“We can’t move along without real implementation of fiscal reforms and we are late,” said Greece’s Finance Minister over the weekend, publicly acknowledging that they have not fully followed thru with the conditions demanded by the EU and IMF in order to release more money to Greece as part of Bailout 1. The Finance Minister will have a call with the EU and IMF at 12pm est time to discuss the current situation. I still assume Greece gets the next allotment of money in 2 weeks, followed by full passage of the EFSF by all 17 Parliaments and then an orderly restructuring of Greek debt where bondholders suffer at least a 50% cut in the value of their holdings off par value, more than twice the 21% reduction assumed with the current debt exchange. There are 3 ways to cut debt, pay it off, write it off or inflate out of it. Option 1 is a sign of health, option 2 is always painful but it cleanses while door #3 is the most dangerous. Greece needs to cleanse. In Asia, the Shanghai index fell to the lowest since July ’10 and the Hang Seng closed at the lowest since July ’09.
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