Wednesday, June 17, 2015

Could this be it? Greece the end of the end game

Well its been a ride, the on-again off-again negotiations seem to be off for good with Germany taking a very hard and uncompromising position vis-a-vis Greece.  This coming weekend has been dubbed by some as a Lehman Weekend -- where in 2008 Lehman went from being a solvent (ish) investment bank on Friday to "get your stuff out of the office before Monday, because liquidators are at the door.

Like Paul Krugman I believe that a deal is possible -- its not likely, but its possible.  The issues are geo-political as the actions on Greece will determine how things will proceed in Spain (looking at elections soon), Portugal and to a lesser extent Italy.  It is possible that the calculations in Berlin is making is that its not a question of saving Greece but to avoid an expensive end game in Southern Europe. Greece has given plenty of ammunition to Germany from intransigence on reforms to an absolute belief in their righteousness of their cause -- the Greeks have elected a slightly delusional (its not our fault, its the other guys) that grattes in Berlin -- it grates because, in part, its true.

Some say that a Greek exit would be good for the economy, except Greece is not a big manufacturer, 80% of Greece's economy is services -- mostly tourists I would guess.  So, Greece is a country that imports everything from fuel to machinery (mostly German by the way), a devaluation of a new national currency would not help them, except it would reduce wages, which maybe a necessary pre-condition to rebuilding an economy -- the Euro makes downward wages adjustment almost impossible, without huge labor strife.

There is no doubt that a Greek exit from the Euro (and maybe from the entire Eurozone system) would be catastrophic; a calamity to Greeks and to their country.  It doesn't mean that an exit will not occur.  It is evident that the conversation has grown stale between the parties -- they grow no closer in the past few weeks, and the strident level of rhetoric is not promising.  The Americans tried to "get involved" but got smacked down for their efforts -- Berlin even when as far as to say that American foreign policy was making things harder for Europe -- that, of course, referred to sanctions imposed on Russia after they invaded the Ukraine.  Since then, the Americans have backed down, let Europe deal with its problem -- of course if Greece exits everybody will pay...

On a side note has anyone noticed fuel prices and stockpiles -- its rather strange OPEC announces "no cuts in production for the foresable future" with inventories near all time high and prices, well prices they keep rising on the spot market.  It now seems that bad new is good in the oil sector -- it was the same in the stock market a few years ago, because more bad news meant more quantitative easing, which means more liquidity, which translates into higher stock prices...


Post a Comment

Subscribe to Post Comments [Atom]

Links to this post:

Create a Link

<< Home