On the 6th May I blogged
http://www.finextra.com/community/fullblog.aspx?id=4044 to say that I thought Greece could signal a bail out of the Euro and the more I read the more I think this will happen. Angela Mekel has seen the warning signs and believes the ban on short selling
will stem the flow. Unfortunately this is the financial equivalent of applying a neck brace to a broken leg. The reason is that the ban on short selling wont alter the fact that Greece's fundamental problem is wasted years of cash injections from the Euro
zone frittered away, state earnings are low and yet the underlying costs have grown. One might suggest that Greeces entry into the Euro zone was a massive sleight of hand with fudged figures, forecasts and balance sheets but in the name of the good ship Europe,
and in a relative boom time, who cared about a minor blemish. Well the blemish is turning into an open wound and getting worse, the Greek trade uniions appear to be in denial and the new austerity measures are set for a rocky ride.
There is no way that a two tier Euro can be introduced but Greece could withdraw and have the ability to devalue and manage its own currency; the tax payers of Europe would draw a collective sigh of relief. If the problem persists heads of state will find
themselves at odds with their own electorate and if the main source of funds, Germany, falls out of love with the whole idea what price an even larger fall out.
Time to brush off the old currency pairs, what odds a $/drachma and $/escudo by end of 2012?