Greece’s bad debts…
There is an old saying that if you owe the bank $1m it’s your problem, but if you owe them $100m it’s their problem. On a grander scale that is what is playing out in Greece and the EC. Everyone talks as if the money Greece owes (cEUR360b) is their problem, but as the IMF has just admitted the bailouts provided in 2012 were to save German and French banks rather than Greece themselves. The Troika (IMF (International Monetary Fund), EC and ECB) are the ‘institutions’ that form the creditors group for the bailouts and other sovereign debt packages for Greece. Over the weekend they rejected Greece’s attempt at outlining exactly how they will reform to be able to pay down this debt. Greece has until April to get agreement but the very hard deadline is June when their 4 month extension expires. There are the small issues of going broke before then too, which has seen them raid pension funds to survive but for how long? Make no mistake that whilst the main stream press has been distracted by another ‘shiny thing’ this remains a big issue. Not because of Greece itself so much, but because of all the very large banking institutions who’s money it is they have borrowed. Last night the ECB started its QE program printing money to buy EUR1trillion of Euro bonds. It’s the ‘shiny thing’ the market will rejoice in but the Greek tragedy will be back with a vengeance in a couple of months for sure and as Lehman’s taught us you will have no warning if one of these banks goes bust, and the repercussions will be global.