Few days ago, about the agreed aid plan for Greece, Mr Van Rompuy said “We hope that it will not have to be activated”. I noted here that the fact that they hoped not to activate it, it might mean that it would be a mess should it be activated.
Greece moved to activate the EU-IMF aid package on Friday 23rd 2010.
I still contend that the loan plan was actually a naked gun put on the table to buy time but smelling the fear of default. It’s now clear that bondholders of Greek sovereign debt should take a haircut and let Greece orderly default stopping the money creation for nothing of European banks. Then other ways to issue EU sovereign debt must be found and bankers should learn that there are no ‘too safe to fail’ assets such as sovereign debt organised in Ponzi schemes where EU governments' money is being reinvested into the scheme to repay previous investors, mainly banks who incidentally in the past were saved by those same governments.
PS: Markets are already looking for the next Greece, if they decide to look at more PIIGS it will be a real mess.
Update of April 28th: Prof. Krugman is now admitting that the situation is "getting a bit scary out there". Is he trying to change ideas on debt and deficits hysterias?