Get It Over With
Research for Online Investors

6/25/12

Why not just get it over with?  Greece is broke and unwilling to reform government spending.  They want other countries to give them money so they can keep government employees on payroll, keep making pension payments to citizens that retired as early as 52 years old, and ignore collecting taxes that are do the government.

Greek Prime Minister Antonis Samaras had to have surgery to repair a detached retina and his Finance Minister Vassilis Rapanos landed in the hospital on Friday because of dizziness and abdominal pain.  This morning he resigned due to his health.

Prime Minister Samaras is not expected to attend the Eurozone Leader’s conference on Thursday and Friday in Brussels.  His allies, French President Francois Hollande, Spanish Prime Minister Mariano Rajoy and Italy’s Monti will be in Brussels to press for more spending to encourage growth and less accountability on governments that are in financial trouble.

Spanish interest rates on ten-year bonds rose to 6.52% this morning while Cyprus and Spain both applied for bailouts.  The cesspool of government bureaucrats and politicians gets deeper with Lucas Papademos, former Greek Prime Minister now holding office in the European Central Bank as Vice-President.

Mario Draghi is President of the European Central Bank and trying to protect the bank from underwriting every troubled country by printing money.  His and Germany’s fear is turning loose inflation if they print money to cover bad fiscal policies.  His flank is “protected” by Papademos who was Greek Prime Minister from Nov. 2011 until this past April when new elections were held.

George Soros told Bloomberg this weekend that Europe should start buying bonds from Italy and Spain in return for budget cuts.  Soros believes European Leaders are running out of time to save the euro.  He said “There is disagreement on the fiscal side.  Unless that is resolved in the next three days, then I am afraid the summit could turn out to be a fiasco.”

Sadly, the eurozone has learned that countries will promise anything to get the money, but once they have the money drag their feet at carrying out their promises.

So again we say, Why not just get it over with?  Tell Greece, No.  No more money, no bond purchases, no bank backstops, no European Central Bank intervention until they cut their budgets.  Shouldn’t take but a day or two.  As we have always said, “Nothing concentrates the mind like a public hanging.”

If Greece does not cut spending, regulations and start collecting taxes they can go bankrupt.  Then the eurozone leaders need to ask “Who is next?”

It would be difficult to watch.  There would be live TV coverage of the Greek economy failing.  There would be protests and vandalism by gangs of youth that don’t have jobs.  Every baby throws a tantrum when it wants a bottle.

The time to grow up is at hand.  Germany is trying to hold the line along with the Netherlands and a few other countries that don’t want to be used and abused by fiscally undisciplined countries.

This week’s summit of European Leaders could be rancorous.  The “haves” and the “have-nots” could be at each other’s throats.  The veneer of diplomatic politeness may wear thin.  The market will react as it always does on the latest headline.  We see a rally for the market on any good news.

Quote:
Mr. Obama should first of all take care of reducing the American deficit, which is higher than in the eurozone.--- Germany’s Finance Minister Wolfgang Schaeuble

Editor’s note:  Thank you Wolfgang, Europe doesn’t need his remedy.

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