept us in the Eurozone.They sure didn't repent about their choice.
I'm quite convinced that 25% of German car exports do not go to a single one country and definitely not to a smallish country like Italy. First of all half of German car sales are domestic and most of German export growth has been to China, India and BRIC countries.
German exports are a lot less dependent on the â?¬ as is commonly believed: Germany exports highly sophisticated produce where price is one factor only. Remember, Germany fared well outside the eurozone for half a century even if the DM constantly grew stronger (like the Swiss).
Still, the main issue is free will: Italians like the rest - voluntarily - bought German products but German taxpayers are most definitely not voluntarily bailing out reckless consumption bu others!
Not bought with work, but with debt. That's the problem.
To luigi bianchi
Luigi, you blame Germany for Italians buying imported cars. Just like the Greeks have blamed EURO-zone for giving Greece to many loans.
You miss the point.
Italy must get their finances in order. If this means you have to drive Fiat, so be it. If it means many other "corrections in Italian life" so be it.
I guess you understand this.
Pierrot.
It was good to let Lehman fail. Fanny Freddy GM Chrysler California New York and Illinois should follow. Greece Itally Span France as well.
I propose the Economist starts writing articles about the weather. Would make for much more savoury readings, than repeating reshuffled articles on the poor Greeks, and how England can be vindicated because it didn't join the euro. WE GOT THE MESSAGE. Now move on! The Economist has a severe case of OCD! But I've got news for you - it's treatable. Get help! http://www.ocdaction.org.uk/
Yawn....
im from syria I'm an manager at rail ways company and accountant at dental company sorry for my English
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