EU economic inspectors and IMF officials have been in Greece to review the economic carnage. What they found was at the horrible end of a scale that ranges from good news to bad. Prime Minister George Papandreou told parliament “The damage is incalculable. It is not only financial or fiscal but also affects the position of the state… Our duty today is to forget about the political cost and think only about the survival of our country.”
The bad news was compounded by a decision to delay a bond offering by the Greek government which was to raise $3 billion in much-needed money.
Believing a thing and knowing it may not be far apart, but in the Greek economic matter doubts about the nation’s ability to survive financially have been cemented by the trip EU experts made to the country. Moody’s and other credit rating agencies are more likely to downgrade the Greek sovereign debt. The largest economies in the eurozone, particularly Germany, will have to decide quickly whether they will supply direct aid to the southern European country or offer to guarantee its bonds. Germany could allow Greece to default on its debt, but that could cause the world to lose faith in the euro and could trigger a number of large write downs at European banks that hold Greek paper. Only Goldman Sachs will walk away from the collapse with a profit.
Now that there is strong empirical evidence of Greece’s deep trouble, the other nations in Europe have little choice other that to solve the problems by using their own capital. It will be expensive, but the alternative is certainly even more costly.
Top Gaining Stocks
Top Losing Stocks