Author: Patrick McFadden, M2 Global
Covestor model: M2 Global
Despite rumors and plans, the situation in Europe continues to expose global markets to great risks and volatility. We do not see an end to this, as the Germans and French arm-wrestle behind closed doors over whether the French or German tax payers will bail out the French banks. The Germans would like to take responsibility just for their own, however they now have responsibility for the whole. Likely, behind closed doors the Germans are pressing the United States and non-Europeans for much greater help, but the U.S. Congress has cornered the Treasury and Fed, and China has its own problems.
Clearly, Greece has become a tool for Core Europe to pressure Italy and Spain into greater fiscal discipline. This is a dangerous path. I expect Europe will be in or near a recession during 2012 and Greece will not meet its budget commitments for quite some time.
The Greek Ministry of Finance, however, is certainly fairly transparent. Greek public debt and public deficit information can be researched easily at http://minfin.gr. According to that data, Greece continues to run about 2 billion Euros per month in deficit while 36.4 billion Euros of short term and long term Greek government bonds will mature by June 2012. In round numbers, Greece needs 30-50 billion Euros over the next six to seven months – 30 billion if you assume a 50% hair cut to government bonds rolling over.
Given the volatility the market has experienced on an 8 billion Euro tranche for Greece, the immediate future does not look that bright.
