Well the news this morning out of Greece is that its debt has been revised UP AGAIN. Up from 12.7% to 13.6% and the advice from Eurostat that this will probably be revised UP yet again because and this I love – the Goldman Sach’s currency swaps deal and any other not yet discovered are not yet calculated into the debt figures.
Within minutes – no scratch that – within seconds Greek bonds began to sell off hard. The yield (the interest the Greeks have to pay) on Greek Ten year debt shot up and was a few minutes ago at a record of 8.4%!! (2pm GMT Still going up). There is not a sinners chance in hell that Greece can survive AT ALL with debt costs that high.
The rise in Debt means that instead of having to make cuts to reduce debt by 4% they now have to cut debt by 5% and therefore find another percent of cuts. Those cuts WILL mean more unemployment as public workers are sacked, more salary cuts for those who stay in work and further gutting of pensions. And no doubt it will fall disproportionately on the poorest. Please, when reading about lazy Greeks retiring early and having lots of perks – ask yourself are there not poor Greeks? If there are then they just got poorer. That is what this means. Poor people being forced to become poorer. Today it’s them. Tomorrow it could be you.
And don’t think it couldn’t be you. Within minutes of the news, the cost of insuring both Portuguese and Irish debt shot up too.
Both the EU and the IMF have published a report saying there is a growing risk of debt contagion. The problem is that if Greece goes over it could bring Spain down since Spanish banks hold a lot of that Greek debt that would default. If Spain went down – bang goes Santander. I leave it to the Brits to ruminate on what that would do here.
Portugal would go under almost as an after thought and and that point the starter would be finished and the waiter would bring on the main course. You see, French, Swiss and German banks are all massively exposed to losses on Greek debt. And let’s not even open the box labelled Spanish debt. Just too ugly.
If you take all the PIIGS together and ask what loss would those who have lent them money, suffer from a default? The answer is, France alone has 367 Billion Euros at risk. Which would certainly lighten their piggy-bank.
And even before BIG countries like France went under their BANKS would go under – and this is where the trail of gunpowder leads. Every European nation has a viper at its breast. Take a look at this list. This is the size of the largest banks in each country as compared to the GDP of the entire nation. If these banks went down due to losses on other nations debt or from CDS exposure to that debt, could their governments save them? You decide. Thanks to Zerohedge for the list.
Belgium – Dexia: 180%of GDP
France – BNP Paribas, Credit Agricole, SocGen: 237% of GDP
Germany – Deutsche Bank: 84%
Italy – Unicredit, Intesa Sanpaolo: 101%
Netherlands – Fortis: 155%
Spain – Banco Santander: 92%
UK – RBS, Barclays, HSBC: 337%
So surely the German’s MUST bail out the Greeks and surely the Greeks MUST knuckle under to no matter what grim poverty they are told they must endure? Surely?! Right?
But people are not sure. And some are beginning to get a bad feeling about it. At a meeting ealier this week no less a person than German finance minister Wolfgang Schauble said if his country’s citizens refused to back a joint EU-IMF bail out for Greece worth up to €45bn they risked ‘a financial meltdown’.
At the same time Asia’s newswire IGM-FX quoted ‘an administrator’ at the world’s top investor, China’s foreign exchange fund SAFE – warning ‘Greece could set off a chain reaction in Europe, serious enough to bring down the bigger states’.
Warnings are being voiced everywhere. BUT, “‘Economic Reality’ I’d like you to meet ‘Political Reality'”. Merkel faces elections and will be crucified if she says yes. She is trying to wait until after the election. But can Greece wait? And the Greek unions and Greek people are striking more not less.
It all seems to clear cut from a distance, when its happening to other people. But if it was you and your children whose future had just been repossessed? Your hopes, the IMF told you were no longer yours?
We are all standing on land mines wired, by our financial classes, to detonators that other people hold. Someone panics and steps off, or presses their detonator hoping your death might save them, and we can all watch the trail of explosions.