Zulauf: Greek Bailout is Hogwash

Our man in Switzerland, Felix Zulauf graces the Up & Down Wall Street column by Alan Abelson, Zulauf, a long standing EU/Euro skeptic, is not impressed with the $157 billion Greek bailout:

The bailout blueprint avoids for the time being default and escalating contagion, but in Felix’s view it does zilch to ameliorate the causes of Greece’s (or anybody else’s) fiscal woes. “The politicians,” he explains, with only the vaguest of smirks, “obviously believe that the world will get back to good growth and great tax revenues” and the problems will vanish. Which, not surprisingly, he sees as pure, unadulterated hogwash . . .

As the primary cause of the euro crisis, Felix fingers the huge competitive differences between Germany, which has frozen labor costs over the past 10 years and the weak sisters of the euro union, not a few of whom merrily partied and went deeply in debt often via real-estate booms even gaudier that the one that ultimately laid us low. The banks of the peripheral members are suffering from what he calls “a slow-motion bank run.” To make matters worse, the governments of the peripherals have imposed fiscal austerity, which he expects, will plunge their economies back into recession by the time the fourth quarter rolls around . . .

Thanks to the decision to once more bail out Greece, equity markets, he concludes, may rally and U.S. shares might even reach new highs in the next two to four weeks. But, avers Felix, stocks are moving in a different direction than the sluggish underlining economies. He compares the situation to a fully loaded plane flying too low and at slowing speed. “Under such circumstances,” he warns, “all sorts of unpleasant surprises usually arrive.” (emphasis added)

We consider ourselves warned . . .

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Previously:
The Big Picture Interview: Felix Zulauf (August 2010)
(Transcript)

Source:
Back From the Brink
ALAN ABELSON
Barrons, JULY 23, 2011
http://online.barrons.com/article/SB50001424053111903337604576455932865193582.html

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