Yabby: "... A very large chunk of Greek Govt debt, is owed to French and German banks. If the Greeks don't pay, down go those banks, ..."

It doesn't necessarily follow that the lenders (banks/instituational investors/governements) that lent Greece money will also fail if Greece fails. The reason why is because before they lent Greece money (in fact before they lend anyone money) they would have considered what would happen in the event that they don't get their money back. When the debts are really big (like Government debts) they do a worst case senario-- in other words the French and German banks will have already accounted for a Greek default and its consequences *before* they lent them money. No money would've been lent if there was a foreseeable link between Greek default and themselves failing.

A single default by any single independent debtor should never backrupt a professional lender (regardless of who is lending and the size: whether it is a home-lender, international bank or government).
Lenders only run into trouble when many debtor's go bankrupt at once. Many debtor's can go backrupt quickly if:
1)it is a purely freak random effect-- many completely different unrelated things occurred that caused many of their debtor's to default (this is not the case with Greek debt default which is just one debtor) or,
2)there is some mechanism by which the default of one debtor causes the default of many other debtor's that the lender never planned for. This is what the GFC was about-- there was a strongly *unplanned/unforeseen* negative feedback connection between the default of subprime mortgages and falling house prices and the markets desire to take on any new CDO's/other complicated debt instruments. No-one yet has pointed out the existence of some previously *unforeseen/unaccounted for* negative feedback mechanism for Greece.

Although it is true that the Greek Government did lie about how bad their own debt problem was/is-- this in itself does not provide an mechanism that will cause *other* countries to default. The only major effect of the lying is the increase in chance of their *own* default.

Of course it does.

It tells us we must cut down on the public service numbers, & what we pay them.

It tells us we are going the right way with retirement age.

It tells us that we must become restrictive, even protectionist, in foreign trade, & go back to making, & growing our own.

thinkabit, according to the Economist, the Greek State owes
Greek banks 8% of their total assets. AFAIK banks only have Tier
1 Capital of around 7-8%. Lose any of it, it has to be replaced
by shareholders for the bank to operate. That is exactly why
Britain had to bale out its banks with capital, when they lost
too much elsewhere. The same would apply to some German and French
banks, if they lost too much on Greece falling over. In Greece
of course that cannot happen, for obvious reasons!

wiggies, it’s not about “gross” GDP numbers, it’s about the ratio of debt as a % of GDP. The Eurozone has a debt servicing ratio of 62% of GDP. This is not an exaggeration.

Andrew has not fully covered the issues of how and why this happened and it does have direct lessons for Australia.

The EU has provided “free money” to nations it wanted in the EU Club. Greece, Spain, Italy, Portugal and Ireland have all been recipients of huge investment funds from the EU. The intent was that these countries could invest in infrastructure, manufacturing capacity, EU trade compliance and logistics. The EU wanted to build up trade with these countries, to grow collective wealth and stabilize disparate economies.

The original concept of the EU was a “Trading Block” with tariff free borders for goods and employees. Those countries now in financial trouble failed to take advantage and instead, spent these investments on populist/tokenistic policy programs designed only to keep their politicians in power.

They invested in things that did not deliver ongoing return on investment and self evidently, unsustainable. The deep pockets of France and Germany have kept the dream alive but now the borrowing capacity of even these countries can no longer sustain the debt ratio and the pigeons are coming home to roost.

What can Australia learn? Well for a start we should recognize that we are embarking upon precisely the same populist/tokenistic investment policies as the EU.

We spent the surplus, ran up a bigger national debt in less time than it took Hawk/Keating. Spent like a drunken sailor putting “free money” into the market. Cash handouts, pink bats, school computers, BER, NBN, Trade Centre’s in Schools (competing with TAFE’s), Childcare Centre’s, Medical Supercentre’s and so on. None of these policies have other than limited demand and benefit. When it comes to the litmus test of “will this provide Australia’s economy with infrastructure and an ongoing return on investment”? The answer is no, of course not. That is the way the EU has operated and that is what Australia can take as a lesson

The Author of this poignant Greek Odyssey is to be commended. Leigh compares the Grecian-apocalypse with other Nations that have survived the GFC. The disparity is discernible, although in Australia's case Rudd's capricious stimulus was overly propagandized. In the final analysis, it wasn't Rudd, but Treasurer boffin Ken Henry who modeled, presided and all but delivered the $ 53 B package. He's also responsible for 103 recommendations to overhaul the regressive, archaic Tax system - one of which is causing so much angst among the Mining Giants, and Overseas consortium's, that have shelved million dollar projects, courtesy of the diabolical trio Rudd, Swan and Tanner. To add fuel to a lost cause, Rudd has shamelessly broken his own advertising rules, by launching a $ 35 M media blitzkrieg of lies and intimidation to convince the Electorate. Since when does it cost money to bait children into accepting a truism ? Shouldn't it stand or fall on it's merits ?

At the onset of the Vietnam War, Secretary of State Kissinger coined the " domino theory " which achieved precious little, but embroiled the Allies in a twelve year duplicitous conflict. Hanoi is now a tourist destination and a valued trading partner.

The cascading deck-of-cards fallout from PIIGS, will most certainly impinge on the US Economy. The fake Ponzi stimulus after the Lehman Bros debacle, and a $ 1.2 T injection of " hot-off-the-press " printed money, has stifled innovation, production, competition, consumer confidence and recovery. Congress has now approved another $ 90 B more to appease the growing unemployment paradigm. Recovery ?

Presently there are 39.7 million Americans on food stamps.More then 17 % are unemployed. 47 % Americans have less then $ 10,000 saved. Should there be a Medical emergency in the family, odds are you will be left to die at the entrance. Their debt is 70 % of GDP, and by 2010 will be a staggering 100 pc.

Does this look like a Global revitalization ?

As the Greek tragedy unfolds, and the euro slides, it takes down the Aussie dollar with it. In turn, it
cont..

threatens the US greenback. It will hurt US Exports to Europe. The multi-nationals profits will evaporate. IMF and ECB will have to pump up the rescue gambit; use the defibrillator to prevent cardiac arrest.

Hilary Clinton has often accused China of manipulating it's currency by NOT devaluing ? It's blatantly obvious, it will affect it's exports, which will have severe repercussions both internally, and at the coal-face. Commodities, merchandise, raw materials, infrastructure etc cost will escalate. It will do little to diminish bilateral trade. The US, like us, are a consumer Nation. We import more then we export - thus the deficit which Oz has maintained for well neigh twenty years with few exceptions.

For some time, China, OPEC, Brazil, Russia etc have been hollering for an alternative World currency change. Should China dump it's vast holdings of Treasury Bonds, investments, or short sell it's US Holdings, the Global Economic / Financial system will go into hysteric convulsions.

It behoves the US, as Banker of the last resort, to underwrite PIIGS recovery.

The main causes of Euro zone's Economic crisis is that virtually all countries involved, breached their own self-imposed rules and Covenants. Under the European Covenant, countries adopted (1) Govt debt must not exceed 60 % of GDP, at the end of the fiscal year. (2) Annual Govt deficits must not exceed 3% of GDP. Only two Countries of the 16 member Eurozone - Luxemburg and Finland have achieved this target. UK isn't a member: 69.1% debt, and deficit 11.5 %. Greece is the worst offender at 115.1% debt. Deficit 13.6 % of GDP. Ireland: 14.3%; Spain 11.2%; Portugal; 9.4% France 7.5% The 16 Nation EU adopted seven Principles: Impartiality, reliability, relevance,cost effectiveness, statical confidentiality, and lastly transparency. Say again ??

Since Apr.2000, the Greeks and others, have been guilty of fessing up their annual GDP, debt, growth and fiscal figures. The EU have cautioned it's Statistical Bureau a number of occasions for it's irregularities, tardiness, and rubbery data. If any thing, the EU milieu epitomizes it's gross failures and perfidy, for not applying stringent conditions and penalties,

cont..