Greek default just ‘end of the beginning’ in debt crisis

Financial Events


JUUGS Mar12.pngYesterday saw the world’s largest ever sovereign debt default, when Greece finally carried through a €206bn ($272bn) restructuring. Yet only the eurozone leaders believe this will solve Greece’s problems and those of the other PIIGS (Portugal, Ireland, Italy and Spain).

Greece is still left with a debt too large to be repaid. Its economy is now in the 5th year of recession, with more austerity measures to come.

Even worse, the process of trying to avoid the inevitable has left the European Central Bank with a record $3.9tn of loans on its balance sheet. As Bloomberg notes, this is “more than a third bigger than the US Federal Reserve’s $2.9tn, and eclipses the Germany’s €2.3tn GDP“.

And, of course, all this money has been spent just on Greece. Little has been done to solve the underlying problems in the other PIGGS. As the chart shows, their interest rates today (red line) are all above the level of May 2010, when Greece received its first ‘rescue package’:

• Portugal’s 14% rate means it is probably the next to default
• Ireland’s 7% rate and €122bn debt burden is also unsustainable
• Spain and Italy appear to be in better shape, with their rates back at 5%. But this is only due to the ECB’s lending spree. Now Germany (as the ECB’s paymaster) has the problem, as and when the loans go bad.

Meanwhile, the decline in rates for the JUUGS (Japan, UK, USA, Germany, Switzerland) shows no sign of ending. Investors remain focused on return of capital, rather than return on capital. Average rates in the JUUGS are now just 1.5%, down from 2.7% in May 2010.

The blog thus fears that Greece’s default marks the ‘end of the beginning’ of the Eurozone debt crisis, and not the end of the crisis itself.


Nissan goes back to the future with Datsun revival


Nissan, Japan’s No2 auto maker, provides further evidence for our argument...

Learn more

Benzene, PTA warn new downturn may be close


As regular readers know, the blog regards benzene as an excellent leading indica...

Learn more
More posts
The end of China’s real estate bubble will impact global supply chains, exports and growth

“How did you go bankrupt?” Bill asked. “Two ways,” Mike said. “Gradually, then suddenly....

An Evergrande default could reset the Chinese, and global, economy

China’s economy has been ‘subprime on steroids’ since the financial crisis in 2008...

“When all the experts and forecasts agree — something else is going to happen”, Bob Farrell

In January, “everyone knew” that inflation was about to take off, and that the US$ was g...

Chart of the Year – CAPE Index signals negative S&P 500 returns to 2030

Each year, it seems there is only one candidate for Chart of the Year. And 2020 is no exception. It ...

Economic risks rise as the lockdowns end

It is now 13 years since I wrote the first post here, in June 2007. A lot has happened since then: ...

China’s property sector is at the epicentre of the crisis

A branch of Centaline Property Agency in Hong Kong © Bloomberg Indebted Chinese property developers...

“They may ring their bells now, before long they will be wringing their hands”

The wisdom of Sir Robert Walpole, the UK’s first premier, seems the only possible response to ...

Will stock markets see a Minsky Moment in 2020?

Few investors now remember the days when price discovery was thought to be the key role of stock mar...


Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more


Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more