The US bug, whereby the worse the economy, the higher the stock market and bond prices must have shifted to Greece, because while the Greek stock market was the best performing "asset" class in October, and Greek bond yields are plunging just because the greater fool stock posse has now moved to the insolvent nation if only for a few months, the economic reality just gets worse by the minute. Case in point - Greek corporations, or what's left of them, and what Greece needs more than anything - taxes.
Rumors that a deal will be reached "soon" have gone on for weeks. Indeed announcements of an expected agreement today have already hit new snags.
For the sake of argument, let's assume a deal does go through and crunch the latest numbers to see what the situation looks like from the point of view of Greece before and after the deal.
Please consider Greece Needs EU145 Billion in Second Aid Package
Via email I received an interesting set of facts from Barclays regarding banking exposures to Greece.
Greece: Euro area official sector exposures in excess of EUR290bn
Euro area official sector exposure
On January 9, 2015 I posted Another Run on Greek Banks Begins; Get Out While You Still Can; Buy Gold.On the same day, Greek finance minister Gikas Hardouvelis said "Probability of a Bank Run is Small and Deposits are Safe".I propose Hardouvelis' statement was one of those "lie when it's serious moments".
The Greek support package has not yet failed. But you can hardly call it a success. Investors have little more confidence in Greek debt than they had last week.
And - it seems - little confidence in the eurozone either. The euro today sank to a one year low, and markets shuddered across Europe.
Why? Apparently, even bond market vigilantes think you can ask a government to do too much.
The Greek economy is in total shambles. Unemployment is 26.9% and youth unemployment is 57.5%. Round after round of bond haircuts have not done a thing for the economy.
Der Spiegel now reports Greece on the Brink: Athens May Need 10 Billion More
The bailout of Greece was bungled because it was an attempt to save the single currency rather than the debt-stricken country, according to a highly critical report by the International Monetary Fund.
The internal report on the handling of the Greek crisis has detailed a catalogue of errors, which led to the IMF breaking three out of four of its own rules relating to lending money to bankrupt countries.
Here's what I learned from spending almost an entire day in Greece.
First, most Greeks I spoke to don't want the country to default on its obligations, and the average person there probably has a better idea of what a default would mean for the country in the short-term than some of the outsiders who blithely recommend it.