Tuesday, September 13, 2011

European governments are preparing for a Greek default

What is bein said in Holland

The German and Dutch governments are preparing for a Greek default. The Dutch Minister of Finance De Jager stated that with regards to the Greek debt crisis his Ministry "considers all scenarios". So that implicitly means the Dutch Ministry of Finance is considering a Greek default, that is an inability to pay back what it has borrowed.

And in Germany

More imporantly the German Minister of Economics and Finance Philipp Rösler has speculated publicly on the risk of Greece defaulting. The German Ministry of Finance is making preparations for the turmoil on the financial markets which will ensue once Greece is unable to make payments to its lenders. At that point Greece will also be unable to pay civil servants' salaries and benefits to pensioners and those on welfare. This is projected to happen by October.

The reason why German and Dutch politicians are speculating on a Greek default is electoral. Their voters are unwiilling to support them if they continue to throw money at the Greeks. Without the money from Germany Greece will default, as their own tax revenue is insufficient to cover their projected spending.

And then

If Greece defaults and is not bailed out, other countries in a debt crisis such as Italy, Ireland and Spain will also not be bailed out. It they are not bailed out by Germany they will not be able to attract loans. Without the loans they will not be able keep up their projected spending. Their budgets will contract very rapidly, their economies will shrink and the investors who lend them their money will have to write off the debts.

The German banks

And these investors are often German and Dutch banks. If the countries in a debt crisis go broke, the German and Dutch banking sector will be in a huge crisis. And the German and Dutch economy will slow down. And then all of Europe will experience a shrinking economy as a result of all the debt that has been taken on.

1 comment:

Affan said...

SO nice article i like this one



(islam in norway)