German -Greek saga reaching climax

Posted: May 11, 2015 in Uncategorized

In these weeks the German Greek saga is reaching is climax.

Some interesting notes to think about.

Greece is really struggling….last week it really had to scramble to put together a payment of E.200 million.

I mean just  E. 200 millions. Most medium size corporations have that amount and even some ultra high net worth!

This week there is another payment of Euro 750 million. Greece says that  it will oblige it (even if there are quite a few persons that they do not understand where they will get hold of that sum).

And there are other payments (bigger ) in June/July/August.

In Germany Merkel, very smartly, wants to keep Greece in Europe, but she is starting to feel the opposition of her own party.

At this point a Greece default by error/misjudgement cannot be excluded.

Merkel has a big conundrum:

She has to keep Greece in the Eurozone

-It helps keeping the Euro down (Germany is a 60%GDP  exporter)

– A Grexit that provokes an immediate rout of Greece, but then a rebound in 3 years (there is an interesting article by the Chairman of the Bank of England on the matter) would push Portugal, Spain and Italy to follow the same steps with disastrous effects on the export biased Germany economy.

– Merkel cannot tell the electorate or even publicly this (as she cannot say we keep Greece in as we are taking advantage of Greece) and she has to answer to an increasing anti -EU / anti-Greece electorate.

So nor Greece nor Germany want a Greek exit…but bringing the discussion to the wire increases the potential for errors.

This issue is highlighted by the sharp increase in yield in Europe (German 10 year quadrupled in 3 weeks and Italian and Spanish breached 2%….for the matter now they slightly retreating (so favouring a positive solution)

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