Hopefully, these spending will just accelerate the fall of the dominos that are most of the sovereign economies. The few countries which have a decent balance sheet — such as Germany — are diluting their credit quality to bailout out the profligate economies which have no reason and no political will to reduce spending and borrowing.
There is no way that debt is going to be paid, so sooner or later, default will arrive. It would be a catastrophe for the stupid and incompetent lenders, but it would be a tremendous liberating force for the people, the economy as a whole, and would help set up a sounder safer system, since lenders will understand that lending is a risky business. Hopefully, the IMF will go insolvent as well in the process, and we'll get rid of this dangerous and useless post-Bretton Woods system.
That's how the economy works. The basic laws of economics are part of the laws of nature. If you don't like it, if you think it's unfair, get used to it. It's as if you complain about gravity being unfair. You cannot do anything about it, can you? So why do you think greedy and ignorant politicians can save you from the natural laws of economics?
May 16 (Bloomberg) -- European finance ministers endorsed a 78 billion-euro ($110.8 billion) bailout for Portugal as they stepped up pressure on Greece to do more to win improved aid terms.
Portugal followed Greece and Ireland in seeking emergency loans from the European Union and International Monetary Fund, bringing to 256 billion euros the aid provided to stamp out the sovereign debt crisis.
The European finance chiefs were also set to approve the nomination of Bank of Italy Governor Mario Draghi to be the next president of the European Central Bank.
Greek bonds fell after the euro area’s economic powerhouses put up hurdles to an expanded aid package, with public discontent simmering in northern Europe over the costs of propping up high-deficit countries on the continent’s periphery.
Finance ministers said the IMF’s role as the contributor of a third of the bailout money for Greece, Ireland and Portugal won’t be hampered by Strauss-Kahn’s May 14 arrest on sexual- assault charges in New York.
Greece, which received a 110 billion-euro loan package last year, is preparing a new economic-recovery program, including 76 billion euros of asset sales and spending cuts, to persuade European governments and the IMF to release the next 12 billion- euro portion in June.
Default is “just a nightmare,” ECB council member Christian Noyer said in Tokyo today. “It’s the absolutely wrong solution. It would be a catastrophe.”
Greece’s chances of escaping a restructuring hinge on the public mood in Germany, which crafted the euro’s low-deficit rules and, as Europe’s largest economy, is the biggest guarantor of the unprecedented loan packages.
Forty-one percent of Germans oppose further financial aid for Greece, with 48 percent in favor, according to an Emnid survey published in Bild am Sonntag yesterday. Some 58 percent voiced “very low” or “quite low” trust in the 12-year-old euro, up from 54 percent in December.