Photo: By charamelody on Flickr
Well, markets, don’t say Germany – oh, um, I mean the European Union – didn’t warn you.Greece is set to default and there’s not much more the E.U. is looking to do to change that fact.
German Prime Minister Angela Merkel has, essentially, blown the EU’s financial and political load and let the geo-political and financial world (ahem – markets?) know that Greece will soon be on its own to figure out and solve the economic mess it finds itself in now.
As Bloomberg outlines in Merkel Says Greece Needs ‘Barrier’ to Stave Off Default, “German Chancellor Angela Merkel said euro-region leaders must erect a firewall around Greece to avert a cascade of market attacks on other European states that would risk breaking up the currency area.”
Most importantly, E.U.’s leadership has pointed toward an “expanding (of) the powers of the region’s rescue fund, the European Financial Stability Facility,” set to take place in 2010.
Merkel continues “‘I don’t rule out at all that at some point we will have the question whether one can do an insolvency of states just like with banks.'”
Well, there you have it. “I don’t rule out at all that at some point we will have the question whether one can do an insolvency of states…”
This quote, perhaps more than any other in the past few weeks and months of this impending(?) crisis, tips the E.U.’s economic hand to the markets and world: “We are set to distance ourselves from Greece.”
So, markets and market-players, I’ve screamed/written/said it before, and I will do so again here: Greece is set to default.
So PLEASE do not be surprised when we soon see credit markets shrinking, demand plummeting, and currency (and commodities) values violently jumping (ps – gold’s set to crash soon, too, sucker’s rally, anyone?), but that’s for another day/story/time).
And while it appears Spain and Italy may soon be next to join Greece on the default line, the E.U. will most likely, for issues of magnitude, effect, and potential political ramifications, stem these 2 member-state’s losses, while Greece will continue twisting in the financial wind.
Most interestingly? Look to Ireland – not immediately, but certainly within the next few years – to take a careful look at the “Irish deal” and begin raising noise about the “unfairness” of it all, at least as compared with the deal (and multiple bail-outs) Greece received.
This modern-day economic rebellion by the Celtic-Tiger will, in turn, inevitably play into and deeply affect the changing face of the European Union in the 21st century.
And, Wall Street (and the world’s markets), a final note: I, for one, am getting tired of trying to teach you how the world-outside-your-cubicles actually works.
Please start taking notes and stop acting so shocked when impending economic crises become just that: crises.
Margaret Bogenrief is a partner with ACM Partners, a boutique crisis management and distressed investing firm serving companies and municipalities in financial distress. She can be reached at [email protected]
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