- The bank recapitalisation covers no more than half the write-down of Greek debt held by the private sector and falls mainly on those who will be least able to raise capital from capital markets by themselves;
- China will not lend money to Europe – why would they buy something that no other investor will?
- One way out is for the European Central Bank to buy debt through more quantitative easing – but the ECB’s mandate does not allow for this as its only mandate is to control inflation.
Greece is living beyond its means and cannot continue to do so. Merkosy would take the decision out of Greece’s hands and vote to throw them out of the single currency if they had the chance to.
Prime Minister George Papandreou’s decision to hold a referendum has upset Germany, France and others and is as much about its membership of the eurozone – which its voting public likes – as it is about the acceptance of its own austerity measures. As a result of Papandreou’s action, any payment from the ECB to Greece will now be delayed until after a referendum is held.
We are close to the point of no return over Greece, but is throwing them out of the eurozone the right decision? Doing so would force bond investors to look at Portugal, Italy, Ireland and Spain with chat surely turning to how long their membership of the euro would last.
Unfortunately, the answer at the moment is “anything could happen” with the possibility of a two-tier eurozone, with some following the euro and others gradually getting their own currency back, totally at odds with the chat a few months ago about fiscal union and a eurobond.
Politicians are meeting in Cannes and will probably prevaricate further but the impression is that Greece may finally get its come-uppance and its orderly departure will be arranged – but the real fear is what the consequences are going to be for the rest of the region.
