For three years now we’ve been repeatedly told that the Greek situation was “fixed.” Those were lies. And those lies have resulted in a gross misallocation of capital both financial and political.
From a macro perspective, anti-austerity/ anti-Euro political parties have seen a chance to capitalize on popular dissent. Simultaneously, pro-Euro groups have been forced deeper and deeper into the deception that somehow the Euro is a good thing for all involved. Distrust in politics and in the Euro is now higher than ever in Europe.
The impact of this will be severe. Europe as a whole is socialist with the percentage of the population employed by the Government ranging from 30% in Germany (the most free-market) to 56% in France (the most socialist).
You’re talking about a joint economy of $16 trillion in which 30%-56% of the population is employed b the Government and the Government is shredding democracy and the legal system. The cultural reactions will have financial repercussions for years to come.
The Euro has taken out its bull market trendline going back to 2003 (green line). It’s finding a little support at 105 but the chart suggests we’re going below parity to 85 or so in the coming months.
It’s not difficult to see why.
The EU was formed based on specific financial regulations (the Maastricht treaty) and border regulations (the Schengen treaty). The ECB and EU leaders have proven they are more than willing to break ALL of these in their efforts to maintain the status quo.
Even more disturbing is the fact that even basic tenants of common law have been destroyed in order to benefit the ruling classes. Private property, in the form of savings deposits, have been confiscated in order to prop up insolvent banks. Meanwhile no one responsible for the banking crisis has gone to jail… and connected insiders are warned weeks in advance to get their money out.
When you shred democracy and the central tenants of a legal system in order to benefit the very few, it’s only a matter of time before the whole system collapses.
The EU has already crossed the Rubicon in this regard. And this has laid the stages for the dissolution of the Euro in its current form. When this crisis hits, it will be entire countries going bust, not just banks.
Remember, NONE of the troubled PIIGS countries have actually lowered their debt levels during the "recovery" of the last two years. All that happened was that their bond yields fell so their debt was more serviceable. So all of them will be entering new debt crises in the coming months.
Spain's Debt to GDP has risen from 69% to 98%.
Italy's Debt to GDP has risen from 116% to 132%.
Portugal's has risen from 111% to 130%.
In simple terms, the “problem” countries of the EU are in worse shape than they were in 2012 when the whole system almost collapsed. All we need is for their bond yields to start spiking.
They just did:
The clock is ticking... Greece is just the tip of the iceberg. When Spain and Italy come knocking asking for debt forgiveness... it's GAME OVER for the Euro.
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Phoenix Capital Research