We have us a classic Mexican standoff over in Europe.
European debt markets have been on a roller coaster as they try to parse the EU smoke signals to judge whether Greece will win financial backing from its neighbors, or just verbal support. So far this month, the 10-year Greek yield has swung between 6.05 percent and about 6.8 percent as hopes for help waxed and waned. The euro, however, didn’t exactly jump for joy at the prospect of an aid package, which tells you that a salvage operation for Greece is no panacea for what ails the common currency’s economies and now Greece is saying they don’t want or need a bailout with Greek Finance Minister George Papaconstantinou saying: "The worst possible signal which we could send out is one calling for outside help."
Actually, I’m pretty sure the worst possible signal they could send would be defaulting on their debt but who am I to question our oldest Western civilization? It does seem that the EU has come to an arrangement that is NOT a bailout, just a loan with VERY EASY terms – kind of like TARP, which worked fine over here so I’m pleased but we don’t have the details yet (7 am).
Perhaps Papaconstantinou has a point as Peter Coy writes:
The European Union’s experiment with a single currency is deep in crisis because Europe failed to learn from the Greeks. Not today’s Greeks — the ancient Greeks, specifically Odysseus, the hero of Homer’s epic poem. Odysseus knew his limitations. Realizing he was vulnerable to temptation, he ordered his sailors to tie him to the mast of his ship. That way he could listen to the bewitching song of the Sirens without obeying their call to steer the ship onto the rocks.
Today’s Sirens are the investors and traders of the global bond market, who lure nations into tapping abundant credit at low rates when times are good. If a nation borrows too much, those open-handed investors abruptly turn into vigilantes who punish the country by making new loans scarce and expensive. Greece has fallen into that trap, Bloomberg BusinessWeek reports in its Feb. 22 issue. It got low-interest loans by promising to behave responsibly and keep its budget deficit low. That gained it admission to the single-currency zone in 2001.
But because Greece was never tied to the mast, it kept spending. Its debt is now about 125 percent of