European Situation is Now Well Beyond Economic Reasoning
The current market activity is seeing volumes and direction remain tantalizingly out of reach.
News from the Greek/German talks is likely to surface throughout the session, and it would be nice to be a fly on the wall when Mr Samaras pleads his case with Angela Merkel.
Imagine walking into your bank with no job, no savings and no assets, but with a massive credit card debt, after having just blown a previous loan on nothing very much.
You then proceed to ask the manager for another multi-million pound loan, and even ask for an extension on the last one, so that you can continue your rather nice life style in the sun.
Now, imagine that the bank manager had to face their boss the next day to explain their decision. Merkel must go to the polls soon and the German electorate is not in a forgiving mood.
Mr Samaras will probably have an easier ride with Hollande tomorrow, as the French Premier seems much happier about doling out other people's money. However, even here the atmosphere might be a bit frosty.
The French voted him in to stimulate the French economy, not to bail out other countries.
In the end though, the decision will almost certainly be that the Greeks will get more time and more money so that we can go for one more turn of the wheel.
The situation is now well beyond any economic reasoning and is purely in the political arena. The politicians will seemingly do anything to hold the euro project together.
By Simon Denham - 24 August 2012
European Situation vs Economic Reasoning - Part 2
Update - 05 September 2012
Investors are having their nerve tested in the run up to tomorrow's ECB meeting.
Many are considering this meeting to be crunch time, not just for the Eurozone but also with major ramifications for the global economy as well.
The crisis continues to rumble on and yesterday's stock market weakness gives a small indication of just how worried people are becoming.
These concerns are only going to be exacerbated by press reports that express doubts about whether Mario Draghi will actually be able to deliver what investors want.
Whilst the ECB President is adding the finishing touches to his plans, the troika are going through the Greek books to see what they've actually done to tackle their bulging deficit.
Unfortunately, it doesn't seem to matter how much the Greeks attempt to rein in spending by lowering pay and making themselves more competitive.
Their outstanding debt obligations are so vast that the repayments are completely outweighing any sort of efficiencies.
The deeply entrenched recession means that the EU, ECB and IMF will have to prop up the country for years, if not decades, to come just to keep it in the Eurozone.
Even the most ardent pro-European is likely to lose patience at some point and throw in the towel.
Politicians have been frantically assessing what a Greek exit would mean for the Eurozone economy, the banking system and the wider global impact. But they have also been considering what it would mean for the European project as a whole.
If one country with unsustainable debts can just default and leave, then what about the others?
Will Portugal, Ireland or even Spain and Italy be next? One thing is for sure; it will be years before we know.
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By Simon Denham, 24 August 2012