2012-02-05

Greece on the edge of default; conflict in the streets

Greece nears debt deal with banks but EU clash looms.

The headline says it all. This was always a conflict with origins in social mood and politics. The euro was formally launched at the height of social mood and political unity. Since then, social mood has declined and the chief fault line is political, not economic. The economy and debt are a problem, but it could be solved, as the deal with banks shows. What cannot be fixed is the need for confrontation and conflict that comes with negative mood, which is why we see Greece fighting Germany and France.
The deal will slice €100bn off Greece's debt and leave banks, pension funds, and other bondholders nursing effective losses above 70pc, but it does not in itself avert the risk of a Greek default in March.
Greece must reach a deal over coming days with Troika officials from the IMF, EU, and European Central Bank, who are demanding further austerity cuts equal to 1pc of GDP before disbursing fresh loans.
If you understand the origin of the conflict comes from social mood and that mood is expressing itself via politics, the situation makes perfect sense. No need to wonder why Greece, France, Germany, Italy, Hungary, Spain, Ireland, Finland or Portugal make decisions that appear "irrational" when there are workable solutions; no need to question whether the euro can survive, whether any members will leave. There will be conflict, it will be political in nature, and several nations will exit the eurozone. If Prechter's long-term forecast for the markets is correct, a few years from now this will seem like a happy time in Europe.

Angry Youths Attack House Of Greek President Papoulias with Rocks and Molotov Cocktails
A group of between 30 and 50 youngsters attacked the house of President Karolos Papoulias on Saturday evening.

The result of the attack was some minor damage to the entrance of the house at Asklipiou Street in central Athens and to the car that Papoulias uses.

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