Greece on the brink. No, really - this time for sure
It usually about this point in a crisis during the two year long melodrama of Greek debt, that a knight in shining armor rides onto the stage to save the fair damsel and yank the Hellenistic world back from the brink of destruction.
At various times, it has been the EU, the European Central Bank, "Merkozy," or even pure dumb luck that has saved the day.
Who will ride to the rescue if the Greeks don't even want to save themselves?
Lucas Papademos, the Greek premier, failed to make party leaders accept harsh terms in return for a second €130bn bail-out, pushing Athens closer to a disorderly default as early as next month.
Greek television reported that Mr Papademos has set a deadline of midday on Monday for the three leaders to let him know whether they agree in principle with the proposed austerity measures, before he meets them again later in the day.
After five hours of discussions, the three leaders of Greece's national unity government had not accepted demands by international lenders for immediate deep spending cuts and labour market reforms as part of a new medium-term package.
Mr Papademos said the political leaders had agreed on some "basic issues", including making spending cuts this year of 1.5 percentage points of gross domestic product, or about €3bn, according to a statement from his office.
The country stands on the precipice of default and the best they can agree on is a lousy 3 billion euro cut to the budget? I thought American politicians were shortsighted and cowardly but our congress critters got nothing on the Greeks in that regard.
The center right party leader Samaris was quoted as saying, "They're asking for more recession than the country can take." Oh really? Try default and see how that will compare to recession.
There has been brave talk among some EU officials that a Greek default will be manageable, that it won't start a dominoe effect where Portugal, Ireland, and perhaps even Italy and Spain follow suit. But really, when you think about it, why should any of those countries be stupid enough to try and pay back creditors what they owe when Greece is showing them a way to apply short term pain for long term gain. Sure, a few banks will go under and a few others will see a run on deposits, but that's better than causing long term pain to voters and getting kicked out of office, right?
American banks have less exposure to the contagion today than they did 6 months ago, but it is not inconsiderable. There will also be a rough ride for a few of our banks -- nothing a little bail out from the Fed won't cure.
Meanwhile, the Greeks have a debt that is 160% of their GDP and appear prepared to reneg on it. Greece will go back to the drachma - which will be worthless in international trade - and slip into third world status as no one will invest in a country full of welchers. Then France, Germany, and a few other stronger economies in Europe can run off and form their own little economic club, leaving the weaker countries behind.
The world is about to undergo radical change. How confident are you that Barack Obama and his gang that can't shoot straight economic advisors have a handle on this?