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article imageOp-Ed: Greek exit hits markets, default looms, and stupidity rules

By Paul Wallis     Jun 28, 2015 in World
Sydney - The bottom line has been hit. Greece has abandoned talks. Greek banks are closing indefinitely. The EU, thanks to its own ineptitude, has unleashed an economic event with unknown consequences for the global economy.
The reason? Mindless lending, unsurpassed incompetence, and Third World loans-like greed. The Grexit, as it’s known, will be a major hit to the EU. Its credibility, as much as its money, is on the line. Global markets are already falling. In Australia, $30 billion in market value was wiped off in the first hour of trading.
Austerity, which is the new word for “official insanity,” is the main reason for the crisis. The EU, in its infinite wisdom, decided that Greek pensioners and taxpayers could deliver what the Greek government couldn’t.
In the meantime, and these are indeed mean times for Europe’s staggering, limping economies, not one word has been said about the quality of the Greek loans. The basic practice of lending isn’t in question. It’s everybody’s fault but the lenders.
Let’s do a bit of lending 101:
1. This scenario is exactly what’s not supposed to happen with national debts. Lending is supposed to be a rational process. Even if the Greek loans were made on autopilot, this situation shouldn’t have happened.
2. The bailouts made it worse. Instead of isolating the bad debts and allowing Greece to trade its way out, the EU made it worse, hitting businesses with added costs.
3. There was zero flexibility in the bailout process. A small economy, with a marginal population income bracket, was expected to suddenly manage billions in repayments.
4.Greece sent a clear message to the EU with its election of an anti-austerity party. As usual in these times of pig-ignorant fiscal governance, the last things on anyone’s minds in the EU were democracy, fairness, or practical solutions. Instead of being a financial counsel, the EU decided to play debt collector, and it’s blown up in their faces.
5. If Greece does exit, the result will be a tough time for Greece, but a net loss for the lenders. Even the most draconian debt collectors focus on getting the money back, not creating a situation where the lender loses. That’s many billions down the tube, simply because nobody could be bothered coming up with a way of shutting down the problem.
6. Germany, which really should know better, has been putting the economic jackboots on Greece’s neck and restricting options for Greek governments past and present. They should have been using them to kick the heads of the incompetent financial fools who allowed the situation to get out of control. This situation wasn’t really a surprise; it was a cumulative event, and the signs were obvious long ago.
7. The global economic fallout and market losses will dwarf the sums involved in the Greek loans. The markets, which tend to be hysterical highly reactive without a reason, become more hysterical when they have a reason, even if they don’t understand it, and will oversell.
8. The result of overselling will be to damage savings, which in turn will put more pressure on social welfare budgets, employment and basic cashflow throughout the world. It’s quite possible that a secondary crash, based on the collateral damage to the EU economy, will do more damage, and add to these issues.
9. Some loans portfolios could be decimated, triggering another possible credit crunch. Interest rates will probably rise steeply in response to the sagging credit base. Borrowers in other markets will be negatively affected, draining capital.
There are no redeeming features in this mess. There’s no sign of comprehension, talent or basic practical thinking. The Greek default will have unpredictable consequences, affecting market confidence. Big capital could be seriously hurt by this useless nitpicking exercise. Greece could only be the first of several countries to shut its banks indefinitely.
The EU has gone from shining global model to total disgrace. This is a travesty of fiscal management. Anything which should never happen has happened.
People queue up outside a national Bank of Greece ATM in central Athens on June 27  2015
People queue up outside a national Bank of Greece ATM in central Athens on June 27, 2015
Aris Messinis, AFP
People queue at a national Bank of Greece ATM in central Athens on June 27  2015
People queue at a national Bank of Greece ATM in central Athens on June 27, 2015
Louisa Gouliamaki, AFP
People queue at a national Bank of Greece ATM in central Athens on June 27  2015
People queue at a national Bank of Greece ATM in central Athens on June 27, 2015
Aris Messinis, AFP
Greece's Communist Party supporters march during a rally in Athens against a new loan agreement...
Greece's Communist Party supporters march during a rally in Athens against a new loan agreement with creditors which would lead to further austerity on June 26, 2015
Louisa Gouliamaki, AFP
German Chancellor Angela Merkel arrives to address a press conference at the end of an emergency lea...
German Chancellor Angela Merkel arrives to address a press conference at the end of an emergency leaders summit on Greece at the European Council on June 22, 2015 in Brussels
Emmanuel Dunand, AFP
IMF chief Christine Lagarde.
IMF chief Christine Lagarde.
John Thys, AFP
A protester holds a sign reading "All we are saying is give Greece a chance" during a Bloc...
A protester holds a sign reading "All we are saying is give Greece a chance" during a Blockupy demonstration in Berlin on June 20, 2015
Adam Berry, AFP
Greek Finance Minister Yanis Varoufakis gives a press conference during a Eurogroup meeting at the E...
Greek Finance Minister Yanis Varoufakis gives a press conference during a Eurogroup meeting at the EU headquarters in Brussels on June 27, 2015
John Thys, AFP
Greek Finance Minister Yanis Varoufakis leaves the prime minister's office on his motorcycle in...
Greek Finance Minister Yanis Varoufakis leaves the prime minister's office on his motorcycle in Athens on June 28, 2015
Aris Messinis, AFP
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of DigitalJournal.com
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