14/07/15Is There a Phoenix?
All you can do is shake your head in disbelief. If Greece were a human being, it’s creditors would have sat down 5 years ago, when troubles became known,worked out its income and expenditure ratio, set a budget based on income forecasts and from the surplus and use a percentage of that as a repayment amount. Set a fair interest rate and review the plan regularly, so that in good times, maybe additional payments could be made and in not so good times, maybe a reduced or even no payment made. Yes, it may take a lifetime to pay it back, but with the stress taken away by the fact that the issue is being shared, life carries on.
But Greece is a country, and not a human being, however, it should be awarded some regard and the bigger issues need to be dealt with. The country has debt and it needs to repay it-I have seen reports that call on the ‘Marshall’ Plan to be replicated for Greece as it was for Germany. (The Marshall plan dealt with rebuilding Germany Post war and the USA agreed to cut in half the debt outstanding.) But we are not post war and to do it for Greece, would mean having to do it for other European countries such as Spain, Italy and Portugal and the ECB (European Central Bank) wouldn’t be able to take 50% off of each member states outstanding debt-in my opinion.
We all know that Greece should not have been brought into the Euro, but hindsight is a wonderful thing and we can’t drive our cars by the rear view mirror alone, but now that she’s in and things aren’t working as they should, this is not the time to put a plaster on a wound, its time to work out where the wounds are coming from and why does it need so many plasters?
Greece has now become a barometer-whether she intended to be or not-for the future of the EU and Euro. The UK market wobbled last week which was to be expected as did the European Markets, especially as some Greek debt still lies with the banking sector, which holds significant weight in those indicies..but to see Asian and USA indicies react to that (as well as China’s slowdown, granted), tells me that a Greek exit from the Euro, would cause a furrowed brow worldwide, because this ‘one continent, one currency’ may start to show cracks.
In my view, that’s the rub. In fairness an exit from the Euro, would still leave Greece needing emergency funding. She could reprint the Drachma, but the countries credit worthiness, the banking system etc, would require an emergency cash injection and who would lend Greece the money, if not the EU?
Russia? well, with an 18% debt/GDP ratio (compared to Greece 275%) it could do, but there is no way the EU would allow that to happen, so it would have to continue its support.
And this is where politics come into play. No one is making -it seems-an effort to help Greece come out of this.Meetings,about meetings about meetings help no one and disenfranchise everyone. To sit down and work out a way forward is the most sensible-if painful-way to pull Greece out of the fire. It will be tough, and it will take decades. Having a meeting, agreeing some interim measures and kicking the already dented can down the street does nothing. Angela Merkel et al, do not want to go into the history books as the starters of the end of the Euro, is how they see it. Do it for one country, you do it for all and the EU can’t sustain it for all. If Greece exits, does this mean other countries can? does this then mean the UK referendum is a foregone conclusion and even the beginning of the breaking up of the EU?
I am merely a financial adviser, putting a view across as to how I see things, and the viewpoint I make to my clients. It is why for now, I see little value in the European mainstream markets, opting to seek growth from outside of the EU, until these esteemed leaders, see beyond the view of their own political party and therefore, their own self preservation and save this wonderfully historic country, whose main export is Olive Oil and main industry is tourism. I hope that the Phoenix will emerge from all of this.
Thanks for reading,