The whole Greek Debt issue has not really been in the front and center of my economic universe, as it had been a pretty boring story of debt deadlines and extensions. But to me, the resounding ‘No’ vote by the Greek people, saying they will not accept the ‘best’ deal the creditors have to offer.
I credit the new Greek government – whom I think the creditors have underestimated. I would not like to play poker against these guys – I think they are playing their hand very well. By getting a resounding No by the people through the public vote, they now have a stronger bargaining position. And I think they know that the Greek creditors need Greece to agree to some restructuring more than the country of Greece needs the Euro.
Look who owns the debt owed to Greece:
I can’t see the how the European bankers will let Greece just walk away from the debt. Sure the debt owed to Italy and Spain is only about 2% of the companies respective GDP, but that would put a dent in their economy (and with Italy at 10%+ unemployment rate and Spain at 20%+ unemployment rates – can they afford that?). The Germans are the ones maintaining the hard line – not surprising since they have a healthy unemployment rate and their debt is less than 1.5%.
Anti-Banker Bernie Sanders came out with a statement praising the greek no vote. Bond King Bill Gross sides with the Greeks on this negotiation. All the while the bankers are saying how stupid the Greeks are for turning down the deal.
Blame should go to the bankers for throwing good money after bad. If I were a betting man, I would bet the European banker cave in and Greeks get a sweeter deal – the Greeks know that the bankers may be in too deep.