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28 septembrie 2011

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jos, pentru conformitate:

Portfolio:

Preparing for Greece'sFailure

Vice President of Analysis Peter Zeihan examines the obstacles to Greek prosperity andthe challenges in ejecting Greece from the eurozone.

Editors Note: Transcripts are generated using speech-recognition technology.

Therefore, STRATFOR cannot guarantee their complete accuracy.

The financial news of the week again is about the eurozone and we are

seeing lots of entities come up with lots of possible solutions about how to solvethe eurozone problem. They all of course rest on what to do about Greece. The

problem is, they are coming from the wrong angle. From STRATFORs point of

view, Greece does not have a particularly bright future as a state before theeurozone crisis is taken into account.

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Modern Greece has traditionally been supported by three pillars.

First is shipping. As a culture that is mostly coastal it makes sense they

would be very good at sailing; however, in the age of modern transport and super

container ships, Greece simply cant compete, and most of its ship buildingindustry has long ago left for greener pastures in places such as Norway, China or

Korea.

The second pillar is tourism and this continues to be an option, but tourismby itself cannot support a modern state.

The final option and the one that the Greeks have gotten the most mileage

out of is leveraging Greeces position. Typically to allow some external power ameans of battling somebody in Greeces neighborhood. When Greece achieved

independence in the early 1800s that external power was the United Kingdomwho used Greece as a foil against the Turks. Later, the Americans played a similarrole supporting Greece against the Soviets. In both cases massive volumes of

capital came in to support Greece. However, in the post-Cold War era Turkey is a

member of NATO, and while the Greeks might not get along with the Turks,nobody is looking to use Greece as a military foil against them. Greece no longer

has a regional foe that it shares with anyone else. The closest might be the Turks

again, but only if the Turks miscalculate their ongoing relationship with Israel orCyprus and miscalculate very very badly.

Bottom-line, the various supports that have allow the Greek state to existsince the 1820s simply arent there anymore and so the path forward goes likethis: Greece is not salvageable. Greece simply cant compete unless it is being

given a constant, steady supply of capital from abroad that it doesnt necessarily

have to pay back. And even if that could be restarted, Greece can not emerge fromits own debt load. It is simply too large.

Greece has to be kicked out of the eurozone if the euro is to survive, but

between here and there, first, a firebreak fund. The EFSF expansion has to happenbecause if you cannot sequester the 280 billion euro of Greek government debt

that exists outside of Greece, then youre going to trigger a massive financial

catastrophe that the eurozone simply cant survive. And so to prepare for a Greekejection, you have to prepare a fund that can handle three things more or less

simultaneously.

First, you need about 400 billion euro to firebreak Greece off from the restof eurozone.

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Second, you need about 800 billion euro in order to prevent a wide-scale

banking meltdown, because the day that Greece defaults on that debt, the day that

its ejected from eurozone, there will be catastrophic banking collapses inPortugal, Italy, Spain and France, probably in that order.

Third, the markets will go wild and the state that is in the most danger of

falling after Greece is Italy. Using the bailouts that have happened to date as a

template, any bailout of Italy would have to provide enough financing to cover allItalian needs for three years. That comes out to about another 800 billion euro. So

until the Europeans have 2 trillion euro in funding stashed away, they cant kickGreece out of the system.

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