“Greek bailout agreed”

Where have I read this before? At least three times over my cornflakes in as many weeks. To quote Yogi Berra, “It’s like déjà vu all over again.” For the sceptics who believe that markets aren’t manipulated (are there any left?) this is going to come as a blow.

 The package “sends a clear message that nobody can play with our common currency and our common fate,” Greek Prime Minister George Papandreou told reporters. On Friday three-year bond yields were 7.2% yet the EU has offered €30 billion of funding at circa 5% with, apparently, “no strings attached”. Who is playing with whom? Short covering has bought the market back with a thump this morning, but yields are still over 100bps above the bailout rate.

 The EU offering will give Greece some breathing space until the end of the year; they need €30 billion just to cover this year’s funding costs and the annual budget deficit. The Greeks have been profligate over spenders since Pontius was a “Pilot” and historically allowed the drachma to take the strain; not an option in euro land…

 Your average Greek is not going to take the government’s austerity measures lying down. It’s not the way the Greeks do things. A lot of column inches have been penned about the need for political union before the euro experiment will work, but very few on social union, which is not the same thing. I am not playing the nationalistic card here (although if you have tried passing off a Scottish ten pound note in a provincial UK pub you will know what I mean!); it’s a “way of life”.

 The EU rules are clear on budget deficits and government borrowing and the Greeks are “out of order” (and not alone) and should have to pay the price; the market price. Now no one is going to shed any tears about Goldman’s losing “a few billion” on short covering, but eventually Mr Market will have his say.

 As Oscar Wilde said, “a cynic knows the price of everything and the value of nothing.” The eurozone governments may have “fixed” the price of Greek debt, but they truly know nothing about value…