The Greek Tragedy

Early reports from last night’s highly anticipated Eurogroup meeting on the Greek debt situation indicate no agreement was reached (after an earlier report to the contrary saw stocks and the EUR jump).  With Friday’s 10 day ultimatum to Greece by the Eurogroup, they now have 5 days left to sort this out and avoid forcing the hand of the threat to kick them out of the EU.  We wrote a little while back about this exact situation being one of the main “black swans” that could trigger a big flight to gold (interestingly we also mentioned Ukraine escalations and yesterday saw the US government approve a $1b defence spend on exactly that…).  The Greek situation is both fascinating and tragic.  Greece is very quickly and literally running out of money to function.  They are openly stating they don’t want to exit the Euro but they cannot survive under the conditions of the original bailout package (austerity measures which God forbid require running a surplus not continual deficits).  The EU knows that Greece has no chance whatsoever of paying back its EUR360 of debt, and certainly not the EUR240 due at the end of Feb but now brought forward to Monday.  The EU also knows that if they let Greece either default or leave the EU there will very soon be a line up of the likes of Spain, Portugal and Italy for the same treatment and untold, potentially severe consequences on not just the direct creditors but given the modern interlinked and ‘derivative-ised’ financial system, far more reaching than them.  Markets will continue their nervous shuffle until Monday but waiting until afterwards may be too late to protect your wealth from the consequences. 

As a side note, if you missed the last Q&A program on the ABC, it provided great local insight into how badly Australia too needs to address its own debt problem.  Like or loath Alan Jones, he was bang on and Heather Ridout illustrated what our political system lacks through contrast.  We need to start now to avoid becoming another Greece but it takes a strong leader to take us on that journey. Easily found on ABC’s Iview.