Latest Greek Economic Collapse Means Country Will Soon Be Out Of Eurozone, Or Bankrupt, Or Both

Tyler Durden's picture

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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Long-John-Silver's picture

Should I start popping the corn for this show now? 

tekhneek's picture

"There is no threat of Greece exiting the euro zone," government spokesman Ilias Mosialos said. "We are proceeding with reforms quickly."

I just shit my pants and blew water out of my nose. This shit's priceless.

tawdzilla's picture

toga party 2nite @ Merkels house

Herman Strandschnecke's picture

The dyslexic will be the one dressed as a goat

oogs66's picture

how do stocks keep going up?

Long-John-Silver's picture

Stealth printing presses are still in use.

Sudden Debt's picture



In the 90's, we had KNIGHTRIDER!!

In the 10's, we have KNIGHTPRINTER!!


Instant Wealth's picture

Printmaster Ben and the Furious Fed

The Gooch's picture

"we know how to fix this mess-fire Ben and the printing press- RON PAUL"

Azannoth's picture

When Greece defaults the voluntary or involuntary way everything we've seen till now will look like picnic, and it looks like that's a given

Better keep your bug-out bag up to date

BORT's picture

Here is what is really not needed in Europe right now


Iceland's Volcano Katla under Close Observation

Increased geothermal heat and seismic activity below Mýrdalsjökull glacier in south Iceland, which covers the volcano Katla, may indicate an upcoming eruption. Scientists are closely monitoring the volcano, although it is not certain whether an eruption is imminent.

PY-129-20's picture

Isn't Katla very powerful? When that other volcano erupted, Eyjafjala...something, they always mentioned Katla as the bigger threat and that they were connected in a way.


Use of Weapons's picture

ZH might just have eyes/ears on the ground if/when it blows. Let's say its being tracked. The 1973 one was a baby - Katla is much bigger.


The issue is simple: . Each of the eruptions of Eyjafjallajökull in 920, 1612, and 1821–1823 has preceded an eruption of Katla.


Here's the disaster porn: last 48 hrs of activity in the crater, looks like it is increasing - Myrdalsjokull = glacier sitting on top of katla, and note the size differences between the two 

Katla volcano can be found under the south-eastern part of Icelands Myrdalsjokull icecap.

Katla volcano has a large ice covered caldera which is 9 miles in diameter and is the fourth largest volcano in Iceland at 220 square miles.

Katla has erupted many times in the past, usually once in every 80 years. The last major eruption was in 1918, and is rumoured to have caused death by gas poisoning in some areas of the UK.


Some say the world will end in fire;
Some say in ice.
From what I've tasted of desire
I hold with those who favor fire.
But if it had to perish twice,
I think I know enough of hate
To say that for destruction ice
Is also great
And would suffice.

Azannoth's picture

That volcano could put the world in a mini-iceage for a few years, think crop failures, food riots, wars, etc.

poggi's picture

What's all the excitement.  Hell, Greece first defaulted about 50 BC, so, what's new.  Order the Greek salad and be calm.  It'll all be okay.

Cole Younger's picture

True...until BAC has to make good on the derivatives it holds....But no worry there either...BAC likely owns derivatives on its derivatives and those derivatives are likely insured by other derivatives (and so on). 

WSP's picture

But since the execs at BAC (as well as the others in our kleptocracy) make the rules, control the government and justice system, and most importantly, the printing presses that feed our ponzi scheme, does it really matter?  Seriously? 

If a bet goes bad, they just change the accounting rules, print money, or dump it on investors, so in the end, does it really matter?  They win, you lose, period!   Don't want to play you say?  Doesn't matter.  Buy gold, they will run it down or change the rules or do a 90% windfall tax.  Hold dollars, they will debase it.  Try to start a business, they will regulate you away.   No, the best option most have is to max out credit cards and other debt and collect government assistance.  They don't care though, they will just print more.


honestann's picture

All correct, except for one minor but rather nasty detail.

The entire system rewards people for being non-productive, destructive, dishonest slugs.

The entire system punishes people for being honest, creative, productive individuals.

Therefore, the end result will be nobody producing and everybody consuming.

Except... where will the products come from when nobody is a producer?

Answer:  the products won't exist, and the majority of mankind will die off.  This is what the elitists have been planning, what they have openly published, and what they have been actively pushing forward in many other ways by making the world unhealthy and people braindead.

What people just don't seem to get (or want to face) is that money cannot buy anything if nothing is produced.  And that's where this is headed.

The producers need to withdraw from society, become self-sufficient, refuse to be participate in "commerce", refuse to be fleeced... and let the vast majority of predators and parasites destroy themselves.  Just make sure you are far, far, far away in the extreme remote boonies, well armed, and capable of self-sufficiency.  These will be the "meek who inherit the earth"... assuming anyone gets off their butts and takes these actions.  If not, all mankind will perish.  And good riddens.

kaiten's picture

Well, I think kicking Greece out of eurozone was the german position from the very beginning. They just cannot do it directly, so it´s all about forcing them to leave "voluntarily".

Cugel's picture

Well, I think kicking Greece out of eurozone was the german position from the very beginning.

So I guess the Germans were right all along then, eh?

Cugel's picture

In the sense that they are now having the problems with Greece that they anticipated they would have with Greece before. Hence, their aversion was well founded.

kaiten's picture

Of course, it´s well founded. I also believe they are right. Greece has nothing to do in eurozone. The sooner they leave, the better. For both, eurozone and Greece.



by "very beginning" I meant 2010, when this crisis started, but it´s also true in broader sense, since 2001 when Greece joined. But eurozone is not a union only between Greece and Germany, so it wasnt just a german decision(to let them in), and there were also other issues, like German unification etc

Fuh Querada's picture

Only the markets can throw Greece out of the EUR. The power elites will never permit it.

frugartarian's picture

just default already, jeeeezzz

guiriduro's picture

Inevitable really, austerity simply introduces an unemployment->contraction->debt expense cycle.  The irony is, what Greece needs is credit - provided that credit can be spent productively.  And for that to happen Greece needs some reform, but mostly it needs its (new) creditors to also know their money is not going into servicing the enormous unproductive debt overhang it already has, or to rank pari passu with its existing (greedy) creditors.  I think policy makers already know this, they've bought as much time as they can, the next step is bankruptcy / haircut / writedowns.  Greece needs to get out of its current obligations in order to form new ones.  This will of course force the problem into the financial sector with a new Lehmans event.  The squabbling was not really whether Greece could "austere" itself into a model debtor, but rather the brinkmanship between the investor class and its politician puppets, versus the Greek and German taxpayers, neither of whom want (nor should have to bear) the consequences of prior malinvestment.  Which isn't to say the Greeks don't have significant reforms to do, just that there is no way for them to accomplish it in the status quo. 

ElvisDog's picture

Greece needs to get out of its current obligations in order to form new ones

Hah, that is funny. And why would you lend money to someone who had just declared bankruptcy so they could take out a new loan? I mean, I know it happens with countries, Argentina is an example, but it does seem a little dubious from a "will they repay this new loan" point of view.

guiriduro's picture

Well, I guess the real question would be, what is worse?

A partially (or even fully) reformed debtor whose past excesses are so large that, with the best will in the world, they will be unable to meet their obligations.  Would you lend to them?

Or, a partially reformed debtor, having just recognised the simple fact that its past debts are totally unaffordable and had declared bankruptcy. Having cleared the previous debt through default, they present you with a transparent, reformed, productive plan for use of new debt.  Would you lend?  Or at least, neither scenario being ideal, which would you consider worse?

honestann's picture

#1:  Default on all debt.

#2:  NO MORE DEBT.  Never borrow another penny.  NEVER.

After the default, they have a clean slate.  They can learn to live without debt.  Zip, zero, nada, none.  Anyone who claims that individuals OR governments cannot exist (or cannot function as effectively) without debt is either insane, a blatant liar and fraudster, or both (a banskster).

edotabin's picture

We know the bankers are crooks. We know the greek public sector is a huge blood-sucking organism.

If they implemented the austerity where it needed to be implemented (deflate huge blood-sucking organism) and took half the savings and invested it by encouraging the more ambitious, hard-working Greeks things would have been more workable.

A friend told me he saw on the news that they are preparing for 10-15% cuts in the public sector starting sometime in September. Far too little, far too late.

They didn't have the time to do it.  Dogma has superceeded the real world in Greece. It took about 30 years to create this monster and it will take about 10 years of very aggressive policies to change it back. There was no way this could/would happen in 1-2 years.

Jack Burton's picture

Greece defaults and European banks blow up. Bang! I mean BANG!

Ethics Gradient's picture

Unlikely. There may however be some printing.

sun tzu's picture

ECB will print and buy up the bad debt from the banks just like the Fed bought trillions of bad CDO's and MBS's from the US banks. 

Mugatu's picture

Its like breaking up with your girlfriend - it takes several attempts before you both realize its over.

MS7's picture

I don't understand the critique. Greece cut jobs, pension, salaries during a recession and people are surprised that the economy tanked? You mean if they followed the even stricter requests of the Troika it would have been better? Already the unemployment is at least 16%, hospitals are lacking in supplies, and there is an increase in homelessness. I suppose if the Troika wants to kill off 1/2 the people,  that might be one way of improving the economy. What do you mean "leeching" off the EU? The rescue money is rescuing the banks. The incompetent and servile Greek government could have just defaulted last year and given its people a chance. Instead it wants to make friends with the powerful and the banks.

knukles's picture

I'll take both for a $Bazillion, Alex.

BTW, was at a dinner of 8 guys last night.  All well educated, comfortable professioanl types... doctors, etc.  One of the fellows is Greek, US naturalized citizen, spends half of year each place, business in both countries.  Topic du jour was Pan-European Clusterfuck.  He was going on and on about how the stupid fucking Germans paid for EVerything in Greece for all the years they were in the EU... roads bridges, pensions, you name it.  He was openly disparaging of the Kraut's absolute waste of money, especially after the integration of E Germany, years of Agricultural Subsidies to  France, etc.
Was an amazing portrayal of the Greek thank you (fuck you very much) attitude toward their northern rich neighbors... and his opinion of the Greek zeitgeist was "Milk the fuckers for anything we can get before they throw us out."

Real eye opener.
Makes one wonder why Germany.... EU.... 
Ah, old conspiracy theories of post war meetings in certain hotels... 

PY-129-20's picture

"stupid fucking Germans?"

Well, I guess we were foolish enough and deserve that attitude. We believed they would use it wisely. We thought it was our duty to help to build a new Europe. We felt guilty for what we had done. And rightfully so.

Like that Telegraph article. It mentioned our generosity towards our European neighbours. I say - kick these beggars out, end the Euro-project and minimize the current EU. Nigel Farage got it right. We need that money here in our own country. Ordinary people have lost a lot of money during these past years.

No, we need a new Germany here. A Germany that is aware of its past, but also self-confident and has strong and good relations to the USA, Great Britain and Ireland, Netherlands, France, Poland, Russia, China, India and Northern Europe. And we need a much more democratic Germany - like Switzerland.


honestann's picture

Unfortunately, the chaos that has been caused by trying to FORCE predatory elitist bankster control over everyone in europe and the world seems to have finally destroyed Switzerland too.  If only they had been willing to hold on a bit longer, they might have been able to stay coherent with their excellent history and not destroy their banking system and now even their currency.  What a shame.  Self-destruction on a continent wide scale.

Wake up humans!  We can all be independent AND friendly.  In fact, people who are left alone and not forced to participate in endless elitist wet-dreams are prone to being friendly and even collaborators or partners.  But the lesson is, each case must be fully voluntary by all parties involved.  Those who wish to "opt-out" must always be allowed to fully opt-out, and never be punished or inconvenienced for doing so (beyond not receiving the benefits the cooperative endeavor creates).

Germans should bail.  Be independent.  Your inclinations and habits can be the basis of a great country, a great economy, and do everyone benefit by providing a great example.  Your leaders tried force in WW2, and that was a disaster.  The euro project is ANOTHER attempt at force, albeit not military in nature.  No more force.  No more deals that force anyone to be part of anything they don't wish to be.  And I don't mean "dont force countries", I mean "don't force any individual", which means, end the damn EU, which is nothing but a different kind of force and another way for misguided predatory elitists to play masters over teeming masses of slaves.  Cut the crap.  Get real, and get free.

Cdad's picture

What?  Oh, we are now on the "Greece is not fixed" trade?  Didn't know.  Thanks for the I was just about to get levered up on Netflix.  Whew!

Texas Ginslinger's picture

"There is no threat of Greece exiting the euro zone," government spokesman Ilias Mosialos said. "We are proceeding with reforms quickly."

A statement like that would make Baghdad Bob proud.  Greece obviously hired the right spokesman. 

edotabin's picture

Will never forget the scene when Bahgdad Bob was saying that no "agressors" would ever set foot in Iraq and Us tanks were visible behind him.

Mesquite's picture

Didn't Mr. Trichet promise 'unlimited liquidity,,'??

And now this...

So, guess Reality still wins..


Ethics Gradient's picture

It's not a liquidity crisis.

falak pema's picture

Its basicly the insolvency of banks now caught between Basel III and their meltdown. But the liquidity is still lurking there mega big if there is a stampede run on a currency started by a huge and concerted short. We will then find out if Trichet's unlimited liquidity pump cans resist :

a) the market speculation carry trades, repeated pump n dump swings, and resulting increasing interest  spreads.

b) inflation spikes...

A double whammy in the race to the bottom on both sides of the pond!

Got to have a supple body to do the giant splits in FED and ECB circles....cover your naked asses where ever you be!

mikmid's picture

Crack-up-boom. The fiat race to the bottom revs up, insolvency revs up, global GDP slowdown revs up. Gentlemen start your engines, 1st to the bottom wins.