Belly ups involving higher haircuts are associated with significantly higher subsequent required returns and longer periods of capital market exclusion. The worse the losses inflicted on the bondholders, the more the markets will punish the defaulters, and the longer it will be before the defaulters could access the capital markets again. Greece's debt increases like cancer. Delay isn't an option. It would be better off to impose a 40% loss on bondholders this year than a 70% loss in 2013. http://venitism.blogspot.com
Jean-Claude Juncker, head of eurozone, points out a weird meeting in Luxembourg was attended by ministers from Germany, France, Italy, and Spain. But Juncker denied a Spiegel report that the talks were held to discuss the possibility, raised by Athens, of Greece withdrawing from the eurozone, as well as the idea of restructuring Greece's 327-billion-euro sovereign debt.
Nevertheless, we do know that Greek Finance Minister George Papaconstantinou also attended the Luxembourg talks, and German Finance Minister Wolfgang Schaeuble presented the results of an internal study of the consequences of a Greek withdrawal. It concluded that Greece's new drachma would depreciate by 50 percent compared to the euro, making a debt restructuring inevitable and provoking capital flight.
Bankruptcy would be God's gift to the cradle of kleptocracy, because Greece needs a real shock and awe to recover from political corruption. And it looks like God will manifest his benevolence pretty soon! A bankruptcy will also bring the much needed revolution to get rid of Graecokleptocrats. The sooner Graecokleptocracy defaults, the better it will be for all concerned. The bigger the haircut, the worse the pain that follows. The damage being inflicted on Greece is very masochistic. When defaults within the eurozone are accepted, a sensible analysis about how to fix the euro can begin.
Juncker notes that a meeting of all eurozone finance ministers on May 16 would discuss whether Greece needed a further economic plan, beyond the 110-billion-euro bailout Athens was granted by the EU and IMF in May last year. The first step to recovery is accepting that you have a problem. In that case, it's welcome news to hear more and more Graecokleptocrats talking about the problems being brought on by runaway government spending and political corruption.
But just as an addict who claims to be on the road to recovery bears watching, the real test comes after they've admitted there's a problem. Of course, some socialists are still in denial. Indeed, they'll even claim we're not spending enough and kickbacks are normal commissions of doing business with government! This is a particularly common cry from Graecokleptocrats and special interest groups that claim to represent the disenfranchised and the marginalized. http://venitism.blogspot.com
The stupid Marilizardist government of Graecokleptocracy is still siphoning in all the money with huge taxes and VAT, and Graecokleptocrats still demand kickbacks, which will only depress the economy further. You can't just cut your way out of this crisis while continuing political corruption. At some point, the Greek economy needs to start growing again. But this cannot happen in a depressed kleptocracy. Greece should bow to the inevitable, put some Graecokleptocrats in jail, announce a 40% haircut on its debt, drastically cut taxes, especially VAT, and impose a four-year suspension of interest payments on what remains outstanding.
With the money saved on debt repayment, Greece could start restructuring its economy, putting demand back into the system, and focusing on creating competitive export industries. Fourthreichians could stop fighting a losing battle to rescue Graecokleptocracy from default and start concentrating instead on how to make the eurozone work better. There is no point in drawing out the agony of defeat any longer. http://venitism.blogspot.com
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