The Euros next Pain is sPain

Greece getting another 145.000.000.000 Euros to spend

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Weeks ago, Greece needed 11 billion Euro to refinance. Its Prime Minister wanted to have access to the Euro bail-out money, not to pay the upcoming interests, but for general expenditure!

Now, today, the EU decided on a € 145 billion default delay package. The idea is to take Greece off the markets. No further refinancing at market rates will be required from that point on. After Government Motors in the US, we will have Government Greece in Europe. But of course once that happens, we will see the whole Eurozone implode.

The next candidate causing Pain is Spain. S&P downgraded the consulting resistant country. Spain failed to implement any measure promoting growth. My recommendations have been ignored, unfortunately. As a result, massive deflation will follow as Spain can no longer refinance at the current financing cost. The cancer of contagion has started to spread around the Eurozone. It does not help any longer to focus on its origian. The metastasis is going to kill the patient anyway. But giving 145 billion Euros away as palliative medicine, is far too much.

Given the fact that the country had the second largest current account deficit in the world this is dangerous. A current account deficit means nothing less than spending more than taking in. The club med countries have become experts in doing so, since the EU started to give free lunches to its member states.  It is really unfair that this comes to an end now. It is unfair for the Spanish and Greek citizens who are used to have an artificially high life style, and it is unfair to German taxpayers with a reduced life style. And it is unfair to argue that Greek citizens can retire with 52 while Germans have to work until 67 years of age. This is especially unfair as Greeks fight and demand rights while Germans just complain.

And by the way taxpayers have not yet noticed the cost of bail-out mania. But they will soon feel the pinch. Their local governments will increase fees due to higher debt burden and failing tax income.  

The adjustment to reality will come. It will come for all Europeans and when it comes it will show if the European idea continues or if it fails. My take on this is that it fails. But in today’s world political leaders are used to sell failures as success and they continue to go on and on into the wrong direction.