Still alive are signs of U.S Subprime Crisis in our memory…Now its turn for European countries (PIGS) to give a threat of going into recession.
- The situation in greece is getting worst with debt close to 110% of its GDP and fiscal deficit close to 13% of GDP.
- The cost of insuring greek bonds went up ,leading to massive sell off.
- The spread between the Greek paper and German bond, considered to be safest in the region,Moved Close to 400 basis point.
- It is likely not to stay on Greek Borders,affecting Portugal,Italy Greece and Spain (PIGS) as they look more vulnerable.
- This story stands very large and different from the US,
“Europe must make it clear that it is standing alongside Greece”
What progress has been made with the reform of capitalism promised by the G20?
Nothing has changed. There has been an intense debate for a year and a half about what should be changed, but I am very pessimistic about the end result. The situation in the United States is even worse than it was before the crisis. Accounting regulations are even more opaque and the banking sector is even more concentrated, which means that the large banks will be even more tempted to take excessive risks
After the bail-outs of the banks, has the time now come for bail-outs of governments?
It is the very same financiers whose institutions were rescued last year by governments that are today speculating against Greece. And yet their situations are not comparable. The banks were on the brink of bankruptcy after having taken on excessive liabilities. The governments, such as Greece or Spain, are simply the victims of speculative attacks. Between 2003 and 2007, the financial markets were irrationally optimistic in imagining that destitute American households would repay their enormous mortgage loans—the famous subprime mortgages. Today they are irrationally pessimistic in wagering that Greece will not be able to repay its debt. They are the ones that are creating the problem by pushing the cost of financing the Greek debt to absurdly high levels.
The package might be worth up to 2 % of GDP or about €4.8bn , according to an official close to the talks.
