Photo: Flickr bazylek100
Another day, another market mishap.Obviously, as we all know both on this – and the other side- of the Atlantic, good news for German Prime Minister Angela Merkel and global markets arrived Thursday in the guise of Germany Approves Expansion of Euro Bailout Fund.
As the New York Times reports, “The German Parliament easily approved the expansion of the bailout fund for heavily indebted European countries Thursday, the most important step in a tortuous process that has rattled markets and raised doubts about the ability of governments to react to the expanding debt crisis.”
In turn, the markets, of course, interpreted this “vote of confidence” in the most irrationally optimistic and delusional manner possible, by jumping in both points and ill-advised positivity. “Well,” the markets seemed to gush post-vote, “Germany’s got this all figured out. Let’s celebrate by drinking the happy kool-aid of the Greek-bailout damned!” (Cue Rome burning).
Alright, markets, we’ve been over this before, but let’s try again: regardless of the political machinations, plays, and schemes we will see playing out on the Euro-political stage over the next few weeks and months, the European Union (er, Germany) cannot financially stem the impending (here!) crisis bearing down on Greece, et. al. (Portugal, anyone?).
So while you work on trading on every minor policy blip, PLEASE understand that, inevitably, the European Union’s crisis is far from over. More importantly – and sooner, rather than later – Germany will regain its senses, Greece WILL default, and the global markets and economies will contract. As much as you want to believe that Greece is an isolated geo-political event – one that the E.U. will contain – you are incredibly mistaken. And the sooner you price this inevitably into the system, the less dramatic the inevitable fall.
In case you don’t believe me, check out the Euro debt tables sometime, do the maths, and please explain to me how this crisis solves itself.
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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