The Man Who Hated Haircuts

 | Nov 10, 2011 | 9:45 AM EST  | Comments
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Former Bank of Greece Governor and all-around respected economic guy Lucas Papademos was confirmed as the new prime minister of Greece Thursday morning.

Everyone is touting his economic credentials and MIT econ doctorate, but we're missing the totality of his academic career focusing on that. He's also got a bachelor's in physics and a master's in electrical engineering – also from MIT.

So, if the budget reforms don't work he can either fix the lights when utility workers strike or try and apply relativity theory to the extension of the Greek debt yield curve. (Admittedly, there's a much better physics joke somewhere here – suggestions welcome.)

Papademos is now the man to implement the Greek bailout program, but some of the details of that package aren't something he'd have predicted or preferred six months ago. He was decidedly against haircuts of bondholders in a May interview with the Wall Street Journal.

Any funding pressures over the next few years will have to be addressed but without a restructuring of the debt involving haircut losses for investors.

I do not underestimate the magnitude of the funding requirements and the arguments made by others, but I am convinced that debt restructuring should be avoided.

With Greece settling its leadership question, investors can focus solely on Italy's power vacuum. Berlusconi will make things difficult and at least one of the 17 eurozone gang won't like the first choice and make trouble.

There's definitely a feeling of Europe fatigue in the United States investing community. The days of talking heads just being able to dismiss any European market updates as pertaining to socialist, vacation-hungry beatniks are gone. Now people actually have to care about what the Greek Socialist Party wants.

That fatigue is doubled for the engaged investor who is watching the Web, Twitter and TV nonstop for updates. Italy's collapsing one day and saved the next. But that is how this Europe situation is going to play out for years. It's not a Lehman weekend, it's a euro decade. Slow political steps will be taken to put out the crisis fires that keep starting.

The solution to beating the fatigue? It's accepting it like we do air travel. While almost every other aspect of life has gotten faster, air travel is many times slower than it was back in the 70s and 80s. We can get global information any time, but still have to endure that security line.

There's no way to catch a flight like O.J. Simpson anymore, and no way to get politicians to either fix or abandon the Europe in the short term.

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