Relay Advisors

Greek Debt Crisis - Nations Need to Explore Their Own Balance Sheets

Economic expansion and deficit spending in Portugal, Ireland, Italy, Greece and Spain (known by some as the "PIIGS") was largely financed by foreign and bank debt that is no longer easily accessible to them.

The EU is providing a lifeline but Germany and France insist that Greece slash public sector wages and other spending that they regard as unsustainable and overly generous compared to their own program spending.

Being tied to the Euro means that EU members with debt problems have limited monetary options.

This means that stronger EU countries will likely step in to help Greece provided that Greece cuts public spending and public sector wages.

Takeaway:  European bond yields will stay high, and unsustainable spending and debt is a threat to all countries including the U.S.

Wall Street Journal - Simon Johnson - MIT Sloan School of Management


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