Greece Nearing Default

Greece the fiscal canary in the coal mine if you will is now close to full collapse. A feckless entitlement ideology coupled with Enron style accounting (The government kept two sets of books, the real GDP and a fake one they could show the other European countries ) has brought the cornerstone of Western Civilization to its knees:

LONDON — As interest rates on Greek debt spiral upward again, the question facing Europe is no longer whether Athens has the political will to cut spending and raise taxes to curb its gaping budget deficit, but whether Greece will run out of money before it gets the chance to do so.

With the rate on 10-year Greek bonds reaching as high as 7.5 percent on Thursday, up from 6.5 just three days ago, the cost of insuring against a Greek default hit a record high.The message from the market could not be clearer: artfully worded communiqués from Brussels will no longer suffice. To avoid bankruptcy, analysts said, Greece needs a bailout from Europe, and fast.

“This is no longer about liquidity; it’s a solvency issue,” said Stephen Jen, a former economist at the International Monetary Fund who is now a strategist at BlueGold Capital Management in London.

But with European officials consumed with a debate over whether loans to Greece should be offered at rates consistent with a typical I.M.F. bailout or punitive ones closer to current market levels, the risk is that while Brussels fiddles, Greece is burning.

In a nutshell the plan is for the Left leaning Greek government to push an austerity package to keep their house in order, all the while other European nations provide financing to keep the country afloat. The problem comes from both ends, Europeans (Read Germans) don't feel like paying for the Greeks and their entitlement ethic, whereas the Greeks (Read Unions and Leftists) refuse to give up their benefits over what they consider the mistakes of previous governments. An additional wrinkle is that previous Greek governments became entangled in many of the complicated derivative swaps that have plagued numerous American municipalities from Jefferson County to Philadelphia. For the record, whenever Greece and its collapse comes up their is an amazing ability of those from the left to focus on the "Banksters" and ignore the disastrous economic policies of the state. I do not discount the impact of these bad deals, but they make a bad situation worse, they alone are not driving the collapse. How bad can it get? Well, lost among the headlines is the very real chance that Iceland will default on its debts, money owed to English financial houses. Spain, Italy, and Portugal are holding on but approaching the cliff, and finally Euro-zone economic growth is literally nil or in some case contracting. Their is simply too much debt. Of course let he who is without sin cast the first stone. Don't worry though, Krugman says its all good here and we need more spending!