It didn’t take too long for Greece to get into more trouble. A single bond auction success quickly became old news. These are headlines from today.
First, Greeks Taking Bribes Thwart Papandreou’s Effort to Solve Crisis. Choice bit (emphasis mine):
Greece’s attempt to dig itself out of its worst financial crisis in about 16 years and avoid a bailout is hampered by rampant bribery and tax evasion, says Costas Bakouris, chairman of the Greek chapter of Transparency International, Bloomberg Markets magazine reported in its March issue. Greece, along with Bulgaria and Romania, is among the most-corrupt countries in the 27-member European Union and comparable to cocaine-infested Colombia, says the research group.
That doesn’t sound very nice.
The second: Papandreou Says Rumors Hurt Greece, Not Seeking Aid. There have been rumors of meetings with China, France, Germany, Goldman Sachs, and others about trying to secure financial support. Greek officials have issued multiple statements denying the rumors. Market analysts always have a bit of a deconstructionist leaning to their thinking, so this is being interpreted as follows:
- If the rumors were really that absurd, why would an official statement be released?
- Multiple statements have been released.
- Greece must be looking for a bailout.
I don’t know why leaders bother wasting their time refuting these rumors. If they wanted to allay the fears caused by the rumors, they would issue a budget that demonstrates no need for a bailout. Without such a budget, the rumors are better than their refutation. At least if they were looking for a bailout, they would be exploring options. If the rumors are false and no viable budget is produced, what happens at the next big bond auction?
Meanwhile, CDS contracts for Greek debt keep pushing to new highs. And remember, California is also in a currency union that prevents them from issuing their own currency. California has a bigger deficit problem. California’s economy is bigger. California’s credit rating is worse than Greece. Yet California is perceived as safer. How can that be? Less corruption? Greater chance of a bailout? Bill Gross likes us better (the co-founder of the world’s largest bond fund happens to have a rather nice home in California)?
