Monday, July 25, 2011

Greek Tragedy

I'm sure many of you have heard of how Greece has been in financial trouble recently, especially with today's financial headlines centering on Moody's downgrading of Greece's credit rating by three notches. Ever wondered what all the hullabaloo is about? Here's what, in my opinion, is the best take on the matter out there.

Part 1

Part 2

So, in a nutshell, it's all about how Greece found itself heavily in debt by spending way more than it could earn (on generous retirement benefits and the 2004 Summer Olympic Games in Athens, for example), how it needed to borrow more to service its old debt and finance necessary expenses, how it had to assure lenders that it would be capable of paying off new debt by legislating significant reductions in government expenses (through the so-called "austerity" measures), how the Greek people would fight tooth-and-nail for the quality of life that they had been accustomed to and expected (something that they would have to give up with the passage of the austerity measures), and finally how we again find the usual suspects (e.g., investment banks like Goldman Sachs) and known modus operandi (e.g., credit default swaps) at the heart of the issue, just as we did three years ago.

The austerity measures have since been passed by the Greek legislature, and the Eurozone has since approved a EUR 109 billion bailout plan to save the Greek economy. It remains to be seen if these efforts would be enough to stem the tides of economic malaise that continues to plague Europe and finally give our equity investments some room to breath and grow.

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