European Bailout Attempts for Greece are Either Heroic or False

October 01 00:00 2011

New York, October 1 ( – It is surprising that one reads in the newspaper almost on a daily basis that the Greek economy is in trouble beyond repair. They are beyond the point of no return and a default is inevitable. The question therefore remains about how and when Greece should default so that the panic does not spread around and becomes a continental or even a global phenomenon.

However the attempts, no matter how good they sound on paper are simply not practical. The basic idea behind bailing out Greek government temporarily is to buy time for that the weaker economies of Spain and Italy to de-intertwine themselves from Greece. This will help the Greek default be an isolated event and prevent the panic from spreading.

Although, it may sound good in story books, an attempt to fool the market is simply futile. The market already knows that Spanish and Italian governments are in trouble too. This is the reason that the cost that they have to pay to finance their debts has risen sharply. Moreover, these governments and their leading banks have sharp exposure to Greek debt. It is almost impossible for anyone to sell Greek debt now.

Hence, the plan will definitely not workout. European bailout may simply turnout to be an exercise of throwing good money after bad.