Latest Greek Economic Collapse Means Country Will Soon Be Out Of Eurozone, Or Bankrupt, Or Both
Once is fine, twice - passable, three times - eh... But when one has missed forecast after forecast after forecast as many times as Greece, one wonders what the hell is going on. Earlier today we got confirmation that what everyone with half a brain (obviously this excludes the apparatchik idiots in Brussels) had been expecting had come to pass, namely that the Greek economy has completely imploded. Per Reuters: "GDP contracted at an annual pace of 7.3 percent in the three months to June, from 8.1 percent in the previous quarter, according to seasonally unadjusted figures by statistics agency ELSTAT, while unemployment stayed near record highs. "Domestic demand is incredibly weak, exports do not benefit from global economic growth ... A 2011 deficit of 8.5 percent to 9 percent doesn't seem implausible," said Ben May, a London-based analyst at Capital Economics. Unemployment fell slightly to 16.0 percent in June, helped by seasonal tourism jobs. But it remained close to a record 16.6 percent it hit the previous month, well above its 11.6 percent level in June 2010. And as rumblings from everywhere confirm, most notably from Greek 1 Year bond yields which are pennies away from 100% (i.e. one doubles their money if Greece does not go broke n the next 365 days), and Greek CDS which now predict a virtual certainty of bankruptcy, Europe has had enough of being used as a liquidity source over and over. Because as speculated ever so often, Greece (and now Italy) realized that the balance of power in Europe is entirely with the broke nations: after all what will Brussels do: blow itself up by kicking Greece out? As a result, Greece continued to promise and promise while doing nothing. Well, it appears that Europe is now about to test just what happens when Greece is kicked out. According to sources Greece will either be kicked out of the Eurozone by the end of the year or will be insolvent in the next 4 months. Either way, things are about to get truly exciting. And unfortunately, what Greece is doing by leeching of the Eurozone is precisely what the US is doing by "leeching" of the (temporary) dollar reserve standard. As Greece is about to find out, all good things come to an end. Soon after, America will also discover that those 4 week Bill yields of 0.000% will be a much cherished memory.
More from Reuters:
Anger at Greece's failure to meet fiscal targets that are a condition for its international bailout is nearing breaking point in Berlin and other European capitals, with senior German politicians now talking openly about the possibility of Athens exiting the euro zone.
But Athens ruled out any chance of quitting the single currency, pledging to make every effort to qualify for a 109-billion euro bailout agreed by euro zone leaders in July, the second rescue package for the debt-laden country in little more than a year.
"There is no threat of Greece exiting the euro zone," government spokesman Ilias Mosialos said. "We are proceeding with reforms quickly."
Greece is missing fiscal and reform targets set out under the first, 110-billion euro bailout it obtained in May 2010, despite the spending cuts and tax hikes it took to comply.
Faced with the threat of its EU partners blocking an 8-billion euro bailout tranche due next month if it does not get its act together, the country's socialist government pledged on Tuesday to step up long-promised budget cuts and asset sales.
But economic figures released on Thursday show austerity is stretching the economy to the limit, making it more and more difficult for the country to meet its 2011 budget deficit target of 7.6 percent of GDP, from 10.5 percent last year.
Reacting to earlier pressure from the inspectors, Greece has taken steps to make its labor market more flexible, including below minimum-wage salaries for people getting their first job.
But before agreeing to new aid disbursements, the inspectors insist that Greece remove hurdles to the introduction of company-level wage contracts, cut the number of civil servants and open up closed professions, such as taxi owners and pharmacists.
Taxi drivers and doctors went on 24-hour strikes on Thursday to protest at the measures. Students opposing university reform have occupied more than 100 faculties across the country as the school year begins.
Bottom line: the status quo is slowly and surely ending, one insolvent day at a time.
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