I’ve been following the next great
crisis quite extensively and have been writing about it on this blog
regularly trying to keep my readers up to date. Just click on the
European debt crisis issues or Ireland on the right topic links for more
background. However, if you follow the markets you know how bad the
situation really is in Euro-land.
Today we got the expected yet unexpected news that
Ireland may need more bailout money. No big surprise there but it does
offer evidence of how rapidly the situation in Europe is deteriorating.
As I mentioned, Ireland may be on the verge of
requesting additional funds from the EU and the IMF because it anticipates having
trouble returning to the debt markets to raise funds next year. This from
Irish Transport Minister Leo Varadkar. He is
the first cabinet minister to say it like it is. that
is, Ireland WILL have tremendous problems raising money because of the
“punishing” yields being demanded by investors.
Quoted by Reuters he said;
"I think it's very unlikely we'll be able to go
back next year. I think it might take a bit longer ... 2013 might be possible
but who knows..It would mean a second program (of
loans from the EU/IMF)..Either an extension of the
existing program or a second program. I think that would generally be most
The Independent is reporting Nouriel Roubini’s
thoughts on the Irish fiasco;
Ireland may be plunged into a "disastrous"
sovereign debt crisis within three years as the cost of rescuing its banks
mounts, Nouriel Roubini,
who predicted the global financial crisis, said.
"Eventually the back of the government is going
to crack" by "taking all the huge losses of the banking
system," said Mr Roubini
at a conference in Budapest yesterday.
The approach will "lead us with almost near
certainty to a sovereign debt crisis in Ireland in a matter of two or three
"Eventually we're going to have a sovereign
debt crisis that's going to be disastrous for Ireland and for the eurozone," Mr Roubini said. (Bloomberg)
Turning to Greece, the chances of default increased
over the weekend as the emergency meeting I mentioned the other day did not result in a favourable
outcome. According to the same Reuters article, “Greece's hopes of averting
default dimmed over the weekend amid fears the country, whose debt burden
stands at around 330 billion euros, may have missed
fiscal targets set by its creditors”. The Independent reports that Greek leaders failed to agree on Prime Minister George
Papandreou's new austerity plan. Conservative leader Antonis
Samaras rejected the measures, saying they would "flatten the Greek economy and destroy
Greek society". Some would say, (like me for
example) that this has already happened with the rapid move to privatizing
anything that would generate cash. Coming soon to a travel agency near you
… Come to beautiful Mykonos .. a lovely Greek island
owned by China.
are swirling that the an international inspection
team has found that Greece has
missed all its fiscal targets (don’t say I never said
that the real shit was nowhere close to hitting the fan) although the IMF is
doing everything it can to dismiss those reports.
Greece currently has the heaviest debt load in
Europe and it too is seeking additional loans after last year's €110bn
European-led package failed to dig it out of its fiscal hole. So is the
solution really to throw more good money after bad? If they
haven’t shown any fiscal responsibility after taking over 110 billion
Euros then why should any investor, the EU of IMF included even think about
giving them more money?
The end result is that both countries will need
additional money or risk defaulting. My
money is on the latter. Timing remains the only unknown.