George Kesarios

Greece and Italy Suffer: Let the Game of EU Chicken Begin

Cnic, you are correct, this is an exaggeration on my part. It’s a scenario of extremes so far, but I am afraid that if Greece doesn’t get its act strait, it might become a reality. But like I said, we are in the middle of a game of chicken and I am sure that in the end the EU will help Greece pull itself out of its predicament.

I am not suggesting that Greece and Italy will leave the euro because they want to, but that they might do it out of necessity.

As far as the 60% drop in bond prices, I think its conservative, especially for Greece.

And yes (as another reader said) Greece’s bond market is insignificant by itself, but with Italy in the picture, it is a serious matter.

Indeed, the euro has benefited Greece in many ways, but the problem is that Greece is in a very dangerous situation with the very high debt. Need I remind you that Greece (with Italy) have the highest level of debt among the OECD block.

My hope is that the Greek government comes to its senses and initiate reforms as such to avoid the worst possible outcome. However, until I see such reforms, I am not very hopeful that many things will change.



On Dec 27 02:31 AM cnic wrote:

> I am sorry George Kesarios, but this is a badly written and cynical
> article based on exaggerations. It is easy to be cynical and to
> sensationalize the situation. Your suggestion that the Greek And
> Italian governments will even consider leaving the Euro to print
> more Lira and Drachma is a short-term solution with no lasting positive
> effect. Staying in the Euro is a long-term option. What makes you
> think that the Italian and Greek government would even consider leaving
> the Euro to pay even higher spreads (which you yourself suggest will
> happen). Also how did you derive your figures of a 60% fall in bond
> prices? I even question your 800 billion figure. Did you pull these
> figures out of your behind? The Euro is benefiting counties with
> a high debt not straining them. Greece and Italy will most likely
> tighten and spend public money more efficiently and try to get more
> money from tax evaders. Greece is still planning to keep its budget
> deficit below 3% of GDP and even the most pessimistic economist still
> predicts positive growth for the Greek Economy in 2009 even though
> most of its partners are in recession. And lets not assume that
> the world will not be in recession forever. I am sure both economies
> will ride out the storm because they are in the Euro, especially
> considering their banks were not directly exposed to losses from
> mortgage products and will not need to borrow as much capital as
> you suggest.