Greeks "In Over Their Heads In Debt" Means Non Performing Loans Poised To Surge
A Bloomberg TV report looks at a troubling and all too expected trend developing currently in Greece: namely the overabundance of easy credit provided to Greek consumers to fund unprofitable business, and which loans the recipients have no intention of every paying back. Sounds familiar - the ECB has now directly taken a page from the official PBOC playbook on how to keep the ponzi dreams alive for one more day. As the narrators points out simply: "more and more Greeks are finding themselves unable to pay back their loans." The surge in NPLs is demonstrated by the chart of loan performance over the past two years, comparing the 5% in NPLs in 2008, jumping to 7.7% in 2009, and hitting 8.2% at Q1 2010. And since banks are all about hiding the true impact of deteriorating assets, one can bet the true level of NPLs is will in the double digit range. And guess what - all these eventual charge offs will have to be funded by the ECB-IMF rescue mechanism, which means that sooner or later America, via its primary contribution to the IMF's various rescue facilities, will end up having to bail out the Greek debtor class. And as austerity is only expected to make things worse, the only possible (flawed) resolution is to do what the Cajas in Spain did: a massive wave of consolidation, so that those bigger banks provide some capitalization buffer for the smaller insolvent firms, until such time as the entire market is comprised of just a few TBTFs, which will nonetheless still be in need of bailing out.