http://www.spyns.com/http://www.tdf-tours.com/Doesn't this feel familiar? An emergency European summit, Greek promises of deeper cuts, and a sombre Greek prime minister (again) informing the media, "This time it's really over." Bullocks!
While Spyns Tour de France clients will undoubtedly benefit from a weaker euro, a tsunami of debt is about to wash over the developed world. Greece is but the epicentre. I'm no economist but countries cannot simultaneously print more money (quantitative easing), prop up delinquent banks, and subsidize everything from mortgages to cars in the dwindling hopes of spurning growth.
Countries don't default on debts because debt levels are too high, Japan's debt is currently 200% of GDP, they default because no one will lend to them at low interest rates. Greece cried "uncle" because the markets would no longer lend money at near-zero interest. Greece is insignificant from the standpoint of global GDP, yet the precedent strikes fear into central banks worldwide. In an era of high unemployment, fragile (or non-existent) recovery, no country can afford to pay higher rates to borrow money. However, higher interest rates are inevitable and should reach the critical point in September or October of next year.
But first there is Greece. The European Union has shown spectacular incompetence in managing this issue and we should brace for more bungling. The EU is simply too bureaucratic to move swiftly. Despite having two presidents, the president of the European Commission (Jose Manuel Barroso) and a permanent president (Herman Von Rompy), there is also a rotating president. And the rotating presidency is held by, er, Spain. So the country with the EU's highest unemployment rate (Spain recently reached 20% unemployment) is somehow heading the rescue effort. And it gets worse.
Add to this mix the International Monetary Fund, European Central Bank and roughly a dozen European finance ministers and its more Hamlet than finance. Europe desperately wants to take the lead but cannot lend money as quickly as the IMF. While everyone speaks of agreement, the Germans will insist on a parliamentary vote to ratify the bailout and other contributors will have to do the same. No government moves quickly so look for some interim IMF bridge loan while the Europeans debate the bailout in their respective legislatures. In a strange twist of events, it would appear that Ireland, Portugal and Spain will have to contribute to Greece's bailout. This won't be popular with their cash-strapped voters.
Remembering the previous two bailout messages, this time markets won't react positively until Greece gets its cash. The Europeans will flap about a bit while the IMF quietly extends some money before Greece's looming debt redemption in about two weeks. Unfortunately, other Euro-club members will start whining for bailout money and to do so they'll have to start revealing just how parlous their finances are. Beyond Greece, there is the great issue of political instability in Europe's periphery.
Financiers probably don't recall that Greece, Portugal and Spain were all military dictatorships up until the 1970s. There is a serious risk of revolution should we push their respective populations too far. Under threat of further austerity measures, riots in Greece have already turned violent and more strikes are planned for the coming weeks. Watch for this to escalate.
It's tragic how often history repeats itself. The Germans are acting like the American isolationists pre-WWII. As economies contract and welfare lists grow, it will be difficult for European governments to find the political will to help Greece or perhaps the next country in trouble. Spyns Tour de France clients fear not, France is another keetle of fish. It's not like they have a history of revolution....er.
Spyns is an active travel company based in Whister, BC (Canada) and Beaujolais France. Spyns offers active holidays to Europe including trips to the 2010 Tour de France. For more information about Spyns 2010 Tour de France tours, please visit http://www.tdf-tours.com, http://www.spyns.com or call 1.888.825.4720.
http://www.tdf-tours.com/ 
