I've only addressed the Greek financial situation directly four times in the past five years -- once in 2010 in a column that is no longer in the archives, once in 2011 ("The Dissolution of Europe Has Begun") and twice in 2012 ("An Unforgiving Debt Problem" and "A Greek Exit Would Cut Both Ways"). I've received some requests from subscribers to address it again. (If you would like a copy of the 2010 column, please email me at email@example.com.)
The reason I've not written about the Greek situation in the past three years is that I felt I had covered everything necessary to discuss and understand the subject and nothing has substantively changed since.
Greece is broke, can't service its sovereign debt, and there is nothing that can be done, other than debt forgiveness, to change that. The math is absolute. The creditors, however, are not willing to offer the debt forgiveness necessary to allow labor and capital to be freed up for productive purposes so the country can grow into an ability to manage its debt. Nothing about this situation has substantively changed in the past five years.
The reasons for this impasse to have lasted this long -- and there are legitimate grievances on both sides -- is irrelevant. As the saying goes, you can't get blood from a stone.
I don't know what the final solution and resolution will be. Maybe the Germans capitulate and offer a substantive debt restructuring. Maybe the Greeks default and stay in the Eurozone and the common currency, or maybe they default and leave.
The most important issue, in my opinion, is the damage the Germans have caused to themselves by refusing to accept some blame for the situation to have gotten to this stage, and as a result offer a debt restructuring that will allow the Greeks to stay.
Greece should not have been allowed to enter the EZ and use the euro. It didn't meet the entry qualifications. It was the Germans that pursued a Greek entrance, and after that made debt capital available to Greece largely used to purchase German goods.
This is similar to subprime residential mortgage lenders pursuing making loans to people who clearly did not have the financial capacity to service the loans and then refusing to accept responsibility for the situation when the mortgagor defaulted.
More importantly, if Greece leaves the EZ, the Germans are going to be in a bind. If they try to prevent a recovery of the Greek economy by way of legal maneuvering as a means of setting an example for other countries considering the same, it could give rise to the nationalist tendencies that have been an integral part of the continent forever and help push other countries to leave.
If, however, the Germans are too lenient with respect to a Greek recovery, other countries could be encouraged to pursue the same for that reason.
Further, if Greece succeeds in re-establishing itself economically after leaving the EZ, regardless of what the Germans do, other countries could become convinced that leaving the zone is not fraught with pitfalls, as is the common current belief.
The bottom line is that a Greek default is inevitable in order for Greece to recover. There are multiple ways a default and restructuring could be accomplished allowing Greece to stay, and I discussed those in the 2010 column.
For whatever reason, and I cannot explain why, those avenues have not been pursued.
Of the 23 Greek ADRs traded in the U.S., only seven have had transactions today. Four of those are Greek banks, which are all rebounding strongly.
National Bank of Greece S.A. (NBG) is up 9% today. Alpha Bank A.E. (ALBKY) and Piraeus Bank S.A. (BPIRY) are up 17%, and Eurobank Ergasias S.A. (EGFEY) is up 25%.
Of the non-banks that are being traded, Mytilineos Holdings S.A. (MYTHY), a construction and mining company, is up about 3.5%. Hellenic Telecommunications Organization SA (HLTOY) is up about 3.5%, and Jumbo S.A. (JUMSY), a consumer goods retailer, is down about 8%.
The Global X FTSE Greece 20 ETF (GREK) is also up about 3.5%.
All of these stocks are trading at or near their all-time record lows, though, and I am not advising anyone to take a position in any of them.
The germane point is that most of them have no trading going on. The Greek stock market is grinding to a halt along with the Greek economy.
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