Debt Crisis: Greece Round 2

This is a consolidation of 3 posts I didn't quite get around to finishing over the recent days.  I was going to make the prediction that the EU was going to release funds to Greece, despite the medias over-reaction to a possible default, and that we would see an announcement of a further bailout package sometime in the next week.  All this was based on the fact that politicians have invested too much money & credibility into the bailout scheme now and that a default would be humiliating for both EU & national politicians.

Low & behold my predictions have come true, a further £100ish billion in the pipelines is set to prop up the failing Greek government for another few months.

If we take a step back at this and look at it from an objective point of view, what we have is a central government body (the EU) using its peoples own wealth to prop up a clearly faltering arm of this economic experiment.  It's not as though the Euro zone is an impartial body (like the IMF is supposed to be), it has a huge vested interest in the continuation of the Euro; in the form of currency control & thus more control over the individual EU nations.  It seems like a rather large moral hazard to make the tax payer foot the bill for a project which only really serves the interests of the politically powerful.

Further more, the bail outs are not even the cure for the problem, tax payers are just being charged for the pleasure of continuing this daft experiment a little longer.  As I and many others have mentioned before; more debt will not cure debt.

"Oh, but the stock markets are up, investors clearly think the bail outs are going to work."

Not really, all this tells us is that investors see positive short term prospects.  Investors can keep playing the game and continue trading in Europe a little longer so long as the banks are still functioning.  Knowing that the banks will be kept afloat simple returns some previously removed capital back to the markets.  This is certainly not a show of long term market strength, just investors leaping back in now that the conditions have been held temporarily stable.

Western economies have found themselves in this predicament by attempting to manipulate markets.  They fail to recognise that markets cannot be beaten, they will react to short term stimuli and incentives but as soon as they cease the investors take their profit and leave.  The greed of governments to be seen as economically important and capable of providing prosperity to their people has been exposed as the myth that it is and has inevitably become their downfall.

Don't be fooled by the near miss, nothing has fundamentally changed; the Euro still cripples Greece's ability to price its currency back into the market, the Greek government is still incapable of passing sufficient austerity measures to keep the debt at bay and even so the level of debt is still so extraordinarily high that there is an inevitable default looming on the horizon.