Greece Surrenders to the Markets

This week Greece surrendered and called in the European Union and the International Monetary Fund. The bond rate rocketed to 7.4% about 4.26% above German Bund rates and fell back to 7.14% after news of the Greek move. Nothing new forced this so the private sector is skeptical of the EU deal that requires individual governments to join the bail-out and for the Germans to bend from their position.

The most recent Greek deficit is 13.5% of GDP with a debt of 120% of GDP.
Downward spiral territory.

Spain has a deficit of 11.4% of GDP and Portugal has a deficit of 9.4% of GDP with debt in the range 54-77% of GDP.

Greece wants access to the Eurozone members loan of €30 billions and wants the IMF to make €10 to 15 Billions available.

All of this shows that the Eurozone no-bail out clause in the rules has been binned. The EU has to evolve and adapt. Olli Rehn, the economics commissioner has proposed that Eurostat should audit members ates accounts so that fiscal recidivists can be accurately identified. The EU must impose real penalties on sinning states. States with large current account surpluses should spend more. For the Euro to survive as a wide currency union,it is clear that there has to a new rule book. I just hope another referendum is not needed.

Greece will be forced to cut public sector jobs and pensions. The effects on the street will be vigorous and possibly violent.