IMF Official Expects Greek Default

Over at Noonan for Nevada I note that Greek one year bonds have rocketed to an amazing 72%, now comes this Zero Hedge:

While the US was panicking over a double zero jobs report, things in Europe just fell off a cliff. As both the WSJ and Reuters report, it seems that the second Greek bailout, following repeated and consistent disappointments by Greece which has resolutely refused to comply with the terms of its fiscal austerity program, has just collapsed.And with the US closed on Monday: long a counterbalance to European risk pessimism, this week (especially with the news fro the latest FHFA onslaught against global banks) may just be the one that “it” all comes to a head. But back to Europe, and more specifically Greece, which it now appears is doomed. “I expect a hard default definitely before March, maybe this year, and it could come with this program review,” said a senior IMF economist who is keeping close tabs on the situation. “The chances for a second program are slim.” …

And remember, Italy and Spain are also on the financial chopping block – it has just been the belief of the Eurozone leaders that if they can save Greece, they can save the entire Eurozone.  Maybe that was true, but what has become clear by now is that Greece cannot be saved…the financial requirements to be placed upon the people of Greece are not politically possible for an elected Greek government to impose (additionally, in my view, even if the Greek people willingly embraced the austerity measures it would not be enough…Greece – like Spain, Italy and so many other nations – owes more than it can ever repay).  So, default.

Some rumors have had it that all the Eurozone leaders were ever trying to do was find a safe place to crash land the Greek economy…knowing all along that default was necessary, they just wanted it to happen in the least damaging manner possible.  I don’t hold to that view – Greek default being inevitable, the sooner it happens, the better.  The longer you keep trying to bail out Greece the more debt is involved and thus the bigger the hit when the default happens.  I think the Ruling Class of Europe really thought they could manage this…the Masters of the Universe never imagined that there wasn’t some way to borrow, print and steal their way out of the jam, as they have done so many times in the past.

But now they are rather stuck…no one in Europe wants to get further on the hook for Greece.  Default must happen, and keeping things afloat even for another full year won’t make it any better for those who continue to extend Greece credit.  Maybe there are one or two more rabbits for the European Central Bank to pull out of the hat, but I don’t think so.  Get ready for an interesting financial time.

5 thoughts on “IMF Official Expects Greek Default

  1. RetiredSpook September 4, 2011 / 9:04 am

    Get ready for an interesting financial time.

    Now there’s the understatement of the year.

    OT, but worthy of note; the Obama Justice Department has figured out a way to woo back disenchanted members of the music, arts and entertainment industry.

    http://tinyurl.com/3d7vh57

    • Mark Edward Noonan September 4, 2011 / 9:16 am

      Spook,

      Bit of genius there…but, also, we must remember that our liberals think that all foreign laws and customs trump American laws and customs. Seriously, if the Hindus brought back sati, our liberals would find reason to laud it…

      • RetiredSpook September 4, 2011 / 10:28 am

        Mark,

        I’m just kind of speculating out loud here, but my sense is that when Greece defaults, the rest of the PIIGS will topple like dominoes, and much, if not most of the world will descend into economic chaos. Having not lived through anything like that, I can’t begin to wrap my head around what we may be facing.

      • neocon1 September 4, 2011 / 10:36 am

        scary stuff

      • Green Mountain Boy September 4, 2011 / 10:37 am

        Time to fire up the ghat’s? You didn’t just go into the firewood business did you? 😛

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