Monday, June 20, 2011

Don't cry for me Greco-tina

People, we've seen this movie before. Greece is Argentina II.

The parallels are uncanny. Insolvency was mistaken for illiquidity. Devaluation was shunned. A big loan package was created with conditions. Conditions weren't met, but installments of the loan were still given (this has only been announced for Greece, it hasn't actually happened yet), and now a "second last chance" loan is being prepared.

All the while the economy and institutions of the country continue relentlessly downward.

The only ones getting bailed out here are the banks who have big exposure to Greek debt. Greece itself is not getting bailed out, it is getting deeper and deeper in debt!

I understand that a currency union is harder to get out of than a currency board, but the combination of fiscal irresponsibility and a fixed exchange rate is just lethal in our era of capital mobility.

Greece needs the ghost of Nestor Kirchner to swim over and give them the onions to simply default.

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