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Sunday, July 22, 2012 11:14 PM


German Vice Chancellor "Very Skeptical" Greece Can Be Rescued, Euro Exit has "Lost its Terror"; Will Defeat Be Snatched From the Jaws of Victory Once Again?


At long last, everyone is willing to wave the white flag on a Greece exit from the eurozone. Please consider German Vice Chancellor ‘Very Skeptical’ Greece Can Be Rescued.

German Vice Chancellor Philipp Roesler said he’s “very skeptical” that European leaders will be able to rescue Greece and the prospect of the country’s exit from the euro had “lost its terror.”

Roesler, who is Germany’s economy minister, told broadcaster ARD that Greece was unlikely to be able to meet its obligations under a euro-area bailout program as its international creditors hold talks this week in Athens. Should that be the case, the country won’t receive more bailout payments, Roesler said.

“What’s emerging is that Greece will probably not be able to fulfill its conditions,” Roesler said today in an ARD summer interview. “What is clear: if Greece doesn’t fulfill those conditions, then there can be no more payments.”
Greece Behind on Asset Sales, Spending Cuts, Deficit Targets

Adding additional details to the above story, Bloomberg makes a nice understatement with
Greece Back at Center of Euro Crisis as Exit Talk Resurfaces
Greece retakes its position at the heart of the European debt crisis this week as its creditors assess how far off course the country is from bailout targets, raising again the specter of its exit from the euro.

Greece’s troika of international creditors -- the European Commission, the European Central Bank and the International Monetary Fund -- will arrive in Athens tomorrow amid doubts the country will meet its commitments and reluctance among euro-area states to put up more funds should it fail.

Greek Prime Minister Antonis Samaras’s three-way coalition, formed last month after a June 17 election ended a six-week political deadlock in the country, has scrambled to assemble budget cuts to convince troika officials.

Finance Minister Yannis Stournaras has identified about 8 billion euros of spending cuts and savings for the next two years out of 11.5 billion in additional cuts required.

The Greek government is also behind on state asset sales, having so far brought in 1.8 billion euros, a fraction of the 50 billion euros it aims to raise by 2020, half from sales in company stakes and half from real estate. The state is unlikely to generate more than 300 million euros this year, short of the about 3 billion euros targeted for 2012, according to the outgoing chief of the state’s asset-sales fund, Costas Mitropoulos.

Once taboo, the possibility that Greece could exit 17- member monetary union has been voiced by European officials this year who consider the fallout from such a scenario would be the lesser evil against a seemingly perpetual crisis.

Roesler, who is Germany’s economy minister as well as the Free Democratic chairman, told ARD that a curtailment of aid to Greece would lead to a sovereign default, which would in turn lead to “Greeks coming to the conclusion that it is probably wiser to leave the euro area.”
Will Defeat Be Snatched From the Jaws of Victory Once Again?

The ducks for a Greece eurozone exit are lined up once again. Admittedly, every time the ducks had been lined up for default previously, defeat has been snatched from the jaws of victory.

I say that because Greece really does not belong in the euro. Of course, no other country belongs there either because the euro was fatally flawed from the beginning and the sooner this mess goes down the toilet the better off Europe will be.

Comparatively Speaking

I was asked earlier today if I thought Greece would recover if it returned to the Drachma. My answer was something along the lines of "At least it has a chance". For comparison purposes, Greece has no chance of a meaningful recovery in the euro.

In that regard, there is absolutely no point in any further delays, something I correctly said three years ago as well.

In the short-term Greece is likely doomed either way. In the long-term Greece has a chance once it rids itself of the shackles of the euro. Hyperinflation may be Greece's destiny, but if so, I see no point in delaying it.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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