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In the long run, it doesn’t really matter what happens in Greece

by Aaron McCormack on November 7, 2011

The Greek political situation makes for fabulous drama and keeps the media outlets nice and busy.

But folks it doesn’t make a jot of difference what happens in Greece.

The solution that everyone is talking about DOES NOT WORK.

1. The banks who have to volunteer for the 50% writedown on sovereign bonds have not agreed

2. The Greek people are not signed up to the necessary austerity measures in the Brussels plan

3. EVEN IF THE BANKS AGREE TO THE HAIRCUT AND THE GREEKS IMPLEMENT THEIR PLANS, THE BAILOUT DOES NOT WORK

This is plain as the nose on your face, media folks. I can’t understand why we are pretending that the next PM of Greece makes all the difference.

Under the Brussels plan, the Greek debt/GDP would still be a terribly unsustainable 120% a decade from now.  That assumes some growth in the economy and assumes that all the austerity is applied and works.  It is not a plan, it is another fudge.  Greece is insolvent and the bond haircut would need to be more like 80% or 90% to work.

Regardless of the Greek outcome, Italy is ready to blow up in any case.  There is literally nothing the EU can do at this point.  The game is up.

From → Europe, General, Politics

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