Tuesday, June 28, 2011

Greece - Will it Make it to the Long Grass?

The Eurozone leaders are becoming increasingly desperate to see Greece's problems dismissed to the long term. Voluntarily extending maturity on loans by 30 years can only be an option taken by someone facing obliteration if they do not.

The usual answer to being unable to pay debt is default. It's painful, it's ugly but it's necessary. Ever increasing debt gets to the point where you are paying nothing but interest on that debt and never repaying the capital. Greece isn't there yet but with it's bond yield in double digits and its economy in recession that is the trajectory.

Far better to accept the consequence now. Restructure the loans and reform the economy. Greece will learn to balance it's budget as it struggles to find foreign funding for years to come. Spurious lenders get their hands burnt and learn to invest more wisely in future. Something to be said for a balanced portfolio. But at least everyone will know where we stand.

The uncertainty is stopping us for moving on after the world financial crisis.

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