The $ 963 billion ( $750 billion Euros ) stability package will not work because it addresses the symptoms and not the causes of Greece's insolvency. And Spain's; Italy's, Ireland's and Portugal's. And maybe even France.
The basic problem has more to do with the EU as a whole than Greece itself. There is no mechanism to stop national governments from breaking the rules. Which Greece and the rest of the "PIGS" did in spades. And got away with and are now being rewarded for. There is no popular support for massive wealth transfers. The German people are having fits. Merkel's coalition got clobbered ijn regional elections in direct response to the bailout. Nothing, repeat NOTHING has occurred to stimulate economic growth in heavily indebted nations like Greece.
The markets greeted this bailout package with typical cheers and whistles. As I've pointed out, markets LOVE bailouts. Even when they know that problems are being postponed and NOT solved.
This crisis arose because the PIGS did not abide by the Stability and Growth Pact which limited annual bidget deficits to 3% of GDP. By failing to enforce the pact, the EU permitted Greece into the euro when by its own rules the EU should have kept them out. No steps were taken to discipline Greece when its budget deficits went out of control.
Since Greece has been rewarded for behaving badly, why should any other Euro country behave itself ? The ONLY enforcement mechanism the EU had was to let Greece default. Like many other countries have done over the last two centuries.
Who says Germany and the other rescuers will keep their commitments ? They might renege if their polls keep dropping.
Worst of all, the EU and ECB have destroyed their own credibility. We were told there would NOT be any bailouts among member states. We were told the ECB would not buy government debt. We were told the Stability Pact would be enforced.
The reason none of this will work is two-fold. Not only do the indebted have to push through huge and painful austerity programs but they can't devalue their own ciurrencies.
Since none of the root causes have been addressed, this problem will recur in Europe. Then what ? The EU will not be able to bail out anyone. The Germans and a few others will say with justice: " Fool me once, shame on you, fool me twice, shame on me." So will the IMF and hopefully the U.S. Who's left ? The Chinese ? They are nervous enough about OUR debt to GDP ratio and are not going to step in to bail out the EU.
In the old days when countries got jammed up, they sold off pieces of their empires. France sold us Louisiana to help pay for Napoleon's wars; Denmark sold us the Virgin Islands because W.W.I was killing their trade with Britain. Maybe the Chinese could buy Santorini, Mykonos and a few other choice islands from the Greeks and Majorca and the Canary Islands from the Spanish. Just a thought.
The bottom line : Don't invest in Europe and buy more GOLD !



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