Greece and the rolling contagion
The crisis in the financial management of Greece may be contained at the moment, but this type of rolling contagion is not so unlike the 1930's, when country financial imbalances were an ongoing issue.
The big question is whether the voters in Germany and France will accept some kind of bailout of Greece, as will obviously be necessary down the road. Among U.S. international banking types it is widely known that, for whatever reason, doing business in Greece with the wealthy and the shipping firms has often ended poorly. Perhaps that penchant for being clever is also reflected in the huge amount of uncollected taxes that the Greek government claims. The fact is that many American bankers have been charmed by gracious Greek hospitality and not had a good outcome. If this is well known in U.S. financial circles, it is certainly a fact among informed citizens of the core EU countries.
The argument for the support of Greece will be focused more on stopping the contagion than on any great sympathy for that country. Among the countries mentioned as challenged: Italy is a country with some industrial power, some world class financial firms in Milan, and a robustly chaotic government and financial structure as always; Spain is still for the most part a government of polite entitled aristocracy(Catalonia excluded), right or left, that had an unchecked residential and tourist real estate boom that would have made Countrywide, Golden West, and Washington Mutual blush; Portugal is still just a charming developing country without major resources or industry, one that is highly sensitive to its European connection, or if the EU catches a cold Portugal catches the flu; and then there's the formerly resurgent Ireland which, if this thought is right, has a significant financial services industry that is more linked to the U.S. than most European countries and also has the drug firm subsidiaries and related tax breaks, and is in the position of waiting for a real U.S. recovery.
The EU powers must know that isolating Greece, forcing reforms, and backing some of its debt is essential to their coalition. One wonders whether they have the political power to pull it off given the deficit spending that has been the way of the world for the last two years. In the 1930's this kind of epidemic all seemed to be an ever unfolding mystery to the central bankers. That's not the case now, but does it make any difference.
The big question is whether the voters in Germany and France will accept some kind of bailout of Greece, as will obviously be necessary down the road. Among U.S. international banking types it is widely known that, for whatever reason, doing business in Greece with the wealthy and the shipping firms has often ended poorly. Perhaps that penchant for being clever is also reflected in the huge amount of uncollected taxes that the Greek government claims. The fact is that many American bankers have been charmed by gracious Greek hospitality and not had a good outcome. If this is well known in U.S. financial circles, it is certainly a fact among informed citizens of the core EU countries.
The argument for the support of Greece will be focused more on stopping the contagion than on any great sympathy for that country. Among the countries mentioned as challenged: Italy is a country with some industrial power, some world class financial firms in Milan, and a robustly chaotic government and financial structure as always; Spain is still for the most part a government of polite entitled aristocracy(Catalonia excluded), right or left, that had an unchecked residential and tourist real estate boom that would have made Countrywide, Golden West, and Washington Mutual blush; Portugal is still just a charming developing country without major resources or industry, one that is highly sensitive to its European connection, or if the EU catches a cold Portugal catches the flu; and then there's the formerly resurgent Ireland which, if this thought is right, has a significant financial services industry that is more linked to the U.S. than most European countries and also has the drug firm subsidiaries and related tax breaks, and is in the position of waiting for a real U.S. recovery.
The EU powers must know that isolating Greece, forcing reforms, and backing some of its debt is essential to their coalition. One wonders whether they have the political power to pull it off given the deficit spending that has been the way of the world for the last two years. In the 1930's this kind of epidemic all seemed to be an ever unfolding mystery to the central bankers. That's not the case now, but does it make any difference.
posted by John Borden at 2:17 PM
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