Greek Finance Minister George Papaconstantinou said Saturday that Greece was exploring the possibility of having a European bailout fund buy its debt if the government is unable to access capital markets again next year. “The markets continue to disbelieve in our country,” Mr. Papaconstantinou told reporters. “We have to plan our next steps for 2012, for 2013.” This could mean turning to the European Financial Stability Facility if the Greek government is still unable to issue debt in capital markets in 2012 as planned … At the root of Greek concerns is a lack of investor confidence regarding its debt outlook, making new borrowing possible only at prohibitive cost. Yields on two-year Greek bonds have topped 23% on persistent fears that the country will have to restructure its debt at some point, forcing investors to absorb heavy losses on their holdings. ING bank analysts said in a report that Greek bonds maturing in five years or more price in around a 50% loss of principal to investors who bought them at face value. – Wall Street Journal
Dominant Social Theme: Greece debt payments will be lengthened, austerity will be rationalized and all this nonsensical talk about the Greeks leaving the EU will cease.
Free-Market Analysis: We have long-predicted the possible break-up of the EU in these modest pages. As we have written many times in the past few years, the EU experiment is not a logical one and at this point its disadvantages far outweigh its advantages. The “immoveable rigor” of the Eurocrats keeps the whole disaster afloat, much as the various compartments of the Titanic allowed that great doomed ship to ride the waters for a number of hours even after it was fatally wounded. Eventually it sank.
But even immoveable rigor has its limits. It is easy to demand that others sacrifice – as the top Eurocrats do – while jetting from country to country and paying no heed to their generous carbon emissions. But when confronted with the determined desperation of their victims – Greece being a prime example – even immoveable rigor gives way to feverish rejiggering designed to inflict further misery on reeling PIGS populations while still allowing the EU to function as a whole.
We continue to believe it probably will not work. Every additional compromise made by the Eurocrats comes at the expense of the Northern EU countries that have benefited from the EU even as the Southern ones have not. It is the Northern countries that are actually the problem. The Finns have just overthrown their government in an attempt to remove themselves from the EU. The German Iron Lady Frau Angela Merkel is bleeding continually at the edges of her coalition as she commits more and more German taxpayer money to the cause of salvaging Southern finances. There is a constitutional challenge to her activities that continues to progress.
The Eurocrats are apparently in denial about these issues. Used to ignoring the sentiments of the electorate (or demanding re-votes when inevitable) EU Grandees continue to come up with clever compromises that seem to provide hope for the EU as a whole. The supine mainstream media trumpets these deals as if each one were a definitive solution to the rolling, roiling EU debt crisis. None of them are.