Thursday, June 16, 2011
A "Greeced" Pole
Violence in the streets of Athens and a government resignation, tremors in the world's financial markets, obduracy of the European Central Bank: that is where we are today. Greek debt has been downgraded to CCC, the lowest rating of any country in the world. Meanwhile, Moody's has placed 3 French banks--SocGen, BNP Paribas, and Crédit Agricole--on warning of impending downgrade because of their exposure to Greek debt, about 9 billion euros for the three combined. Something has to give, and my guess is that it will happen in Greece. Although Germany's position has softened, the financiers seem unwilling to countenance any restructuring and want to put the whole burden on the Greeks, who are unwilling to shoulder it. But Greek leaders can't afford to remain as stubborn as the bankers. They're on the verge of losing control of the situation. With 2-yr Greek debt currently at 25%, the country is already effectively shut out of the markets, but it can't afford to cut itself off from the EU, which is helping to sustain its fragile budget. With no apparent way out of the impasse, radical action is all but inevitable. But what will it be?