Greece, ground zero of the debt crisis, continues to get slammed around. Greece does not have a lot going for itself right now. Wait, let me rephrase that one; Greece has nothing going for itself right now other than media coverage. You know what they say, bad press is press. After Spain was on investors’ minds due to its looming full bailout which nobody can afford, Italy took the ball and passed it back to Greece rather fast.
This time around S&P lowered the ratings outlook on Greece from CCC stable to CCC negative. Keep in mind that according to those ratings a CCC is eight levels below investment grade. Having said that, by now we all know that ratings agencies are a few years behind reality as they don’t fail to proof to the investment world that they have no idea how to rate anything but that would be another story.
The Greek bailout is handed over in tranches. Certain criteria are set and if Greece meets them they receive a small amount of cash from the total bailout package and Greece is allowed to live another month. The Greeks blew through the first bailout, begged for the second one and already hinted at another round, but don’t tell the idiots who claim Greece can be saved and remain part of the Eurozone that.
The fear now is that Greece will not meet the requirements to receive the next installment of the bailout and S&P decided to lower its outlook. So Greece won’t make it, huh? Duh! Thanks for telling us the weather from last week. Sooner or later even the dumbest buy and hold investor will realize that it is game over for Greece the way it is and that the entire Euro needs to be reformed. Representatives from the ECB, IMF and European Commission head to Athens every month to assess the economic situation and the message is always the same; Greece is a little too late.
Greece received a total of €240 billion in bailouts. That is €240 billion in wasted tax payers money which could have been used where it mattered, but hey that is politics at work for you. Greece need to find budget cuts of €11.5 billion and according to Finance Minister Yannis Stoumaras the government has only identified two-thirds of the required budget cuts.
The Greek economy has contracted for the past four years and this year will be number five. A streak no economy wants to have. Greece will require more loans with a GDP that drops double digits which means that Greece is in its final Euro stages. At one point everyone will agree that there is no point on wasting funds on a ship that already hit rock bottom and divert those funds to areas of Europe where a positive outcome has at least a chance.
There will be more job cuts in the government sector, more economic hardship, more riots and more problems out of Greece which currently drags don the entire Eurozone. Investors need to know when to cut their losses and they have overdone it with Greece. The right time to head for the exits was three years ago.