Greece on the Skids

Ace of Spades sums up the whole Greek/Euro problem pretty well:

Greece owes 161 billion (billion with a b) Euros to other Eurozone governments (mostly Germany), and 50 billion (still with a b) to the European Central Bank.

They cannot possibly repay it. Not only can’t they — it’s pretty clear they don’t want to. They ran up a titanic bill on someone else’s credit card, and are simply not going to be paying that. Ever.

There’s an old saying: If you owe a bank a million dollars, it’s your problem.

But if you owe a bank a billion dollars, it’s the bank’s problem.

I’m not sure what the election matters in the scheme of things — stay or go, Greece is either simply going to repudiate its debt or Germany is going to have to cover the bill (a massive wealth transfer from Germany, and other more responsible nations, to Greece).

And it gets worse. Because even while taking a 70 billion write down, the Germans would then have to extend new credit to the Greeks, and hope they’d pay that back.

Which they won’t. Duh.

And the Germans don’t want to do that, for obvious reasons.

All this election stuff. The election doesn’t change the basic fact. Whoever is in power, Greece cannot pay, and will not pay. And Spain cannot pay, either.

And the Germans do not want to send more of their wealth to foreigners. And Eurozone or not, they are foreigners. They already moved a substantial portion of the West German wealth to rescue East Germany (during reunionification).

I do not see any way out of this. The EuroZone project is doomed, and no one seems willing to confront this basic fact. And further, I don’t even see how it helps all that much to confront it, except that Germany gets to keep its money.

The change to a single currency always struck me as a bad idea. Who can come to their rescue? Us? Doesn’t look like it. Would we borrow more to pay their debt? Obama wants to, but I don’t think the American people would agree. China? They are facing headwinds themselves.

Once Spain and Italy follow Greece, then what? Every solution is going to cause pain.

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