Greece Saved For Now – Is Portugal Next?

[Jefferson23]

By Peter Boone and Simon Johnson
April 11, 2010 at 9:59 pm


The Europeans announced Sunday they would provide 30 billion euros of assistance to Greece, amid informed rumors that the IMF will offer another 10-15 billion. With a total of say 40-45 billion euros in the bag – more than the market was expecting — the Greeks have time to make changes.

The Greek government, helped by the market threat of a near term collapse, appear to have strong armed the other eurozone countries into a generous package without making efforts to change seriously their (Greek) fiscal policy. This is good for near term calm, but it does not solve any of the inherent problems now manifest in the eurozone.
Often assistance packages of this nature just help “smart money” to get out ahead of a default. This could be the case here; 40-45 billion euros total money could last roughly one year. Both Russia and Argentina got large packages in the late 1990s but never regained access to private markets, so eventually everything fell apart.

Sunday’s package should make it possible for Greece to borrow short-term but it takes courage to lend for 5 or 10 years to the Greeks unless there is much more fundamental change.

There are two key things to watch for:

remainder in full: http://baselinescenario.com/2010/04/11/greece-saved-for-now-is-portugal-is-next/

[dipsydoodle]

1. They are called the PIGS

Which is an acronym for Portugal. Ireland, Greece and Spain all of whom are financially weak for a variety of reasons.

BTW - the EU support finacial support package is now there for Greece should they require it - they may not do so.

[Jefferson23]

2. I wish more of those in power would listen to Johnson, his

last lines, highlights it perfectly.

"The stronger Europeans, by coming to Greece’s rescue at this time with little conditionality, are effectively showing all the weaker nations that they too can get a package. This will undoubtedly reduce the resolve for needed fiscal reforms across the European periphery.

We are still lurching from crisis to crisis in Europe."