Greece And The Eu

[Malcolm Robinson]

Looks like the beginning of the end for Greece as her debt yields spiral out of control. Trichet is trying to talk the market calm but Greek 10yr debt, which I like to benchmark against the Bund, is now 7.33% making it impossible for the Greek government to borrow at anything like a realistic rate and for that read repayable. Default looks to be the only option if it continues in this way. I feel sorry for the average Greek who was part of a pretty decent economy just a few years ago. Now through international chicanery and political double dealing they are about to be forced into a situation no one would like to go through.

It's always better to lead a charge rather than be at the head of a stampede.

Worth reflecting on this quote by Alexander Tyler in 1778,

"A democracy cannot exist as a permanent form of government. It can exist until the citizenry discovers that they can vote for themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury, with the result that a democracy always collapses over loose fiscal policy followed by a dictatorship”

Anyone else think we could easily attach that quote to our own democracy? We don't see to have learnt anything in the last 250 years!

[Monsta®]

do you not think the uk is in a mess too? and more important than a load of greasy kebab makers!

[Malcolm Robinson]

If we just look at the numbers the UK is in a worse position than Greece! Until we get a dedicated action plan in place (austerity plan) our numbers will get worse. Don't be fooled by the recent highs on the stock market and house prices, they are being artificially buoyed up by all that 'printed money' the chancellor threw around trying to get past an impending election! Even just consider the recent oil price movements, now what is oil priced in.........$'s and what has happened to our exchange rate.......... Costs are about to rise significantly here which leads to upward pressure on wage demands at a time when we cannot afford it and should really be repaying capital not increasing borrowing to meet running costs!

As far as Greece herself goes it's a case of, 'there but for the grace of God.....' The whole lot is interconnected and if Greece fails and is still a Euro member it will probably take the euro with it. That is why the ECB are so keen to find some sort of solution. It will probably result in a revolution and possibly a junta on the streets of Athens. The Greek people have been failed by firstly their own politicians but possibly and more importantly by grandstanding Eurocrats who haven't the faintest idea in which direction they should be going. Yes they do have to accept responsibility for things like a bloated public sector with incredible rights and pay structures, a huge black labour market and misrepresented fiscal figures but these are all things which given the right leadership could have been put right. It is quickly developing into the banana republic of Europe!

I am still surprised to see Greece in this position; her economy was a model for club med only half a dozen years ago. I think Berlusconi might well be thankful the international spotlight is on Greece not Italy!

[Malcolm Robinson]

If we consider the Greek situation and the ECB (lack of!) 'Action Plan' with regard to other central banks around the world there does seem to be acute differences not least in the QE programmes many have used. Inside the Euro zone there is no connectivity between super-national monetary policy and national fiscal policy therefore a straight QE programme was out of the question. Instead we saw the ECB cut rates and flood the short term money markets with cash. This seemed to have the desired effect for a while. However once the Greek troubles hit, the myriad of plans and bale outs put forward by the ECB and the inertia they produced actually had the effect of negating any fiscal benefits accrued from the ECB policy directed at the credit crunch. In other words the ECB lost its credibility as far as the markets are concerned anyway. Their whole effort towards Greece was to provide a borrowing requirement at modest rates but with Greek bonds now at their highest trading levels compared with Bunds that is a forlorn hope. The real problem is that Greece needs funds just to get by month on month and we can see investors in even the last round of Greek government debt issue start to turn their noses up at any more. It is now cheaper to insure Iceland's government debt than Greek.

Considering other implications for the ECB we see Euro Zone economic growth figures for the 4th quarter revised down to zero! The OECD have also forecast German growth to come in at -0.4% in the first quarter of this year. Not very inspiring. Trichet's quip, 'I am the Euro,' will come back to haunt him in the not too distant future!

Outside the Euro Zone the Fed have come out and said they are willing to take chances with inflation, hope they manage to get a lasso on that wild bull!

Japan did go down the QE route some time ago but that has produced rampant deflation and her 'lost decade' has now become her 'two lost decades!'

The UK's QE programme does hold an often overlooked question. If the BoE were given independence from government to take national fiscal decisions then how come the chancellor had to give his permission to start the printing presses? It does lead to further questions regarding inflation target figures as well!

As I commented on in an earlier post UK producer prices are going up at exactly the worst time in the cycle. The (discredited) ONS have reported output price index for home sales of manufactured products rose by 5% in the year to March. Also the input price index for materials and fuels purchased by manufacturing industry rose 10.1% in the year to March and rose 3.6% between February and March. The main driver in this has been the price of oil and its associated products. Are you starting to get a picture monsta?

[Malcolm Robinson]

As a further aside on today's comments and my 'further questions remark' I would like to draw attention to the way Central Banks, including the UK central bank, the BoE, are stoking the fires of inflation as a seemingly economic strategy. GGG's warnings of hyperinflation might be proved prophetic but for slightly different reasons to the ones he states. There has been a distinct loss of independence by central banks as politicians claim to have saved the world from the worst effects of recession if not the prospect of a pronounced depression. They have allowed inflationary influences to build in economies as a way of combating deflation. Let's not forget politicians supposedly have no control over fiscal policy as deemed necessary by a central bank! So we could see larger and larger doses of inflation, accompanied by 'massaged' governmental statistics, looks like the ONS is already under political control, as a way of avoiding the public sector cuts which the underlying real economy needs to rebalance the deficit. If that is the case, and don't we all like a good conspiracy theory, then no wonder Brown and Darling can look so complacent when talking about addressing the deficit. It really is that £50 note going around the country!

[Malcolm Robinson]

Well a 45 billion Euro facility should get Greece through the rest of this year but with no long term solution built in what happens next year? There are still some scary longer term debts for Greece so she is not out of the woods yet.

This might move popular unrest to the streets of Berlin instead of Athens and cost Merkel one constitutional house.

Raw material prices already moving upwards at this news and for that read oil and copper!

[Malcolm Robinson]

Having now had a chance to look over this much heralded EU rescue plan there still seems more flaws than answers. The main on being the exact terms the IMF would intervene? Also as it stands if Greece were to ask for this money (from ECB) to be made available today each member state would have to ratify its part share in their respective parliaments and as we have seen from the Lisbon Treaty that is far from an assured deal. The markets seem to be accepting the 'talk' at the moment but will test EU resolve before too long! If as is being suggested the EMU states cannot be allowed to go broke then an EU bond with an average yield would seem to be the way to go. Problem here is that average yield would be in the order of upwards of 4% and as Germany can now borrow at around 3% why would she agree to that?

That sad fact is that this latest 'bale out' plan is flawed and will come apart at the seems under scrutiny. The fact is that the Euro constitution has a no bale out clause for member states yet here we see almost total agreement on terms offered to Greece which can only be described as being a bale out. Yet another catch 22 for the EU!

With no conditions publicised we can't even assess the prospects on how this might actually help Greece although I think it would have to be far more long term to have any real impact onto the Greek economy. We see the austerity plan supposedly reducing public sector deficits by 4% of GDP this year but there needs to be more and more cuts going forward to achieve EMU criteria. The Greek national debt is around 123% of GDP and as she cannot cover her debt liabilities that will increase even if she hits her austerity targets. Far too optimistic economic targets are being used to justify getting Greek bonds away on international markets and they will see though the figures soon if it hasn't done so already as Greek bonds are now BBB status as assessed by Fitch. Because she is replacing existing debt as it matures with higher yielding debt there is a millstone around the neck of her economy anyway. A carefully considered and quick response by the EU to this last point would have done much more to stabilise the situation, as it is we saw grandstanding Eurocrats thinking talk with no actions would calm markets.

There is one final consideration to all of this and that is if the Greek tragedy has been averted which country might come under the spotlight for nervous international investors? If the EMU do come up with a solid plan for members that will take out Italy and Spain so which currency and economy will be getting shorted....... I don't think we have too far to look!

[Malcolm Robinson]

Well you take your eye off the ball for a couple of days and what the heck has happened with poor old Greece? Last time I looked they had just announced an ECB/IMF bale out package which the Eurocrats were hailing as a solution to Greece's problems. Greece 10yrs bonds are now 7.4% seems the market has pronounced judgement on the bale out plan!

Looking a bit further for the reasons for this we see EU ministers refused to give any detail what-so-ever about this plan in year 2 and 3. Even the IMF didn't lay out any details for long term Greek solvency so at best this latest plan looks like a hobbled together sticking plaster! With the main proposal being a 5% facility for Greece but the fact that even this had to have agreement off the whole of the EMU membership at individual national level and time is pressing would seem even to me to be a major flaw in the plan. Greece needed positive unilateral action then, not even now, to stem her worries, what we will see going forward is anyone's guess. Course the politicos will blame speculators for trying to gain out of Greece's misery but in reality it is their inaction which has caused much of this mess. Even the Greek finance minister wrote to the European commission asking for dialogue on the assistance package which will only be needed if and when Greece deems necessary? There is a candidate for a mental asylum! Did he really think international investors would somehow believe the hype coming out of the ECB and let rates drop even to the 5% level? With an impending debt auction soon to get over the next few months Greece will be paying a heavy price for having such people at the helm.

If Greece does sign up to this aid package there are still flaws implicit in the plan such as who will be in charge? Normally the IMF demands the reins and if that happens expect even more austery measures. With no real conditions or explanations as to how this plan will actually roll out little wonder markets are taking a differing view. All the while this dithering is going on the risk of contagion increases with Spain, Portugal and Italy all in the firing line as next targets. If markets decide to test resolve outside of the Euro we had better watch out as our figures are all in the range of decidedly 'iffy', our savoir would seem to be the size and variety of our economy comparatively.

I cannot believe Greece has not formally asked for the implementation of this plan, if only to get at cheaper credit lines and being able to blame the big bad IMF for job losses and service cuts necessary in an imposed austery measure. The whole thing looks like it is down to poor leadership within the EU and Greece in particular. The Greek government has to start and take charge of its own affairs and protect its peoples, isn't that their defacto role?

[Malcolm Robinson]

On an entirely different tack nice to see the Vampire Squid (Goldman Sachs) finally being held to account. A very tenuous link might be that they advised the Greek government on entry to EMU and so must have played a major role in the misrepresentation of Greece finances!

Seems just before the markets broke down GS was bundling up piles of toxic debts and advising clients to buy them while all the time taking hedged positions against the very paper the were selling to punters! Fraud would seem too polite a word in this case!

[Malcolm Robinson]

In a latest twist to this Greek tragedy Reuter's news agency was reporting that the President of the European Central Bank Mr. Trichet was saying that Greek banks were in difficulties.

"Despite the commitments expressed in the statements by the euro area heads of state and governments on 25 March and the Euro group on 11 April and the determination signalled by the Greek government to implement the announced adjustment measures for 2010, financial market tensions are persisting.”

He goes on to say that the European Central Bank (ECB) and the national central banks are providing liquidity to the Greek banking system and that recent changes in collateral rules had removed the risk that banks would not be able to use Greek government bonds as collateral for loans at the ECB. The most revealing part of his statement,

"Still the liquidity situation of Greek banks remains difficult and could deteriorate”

For a statement from a President of a central bank this is important. It is quite rare for such a person to discuss the failings of his/her political masters but it is even rarer to discuss banks under your system being in difficulties and is quite a departure from his comments of only a few weeks ago!

Taking a close look at what is happening on the ground so to speak in Greece we see there is a huge outflow of money, as we saw in our own NR scenario where people think the security of their savings is suspect. Normally in this sort of case that would mean moving money out of a country and converting it into a different currency, this time there is no need as Greek Euros are the same as German, Dutch, French, etc ones. If we use the NR scenario again we can see a run on a whole country's banking system not just a single bank! Again considering the UK reply to the NR situation where the national government guaranteed all deposits the Greek government cannot even do that as it doesn't have the final solution of printing more of the stuff to stem the flows. It might even be a good move for middle class Greeks if we consider there could be a Greek default and ejection from EMU which would produce quite a depreciation in whatever currency she used at least you would be hedged against it if your cash was in German Euros. This is what seems to be happening now the Greek people are voting with their feet, metaphorically speaking, and liquid deposits are moving north looking for security. Can Trichet do anything about this as this will in itself produce several problems? He could make the ECB responsible for a cross Euro deposit insurance scheme but that would again need the likes of Germany to sign up to even though the Germans will probably never need it. At the end of the day the ECB will have to provide as much liquidity as Greece needs, if any semblance of normality is to return, and the quicker Trichet admits that and tells the markets the better. Either that or Greek politicians find some backbone and take matters into their own hands for the benefit of their electorate!

[Monsta®]

come again?

thats whoosh straight over my head!

[Merlin]

Duck! What the !*!@# was that :lol:

[Malcolm Robinson]

come again?

thats whoosh straight over my head!

Ok Monsta, look what happened to the Northern Rock. When NR had liquidity problems (ran out of cash) people took their savings out of that bank and put them into different backs which they felt were safer. The gov had to step in and nationalise the bank in the end. Greek people with cash deposits are doing the same thing and taking their money out of Greek banks and putting it into say German banks, which they are entitled to do under several cross European treaties. They don't even have currency transactions to pay as they use the same currency. It will produce the same end result with maybe the ECB stepping in to 'take' over Greek banks. Either that or Greece will detach from the Euro and take a devaluation in her currency to get an advantage in Club Med trading terms. If they do that anyone who moved their savings into a German euro deposit will immediately gain by at least the percentage of the devaluation, and let's not forget ours was about 33%. Doesn't really help the underlying problem, much like the NR fiasco, but you can understand the reasoning, I would be doing the same thing!

[Monsta®]

and the lib dems want to join the euro!

[Malcolm Robinson]

and the lib dems want to join the euro!

Its actually one of the very few things which gave the UK some manoeuvrability during the financial crisis. If we had been in the Euro the BoE couldn't have ran the printing presses, not that I think that was a particularly good idea anyway but still...........

[Malcolm Robinson]

While Greek politicians play their high stakes poker game with the ECB and the IMF, UK inflation figures came out showing a continuation of their recent upward moves. This is worrying because we cannot afford to have higher inflation than our trading competitors or we loose any advantage our currency deprecation might hold. The very fact that we seem to be well over the target figure month after month is again another reason to think the chancellor and PM are playing loose with monetary policy in the run up to the election! The fact is that the great and good (MPC)stated they expected to see deflation now not inflation and set interest rates accordingly. This has been shown to be a mistake in policy! Also considering all that QE money and how it was supposed to get the economy going again, well it seems to have held up the housing bubble and stock markets but very little else so again a clear policy mistake! 3 strikes and your are out Mr B! We now see rising inflation both for imports and exports due to in the main oil prices. The ONS have said Consumer Price Inflation (CPI) has risen to 3.4% up from 3% in February and as this is 1.4% over its targeted level but is mostly down to a rise in gas prices. Even if I did believe that, and ONS proclamations in general these days, Merve the Swerve should be hurriedly writing to the chancellor and explain why the MPC have it so wrong! As well as Consumer inflation we can see the Retail Price index inflation figures and they too are going upwards now at 4.4% as against 3.7%. As we return to normalised interest rates this one will rocket as this is the boyo with the mortgage rates included and when we stop subsidising the mortgage market..........

There would seem to be some real culprits in collusion within these figures. It seems pretty obvious to me that the Gov are deliberately putting out misleading information if not falsifying statistics. The recent change in the inflation weighted basket of goods would be clear evidence of that. At the same time we have the Monetary Policy Committee, MPC, clearly in the wrong time and time again with its policy and projections, why should we believe anything they now tell us?????? We have seen political interference in what was supposed to be a separated monetary policy unit taking those decisions out of politician's hands. An Independent Bank of England, don't make me laugh! We have seen changes made in financial instruments meant to measure inflation which can only be to disguise figures as a temporary measure. Our current inflation measure is 1.4% over target and our previous measure is 2.3% over target. Seeing as they are supposed to be measuring the same concept this is quite a difference but one might be politically more acceptable than the other!!!!!

[Malcolm Robinson]

Just to show exactly how figures and statistics are being manipulated lets have a close look at the recent fall in unemployed claimant numbers. Headline figure was a 33,000 fall in claimants which anyone might think would mean that many people had found work. However if we look at the employed figures we see a fall of 43,000, can these two figures be in any way shape or form accurate never mind compatible? We are told there are margins for errors in any statistics but really. I will allow the fact that one is monthly and the other quarterly but why should we take either one as gospel? It looks to be the case, even after gross allowances for margins of errors, that one is cancelling the other and may really mean a flat pattern is emerging. It would seem our employed levels are around the 2005 levels which might give Monsta's favourite party political ammunition in their claim that economic immigration isn't needed? The number of inactive people, including students, long-term sick leave or people who have given up looking for work, rose 110,000 to 8.2 million, the highest recorded number for this series which began in 1971.

So unemployment is falling and "inactivity” is continuing to rise, these are the more revealing figures and ones we should be watching closely to see how our economy is progressing as there might be a viable correlation between these two figures which is not in the other figures!

[Malcolm Robinson]

It would seem the markets are now testing the current EU resolve to 'help' Greece and actually pushing her into ECB/IMF arms. With Greek bonds now touching 9% the markets look to be saying what they want to take as any risk on her bonds and I don't think it will stop there as talks of cutting these figures unilaterally will mean investors wanting even more room to take any cuts. I would say we are seeing the end game for Greece to act independently as her leaders do not seem to have the necessary backbone to take the brave decisions. The only way left to them is to bite the hand off offered by the ECB/IMF but take the consequences as well.

I wondered why Sarko was so willing to jump into the ring; the French are trying to pass a bill to allow nearly 4B Euros of Greek aid immediately. Looking a bit closer who is the largest shareholder in one of the Greek banks? None other than Credit Agricole with a 91% shareholding in Emporiki Bank, no wonder the French are so willing.............. they are protecting their investments!

If we also look at who owns a lot of Greek paper we see Germany, Deutsche bank, with 8% of the stuff representing about 38.5B Euros. The problems the Germans have and one forecasted some time ago is that the main opposite party have just passed a motion saying they will not support any Greek bale out. This will have repercussions for Merkel.

Who is going to be next in the firing line as markets test economic competence? At the moment the UK would seem to be overlooked but that will only last for so long. Of course as we still control our currency we can always start the printing presses up again if no one else will buy our bonds! I wonder what long term plans Brown and Darling have for the interest payments and redemption of the bonds they already own in the last round of QE? I think they are going for inflation to reduce the net worth of those bonds but that is something I will return to later.

Spanish and Portuguese bonds are moving north too............with Portugal especially susceptible!

[Malcolm Robinson]

Yesterday saw Greek politicians shred the last vestiges of self respect as they threw their country onto the mercy of the ECB/IMF. While I do agree this is probably what is needed, if they really want to maintain their membership of EMU, the way this has unfolded leaves no one in any doubt as to the competence of the Greek leadership, not only the present ones as we could go back decades and see the same so endemic corruption and incompetence do have consequences! We will probably see more unrest on the streets as people who have been mollycoddled into expecting the state to provide suddenly have a new set of circumstances imposed upon them. Looking at the quality of leadership apparent within the ECB I do have reservations for Greece going forward, and they are over and above the ones I have about her people accepting the need for austerity and realignment. With at least half a million public sector jobs on the line, tax evasion on a massive scale, black market labour and far too generous pension terms the Greek people are in for a shock to their system! The figures talked about for primary aid seem to be in the region of 40B Euros, I would assess a more realistic figure of between 120B-150B over the next 3 years!

I think this scenario is what Ken Clark was alluding to in his 'hung Parliament' outburst. Weak political leadership at a time of national crisis actually makes the situation a lot worse not better. Speaking of Clarkie, and I have to hold my hand up here as he is one politician I usually do think worth listening to, his other utterances are worth mentioning. "The most urgent question in this campaign is, quite simply, which party is capable of tackling public spending and getting a grip on the deficit.” Lets not forget this is one politician who has actually been there, done that, got the t-shirt, having been Chancellor during our own austerity period in the early 90's and put in place a plan which led to an economically successful recovery for the UK. OK not on the present size but still......... However we do have to be aware that it was primarily his policies towards the EU and EMU which could be argued got us into the problems in the first place! He has also failed to get his own party to disclose just what they intend doing to tackle the fiscal burden we all face, the same could be said for Vince Cable, another generally respected politician. The Clegg idea of an economic council combining politicians from all sides as well as the head of the FSA and the Governor of the Bank of England to deal with the deficit looks at first glance to be worthy of consideration but the lack of detail and the fact that this will only be enacted in whatever form after the election just says he is delegating and we see no real details now to make our decision on. As for Darling/Brown, well their party have been in power throughout and as such should have a carefully worked through and laid out plan now in front of everyone. The fact that they haven't speaks volumes. Without a workable plan to reduce our deficit anything else which should be considered by government will never even get off the drawing board much less enacted. If we accept the need for a squeeze on the public sector we have to ask how that will be done and what size will it be. We also need to ask if these overtly optimistic growth figures built into the UK economy moving forward are not achieved what is the fall back position? We seem to have all the major parties fighting for the same small, very small, bit of grass and none are willing to be honest with us. There are some things even they cannot escape like the rise in inflation, jobs moving away from the public to the private sector and the debt burden we are carrying. A good start to the next debate would be some honest answers on them.

[Malcolm Robinson]

Last week saw the Greek PM give what on the face of it looked a dignified speech laying out why they have now delegated fiscal control of their economy over to the IMF/ECB. There is one significant line in his speech which bears closer thinking about where he said Greece would now have to take "a partial surrender of sovereignty”. This is a realistic assessment as to what happens next and one we should take note of if we ever attempt to go down this road again! This whole Greek tragedy, or at least the EMU member's response, has been brought about because of a lack of political union at the inception of the Euro and a cross EMU coordinated fiscal policy. The great Eurocrats who dreamt up this scheme pointed to economic convergence as a beneficial result whilst in fact we have seen economic divergence, something none of them anticipated or planned for.

IMF intervention was intended for countries with balance of payments difficulties, what we see now is IMF intervention primarily because of fiscal deficit. This has changed to role the IMF was supposed to play and makes it into a global deficit policeman. No wonder the politicians at the last G20 summit agreed to raise their IMF funding requirements! This does now beg the question, if the IMF goes in and offer borrowing facilities to say, Greece, and then Greece defaults on payments who holds the liability? If that did happen would it show up on national balance sheets, i.e. ours as we are a member of the IMF. Another consideration and one I have mentioned before is what is the make up of this much heralded IMF/ECB 'panel'? The IMF always takes the lead in countries where it becomes involved as a matter of course having to deal with the ECB and the European Commission in this case further complicates the matter and I cannot see either side allowing the other to rule the roost! Watch out for any reference from now on to the President of the IMF, Mr. Strauss-Kahn, who is tipped to have political ambitions in France. More meddling to come no doubt!

Going forward the future looks bleak for Greece because to get the Germans onside, the main contributor to ECB funding aid, a very strict austerity programme will have to be introduced, way over what the Greek politicians have already agreed to. In fact to get this aid package passed the German constitutional court they may have to argue that they are making investments into Greece as their gilts attract a lower rate than even the proposed 5% this package allows for. How they can argue the validity of that when they have laws forbidding them from offering credit to anywhere at less than market rates, currently around 9% for Greece, is anyone's guess but I would expect to see Merkel damaged in the impending German elections because of this. If the Germans do get their way and impose too severe an austerity programme on Greece the likelihood of turning recession into depression is a very real threat. Greece has to be able to rebuild her economy and trade her way out of her difficulties and to do this she will probably have to default on her loans at some point.

[threegee]

Last week saw the Greek PM give what on the face of it looked a dignified speech laying out why they have now delegated fiscal control of their economy over to the IMF/ECB. There is one significant line in his speech which bears closer thinking about where he said Greece would now have to take "a partial surrender of sovereignty”.

I heard it argued that they should sell some Greek islands! The point is what happens to any private property owners on said islands who relied on the Greek state - after all that's what they paid their taxes for. Do they find themselves paying taxes to Mrs M? Are they to be compensated? Sounds a bit crazy to me. Maybe the Greek govt. should retain some Native American lawyers to advise them?

IMF intervention was intended for countries with balance of payments difficulties, what we see now is IMF intervention primarily because of fiscal deficit.

Good point! The slippery interventionist slope once again.

This has changed to role the IMF was supposed to play and makes it into a global deficit policeman. No wonder the politicians at the last G20 summit agreed to raise their IMF funding requirements! This does now beg the question, if the IMF goes in and offer borrowing facilities to say, Greece, and then Greece defaults on payments who holds the liability? If that did happen would it show up on national balance sheets, i.e. ours as we are a member of the IMF. Another consideration and one I have mentioned before is what is the make up of this much heralded IMF/ECB 'panel'? The IMF always takes the lead in countries where it becomes involved as a matter of course having to deal with the ECB and the European Commission in this case further complicates the matter and I cannot see either side allowing the other to rule the roost! Watch out for any reference from now on to the President of the IMF, Mr. Strauss-Kahn, who is tipped to have political ambitions in France. More meddling to come no doubt!

Going forward the future looks bleak for Greece because to get the Germans onside, the main contributor to ECB funding aid, a very strict austerity programme will have to be introduced, way over what the Greek politicians have already agreed to. In fact to get this aid package passed the German constitutional court they may have to argue that they are making investments into Greece as their gilts attract a lower rate than even the proposed 5% this package allows for. How they can argue the validity of that when they have laws forbidding them from offering credit to anywhere at less than market rates, currently around 9% for Greece, is anyone's guess but I would expect to see Merkel damaged in the impending German elections because of this. If the Germans do get their way and impose too severe an austerity programme on Greece the likelihood of turning recession into depression is a very real threat. Greece has to be able to rebuild her economy and trade her way out of her difficulties and to do this she will probably have to default on her loans at some point.

Simples! Do what the UK did and drop out of the ERM. Print a few tens of billions more Euros before the ECB demands the printing presses stop, and quickly truck them off to creditor banks. After all they were stupid enough to authorise you to print the stuff. Think of it as getting back at Germany for the war! . If you lied to get into the Euro then a tiny bit of cheating on the way out should be lost in the general mess.

The general principal of having to go bust is doing it in style, and at the maximum profit you can get away with. (A lot easier for a sovereign state than mere mortals!) Not in grovelling in front of some jobs-worth bank manager.

Value the new Gruro at two Euros and let it slowly sink to parity to save a bit of face, then place all the blame the previous administration. Start a TV advertising campaign on how cheap Greece now is for holidays, and start a cut-price rival to the Olympic Games: you've already paid for the facilities and could claim first rights to the name and look & feel!

Total lack of imagination in leveraging this sovereign state thing for all it is worth I say!

[Malcolm Robinson]

Total lack of imagination in leveraging this sovereign state thing for all it is worth I say!

I agree and I think they could cut a pretty decent, for Greece, deal with the ECB for withdrawing from the euro saying they are protecting the currency. At least an agreed default on EU owned debts. Course you need some politicians with marackers for that!

They can't blame the previous government, that lot are blaming the current one??????

They could easily make Greece the holiday destination in the Med and that would bring in foreign currency. They must have the longest coastline of any Mediterranean country? As it (tourism) makes up about 20% of their economy anyway it could easily be expanded and that would mean some building jobs, airport jobs, road and rail jobs, hotel jobs, etc etc..........

[Malcolm Robinson]

Interesting day unfolding today. Greece seems to be getting penalised again for the dithering of the rest of the EMU members. Merkel is on the campaign trail saying they haven't agreed to a Greek bale-out. Portuguese credit default swaps are attracting attention which could well mean they are the next Club Med country to be tested by the markets.

[Monsta®]

Greece seems to be getting penalised again for the dithering of the rest of the EMU members.

Emu like rod and Emu?

[Malcolm Robinson]

Yep and the EMU is going to do the same with Greece as it did with Rod, throw them off the roof!