Greece is going to their bailout, to the tune of almost a trillion dollars. European markets responded with large gains, which have spilled over to North American markets. There seems to be a lot of excitement over pouring a trillion dollars down a rabbit hole. Make no mistake, the European Union must enforce difficult financial reforms otherwise the Greeks are just going to find themselves back in this exact same situation a few years from now.
What happens when Italy needs their bailout? Portugal? Spain? Greece is a small country of 11 million people. Spain has 46 million people. Italy has 60 million people. Greece has a GDP of $341 billion dollars. Spain, Italy, and Portugal have a combined GDP of $3.3 trillion dollars. If it requires $1 trillion dollars to bailout Greece, then it in theory would require $10 trillion dollars to bailout Italy, Spain, and Portugal. If all of the above just burn through that money without fixing structural problems, this will hit us even harder next time.
I'm really happy to see the markets having a good day, but without structural reforms to correct the fatal flaw dragging these European countries into the abyss, these crises will just occur with greater frequency and stronger magnitude.
Some "big boys" must be covering their "shorts", before the house burns down.
ReplyDeleteThe day of reckoning has not come, we are starting to see some unhappy homeowners getting an inkling of things to come. The hydro bills on those smart metres, hst on nearly everything. Someone is going to get punished at the polls.
Interest rates are at bottom and the debt repayment is not an issue for everyone. China is able to manage it currency against the recommendation of the G8.
How much capacity do the hot countries have to absorb the junk debt?
They should have let greece go down the drain as an example to the rest of the euroweenies.
ReplyDeleteRob C
the EU has nothing left in the cupboard. it took this much haggling and hand wringing just to go ahead with A plan, let alone this one. the day of reckoning is upon us in about 6 to 8 months. the next leg of housing defaults is already revving up in the states and will peak around january 2011. buy gold, guns, and canned food. our lives are going to change in very short order.
ReplyDeletebrad