Greek Mythology
We almost choked on our coffee this morning when we saw this cartoon in the Economist:
Yes, it would seem that the venerable British magazine is not taking Greece's economic recovery plan seriously. Interestingly, the currency markets are telling much the same story. The euro was down sharply yesterday and continues to be weak this morning.
The EU's rescue plan for Greece...shall we say..."failed to impress."
As the Financial Times recounts,
A pledge from the European Union to stand by crisis-hit Greece yesterday fell short of investor hopes for an immediate rescue and raised fears of renewed selling in financial markets...
The leaders of the 27-nation bloc promised "determined and co-ordinated action if needed to safeguard stability" of the eurozone, which has been shaken by turmoil in bond markets amid fears that Greece's debt problems could spread.
The accord amounted to an implicit assurance to help Athens if it had problems in refinancing debt in April and May. But the lack of a detailed bail-out plan underwhelmed investors in financial markets. Global stocks and bonds made modest gains but the euro fell 0.9 per cent against the dollar. (Link to article)
Basically, the EU said that it or some of its member states would "do something" to prevent this crisis from getting out of control. But that "something" was left very vague.
The core problem remains that the EU is hesitant to explicitly bail out Greece or any other member because it opens the door for larger bailouts of other countries in the future. But at the same time, failing to do anything at all creates a climate of uncertainty, which has been putting pressure on the euro.
Of course, it could be that certain EU states -- notably the big exporters like Germany -- actually want this uncertainty to continue a while longer, as a weaker euro would make their exports more competitive. Germany lost its crown as "world's biggest exporter" in 2009 to China, and that had to sting a little.
At any rate, the Greek tragedy continues for now, as does the decline of the euro.
Charles Lewis Sizemore, CFA
Chief Investment Officer, Sizemore Capital Management LLC
The views expressed in this post are the personal views of Charles Sizemore and may or may not reflect the investment policies and decisions of Sizemore Capital Management.
Sizemore Capital Management LLC is a registered investment advisor specializing in money management and financial planning for individuals. Please visit us on the web for more information: www.sizemorecapital.com
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Charles Lewis Sizemore, CFA
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