It is astonishing (but I guess not exactly surprising) to hear the cascade of stories about the shocking idea that Greece would offer a direct vote to its citizens on a package of ultra-harsh austerity measures which would cost millions of jobs, reduce retirement and other benefits for millions more, sell of billions and billions of dollars in public assets and offer all the proceeds to bondholders who were supposed to be purchasing debt instruments with a risk of default which is priced into the yield.
Sounds like Panandreou isn’t going to make it beyond the next few days anyway. Likely a new compliant government will be “found” to keep those pesky Greek citizens in line.
The upside of all this in the long run will be if Greece ends up leaving the Euro, followed by others, and the continent can begin to return to a semblance of economic sanity. As a bonus, just maybe somewhere, some bondholder will actually take a significant loss in this Great Recession, validating the idea of interest rates reflecting risk. Who knew?
Here are a few samples:
Markets rattled by Greece referendum – CBS News – “The stock market is expressing disgust with Greek politics and a lack of confidence that Italy and Spain will generate the growth needed to pay down their debt,” said Peter Boockvar, equity strategist at Miller Tabak & Co.
Greece’s Referendum Step Leaves Europe Aghast – It was, in the tempered words of Rainer Bruederle, a senior German lawmaker, “a strange thing to do.”