If I was Greece I would default the reason is probably best explained in the excellent blog post by Harris Kupperman in his blog Adventures in Capitalism blog called What Should Greece Do?
The post contains an article by Peter Gianulis, manager of Carrelton Asset Management with themost important part being this:
?By defaulting (or the credible threat of defaulting), Greece actually improves their negotiating position not worsen it. I would immediately default on all government obligations, raise the retirement age, cut social programs, simplify the tax system and create new business tax incentive programs to create a ‘safe tax haven? for new European businesses willing to operate in a European country without the shackles of the Euro. Also, the fact that you cannot borrow more money in the international markets would be the best news; you are now forced to live within your means.
Greece (representing less than 5% of European GDP) is not large enough to even register a ?blip on the screen? in terms of world economies or markets; so why all the fuss? It is our belief that a Greek default would legitimize the concept of government defaults from European or ?Developed? Countries and most likely lead to a series of defaults (far larger than Greece) that would roil the financial markets and world economies for years. The European Central Bank (as well as the FED) is acutely aware of this draconian scenario.?
Read the whole article it’s really worthwhile. Here is the link again What Should Greece Do?
So the other European countries are really not bailing out Greece but their own banking systems that have loaded up on debt of Greece and the other over-borrowed European countries.
The banks can most likely survive a Greece default but not a default by Portugal and Ireland. And definitely not Spain.
Barry Ritholtz in his Big Picture blog is of the same opinion.
In his post titled Not the Greeks, But Their Creditors Get Bailed Out he mentions:
“Whenever you hear a Bailout being discussed, look to see who it is that is actually being bailed out. It is not the Greek people or even the Greek government ? rather, it is the creditors of Greece. These are the banks mostly in Europe, primarily in Germany and France, but also includes Japan, China and the US.”
Also next time I hear a bank CEO or analyst saying that Europe cannot allow Greece or anyone to default I am going to throw up. Because it is not an independent opinion backed up by in depth independent analysis. It is someone talking his book, plain and simple.
