{"id":383,"date":"2010-03-26T09:29:00","date_gmt":"2010-03-26T13:29:00","guid":{"rendered":"http:\/\/www.intuitiveinvestor.com\/web\/?p=383"},"modified":"2018-08-20T15:47:39","modified_gmt":"2018-08-20T19:47:39","slug":"the-eu-bailout-of-greece","status":"publish","type":"post","link":"https:\/\/jasonapollovoss.com\/web\/2010\/03\/26\/the-eu-bailout-of-greece\/","title":{"rendered":"The EU bailout of Greece"},"content":{"rendered":"

Yesterday the EU put the finishing touches on its bailout package for the troubled Greek economy.\u00a0 Key to moving the deal back into the EU court from the IMF court was the involvement of France.\u00a0 The deal is valued at 22 billion Euro and combines monies from both the EU and the IMF.\u00a0 However, the IMF has a secondary role in the\u00a0aid package.<\/span><\/p>\n

Analysis:<\/strong> While it sounds like Greece is out of the woods, it is not.\u00a0 The 22 billion Euro package can only be awarded to Greece upon condition that it cannot find financing from the international bond markets.\u00a0 In other words, this package is a failsafe mechanism only.\u00a0 The plan still requires Greece to undertake budgetary austerity measures and to seek financing from all<\/span> other sources first.<\/span><\/p>\n

These negotiations have been interesting for a number of reasons:<\/span><\/p>\n

1.\u00a0 For the first time since World War II Germany has asserted itself politically.\u00a0 France finally sensed the nature of “the moment” and got involved only at the end of the negotiations.\u00a0 In the long-run, I am anticipating a competition for EU power between France and Germany, thus ending French dominance of the EU.<\/span><\/p>\n

2.\u00a0 Germany bent to the will of its population who were very opposed to bailing out Greece directly.\u00a0 This means that at the end of the day, Germany’s first priority is Germany, not the EU.\u00a0 If further tensions erupt in the EU the Union may disintegrate.\u00a0 When given the chance to unify, not just economically, but politically back in 2005-2006, each EU member voted against political unification.\u00a0 That means that the EU remains a weak economic confederation and not a competitor to U.S. hegemony.<\/span><\/p>\n

3.\u00a0 The EU has been exposed for what it is: a weak economic confederation and not a competitor to U.S. hegemony.\u00a0 Primarily, the vulnerability of the EU has been\u00a0highlighted by its continued inability to deal with homegrown crises.\u00a0 First there was the war in former Yugoslavia which the EU couldn’t handle.\u00a0 Ultimately, the EU had to realize its limitations of power, swallow its pride, and ask for United Nations and United States help.\u00a0 In the current economic crisis the EU had to scramble to aid one of its smallest members and had to involve the IMF (largely a U.S. foreign policy shill).\u00a0 Not only that, but the EU charter never had any built in mechanism for dealing with a member’s economic problems.\u00a0 Further, during the Greek crisis it was learned that Greece lied about the health of its economy in order to gain admission to the EU.\u00a0 But alas, there is no auditing mechanism in place to confirm the health of a nation’s economy – it’s on the honor system.\u00a0 In other words, the EU has sham authority.<\/span><\/p>\n

4.\u00a0 The Greek crisis is the tip of the iceberg in terms of European economic crisis.\u00a0 There remain three other nations in big trouble: Portugal, Italy and Spain.\u00a0 Each of these nations is approaching their own economic cliffs.\u00a0 How will each of these nations respond to their own crises? \u00a0How will the international debt markets respond?\u00a0 How will the EU respond?\u00a0 The plan put in place yesterday does seem to lay the groundwork for future EU member economic crises.\u00a0 However, that groundwork basically says, “You are on your own.\u00a0 If that fails, we might bail you out.”<\/span><\/p>\n

5.\u00a0 The effect on the Euro.\u00a0 Because the EU has been exposed as a powerful free-trade zone, but weak political body, the Euro has taken a hit.\u00a0 It’s my feeling that the Euro is likely weaker against the dollar going forward, and for many years.<\/span><\/p>\n

Importance grade:<\/strong> 8; the international financial markets were tracking this event very closely.\u00a0 The storm clouds seemed to have passed.\u00a0 However, meaningful policy was not established, so the EU remains a weak institution with two dominant players: Germany and France.\u00a0 The health of the EU going forward will exactly correlate with the degree of cooperation that exists between those two nations.\u00a0 If there is any fracturing, which is likely, then the EU is a sham.<\/span><\/p>\n

I will continue to track this issue closely.<\/span><\/p>\n

Jason<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

Yesterday the EU put the finishing touches on its bailout package for the troubled Greek economy.\u00a0 Key to moving the deal back into the EU court from the IMF court was the involvement of France.\u00a0 The deal is valued at 22 billion Euro and combines monies from both the EU and the IMF.\u00a0 However, the […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[3],"tags":[],"class_list":["post-383","post","type-post","status-publish","format-standard","hentry","category-the-blog"],"_links":{"self":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/posts\/383","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/comments?post=383"}],"version-history":[{"count":0,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/posts\/383\/revisions"}],"wp:attachment":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/media?parent=383"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/categories?post=383"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/tags?post=383"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}