Greece’s debt and the solution
THE EUROPEAN UNION (Germany is now almost the only solvent member) and the International Monetary Fund are convinced that, in the interest of economic stability, they must rescue Greece through a huge injection of more than €100bn. Bill Bonner gives the following short outline of the Greek tragedy: Decide how you’d feel if our Government decided to use part of your tax money to rescue this country.
This is what Bonner says: “Back to Greece – the fiscal future is really messy. Latest projections show that by 2013 public debt-to-GDP will approach 150%, debtservices charges will absorb 9% of GDP and 25% of tax revenues will be siphoned to bondholders outside the country. Government spending is 50% of GDP and the public service doesn’t seem willing to accept even a freeze – not a cut – to wages, benefits and pensions.”
The future for Greece is simple: any country that must use 10% of its future GDP to pay interest on old state debt is heading for a recession. It’s no wonder even grey-haired pensioners were recently protesting on the streets of Athens.
If you think Greece – and perhaps many other countries, such as Portugal and Spain – must accept the conditions of the EU/IMF aid package, take Bonner’s advice and keep away from shares. And that’s not only Greek shares, but also those in SA.
Here’s Bonner’s and many of us will probably feel much the same: “Fire one out of every five government workers, cut the budget by 20% and default on your loans.
“Follow the Greeks.”
(and even more so to Britain):
“Take a long vacation.” If you agree with that advice – and especially Bonner’s view that the banks voluntarily bought former Greek state debt: that is, they bought bonds because they offered a higher return than the far safer German bunds – it’s just plain unrealistic to expect German taxpayers to have to help them out (again). Take your pain: after all, you were prepared to gamble on a higher return – which always goes with a higher risk.
And keep away from shares, especially bank shares. See Lucas de Lange’s story on p42, Marc Ashton’s on p44 and Simon Dingle’s on p15.