Bailouts Go International: Who's Got Greece? EU? IMF? California?

Nobody in Greece is doing this right now.Greece is in bad shape. Their debt is 125% of their annual output. So, they are much worse off than the United States as a whole. More like California writing IOU slips kind of bad- but even worse than that. Their books were done by Wall Street, and they basically hid a whole lot of debt for a long time while they squeaked their way into the EU, now they are asking the EU to bail them out. So far, the EU is thinking about it. There is another organization they could turn to- it’s called the International Monetary Fund. Yes, that Illuminati controlled capitalist vehicle for the entire world- the one that loans you money to build things and then charges you interest based on your hypothetical returns on those things you built. Except, Greece won’t be making any money- they have a huge debt to pay off, or at least deal with. Strategically.

How would they pay off an IMF loan? Put the money in the stock market? Loan it to someone else with a higher interest rate? I mean, they are stuck. They have spent themselves into a hole and now, well, there’s nowhere else to go and the sides of the hole are breaking off and slippery. A loan from the EU? A loan from the IMF? Maybe they could get a loan from California, and then California could use the money from interest…

Greece is implementing what it calls “austerity measures,” which means that they will increase their value added tax by 2 percentage points to 21%,  cut public sector salary bonuses by 30% (ooowww, but wait, there’s more…) and freeze state-funded pensions. Freeze state funded pensions? Like, retired people who are living off their pension just won’t get paid anymore? Wow.

Unions and other public sector groups are upset- maybe even striking this month. But for the most part, Greece’s people are supportive of the measure. Yeah, you’d better be. There is nothing else to do. Most of the fuss is stemming from the S & P rating of Greece at BBB+, which is bad. Moody’s has them at an A. Still bad. (In the financial world they just make everything A’s and B’s so even when you’re doing bad it looks ok). That’s 2 notches above investment grade. If Moody’s drops them to BBB+, “Greek government bonds would no longer be eligible as collateral for European Central Bank lending from the end of this year.” So that’s bad.

European Central Bank (ECB) governing council member Ewald Nowotny hit on a key issue, saying:

"The fate of Greece, and if you are going to be more dramatic, the fate of Europe, depends on the judgment of one rating agency. That is an unacceptable situation."

Sir, it has been that way for a long time. It’s a bad situation. There will need to be a critical mass of countries and businesses that screw up and get bad credit ratings before a tipping point is reached and we change the rule(s). For now, though, the little guys like you get the short end of the proverbial stick.

Photo Credit: Will Spaetzel (via Flickr under CCL)