Just like the Hekla eruption caused the Dow to surge in complete disregard of cause and event, or, heaven forbid, logic, so this next news should finally force us to start selling the Dow 36,000 hats. Bloomberg reports that Bundesbank President Axel Weber has told German lawmakers that the €30 billion rescue package promised by the EU and the IMF will not be enough. Just how big will the shortfall be? Well, the recent expansion in the IMF's $50 billion rescue facility to $560 billion should provide some color on the matter. It gets worse: according to Bloomberg, "Weber, citing television footage of Greek demonstrators, expressed concern that sections of the Greek population either don’t care or fail to appreciate the seriousness of the situation their debt-laden country faces, the two people said on condition of anonymity because the briefing in Berlin today was held in private." How quaint - did anyone tell the Greek bureaucrats to look up the definition of the term "austerity" in this whole spectacle? As always, look for the American taxpayers to end up footing an ever greater portion of the Greek bailout bill. That's fine - they won't care: they have the brand new double double KFC burger, a new never to be read book downloaded on the iPad, and the GS witchhunt to keep them distracted, even as their taxes prevent the firesale of Santorini.
The presentation to lawmakers from the Free Democratic Party, a partner in Chancellor Angela Merkel’s coalition, underscores concern over the likely cost of a bailout to euro- area members. Bundesbank spokeswoman Susanne Kreutzer declined to comment on Weber’s presentation.
“We want as much restraint as possible on this issue” of aid for Greece “because these decisions lie with the Greeks and the Greeks have to take on their responsibility,” Birgit Homburger, the FDP’s parliamentary head, told reporters in Berlin today after the meeting. Greek government commitments “made as part of this deficit procedure have to be implemented.”
Greek bonds fell today, pushing yields to the highest relative to German bunds since 1998, as debt-crisis talks with the European Central Bank, European Commission and International Monetary Fund were delayed. Greek 10-year bonds yielded 7.64 percent, 456 basis points more than 10-year bunds. The benchmark stock index in Athens slumped 2.6 percent.
The circus is now complete. At this point free fall is essentially guaranteed. We strongly urge anyone booking trips to Greece this summer to reconsider.
Papandreou’s decision to call for talks this week with officials from the EU and IMF, which has promised another 15 billion euros, prompted a reaction of “rage” among 48 percent of Greeks polled for yesterday’s Eleftheros Typos newspaper. Nine of 10 people surveyed said they expected the IMF to insist on more austerity, while unions threatened new strikes over the prospect of more budget cuts.
“If public opposition to further austerity measures hardens, the Greek government could find it even tougher to put the public finances back on a sustainable footing,” Colin Ellis, an economist at Daiwa Capital Markets Europe Ltd. in London, wrote in an e-mail to investors.