Daily: Greek election means Greek economic recovery nowhere in sight

Daily commentary

Last week, in framing the Greek elections, I reminded you that irrespective of who won the elections in Greece on Sunday, it was clear that Greece would be unable to hit their deficit targets. This is why the German government is already debating relaxing Greece’s austerity targets. The bailout package will be renegotiated. The question is under what terms.

New Democracy have signalled to the Germans that they have no good alternative to a negotiated agreement and so their negotiating position is weak. What that means if they are actually able to form a government is more austerity and further crushing economic depression in Greece. Clearly the economic situation is untenable and so I continue to believe this will lead to a Greek re-default and exit from the euro zone.

Links commentary

I am dubious on the Bloomberg story about the Chinese economy bottoming this quarter. But it would be great for the global economy if it were true. I highly recommend reading this article to understand the bullish case on the Chinese economy.

I also recommend reading the article on the difficulty of liquidating Spanish banks via sub debt writedowns. basically, sub debt writedowns would fall on the depositors of Spain’s savings banks who were snookered into not just depositing funds there but doubling up their liability to those institutions by buying sub debt too. It reminds me a bit of Enron’s exhorting its employees to load up their pension plans with Enron stock. hat’s too high a concentration of risk. The question is who takes the loss, the sub debt holders or taxpayers writ large. I say it should be sub debt because subordinated debt is risk capital and the risk must be borne there first.

That’s it. Here are the links.

Los inspectores del Banco de España avisaron al Gobierno de la crisis en 2006 | Economía | elmundo.es

China’s Economy Likely to Bottom Out This Quarter, Adviser Says – Bloomberg

Home-Builder Confidence Hits Five-Year High – Real Time Economics – WSJ

French president Francois Hollande ‘urges EU to agree on €120bn plan to boost growth’ – Telegraph

Big Banks Reaping Big Benefits From HARP Refinances – The Consumerist

Google Says the U.S. Government Asks for User Data Most Often – Liz Gannes – News – AllThingsD

Why it’s hard to shut down a Spanish bank | Reuters

Greek bank withdrawals set alarm bells ringing | Business | guardian.co.uk

Greek voters blame ‘political terrorism by masterminds of austerity’ | World news | guardian.co.uk

Greek elections: the replay deepens the divide | Editorial | Comment is free | The Guardian

Sacramento ‘Teacher of the Year’ laid off | The Lookout – Yahoo! News

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