Greece : Delaying the Inevitable?

As I start my new blog, I think it is probably fitting to start with some sort of comment on the Greek debt crisis as this is clearly the single most important issue at the moment.

My view is that default with an exit from the Euro would have been the best way forward for the Greeks. However the EU Cabal have chosen to kick the can down the road and delay the inevitable.

Why inevitable? Well Greek debt stands at somewhere in the region of 140% of GDP. Even if Greece managed to fun this debt at 10% p.a. it would mean that 14% of its GDP per annum goes purely on servicing the interest payments. With those sort of numbers I do not see how Greeece can possibly go from deficit to surplus by 2014 as the EU / IMF etc predict thanks to their austerity measures. Clearly there is the selling of Greek state assets which will be privatised in the coming months and years - but this nothing short of a German takeover of Greek assets on the sly. Ultimately this is bound to hurt the Greek nation socio-economically - especially when you take into account the massive cuts across the board that we are bound to see as a result of austerity.

An analogy would be to imagine that you have an annual income of 40,000 and some credit card company gave you a credit card with a limit of 60,000 (very foolishly). You then proceed to max out the credit card and pretty soon cant pay the monthly amounts and thanks to the high interest the amount keeps going up even without any new spending. So in effect the credit card company says you cant spend money on anything other than the minimum payment - never mind that you probably cant afford your rent or maybe even food. Soon the also send the repo man in to start taking back your more expensive items in the house so they can claw some of their money back. You are stuck in a debt trap you have very little chance of getting out of. The credit card company will probably recover a large part of what they lent you even if not all and most likely you will end up penniless and destitute.

I paint a pretty extreme scenario above but that is pretty close to what is happening with the sovereign debt crisis at the moment. The borrowers were clearly living beyond their means, but by the same token those who lent did not conduct their due diligence properly and are now refusing to pay the price for their actions.