Greeks Need To Default On Their Terms

A Greek default is almost inevitable. Employment is falling and GDP is shrinking and things are only going to get worse.

The Greek GDP is already 6% down this year but Greek government sources are tyring to claim a 5% reduction

Next year GDP is expected to fall by 2.5% but the Greek government expects the government deficit to reduce from 7.6 to 6.8%

From my sources these figures are pure fantasy.

I believe it is impossible for the Greek government to reduce its deficit next year. The figures do not appear to make any sense whatsoever on many levels.

1. The first is that the unemployment rate has not stabilised. It is increasing as fast as ever. This is probably the most critical measure. Not only does the Greek government have to pay out social security to the unemployed they also lose tax revenue. Until this statistic is sorted Greece’s problems will continue to get worse.

2. Greek banks are currently pulling over 1 billion Euros a month out of the Greek economy and the Greek trade deficit is over a billion Euros a month. Not to mention the fact that the government is also reducing spending at a time when taxes are increasing

And these figures are ignoring the new property tax whose effects are yet to be understood

The Greek government is simply making it impossible for Greece to have a functioning economy

Given all these facts I believe Greece will default the question is will Greece do a bare minimuum default ie a default for bankers or will Greece default big ie a default for the people.

There is talk of a 50% haircut as being the default aim. No way this will be a good thing for the Greeks. The Greek government debt is currently 170% of GDP reducing it to 85% of GDP is not what I would call a default.

If Greece wants to default and give the country a propesperous future and not a future where Greek for the next 100 years are paying interest payments on this debt then they need to default big and this means a 80-90% default on their debts.

A 50% default reduces the loss of the bankers and gives the Greek government enough space to keep paying the interest rates on the debt forever. A 80-90% default gives Greece freedom to reduce its taxes and create a prosperous economy within minium debt repayments.

The penalty of a default are the same, Greece may as well go all in.