'Toontime: Greeks at the Pass

[credit: Steve Sack, Minneapolis Star Tribune]

Greeks will be able to make the huge debt payment coming due this month because European creditors decided to protect their themselves and the Euro union by bailing out the sick man once again, but the Greeks have signed up to an economic death by a 1000 cuts. As another recession grips Europe tighter, it will become impossible to keep the country from defaulting on loan terms regardless of the 70% "haircut" taken by sovereign bond owners. Greece's bonds have been downgraded again to "selective default" by Standard & Poor's meaning the ECB will not accept them as collateral for borrowing which could cause Greek banks another liquidity crunch. This chart shows why Greece is headed for a crash:

Greece's economy as measured by manufacturing orders and purchasing is tanking. It is the worst contraction seen in 13 years of data collection. Survey respondents cited shorter working hours, fewer jobs, lack of working capital, and weak demand caused by austerity measures. Granted, Greece never was a manufacturing powerhouse like Germany is. Its economy is driven by tourism, agriculture, and the public sector. Forget the public sector under austerity imposed from without. Fewer tourists will be showing up this summer because no one really wants to visit a country on the brink of economic collapse especially when euros are harder to come by. Greeks formerly employed as professionals are already growing their own crops, even on rooftops and balconies in the cities. You don't need a weatherman to tell which way the wind is blowing.

Iceland stands as the only example of a government listening to its people and rejecting the demands of banksters. Iceland placed the needs of its populace ahead of international creditors by protecting domestic depositors, halting a retaliatory sell-off of the krona and creating new state-controlled banks from the remnants of the banks that failed. Most importantly Iceland's banks have forgiven debt equivalent to 13% of gross domestic product. The rating agency, Fitch, that once downgraded Icelandic bonds, is now rating Iceland's recovery a success story.