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Thanks to the Bailouts, Germany Now Has a Debt to GDP of 300%... Bye Bye Eurozone!

Phoenix Capital Research's picture




 

 

 

The European Crisis is accelerating with every day. Indeed, at this point there’s a new major development (if not more than one) on a daily basis.

 

Rather than detailing every single news item, I’d rather address the larger concerns. This will better help you understand the larger systemic issues and how this is all likely to play out.

 

Greece, which we’ve been told was “saved” more than a dozen times, is back on the ropes and on the verge of needing a third bailout:

 

            Greece will need more debt restructuring…EU officials

 

Greece is unlikely to be able to pay what it owes and further debt restructuring is likely to be necessary, three EU officials said on Tuesday, a cost that would have to fall on the European Central Bank and euro zone governments.

 

The officials said that twice bailed-out Greece would be found to be way off track by EU and International Monetary Fund officials who have been assessing the country.

 

Inspectors from the European Commission, the ECB and the IMF -- together known as the troika -- returned to Athens on Tuesday and will complete their debt-sustainability analysis next month, but the sources said the conclusions were already becoming clear.

 

It means Greece's official-sector creditors -- the ECB and euro zone governments -- will have to restructure some of the estimated 200 billion euros of Greek government debt they own if Athens is to be put back on a sustainable footing.

 

http://www.reuters.com/article/2012/07/24/us-eurozone-greece-idUSBRE86N11D20120724

 

How this can be a surprise to anyone is beyond me. Greece was already asking for repayment extensions after its first bailout. Put another way Greece was already showing that it couldn’t meet its easier/ more lax debt repayment schedule back in 2010.

 

As a standalone item, Greece is now at the point of either leaving the Euro or defaulting. Both items are receiving coverage in the mainstream financial media, which tells us that high-level officials have plans in place for either eventuality (things don’t get out into the media in Europe until political “sources” plant them).

           

Greece’s Far-Left Leader Says Country Will Default

 

Greek’s leftist leader said his country would default, and has forecast that the ruling coalition government would look into returning to using the country’s old currency.

 

Syriza party head Alexis Tsipras said in an interview Saturday with Greek weekly Real News that the government will “soon present” the idea for Greece to stop using the euro and use the drachma, reported the Athens-Macedonian News Agency.

 

Tsipras said that any extension of the deal with the International Monetary Fund and the European Union is “essentially a longer rope with which to hang ourselves.”

 

http://www.theepochtimes.com/n2/world/greece-s-far-left-leader-says-country-will-default-268844.html?popular

 

Tsipras is the head of Greece’s anti-Euro Syriza party, which has grown rapidly in popularity over the last few elections:

 

 

October 2009

May 2012

June 2012

SYRIZA’s % of Vote

4%

16.8%

26.9%

 

Indeed, in the most recent election, Syriza lost by less than 3%. With Greece now showing a GDP contraction of 20% (this is on par with Argentina in 2001 which was accompanied by systemic collapse and full-scale defaults), it is highly likely that should Greece hold another election, Syriza would take is Parliament. The man who says Greece should just default would then be in charge of things in Greece.

 

On the other side of this debate is Germany whose political leaders are increasingly calling for Greece to leave:

 

Angela Merkel's coalition partners are lining up to demand a Greek exit from the euro, mounting pressure on the German chancellor and fanning market fears that Greece could shortly leave the single

currency bloc.

 

Patrick Döring, general-secretary of Angela Merkel's junior coalition partners the Free Democrats (FDP), told the regional Passauer Neue Presse newspaper that Greece could recover and regain competitiveness more quickly outside the eurozone.

 

"If Greece was no longer a part of the eurozone it could create trust on markets", he said in remarks published Tuesday (24 July).

 

He is the latest of a number of top-ranking members of the two smaller parties in Merkel's coalition to call for an exit for the benefit of Greece and to prevent contagion, mindful of the rising cost to Germany of bailing out weaker eurozone states.

 

Rating agency Moody's acknowledged that burden on Monday, dropping its outlook on German debt from stable to negative.

 

http://drugi.euractiv.com/euro-finance/merkel-partners-call-greek-euro-news-514099

 

The Moody’s outlook change on Germany lets us know that this time around the debate is more than political posturing. If Germany loses its AAA status, then it’s GAME OVER for the EU: the German population, already outraged by the EU bailouts, and now facing a recession will NOT tolerate a credit rating downgrade.

 

As I’ve stated many times, Germany is THE REAL backstop of the EU. And it’s comprised its own solvency as a result: the country is only €328 billion away from reaching an official Debt to GDP of 90%, the level at which national solvency is called into question.

 

Moreover, that €328 billion has already been spent via various EU props. Indeed, when we account for all the backdoor schemes Germany has engaged in to prop up the EU, Germany's REAL Debt to GDP is closer to 300%.

 

Folks, Germany is tapped out. It’s now only a matter of time before the EU is broken up.

 

On that note, we’ve recently published a report showing investors how to prepare for this. It’s called What Europe’s Collapse Means For You  and it explains exactly how the coming Crisis will unfold as well as which investment (both direct and backdoor) you can make to profit from it.

 

This report is 100% FREE. You can pick up a copy today at: http://www.gainspainscapital.com

 

Good Investing!

 

Graham Summers

 

PS. We also feature numerous other reports ALL devoted to helping you protect yourself, your portfolio, and your loved ones from the Second Round of the Great Crisis. Whether it’s a US Debt Default, runaway inflation, or even food shortages and bank holidays, our reports cover how to get through these situations safely and profitably.

 

And ALL of this is available for FREE under the OUR FREE REPORTS tab at: http://www.gainspainscapital.com

 

 

 

 

 

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Tue, 07/31/2012 - 14:12 | 2665735 Lohn Jocke
Lohn Jocke's picture

DOOM! DOOM! DOOM! DOOM! Happy investing!

Tue, 07/31/2012 - 13:20 | 2665553 YesWeKahn
YesWeKahn's picture

Drugie already promised us: euro will be saved, trust Drugie.

Tue, 07/31/2012 - 13:09 | 2665501 TPTB_r_TBTF
TPTB_r_TBTF's picture

@US bloggers, stop quoting FDP members already.  The FDP has no say in the matter.  The FDP are lame ducks.

Tue, 07/31/2012 - 12:42 | 2665427 vinu02
vinu02's picture

As long as printing machine has ink countries will keep printing and thats how things will keep moving unless this printing bubble is brusted . http://www.freefdawatchlist.com/

Tue, 07/31/2012 - 11:21 | 2665179 Snakeeyes
Snakeeyes's picture

True. The Eurozone unemployment rate is so awful that Germany CANNOT do anything. They have their own problems.

http://confoundedinterest.wordpress.com/2012/07/31/schauble-says-nein-to...

Tue, 07/31/2012 - 11:05 | 2665096 q99x2
q99x2's picture

If it is free I don't believe it and I don't want it. If it costs money I don't want it either. Thanks for nothing.

Tue, 07/31/2012 - 10:30 | 2664990 Jack Sheet
Jack Sheet's picture

These posts are the garbage bucket of ZH.

Tue, 07/31/2012 - 10:25 | 2664974 Joe A
Joe A's picture

Get rid of this guy already. He doesn't tell anything new ("As I’ve stated many times, Germany is THE REAL backstop of the EU", geeh you think so?) and pretends he is the one who brought you it anyway. And then this "If Germany loses its AAA status, then it’s GAME OVER for the EU". Oh yeah, a project already 50 years in the making will then suddenly evaporate.

 "the German population, already outraged by the EU bailouts, and now facing a recession will NOT tolerate a credit rating downgrade.". Hello, West Germany once had to incorporate East Germany which costs them 10 times as much as they had expected and they survived that. They will survive a credit downgrade, especially when the others even have a lower grading.

"the country is only €328 billion away from reaching an official Debt to GDP of 90%, the level at which national solvency is called into question.". Hello again, the US is already at 100% and they are running as an economy.

"Moreover, that €328 billion has already been spent via various EU props. Indeed, when we account for all the backdoor schemes Germany has engaged in to prop up the EU, Germany's REAL Debt to GDP is closer to 300%. Oh yeah, that is why they are getting negative interest rates when they issue bonds because investors are so worried about Germany's debt-to-GDP ratio that they actually want to pay for parking their money in German bonds.

"Folks, Germany is tapped out. It’s now only a matter of time before the EU is broken up.". Eurozone, perhaps. EU no way. Memories of war last long in Europe.

According to this guy the Euro would have collapsed some time ago but the thing is still there. Now run along and go somewhere else.

Tue, 07/31/2012 - 13:20 | 2665555 arby63
arby63's picture

"...but the thing is still there..."

 

The "thing" is still there alright. No one knows exactly what it is or how it still breathes but it's there! Not to defend Mr. Phoenix but you are way too optimistic.

Wed, 08/01/2012 - 02:13 | 2667791 Joe A
Joe A's picture

And Mr. Phoenix is way too opportunistic.

Tue, 07/31/2012 - 10:21 | 2664959 Tinky
Tinky's picture

oops! There's that damned word "exactly" again.

Go sit in the corner, Graham.

Tue, 07/31/2012 - 10:19 | 2664950 123dobryden
123dobryden's picture

well, cant they just leave the EURO one day and join back the day after with lets say 50% devaluation??? 

Tue, 07/31/2012 - 10:12 | 2664912 TahoeBilly2012
TahoeBilly2012's picture

Hey Summers, what if your data is right but it leads to something else. What if Germany too is broke? What if you are correct, then why won't they use this logic to get Germany to allow massive money printing and a Central Treasury. I mean, couldn't you maybe have this upside down? Maybe if Germany "wasn't broke" the Euro would breakup?

Tue, 07/31/2012 - 10:22 | 2664964 the tower
the tower's picture

Graham Summers is a bitter old man.. there's too much anti-European sentiment in his postings.

Finance and emotions don't go together very well, especially if you haven't been "in the loop" for a decade..

Tue, 07/31/2012 - 11:39 | 2665251 SheepDog-One
SheepDog-One's picture

Fuck Europe.

Tue, 07/31/2012 - 12:14 | 2665357 dearth vader
dearth vader's picture

That's what Zeus did when he abducted and raped her.

Now the Greeks are out to replicate the feat.

Tue, 07/31/2012 - 10:08 | 2664903 Satan
Satan's picture

The same disaster will strike Germany that struck the US when they lost there AAA?

Tue, 07/31/2012 - 10:06 | 2664889 alp
alp's picture

Summers may be right, but he doesn't seem to account for the almost limitless capacity of markets to sustain themselves and even rally on hope and optimism. He obviously is pessimist.

Tue, 07/31/2012 - 12:26 | 2665392 Tango in the Blight
Tango in the Blight's picture

Long Hopium Bitchez!

Tue, 07/31/2012 - 10:05 | 2664887 digitlman
digitlman's picture

Enough with this guy!  Every fucking day he says the EU is about to collapse.

Hasn't yet.

He's just here to peddle more stupid "newsletters".

 

 

Tue, 07/31/2012 - 10:08 | 2664901 alp
alp's picture

Perhaps we could trace on how far backwards he's been calling for this "imminent" collpase?

Tue, 07/31/2012 - 12:28 | 2665398 carbon
carbon's picture

alp, i could be, he`s calling from 

from neutral ground
Tue, 07/31/2012 - 10:01 | 2664870 Precious
Precious's picture

... and by the year 3000 the German population will be only 125,000.  OMG

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