Forget The Election Results – Greece Is Still Doomed And So Is The Rest Of Europe
Activist Post — The election results from Greece are in: the pro-bailout forces have won, but just barely. It is being projected that the pro-bailout New Democracy party will have about 130 seats in the 300 seat parliament, and Pasok (another pro-bailout party) will have about 33 seats. Those two parties have alternated ruling Greece for decades, and it looks like they are going to form a coalition government which will keep Greece in the euro.
Meanwhile, things in Spain and Italy are rapidly getting worse. So where in that equation is room for optimism?
Right now the ingredients for a “perfect storm” are developing in Europe. Government spending is being slashed all across the continent, ECB monetary policy is very tight, new regulations and deteriorating economic conditions are causing major banks to cut back on lending and there is panic in the air.
But is that really a reason for Greeks to celebrate?
Right now, the unemployment rate in Greece is about 22 percent. Businesses continue to shut down at a staggering rate and suicides are spiking.
Meanwhile, the Greek government is still running up more debt. It is being projected that the Greek budget deficit will be about 7 percent of GDP this year.
The Greeks went to the polls and they voted for more of the same.
Are they crazy?
Someone once said that the definition of insanity is doing the same thing over and over again and expecting different results. Unfortunately, it looks like things are going to continue to get worse in Greece for quite some time. And the rest of Europe is heading into a very bleak economic future as well.
At the moment, unemployment in the eurozone is at a record high. Most analysts expect it to go even higher.
To say that Spain has an unemployment problem would be a massive understatement. The unemployment rate in Spain is even higher than the unemployment rate in Greece is. In fact, unemployment in Spain is the highest that it has ever been since the introduction of the euro.
The Spanish banking system is a complete and total disaster at this point. The Spanish government has already asked for a 100 billion euro bailout for its banks.
But that might not be nearly enough.
Spain is facing a housing collapse similar to what the United States went through back in 2008 and 2009. Right now, home prices in Spain are absolutely collapsing….
Fresh data yesterday shows how desperate the crisis is becoming in Spain. The property crash is accelerating. House prices fell at a 12.6pc rate in the first quarter of this year, compared to 11.2pc the quarter before, and 7.4pc in the quarter before that. Prices have fallen 26pc from their peak.
‘Fundamentals point to a further 25pc decline,’ said Standard & Poor’s in a report on Thursday. It may take another four years to clear a glut of one million homes left from the building boom.
As I have said so many times before, watch Europe.
Every few weeks there are headlines that declare that “Europe has been saved” but things just keep getting worse.
The governor of the Bank of England, Mervyn King, said the following a few weeks ago….
Our biggest trading partner is tearing itself apart with no obvious solution.
The equation for what is happening in Europe that I have shared before still applies….
Brutal austerity + toxic levels of government debt + rising bond yields + a lack of confidence in the financial system + banks that are massively overleveraged + a massive credit crunch = A financial implosion of historic proportions.
It is going to be a long, hot summer for the European financial system.
On election day in Greece, the mood was incredibly somber. Instead of celebrating, most Greeks seemed resigned to a very hard future. As an article in the Telegraph described, the entire nation seems to be grinding to a halt….
This is the election that is supposed to decide whether Greece stays in the euro. Yet as it, and Europe, face what could be their Katrina moment, the dominant sense here is not of panic, or fear, or even hope – but of a country in suspended animation, grinding to a halt.
The Athens Heart shopping centre, in the southern suburbs, is polished, full of big brands, and almost totally empty of customers. ‘We’ve had five sales all day,’ says Steryiani Vlachakou, the assistant in the Champion sportswear store. ‘It’s been getting a lot, lot worse.’
Sadly, it is not only Greece that is doomed.
The truth is that all of Europe is doomed, and when Europe falls the entire globe is going to feel it.
So get ready for the hard times that are coming. The pain is going to be immense and most people are not even going to see it coming.